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State regulators face decision over failure of grain business

PIERRE — Lawyers for more than 20 farmers in eastern South Dakota who lost millions of dollars for unpaid grain want a state agency to become receiver for the failed seller.

The state Public Utilities Commission shut down H and I Grain of Hetland last year.

Farmers from Kingsbury, Clark, Beadle, Brookings, Lake and Minnehaha counties see the agency as their way to get money from commodities company CHS Hedging.

The commission could decide at its next meeting on Tuesday, Aug. 7, whether to ask a state judge to designate the agency as the receiver.

That would mean the commission could pursue money from CHS Hedging that would be returned to farmers. CHS Hedging for the first time sent a lawyer from Des Moines, Iowa, to the commission's meeting last week.

Jesse Linebaugh, representing CHS, told commissioners Thursday there would be at least $75,000 in expenses just for discovery before the case could proceed. He said CHS hadn't received notice of two prior rounds of action by the commission.

"We just want our opportunity to say our piece here," Linebaugh said.

Commissioner Gary Hanson told Linebaugh the amount wouldn't sway him. The commission ordered $400,075 of H and I Grain's bond proceeds to be distributed to farmers April 12. The amounts farmers claimed totaled $2,962,186. In a separate proceeding, state Circuit Judge Patrick Pardy decided on April 17 that H and I Grain still owed farmers $3,775,484 for corn and soybeans.

CHS Hedging filed a lawsuit in 2017 against Duane and JoAnn Steffensen for more than $1.9 million. They own H and I Grain. Son Jared Steffensen opened a grain-trading account in 2011 with the Minnesota-based hedging company. The parents signed a guaranty for the account.

CHS Hedging shut down the trading account in July 2016.

The parents in June 2017 filed a counterclaim against CHS. They said their son didn't tell them about his increased volume of trades.

Phone records allegedly indicate at least one CHS Hedging employee loosened, and ultimately removed, all limits on the son's trading.

Gary Schumacher, a De Smet lawyer for the farmers, said the couple doesn't have the ability to satisfy the $3.7 million from the state-court decision.

A lawyer for the Steffensens encouraged the commission to request to be receiver. Many of the local farmers spoke to the commission during the public-comment period at the end of the meeting Thursday.

Commissioner Chris Nelson said his fear is spending money for the agency to be named as receiver and farmers getting zero.

"That's the worst of all outcomes," Nelson said.

Schumacher said "the real number" was between $5 million and $6 million.

"Without a receivership, some of these farmers aren't going to make it," Schumacher warned.

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