By NIGEL DUARA
IOWA CITY, Iowa (AP) -- It's not often that someone demands $1.7 million from Jeff Reed, so when the Minnesota cattle seller opened an ordinary envelope with a surprising letter inside, his jaw dropped.
The letter was one of hundreds asking companies to return money paid by Agriprocessors, Inc., within 90 days of the kosher slaughterhouse's bankruptcy declaration in November 2008.
"It was fairly shocking, to say the least," said Reed, the chief operating officer of the South St. Paul-based Central Livestock Association, a cooperative of livestock sellers.
Reed, who received the letter Monday, said he has no intention of repaying the money.
"We're just an agent," Reed said Wednesday. "We were buying the cattle from farmers and selling them to Agriprocessors. (Now) we have no product and we don't have these dollars because they were all paid to farmers."
The Agriprocessors plant was the site of a massive immigration raid in May 2008. Almost 400 workers were arrested, the company filed for bankruptcy and last month, former plant manager Sholom Rubashkin was found guilty on 86 counts of financial fraud. The plant has since been sold and renamed Agri Star.
The letters -- nearly 500 in all -- are backed by a part of the bankruptcy code intended to discourage creditors from being so aggressive in collections that they force debtors into bankruptcy. The law also keeps bankrupt companies from shuttling money into other corporations and disguising assets just before they go bankrupt.
The letters ask the companies to repay whatever Agriprocessors paid them. If they pay by Dec. 15, they only need to return 80 percent.
But Dan Childers, the attorney for the bankruptcy trustee and the man behind the mailings, said the recovery process will be long, and he expects to negotiate with all the companies. Some will likely walk away owing no money.
"These (letter recipients) will almost surely, eventually, be boiled down to only a few where agreements can't be made," Childers said. "I think it has become an emotional issue, or at least an issue where there's a question of fairness because there's a perception that because (the sellers) got paid timely, they're going to suffer."
Bruce Berven, of the Iowa Cattlemen's Association, said at least 25 of his members have gotten the letter. He has told them not to ignore it and said his organization has asked an attorney to look into the matter.
"Remember that these transactions were for cattle sold primarily in August, September and October of 2008," Berven said. "You received payment, you took it to the bank, the check cleared, you breathed a sigh of relief and you went on about business."
The market for cattle sellers fell off considerably when the former Agriprocessors plant was raided, Berven said, and many cattlemen are still reeling from the initial financial blow.
"When the facility ceased operating, we saw an immediate drop in cattle prices because a major competitive bid in that area was no longer there," Berven said. "As a buying source for cattle, it is sorely missed. We're hoping that the plant under new ownership will begin operating again.
"It will be a healthy thing for the Iowa cattle industry if it does."
Copyright 2009 The Associated Press.