Express Grain submitted phony audits to state.
Express Grain Terminals, LLC continued Mississippi's grand literary history of creative writing as it submitted rather creative financial statements to the Mississippi Department of Agriculture & Commerce when it renewed its grain warehouse licenses. Phony logos were used, losses were understated by $20 million, and warnings of impending doom were just plain erased. Both the accurate and fraudulent audits are posted below.
Mississippi requires grain elevator operators to obtain an annual
warehouse license. The grain elevators must pay a fee and submit audited
financial statements. Horne LLP audited the company and submitted the
audits to Express Grain. Unfortuantely, Express Grain in turn submitted a different
set of financial statements to the MDAC (The real audits will be called the "Horne Audits" while the phony audits will be labeled the "MDAC audits" in this post.).
The Horne audits show a company that is in serious trouble as it tries to stave off impending collapse. The losses substantially increase every year while debt soars. Meanwhile, the MDAC audits paint a rather different picture. Express Grain is losing some money but is in no danger of failure.
Horne warned at the beginning of each and every audit the company face the serious prospect of failure. Horne stated on page 4 of each Audit:
The accompanying combined financial statements for the year ended June 30, 2020, have been prepared assuming that the Companies will continue as a going concern. As discussed in Note 1 to the combined financial statements, the Companies have accumulated losses of approximately $21,600,000 since its inception and their total current liabilities exceed total current assets at June 30, 2020. The biodiesel facility was placed into service during fiscal 2019 but has not operated at full capacity. The Companies have a line-of-credit with a balance at June 30, 2020 of approximately $24.6 million that matures within the next twelve months. These conditions raise substantial doubt about the Companies' ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 1 to the combined financial statements. The combined financial statements do not include any adjustments that might result from the outcome this uncertainty. Our opinion is not modified with respect to this matter.Every Horne audit continued this dire warning although the amount of the losses changed. The audits show Express Grain's implosion accelerated over the last four years. The annual losses are stated below.
December 2020 (Semi-annual audit): $19.4 million
2020 audit: $21.6 million
2019 audit: $14 million
2018 audit: $9 million
2017 audit: $2.4 million
None of these warnings appeared in the audits submitted to the state for licensure requirements. They were simply omitted. Out of sight, out of mind. It is not hard to see why they disappeared as they would have stood out as a giant red flag to anyone who even looked at the first two pages of the audits. With no such red flag warnings present, MDAC renewed the license, unaware the company was collapsing.
The phony 2020 audit overstated total assets by $13 million and understated inventories by $3 million. The total liabilities were understated by $10 million and included a $20 million understatement of long-term debt.
However, the real chicanery took place on the income statement. The phony audit understated the the net loss by $19 million. The Colemans reported a loss but it was a much smaller $1.9 million. The actual loss was $21.2 million.
The fraud even extended to logos. Express Grain copied and pasted old logos onto the phony audits.
Express Grain submitted the 2020 audit with this logo on the letterhead.
The only problem is Horne began using a different logo on the 2020 audit. It's always the mistakes that expose the cheaters and this case is no exception. Here is the proper Horne logo.
Horne used the red logo in the 2019 and previous audits.
Agriculture Commissioner Andrew Gipson will hold a hearing to revoke the Express Grain warehouse license Monday.
Audits Submitted to MDAC
2020: p.1
2019: p.21
2018: p.40
Legitimate Audits (not submitted to MDAC)
December 2020 (Semi-annual audit): p.1
2020 audit: p. 26
2019 audit: p. 49
2018 audit: p. 72
Synopsis
Express Grain Terminals opened in 2007 and is a major grain elevator in the Mississippi Delta. Dr. Michael Coleman and his son John Coleman own Express Grain Terminals although John's share is 1%. Express Processing open in 2015 and Express Biodiesel opened in 2018. Express Grain owns the two companies.
Express
Grain ran into some financial trouble a year ago. Several farmers
complained to MDAC in December 2020 that checks for their harvest
bounced. However, the company made good on the checks. However, the
company owed over $70 million to UMB Bank. The company submitted phony
financial statements to the state when it renewed its license in the
spring of 2021. Word circulated among Delta farmers during the harvest
season that the company was in trouble.
