Practice Areas
By Scott Sloan - ssloan@herald-leader.com
Lexington Herald-Leader
Wednesday, December 01, 2010
Nearly 200,000 tobacco farmers in five states will receive a small check by the end of the year and a larger one in June as part of a long-running lawsuit between growers and the Lexington-based Burley Tobacco Growers Cooperative Association.
Fayette Circuit Judge Pamela Goodwine recently gave her approval for $7.3 million to be distributed to past and current burley tobacco growers in Kentucky, Indiana, Missouri, Ohio and West Virginia.
It will be the second such payment to the group of farmers. The first came in 2008, when about $57 million was distributed.
The money came from the 2005 sale of previously unsold burley tobacco, the ownership of which is central in the case. The sale came after the decades-old federal price-support program for tobacco ended in 2004 and saw the federal government send unsold tobacco to the co-op. The co-op historically had paid farmers an advance on their tobacco and stored it for future sale, said Robert Maclin, an attorney for the farmers. A 2007 court order in the case ruled that the tobacco received in 2005 belonged to the farmers and that proceeds from the sale by the co-op should go to them.
The $7.3 million is from the sale of tobacco after the first check was sent to farmers in 2008. Of that amount, $700,000 will be reserved to account for the costs of issuing the checks, estimated at $150,000 to $170,000, with the remainder being held in a bank-requested contingency fund, Maclin said.
Each check will be for about $30.
"Because of the nature of the way the memberships were held, most farmers are going to get between two to 11 checks," he said.
But the checks next year will be larger. In mid-June, more than $22 million will be disbursed with each check being more than $100. That round of money relates to tax refunds. The co-op had paid taxes on the burley when it was sold in 2005 and 2006, but the plaintiffs' lawyers argued that the co-op should seek a refund of the taxes and turn it over to the farmers.
The co-op's payments to the trust fund have led it to restate its income taxes and report losses. As a result, it indeed received tax refunds that have been paid into the trust.
Maclin and the plaintiffs' lawyers had pushed for the $22 million to be combined with the $7 million and released immediately, but the judge "was reluctant to do that," he said.
That's because the co-op's leadership had voiced concerns that if the Internal Revenue Service were to rule the refunds were improper, then "someone would have to repay the money," said co-op President Roger Quarles.
"We have always been in favor of disbursement," Quarles said.
The time period for the IRS to review the case expires in June, allowing the disbursement to take place then.
Maclin said that even though there will be the costs of two mailings, his clients preferred to go ahead and have two sets of checks issued.
"They felt like it was appropriate to do something as soon as possible," he said.
The June check won't be the final one, either. Each time the co-op makes a payment to the trust fund, it results in another tax refund, although they get smaller and smaller.
Maclin said an additional $8 million to $10 million is expected in the coming year.
"This isn't going to be it by any stretch of the imagination," he said.
