News that the Alberta government has suspended a loan program at Picture Butte Feeder Cooperative has shocked the beef industry.
“Anger, disbelief and confusion about how this is even possible, while recognizing that the Alberta government did not take this process lightly and underscoring the necessity to rectify and realign findings in the ‘unsound practice’ back to the intent of the (Feeders Association Loan Guarantee) program,” Curtis Vander Heyden, vice-chair of the Alberta Cattle Feeders Association, said in an email to the Western Producer after hearing about the suspension.
The Picture Butte Feeder Cooperative is the province’s largest cattle financing co-operative. The government suspended the loan program at the co-op after an inspection alleged a number of financial mismanagement and regulatory issues.
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The province’s claims were attached to an affidavit for Tony Ankermann, who was vice-chair of the co-operative, dated Feb. 18. They include that the co-operative allegedly accepted ineligible feeder members, used guaranteed loan proceeds for improper purposes, provided more advances than allowed and obstructed provincial inspections.
Noncompliance claims with the act and regulation noted in the affidavit included:
PBFC contravened section 11 (1) of the regulation by accepting members who did not meet the requirements of section 11(1)(a) of the regulation, which include but are not limited to, owning or leasing land on which the individual directly carries on the business of farming for gain or reward.
PBFC contravened section 11 (2) of the regulation by allowing members to maintain membership when it was not reasonably apparent from the person’s conduct that the primary purpose for holding the membership was to enable the person to receive supplies of livestock under the act and regulation for growing or finishing or both.
PBFC contravened section 4 of the act and section 13 of the regulation by using proceeds of the guaranteed loan for a purpose other than supplying livestock or advances to the member, or for the other purposes allowed by section 13 of the regulation.
PBFC contravened section 4 of the act and section 13 of the regulation by using proceeds of the guaranteed loan for transactions made on behalf of members who had withdrawn from PBFC.
PBFC contravened section 14(3) of the regulation by providing livestock or advances to individuals that PBFC knew or reasonably should have known were not eligible to be feeder members under section 11 (1) or 11 (2) of the regulation.
PBFC contravened section 30(2) of the regulation by providing advances to members that exceeded 50 per cent of the difference between the purchase price and fair market value of the livestock.
PBFC contravened section 31(1) of the regulation by supplying livestock to members in excess of the prescribed limit for their total monetary obligation, excluding advances.
PBFC contravened section 33 of the regulation by failing to collect security deposits from certain members.
The affidavit also included claims of obstructing inspections and failing to provide reasonable assistance by obstructing the minister in carrying out inspection powers and failing to provide reasonable assistance to the minister.
This included:
- PBFC staff refused to speak to inspectors.
- Used non-disclosure agreements with staff in a way that led them to refuse to speak with inspectors.
- Interfering with the minister’s attempt to interview a relevant witness.
- PBFC failing to respond to the inspectors’ questions about amended board minutes.
- Maintaining inadequate sales documents including the name of purchaser and purchase price of livestock, and to provide records on request.
- Unsound practices by PBFC administration were also listed:
- Allowing memberships reliant on powers of attorney.
- Preparing or accepting irregular powers of attorney and other legal documents.
- Accepting documents with irregular signatures.
- Accepting documents that may have not been properly executed or witnessed.
- Using equity advances in payment of security deposits.
- Failing to reduce the risk of member default.
- Failing to update sales records in a timely way.
- Processing transactions in the names of member who had withdrawn.
- Failing to keep adequate board minutes.
- Failing to keep adequate financial records.
- Unsound practices by the PBFC board of directors listed in the affidavit included:
- Failing to consider membership eligibility requirements.
- Failing to consider appropriate monetary limits for new members.
- Permitting a high proportion of related transactions.
- Failing to keep adequate financial statements.
- Failing to address conflicts of interest.
- Providing excessive board compensation and expenses.
- Failing to hold an annual general meeting in a timely manner.
In response to the order, the co-op sought court approval to appoint a restructuring officer, Alvarez & Marshal, to oversee its operations and work toward lifting the loan suspension. A number of board members resigned after the order was issued, while the remainder were set to resign upon the appointment of a restructuring officer, according to documents on Alvarez & Marshal’s website.
“Anyone with PBFC financing is handcuffed right now, and the understanding is that it will continue until the restructuring is complete,” said Vander Heyden.
“Producer exposure is unique to each contract. It would be unfair to speculate other than to say that security deposits are always at risk to cover a financial shortfall within a LFA (local feeder association).”
Alvarez and Marshal consultants are acting in place of PBFC board and staff while they handle business affairs, according to a statement from Alberta Agriculture.
According to information posted to Alvarez & Marshal’s website, a letter was delivered to the co-operative stating the inspection and investigation section of Alberta Agriculture conducted inspections of PBFC between Sept. 7, 2023, and May 15, 2024. The inspection turned up the alleged violations, which triggered the suspension of the co-operative’s loan program.
“ACFA recognizes and supports the Alberta government in taking action now to protect the integrity of the program for other feeders, associations and their members,” Vander Heyden said.
“We want to ensure this program remains viable and available to producers who need it, ensuring the intent of the program continues to be met, which includes supporting new entrants, facilitating sector growth and helping to provide access to effective low-cost financing for small and midsize livestock-grassroot producers.”
The Alberta government has agreed to guarantee 15 per cent of PBFC’s loan facility, Ankermann’s affidavit states. It goes on to say the government guaranteed to cover up to $60 million, but reduced that to $50.25 million on July 17, 2024.
Given the order, Ankermann’s affidavit stated PBFC is currently unable to provide quick and reliable access to funding for members. Some members who own cattle financed by PBFC can’t currently advance additional funds to cover feed costs. Others have security deposits or approved funding tied up and can’t use it to purchase livestock.
“Affected producers need to search their own financial advice,” Vander Heyden said.
“The poor governance, alleged misuse and publicly available ‘unsound practices’ found in the ministerial order are very concerning. Information provided to date includes assertions which could hold impacts on an industry built on integrity and a handshake cannot afford.”
Vander Heyden said the Feeders Association Loan Guarantee program remains important to the Alberta beef industry and must be protected.
“The Alberta Cattle Feeders believes that the necessary steps taken to rectify the non-compliance must be transparent and result in improved practices and oversight to ensure this cannot happen again.”
