Owner of bankrupt Ontario onion processor given probation

The owner of a large Ontario, Ore., onion farm and processing plant threatened back in April 2012 to cut the power to a refrigerator that held 3 million pounds of onion in storage.

Farrell Larson, owner of Select Onion, which harvested onions grown on 9,000 acres of ground across from the Idaho border, made the threat a day after an Idaho bankruptcy judge refused to give Larson permission to spend reserve money held for the company’s bank.

Instead of cutting the electricity to the cooler, Larson wrote $36,000 worth of checks to himself and his three sons who were partners in the business. The money came from an account that held assets obtained by Select Onion. The withdrawals, along with another $20,000 that was removed, were not authorized nor disclosed to the bankruptcy court or trustee.

On Tuesday, Larson, 67, was placed on five years probation. He pleaded guilty in June to one count of fraudulent transfer and concealment of assets in a bankruptcy. Larson, who now resides in Meadow, Utah, was sentenced to 100 hours of community service and ordered to pay $47,000 in restitution.

In court, he apologized for his actions, saying the bankruptcy of his company — which sold $20 million worth of whole and diced onions and onion rings in 2010 and employed 250 seasonal workers — clouded his judgment.

“I let my emotions get ahead of my logic. It was a mistake,” Larson told U.S. District Judge Edward J. Lodge while wiping a tear from his eye.

Lodge, who told Larson he served as a bankruptcy court judge at a time when a lot of farms went under, said all of those tales, including Larson’s, were heartbreaking. Even good people make mistakes, Lodge said, placing Larson in that category.

“No one likes to kick a person when they’re down,” Lodge said, noting that Larson’s children no longer speak to him and he doesn’t get to see his grandchildren. “Keep your head up and do the right thing, as you’ve done most of your life. This is not the end of the world.”

Larson began farming in Utah 33 years ago, following in the footsteps of his father and grandfather. He eventually ended up in Oregon’s Malheur County, the state’s leading onion producer with more than 12,000 acres under production.

In 2004, the company announced plans to expand its peeling and slicing operation, along with addition of machinery to slice and batter onions for onion rings. The company received $500,000 in Oregon business development grants to help with the expansion and to pay for new refrigeration equipment.

Four years later, Larson signed a 20-year deal with ConAgra to supply battered onion rings that were resold to restaurants. The contract was valued at $12 million to $15 million per year, according to defense documents.

As the company expanded, it required considerable bank financing. By 2010, Zions Bank provided $10 million in an operating line of credit.

In early 2012, Zions declined to issue a new loan because of cash flow shortages and moved to foreclose on both the farm and onion operation. The cancellation came right before that year’s farm season began and there wasn’t time to obtain financing from another bank.

“He quite literally lost the farm,” defense attorney Walter Bugden told Lodge. “The farm is gone.”

The Oregon Bureau of Labor and Industries paid out nearly $250,000 from the state’s Wage Security Fund to settle claims by nearly 240 Select Onion employees. The money covered final wages for those employees. Oregon is the only state in the nation with such a fund.

Earlier this year, Ohio-based Fry Foods purchased the Select Onion property. Fry Foods, which also operates a plant in Weiser that employs 250 people, manufactures onion rings and other appetizers. The company expects to create 330 jobs when the Ontario plant is fully operational.