A giant tobacco cooperative based in Raleigh, N.C., has filed a multimillion dollar bankruptcy petition, the Triangle Business Journal reported. The U.S. Tobacco Cooperative filed papers to reorganize through a chapter 11 petition, listing both assets and liabilities as ranging between $100 million and $500 million. In a statement, USTC said the filing was to meet "short-term contractual obligations to member-growers during crop season 2021." USTC, according to its website, produces flue-cured tobacco grown by its more than 500 members in Florida, Georgia, South Carolina, North Carolina and Virginia. Member-grown tobacco is processed and sold as raw materials to cigarette makers throughout the globe. Over the past few years, the firm has been involved in contentious litigation. In 2018, it sued the federal government, alleging that informants from the Bureau of Alcohol, Tobacco, Firearms and Explosives had “engineered a scheme to steal approximately $24 million from USTC’s farmers.” In the initial lawsuit, USTC claimed the informants had pushed USTC to purchase the assets of two tobacco distribution businesses (Big South Wholesale and Big South Wholesale of Virginia) which were, in actuality, “an ATF front.” The ATF, in the U.S. government’s filings in the case, had explained that its investigations required it to purchase cigarettes, “therefore, ATF could operate in the small world of the tobacco trade only through established tobacco traders,” and denied USTC’s claims of negligence. That lawsuit was ultimately dismissed with prejudice last October. In 2019, USTC again filed suit, this time against certain underwriters at Lloyd’s, claiming the insurers failed to reimburse it “for the millions of dollars of losses it has incurred as a result of physical loss of and damage to its tobacco product arising from mold, humidity, water damage, moisture, flooding and/or other similar perils.” That case is ongoing in federal court. USTC also found itself on the receiving end of what ended up being a $24 million class action complaint, referenced in its bankruptcy statement. The complaint accused it of improperly retaining and using reserve funds held over from the tobacco pricing era, where members were paid for tobacco that failed to sell at auction for more than the minimum support price set by the federal government. USTC denied wrong doing.
