Even though Andrews Farming of Hillsville has filed for Chapter 7 bankruptcy, Carroll County will continue to work with its sister company Andco Logistics in an effort to help the company provide employment in the county.
Court documents show Andrews Farming filed May 5 for Chapter 7 bankruptcy in U.S. Bankruptcy Court in the Western District of Virginia in Roanoke. Chapter 7 bankruptcy is liquidation, not reorganization, of a company, and includes the sale of a debtor’s property and distributes proceeds to its creditors. Listed among creditors for Andrews Farming are Andco Logistics, several produce vendors including Brady’s Produce of Hillsville, the Carroll County Treasurer’s Office, the Internal Revenue Service, and the Virginia Tobacco Commission.
On February 9 of this year, the United States Department of Agriculture (USDA) filed an administrative action under the Perishable Agricultural Commodities Act (PACA) against Andrews Farming. In the filing, the USDA alleged that the Hillsville company failed to make payment to 11 produce sellers in the amount of $513,226 from December 2014 through June 2015. Additionally, a former accountant and bookkeeper of the company was sentenced March 29 in federal court to serve six months in prison and ordered to pay $284,796 in restitution on charges of bank fraud and tax evasion charges.
Andrews Farming and Andco Logistics joined Carroll County officials in October of 2014 to announce a plan to invest more than $5.6 million to expand their agricultural production, warehousing and distribution operation in Carroll County. The Virginia Economic Development Partnership worked with Carroll County, the Carroll County Industrial Development Authority, and Virginia’s aCorridor to help secure the project for Virginia. The Virginia Tobacco Commission approved $225,000 in Tobacco Region Opportunity Funds for the project.
According to the performance agreement, Andrews Farming subleases a building in the Carroll County Industrial Park from the Carroll County IDA until April 30, 2018 with an option to buy. Virginia Produce owns the building, which is leased to the IDA. Carroll County holds collateral, according to the performance agreement, of $266,494 from the company in the event the $225,000 Tobacco Commission funds cannot be repaid. That part of the contract was one of many points Carroll citizen Markel Cochran raised concerns with to the Carroll County Board of Supervisors on June 13.
“Andrews Farms got a $225,000 (grant) from the Tobacco Commission. Part of the collateral was part of land Carroll County (IDA deeded) to Andco,” Cochran said. “This is an incredible lack of oversight and that has to be corrected. I think it would be the right thing for Carroll County to go back and see if we owe the Tobacco Commission because we will have to pay for it because Andrews Farms is busted. Right now according to news reports, the liabilities are $2.8 million and none of this would have ever happened if we hadn’t put them in business. There is no way they could have floated this on their own…There needs to be some shaking up done, some oversight, because one person for years had complete control…Quite honestly I think (former Carroll County Administrator) Gary Larrowe ran this county as if it were his own little private kingdom.”
According to the bankruptcy documents, Andrews Farming had a gross income of $6,705,217 from Jan. 1, 2014 to Dec. 31, 2014. That number shrank to $4,033.837.60 in 2015. And from Jan. 1, 2016 until the May 5 filing date, the company’s listed gross income had dwindled to $440,239.09. The bankruptcy documents also list “a loss of approximately $1.3 million from embezzlement of employee, Robert Donald Morgan, III,” from 2012-2015. In total, the bankruptcy documents list total assets for Andrews Farming at $255,681.35 and total liabilities at $2,771,912.82.
Carroll County Interim County Administrator Nikki Cannon said the county and the Carroll County IDA are currently in a waiting pattern to find out what direction the bankruptcy trustee will take as he has the option to sell assets and distribute that money. Cannon said Andrews Farming has paid its rent and currently does not owe the Carroll County IDA anything.
“We actually made a motion at the (June) IDA meeting to defer half of the rent to try to assist Andco in continuing operating. His rent to the IDA is $5,000 a month. He is going to pay $2,500 from July of 2016 to December of 2016 and at the termination of the lease he is going to repay the difference,” Cannon said. “So at the termination of the lease he is going to have to pay us $15,000 to catch up those lease payments. And the reason for that is the Carroll County IDA would like to see Andco be a thriving business in the Industrial Park.”
According to Cannon, the agreement with the Tobacco Commission is based on both companies and not one single company. Therefore, the more people Andco hires, the better off Carroll County and the company will be in regards to the Tobacco Commission.
“We could pay nothing, we could pay half the amount or we could pay $225,000 depending on how the Tobacco Commission interprets the agreement,” Cannon said. “It actually could be any number in between there. If your performance agreement says you are going to hire 50 employees and you only hire 25, I think they would basically prorate it, so you don’t have to pay back all of it, just the portion you didn’t cover or meet. So really the Carroll County IDA would like to see Andco succeed and continue to do business and continue to have people employed.”
Allen Worrell can be reached at (276) 779-4062 or on Twitter@AWorrellTCN