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House Bill 1458 reforms the Illinois
Grain Code and was prompted by the August 2001 failure of
Minooka-based Tywalk Liquid Sales Inc. Tywalk's collapse -- the
largest grain elevator failure in Illinois history -- bankrupted the
fund and resulted in criminal charges against two top executives of
the company.
“No law can prevent the kind of fraud
and deception that caused Tywalk's demise, but this legislation will
ensure that dishonest elevator operators who harm our hardworking
farmers face stiff fines and substantial jail time,” Blagojevich
said. “In addition, the new law will increase the agriculture
department's oversight of grain merchandising activities and
discourage wrongdoing that threatens the financial stability of the
state's multibillion-dollar agricultural industry.”
The legislation creates a three-tiered
examination system requiring increasingly thorough examinations of
grain elevators, depending upon their type of grain merchandising
activity. It also permits the
Illinois Department of Agriculture
to conduct criminal background checks on the management and
principal officers of licensees.
Criminal violations of the code would
increase from a Class 3 to a Class 2 felony, and licensees who fail
to comply with the code's limits on open positions and grain
quantity shortages would pay increased fines.
Farmers and lenders lost $14 million in
the failure of Tywalk's grain business. A total of $46 million in
claims -- $32 million of which were covered by the Illinois Grain
Insurance Fund -- were filed. Payment of the covered claims
exhausted the fund's $5 million balance and required a $4 million
state appropriation. The remaining $23 million was raised from the
sale of seized company assets.
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To pay back the state and replenish the
fund, grain farmers and lenders who either hold warehouse receipts
as collateral or enter into grain repurchase agreements with
licensees will be assessed premiums for the first time. The
assessment on elevator operators, who have contributed to the fund
since its inception in 1983, was unchanged.
“The premium will cost the average
grain farmer about 12 cents an acre, or $4 for $10,000 in insurance
protection,” Agriculture Director Chuck Hartke said. “That's a
reasonable price to participate in an insurance program that
provides the most comprehensive coverage in the nation.”
Contributions from grain farmers are
expected to generate $2 million a year, farm lender premiums will
bring in another $250,000, and grain elevator operators will pay
$825,000.
Farmers will continue to pay premiums
until the fund balance reaches $3 million. The assessments on
lenders and elevators will cease when the balance hits $6 million
and will not be reinstated unless a failure causes reserves to dip
below the $6 million threshold. Farmers would not contribute again
unless the balance falls below $2 million.
Other provisions of the legislation
will:
--Increase
the coverage offered to producers with price-later contracts and
other unpaid grain transactions from $100,000 to $250,000. The
coverage period also would be extended from 270 to 365 days.
--Allow claimants to be paid for the
undisputed portions of valid claims during the appeal period for
disputed portions of claims.
--Require licensees to increase their
net worth from the existing $50,000 requirement to $100,000 over a
five-year period.
--Permit the use of electronic
warehouse receipts.
House Bill 1458 was sponsored by state
Rep. Mary K. O'Brien, D-Watseka, and state Sen. Larry Walsh,
D-Elwood.
[Illinois
Government News Network
press release] |
