Elevator fraud victims likely to get a fraction of what is owed
MINNEAPOLIS — Federal prosecutors in the Jerry Hennessey fraud case recommended to the court how the $5.3 million in restitution should be split among victims of the former elevator manager, which will be a fraction of percentage of what is owed.
Hennessey, 56, is serving an eight-year prison sentence for the many years he spent defrauding the Ashby Farmers Cooperative Elevator in western Minnesota. The fraud, with much of the money spent on big-game hunting trips around the globe, was discovered in September 2018.
In July, U.S. District Chief Judge John R. Tunheim ordered certain assets be forfeited and that Hennessey pay restitution of $5.3 million. Prosecutors proposed a method for allocating the restitution to victims, but Tunheim has so far not approved it.
In a separate but related state civil matter, an assignee (trustee) for the benefit of the creditors of the defunct co-op is liquidating other co-op assets to pay creditors.
In the proposed motion, Assistant U.S. Attorney John Kokkinen specified terms for two kinds of victims: creditors and owners of equity in the co-op.
The government estimates a total of $14.5 million in claims. This includes:
$12 million in creditor claims by 38 victims. These include CoBank, a Denver-based lender that had loaned money to co-op. A listing of creditor amounts shows only one large creditor that is owed $7,670,391.43, or about 53% of the total owed to creditors. The name of the creditor, however, is redacted. That creditor is allocated $2.85 million from the restitution, if full value is acquired from assets Hennessey has agreed to forfeit.
Other large debts involve farmers who supplied crops but weren’t paid for them. The largest of those appears to be $962,750.25.
$2.4 million is owed to 428 equity owners of the co-op. Kokkinen proposed that each be allocated their proportionate share of Hennessey’s restitution amount. The amount paid out will relate to how much U.S. attorney can collect on assets.
So far, the sale of those assets seems to be moving slowly. A hunting property in Minnesota’s Kanabec County initially was listed for sale for about $750,000. Another 80 acres near Dalton, Minn., sold for roughly $180,000. Hennessey’s home and outbuilding complex — including two large buildings used to display hunting trophies — was listed in February at $795,000. The asking price has since been dropped by 19% to $645,000.
Erik Ahlgren, an attorney who was appointed the assignee for the benefit of creditors, said he sent a letter to co-op equity holders telling them they would likely see no money because secured creditors would be paid first. Some may have declared a loss on their taxes.
“Now, it appears they will” get a payment, Ahlgren said. The amounts will be a fraction of a percentage of what they are owed, he said.