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Express Grain appeals MS Department of Agriculture decision voiding its warehouse licenses for fraud

Tuesday, March 22, 2022, 6:41 pm News Flash Archive

Express Grain has filed an appeal of the decision by the Mississippi Department of Agriculture and Commerce ("MDAC") to void EG's warehouse licenses due to fraud.

The appeal, signed by EG's bankruptcy attorney Craig Geno and Greenwood attorney Charles J. Swayze Jr., was filed in the Leflore County Chancery Court on March 11, and has been assigned to Chancellor Willie J. Perkins, Sr.

The appeal may be seen here: Notice of Appeal of MDAC Order voiding Express Grain warehouse licenses for fraud

On February 10, 2022, MDAC voided EG's warehouse licenses due to fraudulent submissions of forged audit reports, in which EG changed significant parts of the audits to make EG look financially sound when it was not. In fact, the auditors at Horne LLP had included warning language that EG was mounting large losses, was unable to comply with its loan agreements with UMB Bank, its major financier, and that EG might not be a viable going concern.

All that warning language was removed by EG, and forged audit reports were submitted by EG to MDAC, instead of the correct audits from Horne.

MDAC Commissioner Andy Gipson held a hearing, after which he determined that EG's warehouse licenses had been obtained by fraud, and that they were therefore void ab initio, which means "from the beginning."

To read our reporting on this license revocation, see here: Mississippi Department of Agriculture VOIDS Express Grain warehouse licenses due to fraud

In the appeal papers, EG's attorneys claim that MDAC and Commissioner Gipson acted outside legal authority when they voided EG's licenses.

They wrote:

The Commissioner exceeded his authority and ability to declare that the Licenses and grain dealer authority were revoked ab initio and were determined to be null and void ab initio and without legal effect since July 1, 2021.

EG claims that the Commissioner doesn't have the power to declare that the licenses "were never lawfully issued."

There has been a good deal of dispute over the effect of MDAC's order voiding the EG licenses. Some parties, especially the farmers, have claimed it means that EG never actually owned the grain the farmers delivered, since without warehouse licenses, EG had no legal authority to conduct business as a warehouse and grain dealer.

Other parties, particularly the financiers who hold Warehouse Receipts, claim that the voiding of the licenses does not mean that all the transactions that took place after July 1, 2021 are to be "unwound" as if they never took place.

This is just one of the knotty legal issues that the bankruptcy judge will have to decide in the 557 Final Determination Hearing (scheduled to begin April 1), as she determines who owns the grain or who has a security interest in the grain.

 


To read all our coverage of the Express Grain bankruptcy case, see here: Index of Express Grain articles

 

John Pittman Hey
The Taxpayers Channel

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