Judge Allows Bank to Seek Documents Tied to Feedyards in Bankruptcy Case

Judge Allows Bank to Seek Documents Tied to Feedyards in Bankruptcy Case

Russell Nemetz
Russell Nemetz
A federal bankruptcy judge in Texas has granted Rabo AgriFinance authority to issue document subpoenas to several people and businesses involving the financial collapse of a Kentucky-based cattle operation.

U.S. District Judge Robert L. Jones out of the U.S. Bankruptcy Court for the Northern District of Texas granted the motion for Rabo AgriFinance to seek documents from 11 companies and people connected to a pair of Texas feedyards, McClain Feed Yard and 7M Feeders, both of which were operated by McClain Farms Inc. from Benton, Kentucky.

The court authorized subpoenas to compel records and documents from Mechanics Bank, Texas and Southwestern Cattle Raisers Association (TSCRA), Chelsea McClain, Crystal McClain, Meagan B. Goad, Kinsey Moreland, MAP Enterprises Inc., Wildforest Cattle Co., 2B Farms Inc., Community Financial Services Bank, and Whitlock CPA from Benton.

Each of those businesses and people were tied to Robert McClain, 52, a cattle producer from Benton who died on April 18.

Rabo alleges in the bankruptcy court that McClain and his feedyards owed Rabo AgriFinance $50.6 million in unpaid loans. Rabo, in its court filing, questioned the possible sale or transfer of as many as 78,000 cattle since the beginning of the year from McClain's feeding operations without paying on the loans from Rabo.

Rabo had conducted an audit of McClain's cattle operations in early April and found 10,575 total head. The bank could not verify the whereabouts of more than $33 million for more than 20,000 head McClain's operations had reportedly sold.

McClain Feed Yard Inc and 7M Feeders, all with common ownership, filed for Chapter 7 liquidation bankruptcy in the U.S. Bankruptcy Court for Northern Texas on April 28. McClain's feeding operations listed as many as 200 possible creditors and as much as $100 million in liabilities. McClain Feed Yard, a 3,000-head operation, is based in Hereford, Texas, while 7M Feeders -- a 115,000 head capacity yard -- is based in Friona, Texas.

USDA had issued a warning to cattle producers who had done business with McClain to file a Dealer Trust claim if they have not received payment.

In a response to questions from DTN about the case, a spokesman for USDA's Agricultural Marketing Service stated, "USDA has an ongoing investigation into the McClain matter and cannot provide further comment at this time beyond the publicly available information which states that on April 28, 2023, McClain's three companies, McClain Farms, Inc.; McClain Feed Yard, Inc.; and 7M Feeders, Inc., filed for Chapter 7 bankruptcy in the United States Bankruptcy Court for the Northern District of Texas.

"If a P&S Act statutory trust becomes part of a bankruptcy proceeding, USDA works collaboratively throughout the case with the U.S. Department of Justice (DOJ) to ensure the proper protection and distribution of statutory trust assets through the course of bankruptcy proceedings," a USDA spokesman stated.

A spokeswoman for TSCRA, which has special rangers who investigate cattle cases, told DTN the group's agents were not investigating the case, but instead the Federal Bureau of Investigation was looking into whether there is fraud involved in the cattle operation.

Jones, the bankruptcy judge, has also granted the three McClain cattle operations an extension until June 7 to file some of the Chapter 7 bankruptcy schedules and forms, including the full list of assets and liabilities.

Source: DTN

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