New legislation, named SB356 and effective August 28th, now requires grain dealers within Missouri to set aside more money and also requires a surety bond double the present amount currently required to better protect against fraudulent acts. The new law came about as a result of 180 farmers losing roughly $27 million because of deceitful practices by T.J. Gieseker Farms and Trucking, a Missouri grain dealer. Cathy Gieseker was running the business at the time and is now serving a nine year sentence in federal prison for felony charges of theft and filing untrue statements with state officials

According to Prosecutors, Gieseker cheated farmers by telling them she had contracts with Archer Daniels Midland Co. that would generate returns of 50-100 percent above market even though there were no such contracts in place. In order to stay under the radar, she would occasionally pay inflated returns to farmers as false proof that she really had a deal with the company. When Gieseker started to neglect various farmers’ payments, it raised a flag and they went to regulators of the state Agriculture Department for some aid. An audit of T.J. Gieseker Farms and Trucking exposed financial abnormalities in the company that prosecutors claim go back to 2002, removing Gieseker’s smoke and mirrors.

Safeguards were already in place in Missouri, but they were not adequate to handle this kind of fraud. The new law doubles the surety bond amounts required of grain dealers from a minimum $20,000 and a maximum $300,000 to a minimum $50,000 and a maximum of $600,000 (based on the amount of grain). Grain dealers are now also required to preserve assets equivalent to their liabilities. With the larger surety bond being required of grain dealer’s, farmers have more financial protection. Surety bonds are required by the state or federal government and they guarantee that an individual or organization will follow rules and regulations. If they don’t abide by the rules, a claim can be filed against the company with the surety bond up to the full amount of the bond. The surety company who wrote the bond will pay the claim amount, but will then turn to the company who broke the rules in the first place for reimbursement. With the new legislation, farmers doing business with grain dealers are now protected up to $600,000.

“Overall it’s a move to modernize Missouri’s grain dealer statute, and it should enhance the protections that the (state agriculture) department provides to the farmers through its regulatory program”, said Richard Wahl, president of the Association of Grain Regulatory officials.

In the end surety bonds are there to protect the public. They help deter illegitimate businesses and will reimburse for damages done by any. Although this new bill came too late for the farmers involved here, it will better protect Missouri farmers in the future to come.

The surety company who wrote the original $22 million bond for the job went into bankruptcy, which caused the surety to lose its required AAA rating. The county was then going to be forced to look elsewhere for the surety bond which would end up costing roughly $200,000 in additional premium with a new surety company. But on Monday, the Jackson County Legislature authorized the waiving of the original AAA credit rating requirement that the surety company was to uphold avoiding the extra premium.

“This looks like a wonderful resolution,” said Dennis Waits, the new chairman of the Legislature.
The reasoning for the AAA credit rating requirement was to guarantee the financial strength of the surety company backing the bonds they wrote which protected public money. Obviously the surety company is not in great financial shape considering their bankruptcy so the county just modified the criteria the surety must meet. Normally, removing the AAA rating requirement negates the point of having the bond in the first place because now that the surety’s financial strength is more than questionable there is absolutely no guarantee that they can pay any claims that may arise. Being that much of the work is already complete, the risk that a claim will arise is minimal which makes this a reasonable solution. This resolution works out for the Royals because more time will be spent completing the stadium job as oppose to raising more funds to pay the additional premium of a new bond. The Kansas City Royals will now be playing ball in their new home sooner than later.

This is a perfect example of why it is so important to carefully choose the surety company that is backing your bonds. Most of the time it would be very risky to modify the financial requirements sureties must meet mid job, but in this case the majority of the work is done and there is a small possibility for a claim. Hopefully all goes well with the rest of the Truman Sports Complex project.