Express Grain President John Coleman assured farmers everything was okay in a September 28 letter:
UMB Bank sued the company for fraud on the same day in Leflore County Chancery Court. UMB had issued a $40 million revolving loan and a $35 million term loan to the defendants. The bank extended the loans several times. The bank allegedly caught the company submitting false financial statements. UMB declared Express Grain in default on loans of $71 million. The lawsuit sought repayment of the loans and asked the Chancellor to place the company into receivership. Earlier post.
Express Grain filed a petition for Chapter 11 bankruptcy the next day.
The company reports total liabilities of $106 million in assets of $101 million. However, the company owes another $9 million to farmers. The secured claims are $70 million while unsecured claims are $36 million. Total amount owed to farmers is $41 million. The top twenty unsecured creditors report claims of over $23 million.
The damage does not stop with farmers losing their crops. More than a few banks place liens on harvests when farmers borrowed against them. The bankruptcy means those banks could lose the collateral on those loans.
Some farmers have gone to court to get their harvests back. They accused the bank of keeping the broke borrower afloat just long enough to steal the harvests delivered to the grain elevator without paying for them Earlier post.
Commissioner Gipson said Express Grain submitted phony financial statements when it applied for the renewal of its license. He obtained copies of the audited financial statements for the last three years from the company's accountant, Horne LLP, and compared them to those filed with his agency. The Commissioner said the true audits show the company was suffering a $20 million loss while those filed with his office showed a thriving company. The auditors also stated in their notes that it was doubtful the company could continue "as a going concern."
The Commissioner asked the Court's permission to investigate the company and made it clear he wants to revoke Express Grain's license. However, Express Grain and UMB Bank objected to any investigation of the grain elevator.
The bankruptcy judge will hold a hearing on the matter on January 25. However, Commissioner Gipson is holding a revocation hearing on January 24.
32 comments:
My advice to express grain “terminals”. Try to move all legal issues to Hinds County Ms. That is your best shot at survival.
Interesting that the "Delta Farm Press", the bible of delta farmers, has not published 1 word on this disaster.
Remember when I commented that it was going to be a federal case?
UMB is based in Kansas City.
They Phooled Phildo Bryant in 2016:
"Jackson, Mississippi — October 25, 2016 — Express Grain Terminals has expanded agricultural product processing operations in Greenwood, Mississippi, creating 10 new jobs and investing $2 million. Earlier this year, the company created 55 jobs and invested $13 million in Mississippi.
“Agribusiness is a significant economic driver in Mississippi. I am glad Express Grain Terminals found the resources and skilled workers needed to grow. This project will help boost the economy in Leflore County and the entire Mississippi Delta region,” Governor Phil Bryant said."
Is it illegal to overstate asset values?
If insurers and banks rely on the overstated value will
The liars face jail time?
That seems to be the case here…..
Is that the law everywhere?
11:08
You are correct but as someone who used to work for the feds, federal courts move at the speed of a herd of racing turtles.
Does anyone still think the proposed deal for UMB to loan another $30 million to keep the company operating, in return for a super-priority lien against $100 million in assets, passes the smell test?
Note: These guys are bush league compared to Texas, where $1 billion went missing from the Department of Transportation, and they chalked it up to an "accounting error."
Yes, it’s called fraud.
§ 97-7-10. Fraudulent statements and representations
• (1) Whoever, with intent to defraud the state or any department, agency, office, board, commission, county, municipality or other subdivision of state or local government, knowingly and willfully falsifies, conceals or covers up by trick, scheme or device a material fact, or makes any false, fictitious or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry, shall, upon conviction, be punished by a fine of not more than Ten Thousand Dollars ($ 10,000.00) or by imprisonment for not more than five (5) years, or by both such fine and imprisonment.
• (2) This section shall not prohibit the prosecution under any other criminal statute of the state. SOURCES: Laws, 1988, ch. 511, § 2, eff from and after July 1, 1988.
It would be interesting to know whether their bank was getting the HORNE audit or the Fraudulent Financials. I would think surely the got the HORNE audit because they would know the amount of debt the company had with the bank. I guess that will probably all come out in the lawsuit between the farmers and the Bank.
Thx KF for these stories of malfeasance. I believe each episode that escapes prosecution creates a dark, fertile bed for more worms to be inspired to feed their greed. EG: Ex governor Barbour appeared freewheeling in some of his promotions.
@12:18, if not, the Bankruptcy Court will not approve it.
