Ashby Elevator embezzling scheme prompts call for farmer protections

The calls for added oversight come months after the elevator manager was found to have embezzled millions of dollars.
Erik Ahlgren, lawyer for Ashby Farmers Elevator Cooperative, on Oct. 15 tells members he has filed a civil suit against former general manager Jerry Hennessey and his wife, Rebecca, and has urged a federal Department of Justice to investigate possible criminal bank fraud. Seated second from left is Russell Dewey, the co-op’s board chairman. (Forum News Service/Agweek/Mikkel Pates)
Erik Ahlgren, lawyer for Ashby Farmers Elevator Cooperative, on Oct. 15 tells members he has filed a civil suit against former general manager Jerry Hennessey and his wife, Rebecca, and has urged a federal Department of Justice to investigate possible criminal bank fraud. Seated second from left is Russell Dewey, the co-op’s board chairman. (Forum News Service/Agweek/Mikkel Pates)

ST. PAUL -- Minnesota lawmakers should weigh extra safeguards for farmers to prevent grain elevator fraud cases like one discovered last year in Ashby.

That's according to attorneys working on behalf of the producers that were affected by Ashby Farmers Cooperative Elevator Co. embezzling scheme, which came to light last year. The elevator's former manager, Jerome "Jerry" Hennessey, wrote checks from the elevator totaling more than $5.5 million for personal purchases including home improvements, international big game hunts and taxidermy.

And elevator board members and producers that worked with the company were left in the lurch when the scope of Hennessey's mismanagement was discovered in September. The former manager faces federal charges and is being held on electronic monitoring and can't leave the state.

Jason Lina, a Morris attorney who is representing farmers who worked with the elevator, said lawmakers should provide additional education for directors who sit on the state's grain elevator boards and require more frequent third-party audits to uncover possible wrongdoing earlier.

“This isn’t a producer problem, it’s an elevator problem,” Lina said. “This was a real failure of the board of directors."

Lina said he and Fergus Falls attorney Erik Ahlgren would bring claims against the elevator's board of directors in hopes of making up some of their lost compensation, Lina said.

Ahlgren, attorney for the elevator and as an assignee for the benefit of creditors, said he'd also pursue claims against those who received fraudulent transfers and he'd look to tap the elevator's crime policy and sold assets. But that'll be "just a drop in the bucket here," he said.

Ahlgren said the apparently unauthorized spending appears to date back to 2003. And there could be funds in excess of the $5.5 million he's found that were used improperly.

“I don’t think we’ve uncovered all the unauthorized checks," Ahlgren said.

Farming advocacy, cooperative and grain and feed advocates said they favored the additional protections against mismanagement and fraud. Gary Wertish, president of the Minnesota Farmers Union, urged lawmakers to take a step further and set up a grain producer indemnity fund.

But legislators should be careful not to hit others with undue constraints, Laura Lemke, assistant director with the Minnesota Grain and Feed Association, said.

“Our industry, especially cooperatives, have really been dealt a black eye in this situation," Lemke said. "It's not fair to punish our entire industry for one man's greed and a board of directors' complete failure to do their job."

Sen. Torrey Westrom, R- Elbow Lake, who chairs the Senate Committee on Agriculture, Rural Development and Housing, said lawmakers would consider the advice as they thought about possible legislative fixes.

A previous version of this story contained an error. The Minnesota Grain and Feed Association was misidentified.