Court rules Stamp Farms' Chapter 11 case will not be run by trustee

By Caroline Salls

Pittsburgh, Jan. 18 - Stamp Farms, LLC's U.S. Trustee's motion for appointment of a Chapter 11 trustee to oversee the company's bankruptcy case was denied Friday by the U.S. Bankruptcy Court for the Western District of Michigan.

As previously reported, Region 9 U.S. Trustee Daniel M. McDermott said Stamp Farms principal and sole member Michael Stamp allegedly engaged in improper conduct before the company's bankruptcy filing.

McDermott said the conduct included misrepresentations to Wells Fargo Bank about the amount and value of the Stamp Farm debtors' assets in order to obtain additional funds from Wells Fargo; misrepresentation of acreage farmed; use or sale of Wells Fargo collateral to generate cash to pay other creditors; transfer of Wells Fargo collateral to related non-debtor entities and liquidation of that collateral for the benefit of non-debtor entities; and accounting irregularities.

According to the motion, the total net worth of Stamp Farms and Northstar Grain LLC, as determined by new auditor Crowe Horwath LLP, was allegedly negative $2.8 million, compared with a total net worth of $39 million based on internal financial reports.

The U.S. Trustee said Crowe Horwath determined that "the debtors' financial records and reporting are so unreliable as to render it impossible for Crowe Horwath to accurately analyze debtors' finances."

"It appears that Michael Stamp engaged in significant fraud, self-dealing and mismanagement," McDermott said in his motion.

In addition, McDermott said Stamp and his wife allegedly conveyed their voting authority to O'Keefe & Associates on the eve of the bankruptcy filing. O'Keefe is acting as Stamp Farms' chief restructuring officer and manager, but the U.S. Trustee said it has not sought court approval of its appointment as CRO.

"At this point, the debtors lack any real or effective management structure," the U.S. Trustee said.

"O'Keefe essentially has carte blanche (at least for the next 5 months) to operate the businesses without any corporate oversight by an active board or active managing member."

Stamp Farms, a Decatur, Mich., commercial grain farming business, filed for bankruptcy on Nov. 30. Its Chapter 11 case number is 12-10410.

Note: A story in the Jan. 10 edition of Prospect News Distressed Debt Daily incorrectly reported that the Chapter 11 trustee motion had been approved by the bankruptcy court.

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