NEW WILMINGTON, Pa. — The U.S. Department of Agriculture’s Grain Inspection, Packers and Stockyards Administration entered into a consent decision with New Wilmington Livestock Auction, Inc. and Thomas R. Skelton, Canfield, Ohio, over issues with the custodial account from 2009 and 2011.
New Wilmington and Skelton have been ordered to cease and desist from:
• engaging in business subject to the Packers and Stockyards (P&S) Act while current liabilities exceed current assets;
• failing to properly maintain their Custodial Account for Shippers’ Proceeds in strict conformity with the P&S Act and regulations; and
• using funds received from the sale of consigned livestock for any purpose other than those specifically permitted in the regulations.
They have been suspended for 14 days or until they demonstrate to the satisfaction of the Packers and Stockyards Program that the custodial account shortages and insolvency have been corrected.
New Wilmington and Skelton have also been assessed a $25,000 civil penalty.
The civil penalty is being held in abeyance according to the terms and conditions of the consent decision.
New management
The New Wilmington Livestock Auction is under new management and a new name. Kenny Mezurek, manager for the New NW Sales Company, said the USDA fine and past problems have nothing to do with the new operation.
“It has nothing to do with me or this new auction company,” said Mezurek.
Phone calls made to the auction barn and the phone number given to the Farm and Dairy, for additional clarification, were not returned.
Background
GIPSA filed the original complaint in February 2012 about mishaps with the custodial account in 2009 and 2011.
Skelton told the Farm and Dairy at that time that he was the fourth generation to own the business, which was started in 1946. He also said he was concerned that the business would be hurt by the complaint because many people don’t understand the whole custodial account process.
Custodial account
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.
2009
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.
2011
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.
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