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Fraud-stricken Minnesota grain co-op looks for quick sale

Jerry Hennessey (Photo courtesy of the Battle Lake Review)1 / 4
Erik Ahlgren, a Fergus Falls, Minn., lawyer, says he’ll aggressively go after former general manager Jerry Hennessey’s acreage, as well as fraudulent transfers of Ashby Farmers Cooperative Elevator’s money to pay for safari trips and taxidermy, among other things. Photo taken Sept. 18, 2018, at Ashby, Minn. (Mikkel Pates / Forum News Service)2 / 4
More than 250 stunned members of the Ashy (Minn.) Farmers Cooperative Elevator in a Sept. 18 special meeting asked questions about how their board allowed at least a decade of fraudulent transfers by former manager Jerome “Jerry” Hennessey. Photo taken Sept. 18, 2018, at Ashby, Minn. Photo taken Sept. 18, 2018, at Ashby, Minn. (Mikkel Pates / Forum News Service)3 / 4
Farmers, in a special meeting of the Ashby Farmers Cooperative Elevator, heard they may have to wait six months to receive partial payments on what the co-op owes them. (Mikkel Pates / Forum News Service)4 / 4

ASHBY, Minn. — Ashby Farmers Cooperative Elevator is closed for business but is talking with three other cooperatives in the region to buy or lease it, hoping to get one of the community's vital businesses up and running.

Erik Ahlgren, a Fergus Falls lawyer, was hired by Ashby Farmers Cooperative Elevator Association to help pick up the pieces in the wake of an alleged fraud by long-time elevator manager Jerome R. "Jerry" Hennessey. Hennessey is alleged to have stolen some $2 million in at least the past 10 years, a time when he was known to go on safaris and other expensive big-game hunting trips.

RELATED STORY: Did safari hunter kill a co-op? Minnesota elevator manager accused of stealing $2 million

"It's very possible it had gone on before that," Ahlgren said. Hennessey had managed the elevator in west-central Minnesota's Grant County since 1989.

Speaking to a member meeting of about 300 people at the co-op warehouse on the evening of Sept. 18, Ahlgren laid out the facts as the board of directors sat silently in the front row and declined comment. Ahlgren said he could guarantee that "nobody feels worse" than the board members, although some audience members indicate the board had failed in its oversight responsibility.

Most co-op members declined to be interviewed. William Malvin, 92, a farmer from nearby Carlos, sold grain he'd raised to the Ashby elevator in 2017.

"The directors were asleep; they weren't doing their job," Malvin said of the Ashby situation. He estimated he might never see half of the $15,000 he's owed.

Ahlgren said he's unaware that a financial audit of the company had ever been done for the company. A co-op, he said, is not required to conduct an annual financial audit, although the bank's lender, CoBank, could have required one.

The co-op owes $8 million to CoBank.

Ahlgren said the Ashby elevator would sell the assets in order to get the grain elevator operating.

"We've got to have this place open as soon as possible," Ahlgren said. Any sale of the assets would require a membership vote.

Questionable books

A criminal investigation has been opened in the case, but Hennessey has not been charged.

The Eide Bailly accounting firm is doing an investigative study of a Wells Fargo account used by Hennessey and has identified $2 million in checks to unknown individuals.

Some of the names belonged to people associated with Hennessey's big-game hunts.

The co-op's financial statements indicate the co-op owes the members about $800,000, and Ahlgren said he thinks it's "actually higher." He thinks the co-op would be able to distribute "some money" to members, but he couldn't make promises about how much. He said the co-op's profit-and-loss statements had been "falsified a long time."

RELATED STORY: Did safari hunter kill a co-op? Minnesota elevator manager accused of stealing $2 million

"At this point, I don't trust the information on our financial statements," Ahlgren said.

The co-op showed about $4 million bushels of off-site grain storage, a figure Ahlgren said likely was "fabricated."

The Minnesota Department of Agriculture conducts a "grain audit." Nick Milanowski, supervisor for the grain unit division, said the company was certified only as a grain buyer — not as a company that stores grain on behalf of farmers who would still own it. Because any grain in off-site storage belongs to the elevator, and not the public, the inspector is not obligated to physically count it for the kind of special inspection the elevator requested.

Asset scramble

Ahlgren indicated the elevator may attempt to ask a judge for a pre-judgment lien on Hennessey's assets.

Otter Tail County shows Hennessey and his wife, Rebecca R. Hennessey, as owners of 170 acres in the county, including a 57-acre building site with a home valued at $516,000.