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Minn. lawyer appointed to gather assets in McMartin bankruptcy case

Ron McMartin Jr., president of McM Inc., a sprawling high-value specialty crop farm based at St. Thomas, N.D., says he has no plans of quitting farming, despite false rumors. He's endured rumors of financial collapse and even that he'd committed suicide. Photo taken Oct. 10, 2016, near St. Thomas, N.D. (Forum News Service/Agweek/Trevor Peterson)

MINNEAPOLIS — A federal judge has granted a bank's motion to put a receiver in charge of gathering personal assets of Ron McMartin Jr. to pay off creditor claims and denied the farmer's effort to dismiss the case.

BMO Harris Bank N.A. alleges the large-scale, specialty crops farmer, formerly based in northeast North Dakota, purposefully engaged in a pattern and practice of misrepresentation to obtain or continue credit from the bank.

McMartin's lawyer, Jon Brakke of Fargo, N.D., said he hadn't responded earlier because he was asking for the dismissal or change in venue to North Dakota.

"Now that that has been denied, we will have to put in an answer, and you will see our rejection," Brakke said. He said one area of dispute is how much of McMartin's personal assets, if any, are encumbered by the loans.

U.S. District Judge Donovan W. Frank in Minneapolis granted the receivership motion last week and appointed Philip Kunkel, a St. Cloud, Minn., lawyer, as receiver.

McMartin was the sole-owner of McM Inc., of St. Thomas, N.D. The farm had operations in North Dakota and Minnesota, farming up to 50,000 acres of red potatoes, corn, wheat, soybeans, dry edible beans and sugar beets.

McMartin and McM since 2012 had accumulated debts of $50 million, including $43 million from the bank, and "convinced the bank to extend or continue these loans by providing false financial statements to the bank," the bank said in the receivership request. In court documents the bank also claimed McMartin had failed to comply with terms of loans and had converted loan proceeds and collateral for purposes not permitted by contracts.

As of Jan. 30, BMO Harris Bank said $42.2 million in principal was due: $32 million for the revolving line of credit; $1.4 million for a hedge line; and $8.8 million for the 2016 input loan.

On Feb. 2, the bank lawyers alleged McMartin had "fraudulently misrepresented — by millions of dollars — the financial statements and financial information which it delivered to the bank in support of McM's requests for advances under its revolving credit line with the Bank, and otherwise intentionally converted or transferred the bank's collateral, including cash proceeds thereof, to third parties without the knowledge or consent of the bank."

McM's corporate bankruptcy filing listed about $50 million in debts, including the $42.2 million to BMO Harris, and about $10.2 million in assets. The 40,000 acres in the farm went on to be farmed by others. (The Kenny Johnson family of Walhalla, N.D., one of McM's landlords, scrambled to form Elk Valley Farms LLP, to handle 20,000 acres of the land.)

Brakke on Feb. 23 asked the receivership case be dismissed or moved to North Dakota. In March, the bank's lawyer, Thomas J. Lallier of Minneapolis, called the change-of-venue request a "shameless attempt to delay this case and divert the court's attention from his fraudulent conduct." BMO noted the venue was spelled out in contract and McMartin lives in the Minnesota district. As evidence, they the September/October 2016 issue of Lake and Home Magazine, which featured McMartin's home on Island Lake, Minn. "quite possibly purchased and built with the bank's money." The motion for change of venue was denied on Aug. 8.

In late April, Lallier asked Frank to confer about whether McMartin would intend to file his own personal bankruptcy prior to a May 5 hearing.

"If a personal bankruptcy by Mr. McMartin is a certainty, it would be inefficient, inconvenient and costly for the Bank and this counsel to prepare for and attend the May 5, 2017 hearing," Lallier said. He noted that in a March 27 state court divorce proceeding in Grand Forks District Court, McMartin "represented to the court ... that a bankruptcy filing by him is inevitable."