NEW WILMINGTON, Pa. — The U.S. Department of Agriculture’s Grain Inspection, Packers and Stockyards Administration says the New Wilmington Livestock Auction Inc. is not meeting the requirements of the Packers and Stockyards Act, in regards to the auction’s custodial account.
GIPSA filed a complaint against the New Wilmington Livestock Auction and owner Tom Skelton Feb. 17.
Skelton said he is concerned that his business will be hurt by this complaint because many don’t understand the whole custodial account process.
“I’m going to engage legal counsel and defend myself and my livestock auction to the fullest extent,” Skelton said. “Three generations have not failed and I won’t either.”
He said the livestock auction has been in business since 1946.
“Anyone who knows our service and dedication in the four-state area, and knows me, knows about our steadfast loyalty to our customers,” said Skelton. “If there are problems they stem from people who don’t pay their bills promptly. The bank that we work with feels very secure in the backing of us.”
The Packers and Stockyards Act requires markets selling livestock on commission to maintain a custodial account for shippers’ proceeds.
The custodial account is a trust account that protects funds that are owed to livestock producers and owners who consign livestock for sale at an auction market.
Proceeds from livestock sales at auction markets must be deposited into custodial accounts. If the proceeds receivable from livestock sales can not be collected and deposited into a market’s custodial account by the close of the seventh day after the sale, then the market must make up the shortfall and reimburse the custodial account for the unpaid receivables.
In September 2009, GIPSA sent Skelton a complaint notifying him that the annual report for 2008 showed a custodial account shortage of $129,204.
The auction was required to correct the violation and bring the auction back into compliance.
In addition, report showed that the auction’s liabilities exceeded its current assets. The letter, according to GIPSA, specified that the auction had assets of approximately $215,508 and current liabilities of approximately $240,558 resulting in an excess of liabilities over current assets in the approximate amount of $25,050.
Then in October 2011, GIPSA sent a violation letter notifying Skelton that the auction was again operating with a custodial account shortage totaling $169,070. The letter informed Skelton that he was required to correct the shortage and filed a report showing another custodial account analysis as of Oct. 31, 2011.
The special report was filed by the auction barn Nov. 30 and it showed that New Wilmington Livestock Auction was operating with a custodial account shortage totaling $194,000.
According to the GIPSA complaint, the custodial account shortages described were due in part to the failure to deposit in the custodial account, within the time prescribed by the regulations, an amount equal to the proceeds receivable for sales of consigned livestock.
The complaint indicated shortages were also due in part to the management’s withdrawal of funds for purposes other than payment to the sellers.
Assets and liabilities. Another charge against the auction barn deals with their assets and liabilities.
As of October 2010, New Wilmington Livestock Auction Inc. had assets of $23,919 and liabilities of $254,599, resulting in an excess of liabilities over assets in the amount of $230,680.
Then in October 2011, New Wilmington Livestock Auction Inc. had assets of $51,844 and liabilities of $236,481, resulting in an excess of current liabilities over current assets in the amount of $184,637.
Skelton will have 20 days after receiving the complaint to file an answer with the USDA clerk.
According to a statement from GIPSA, if the allegations are admitted or proven in an oral hearing, the New Wilmington Livestock Auction and Skelton may be ordered to cease and desist from violating the Packers and Stockyards Act, suspended and assessed a civil penalty.