LINCOLN, Neb. (DTN) -- The former owner/operator of Express Grain in Mississippi was arrested Tuesday after a federal grand jury issued a six-count indictment Nov. 15 on federal wire fraud charges in connection with the company's ongoing Chapter 11 bankruptcy.
In addition, John R. Coleman, 46, of Greenwood, Mississippi, was indicted by a state grand jury on Nov. 29 on state charges.
Soybean processor Express Grain owed at least $31 million among hundreds of farmers for grain it held but did not pay for, according to the federal indictment, and instead used the grain to obtain operation loans.
A state grand jury charged Coleman with five counts of making false or fraudulent statements to the state and one count of obtaining a signature or thing of value with intent to defraud. The state charges, however, allege Coleman induced farmers to deliver grain without payment, in "an amount exceeding $50 million."
Coleman was released from jail on $50,000 bond and pled not guilty to the charges this week, according to court documents filed in the U.S. District Court for the Northern District of Mississippi. Coleman could face up to 20 years in prison for each wire fraud count.
The federal grand jury accused Coleman of defrauding farmers, banks and the Mississippi Department of Agriculture.
From June 2018 to October 2022, the federal indictment said Coleman schemed to "obtain money by means of false and fraudulent pretenses, representations and promises. John R. Coleman intentionally misled farmers, lenders and the Mississippi State Board of Agriculture to induce them to deliver grain to Express Grain, lend money to Express Grain and provide Express Grain with warehouse licenses despite Coleman's direct knowledge that Express Grain was in severe financial distress."
Coleman's actions "caused widespread financial hardship and suffering through the Mississippi Delta and elsewhere," the federal indictment said.
Starting in 2018, Coleman made "material changes" to his company's audited financial statements for 2017 including the removal of the "emphasis of matter regarding going concern" paragraph, according to the federal charges.
On or about June 7, 2018, Coleman emailed the altered financial statements to the Mississippi Board of Agriculture "claiming that they were the legitimate financial statements" of the company.
The federal indictment alleges Coleman made the same changes to Express Grain's financials in 2018, 2019 and 2020. He then emailed those statements to the state to renew his grain warehouse license.
On or about Sept. 4, 2021, Coleman allegedly emailed fraudulent financial statements to Kansas City, Missouri-based UMB Bank.
"Throughout the harvest season of 2021, farmer victims delivered grain to Express Grain but did not receive payment for grain," the indictment said.
"As a result, in September 2021, Express Grain had not paid the famer victims for much of the grain physically stored at Express Grain. John R. Coleman sold large amounts of grain to third parties such as FC Stone Merchant Services LLC and never actually paid the farmer victims for the grain they had delivered to Express Grain."
On Sept. 22, 2021, UMB Bank requested a warehouse receipt report showing the amount of grain held by the company that "had been pledged as collateral to UMB Bank" as well as the amount of grain pledged or sold to third parties.
"John R. Coleman responded to UMB Bank and grossly underreported the amount of grain that had been pledged or sold to entities other than UMB Bank," the indictment said.
In one instance, Coleman claimed 100,000 bushels had been sold to FC Stone in a purchase and sale agreement. In reality, the indictment said, 2.78 million bushels had been sold to FC Stone for a difference of $30 million.
"Farmer victims that had harvested this grain had not been paid by Express Grain for that same grain," the indictment said.
UMB Bank issued a notice of default to Express Grain demanding the immediate payment of about $70.7 million.
"Despite the notice of default and notice of intent to file a verified complaint," the indictment said, "on or about Sept. 28, 2021, John R. Coleman directed Express Grain to send a widely distributed email to potential customers stating that Express Grain was financially stable."
That email reads: "We are steadily crushing beans and will start shipping trains of beans, so we have ample space for everyone. I also wanted to let you know that we are in good shape financially. We have funding in place from multiple sources to make sure everyone gets paid on time. Stay safe out there and keep those combines rolling!"
Express Grain filed for bankruptcy on Sept. 29, 2021, according to court records.
Though farmers lost tens of millions of dollars, court records indicate farmer creditors will divide just $9 million as part of a settlement.
In February 2022, UMB Bank purchased Express Grain at auction for $25 million, according to court records. UMB bought three storage warehouses and a soybean-processing plant. The purchase reduced the company's debt to the bank to $45 million.
Todd Neeley can be reached at firstname.lastname@example.org
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