DIRK LAMMERS

Associated Press

SIOUX FALLS, S.D. (AP) -- Midwest corn farmers who received official letters from bankrupt ethanol producer VeraSun Energy Corp. asking for money back can breath a little easier.

Patrick Glover, a Sioux Falls attorney who's representing some 70 farmers, said he received a call Thursday morning from New York-based law firm Kelley Drye & Warren LLP saying the bankruptcy trustee will not pursue individual farmers.

"I've talked to attorneys in Iowa and Nebraska and they confirmed that they received the same message," Glover said Thursday.

A message left for an attorney with Kelley Drye & Warren was not immediately returned.

August letters sent to growers who sold corn to VeraSun in the 90 days before it filed for Chapter 11 bankruptcy protection in 2008 told the farmers they had until Sept. 30 to repay 80 percent of what VeraSun paid them for their corn.

The demand was not well-received by farmers, many of whom also had their high-price corn contracts with VeraSun negated when the company filed for bankruptcy.

The news couldn't have come at a better time for farmers, who need to be spending their time on harvest, said Lisa Richardson, executive director of the South Dakota Corn Growers Association.

"They organized, they responded and they won," Richardson said.

Richardson said it hasn't yet been determined whether the bankruptcy trustee will continue to seek money from larger commercial operations.

Sioux Falls-based VeraSun, once the nation's No. 2 ethanol producer, filed for bankruptcy in October 2008 after tightening credit markets erased its lifeline to weather the swings in corn and fuel prices. San Antonio-based traditional refiner Valero Energy Corp. has since bought nine former VeraSun facilities.

VeraSun as a company exists only in a Delaware bankruptcy court, with a trustee who is responsible to the creditors in charge of its remaining assets.

Bankruptcy code considers any payment made by a company in the 90 days leading up its Chapter 11 filing a preferential payment. The idea is to prevent a company that knows its days are numbered from choosing to pay certain creditors while stiffing others.

Glover said farmers had a strong defense by showing that the payments were part of an ordinary course of business.

If farmers can show that VeraSun made payments for corn to farmers in the ordinary course of its business before and up through the bankruptcy, then they could be considered exceptions to the preferential-payments rule, he said.

"I think we made a statement to them, and they listened," Glover said.

Glover and Richardson credited the National Corn Growers Association for getting farmers and state groups working together on a coordinated response to the letters.

"We had an excellent team working on this to make sure we had the right information, and to present our case," National Corn Growers Association President Darrin Ihnen said in a statement.

Copyright 2010 The Associated Press.