Grabanski case to come together in April hearings

FARGO -- Bankruptcy cases and lawsuits connected to the many complicated farm business arrangements of Tom and Mari Grabanski, of Grafton, N.D., are going before the courts in April.

Grabanski, 42, had, in the past three years, put together a string of farming operations stretching from northeast North Dakota to Colorado and Texas involving various legal entities and partners. But debt problems caught up with him.

Now, several substantial ag lenders are alleging fraud, attempting to recover tens of millions of dollars.

The case has captured the interest of farmers because of the scale of the arrangements and because of Grabanski's activities with crop insurance programs.

Grabanski started farming in Grafton and continues to control family land there. Today, he lives in Blossom, Texas, with his family and reportedly plans to resume farming in Texas. Attempts to reach him have been unsuccessful.

There are three separate Chapter 11 bankruptcies, some involving charges of improprieties regarding the handling of funds and commodities. Each of the main cases has its own schedule. No criminal charges have been filed.

The related adversary actions are separate suits, but have their own schedules.

Case I

MTM Farms, a partnership between the Grabanskis, and G&K Farms, a partnership that had involved other farmers, are involved in this bankruptcy case.

Tom Grabanski has proposed a "stipulation agreement," which simply would be an agreement between the partnerships and their creditors, as to how specific debts are to be repaid.

He would sell some Walsh County, N.D., land to satisfy loans and guarantees of $5.2 million. In addition he would transfer some land that had been in the family for 100 years to his parents, Merlyn and Dolores Grabanski, and, in exchange, they would transfer to him some other land. Ultimately, the elder Grabanskis proposed simply selling some of their land directly and keeping some of the family land.

Initially, John and Dawn Keeley, Grafton farmers who were partners with the Grabanskis in some of their farming, including G&K Farms, objected, saying there's no evidence the traded land has equal value. But they withdrew their objections.

Attached to the bankruptcy, there are several "adversary actions." These are separate but related lawsuits by various creditors. Bankruptcy eliminates some debts, but creditors in some cases use adversary actions to argue that their debts were incurred by fraud and can't be protected by Chapter 11 bankruptcy protection.

Those lawsuits include:

- Colorado Farms: Several members of this partnership, set up by Grabanski to farm in Colorado, accuse Grabanski and others of diverting assets for their own benefit, alleging things such as "fraud, deceit and civil conspiracy." The plaintiffs include some prominent Grafton-area businesspeople and farmers. Trial is set for Oct. 3.

- AgCountry Farm Credit Services alleges Grabanski fraudulently sold crops in Colorado, Nebraska and Manitoba that were pledged to AgCountry as collateral on loans that were in default in April 2009. The lender asks the court to make its debts non-dischargeable. Trial is set for April 12.

- Crop Production Services, an agriculture input retailer contracted with G&K Farms in 2008 and claims Grabanski told it G&K had been in business 20 years, had a net worth of $12.2 million and owned $19 million in real estate. Among other things, they say farm inputs they financed were used on other farms, and that they are owed $1.04 million. Trial is set for April 19.

- PHI Financial Services says Grabanski and five other entities entered loans of $7 million, based on July 2008 statements that Grabanski's net worth totaled about $20.8 million, including G&K land of $14.2 million. The firm says G&K never owned the property. Trial is set for April 21.

- The Keeleys were in the Keeley and Grabanski Land Partnership, formed by Grabanski to farm in Texas and Grafton. This partnership required they obtain each other's signatures on decisions involving more than $1,000. Among other things, they say Grabanski violated this contract by improperly obtaining a line of credit with PHI without their knowledge. Trial is set for April 25.

Case II

Grabanski Grain LLC, a commercial elevator, started by Grabanski are involved this bankruptcy case. It has assets of $1 million to $10 million and debts at $10 million to $50 million. Largest unsecured claims include Grand Forks attorney John Warcup with $1.01 million and PHI with $3.7 million. The grain company had until Jan. 7 to file a reorganization plan, but none was filed. Secured debts include AgCountry and PHI.

There is one adversary case:

- AgCountry: The lender says the elevator still owes it $1.5 million from loans made in 2007, 2008 and 2009 because of Grabanski's fraudulent activity. Starting in April 2009, AgCountry claims Grabanski sold grain that was collateral, some of it to Canada, willfully concealing more than $2 million in sales. A hearing is set for April 12.

Case III

Keeley and Grabanski Land Partnership: This is an involuntary petition by the Keeleys to push their partnership into bankruptcy. The Keeleys claim $2.34 million in debts. The Grabanskis asked for dismissal on grounds that no partnership exists.

Texas land case

In addition, the Keeleys were served in April 12, 2010, with a summons from PHI saying they were liable for about $7.3 million in debts from the Keeley and Grabanski Land Partnership, related to land deals near DeKalb, Texas.

Grabanski says the Keeleys ended their involvement in the partnership, which they say they thought had ended in 2009 by mutual agreement.

The Keeleys asked for information from the debtors, and have asked for a trustee appointee to be named. A hearing on this has been rescheduled to Feb. 25.