IN all seriousness KF thank you for the coverage of this. Haven't heard a peep from any other metro area publication, while this seems to be big enough to make national news when it's all said and done. You'd think "$100M+ Fraud screws rural MS farmers" would catch some eyes
Auditing 101 lesson:
There are various types of opinions that an auditor, like Horne, can issue. Two of them are as follows:
- "Clean" opinion: The financial statements are what they are, and there are no issues or problems.
- "Going concern" opinion: Based on the financial statements, the financial condition of the company raises questions about its ability to continue operating. There is very specific language that the AICPA requires an auditor to use in it's opinion. Here is that language (quoting from the excerpt above):
"These conditions raise substantial doubt about the Companies' ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 1 to the combined financial statements. The combined financial statements do not include any adjustments that might result from the outcome this uncertainty. Our opinion is not modified with respect to this matter."
If the owners of EG removed this language and/or in any other way materially altered the financial report prepared by Horne, this is outright fraud. And it is criminal.
Lost in all these new revelations is what was the opening shot in this and other reporting sites - Shyster Don Barrett's attempt to make the bank the bad guy and reaping large legal fees by suing them for the farmer's losses.
Clearly the bad guys here are the ones that were running the elevator, issuing rubber checks, and producing fake audited statements. Clearly the Coleman's faked financial statements to retain their elevator license; it would be a logical conclusion that they submitted similarly false financial statements to the bank. Seems to shoot large holes in Barrett's claim that the bank kept the business operating knowing of their financial condition.
It will (sort of) be like WorldCom, unless Andy pulls their license. Then it will be like Sears, Stein Mart, and Toys-R-Us.
@12:33 The penalties referenced in your post are literally crumbs when compared with the amount of monies involved. Whatever individual that submitted the doctored audits to the State had better hope that is all the punishment he faces, and it is pretty much a given that this minor event was somehow forgotten when hiring his lawyers. They probably are as pleased as the farmers.
@ 1:37: I'm glad that they bank has hired your as their spokesperson. Congratulations.
I'm sure the bank got the real audits since even a casual reading of the fake ones by the bankers would have revealed something was up. The reason why the banks are going to pay for this is that they intentionally schemed to time their calling of the loan to coincide with when the elevator would have the farmers assets in custody. They intentionally delayed that process in order to maximize their ability to seize other peoples' assets.
I know you know this, but I'm trying to just make sure no one else loses sight of the reason the bank is involved.
Did the Bank actually seize any of the grain on site? Did the Bank have a security interest in that grain?
@3:06pm. I am not a lawyer, nor did I stay in a Holiday Inn Express last night, but I think we can all agree that the actions of UMB appear to be morally wrong. That being said, morally wrong and illegal are two different things. Please share with the rest of us the specific laws that have been broken by the bank, Asking for many friends.
Where did all of the money actually go?
Grain elevators are highly profitable and do not "lose" that much money each year.
4:52: Common law, statutory law, administrative law, and the Golden Rule.
-not 3:06
To 6:44, the elevator was floating the Biodiesel operations. That business segment was the downfall of this company.
$20 million went to 15 lifted golf carts. Can’t you read? Dang. EZ-Go will not issue a refund as the buyer signed the interstate bill of sale to avoid paying sales tax.
(The real audits will be called the "Horne Audits" while the phony audits will be labeled the "MDAC audits" in this post.)
To be more accurate, let's call them the 'Accurate Audits' and the 'Revised Audits'.
And please stop with the nonsense of 'the figures were omitted'. Literally they were *redacted*. There's a difference. Omitted means 'left out of'. Redacted means 'cut from as if to conceal'. You can expect to hear this explanation at trial.
Thanks Kingfish. You are the only one who has dug into this story to bring the facts. Keep up the good work.
If those audits were indeed fabricated, they don’t need a trial, they.simply need a conviction.
The bankruptcy court record now includes the real Horne audit reports and the falsified reports submitted by Express to the State and to the lenders.
They won't be riding lifted golf carts where these losers will be went after they are sentenced.
Nice Post!!
Please look here at Freight Auditing Companies
4:52, you can’t be serious that you aren’t aware of a law against providing falsified reports to a state regulating agency and to a lender.
I thought ole Cowboy Andy was supposed to protect us from fraud like this and marijuana?
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