ConAgra Inc., a multi-billion-dollar multinational, can’t get credit in a small town co-op.
Failure to pay outstanding bills in small towns and cities near the largest of the company’s three new Saskatchewan grain handling facilities has left the grain giant an unwelcome debtor in several rural Saskatchewan businesses.
In Wilcox, Sask., a small farmer-owned co-operative has said it will not extend credit to the agricultural company until it looks after unpaid bills from the construction of a local elevator. Three thousand dollars of fuel was purchased at the co-op by Universal Grain Systems to be used for construction of ConAgra’s facility. The co-op said a bill is still outstanding six months after the elevator opened.
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Last week the co-op received an application for credit from ConAgra’s administration department in Winnipeg. The Wilcox Co-op’s board of directors gave a quick answer – no.
Several other creditors owed money say they have faced hardship. Many are not pressing the unpaid bill issue and are reluctant to complain publicly because they say they fear loss of future business or that bills will go unpaid even longer.
Universal Grain Systems, based in Winnipeg, was hired by ConAgra as general contractor for the projects, but was later fired. Universal principals say ConAgra owes them money and this left them owing money to local businesses.
“They have nearly put me out of business,” said Universal president Tom Peterson, about ConAgra. “Forty years to build it up and by not paying their bills ConAgra has nearly wiped me out.”
The grain company disagrees.
“ConAgra feels that they do not owe UGS any more money. We are going to court over this issue. It was a fixed price contract and ConAgra has paid all it owes … . It is Universal that owes the money,” said Bruce King, a lawyer for ConAgra.
While the two companies fight it out in court, smaller contractors and suppliers wait to be paid.
Westeel, supplier of steel bins and other structural materials for the Saskatchewan projects, would not say if ConAgra has paid for previous work. A company spokesperson said Westeel is providing materials for another ConAgra facility being built in Manitoba. He said many suppliers and contractors that worked on the Saskatchewan ConAgra projects are also involved in a Manitoba project and are comfortable with ConAgra’s payment record.
A Saskatchewan farmer and subcontractor on the Corrine, Sask., project is not so optimistic.
“I’ve done work for Universal for 15 years and this has never happened before. We’ve done Sask Wheat Pool, Cargill, everybody’s elevators. We’ve always been paid on time. I do one job for ConAgra and this happens,” said the contractor, who wished to remain anonymous for fear future payment prospects won’t be jeopardized.
The contractor said the situation has hurt his business. Paying for labor, taxes, workers’ compensation contributions and for materials that were built into the elevator has resulted in serious problems for the small company.
“It has hurt us bad. When I talked to ConAgra they told me to get my money from Universal. Universal can’t pay me unless they pay him. What more can he do?” said the contractor.
ConAgra began construction of a multi-million dollar agri-centre in Corrine, Sask., more than a year ago, with Universal as a general contractor for it and for facilities at Nokomis and Yorkton, Sask. The general contractor hired specialty sub-contractors, local contractors and businesses to supply tradespeople, labor, materials, heavy equipment and fuel.
In the fall of 1997, ConAgra and Universal Grain Systems had a falling out over construction schedules and payment for unplanned extras. ConAgra fired Universal and, according to Universal, failed to pay for construction that had already been done. ConAgra spokespersons say Universal was well recommended within the industry but that it is responsible for the problems.
When construction was completed using new general contractors, the grain terminals opened, but some local sub-contractors, co-ops and suppliers were left with unpaid accounts.
Local suppliers and Universal filed builders’ liens against the new grain terminal in Corrine. Saskatchewan law requires a builder to hold back 10 percent of the total cost of the contract until construction is complete.
ConAgra’s lawyer says the company is anxious to see the holdback monies paid to those with liens, but the process involves payment to the court for distribution and that dispute is causing a delay.
“We believe that the holdback on the project will result in a payment of 60 cents on the dollar to the subcontractors … . The total project was $27 million,” said King.
Peterson has made a statement of claim with the court but fears he will not be able to secure a hearing date for up to two years.
ConAgra says it is attempting to have the court case moved to Saskatchewan from Manitoba. King said the company is aware of the problems this is causing for the small players in the financial drama.
“We don’t know why Universal failed to pay its subcontractors. ConAgra realizes the pressure this places on the small contractors. This is the worst thing that could have happened.”
According to recent land title searches of the Corrine project, nearly $2.7 million remains unpaid to Universal, local small businesses and a provincial crown corporation. In all, 25 creditors are listed on the document.
Mayo Schmidt, president of ConAgra Canada, said in an interview last week the company “hopes to have the matter cleared up shortly.”
It is the same response he gave last December when interviewed by The Western Producer about this subject.
