Lt. Gov. Casey Cagle and Secretary of State Brian Kemp emerged as the top finalists in Tuesday's election.
Kemp’s investments in a range of firms, including Hart AgStrong, are central to his pitch to voters that emphasizes his private-sector prowess. Riffing off Gov. Nathan Deal’s favorite boast, he says he’ll make Georgia the top place in the nation for small business.
His stake in Hart AgStrong, though, has come back to haunt him. The seed processor rapidly expanded into Kentucky and was pitched to local farmers as a lucrative way to diversify their crops, using a portion of their land to grow plants not usually cultivated in the steamier Southern climate.
But it has struggled under the crush of technical problems and poor financial decisions. By 2017, it had lost a key agriculture license and tallied more than $2 million in missed payments to frustrated farmers who took a gamble on the crop. Several major investors have filed legal claims.
“They missed payments, then they played legal games with me,” said Rick Phillips, a well-connected Toccoa financier who filed a lawsuit claiming Kemp owed him $500,000. “I expected him to keep his word. And he didn’t. That speaks volumes about Brian.”
Kemp’s campaign has said he was an investor in the company — and not an executive — and that the firm’s bad fortunes were a casualty of the Great Recession. And Kemp said in an interview he’s confident the company will recover, and that it will repay the loans he owes.
“The company is working hard to try to resolve their debts,” Kemp said, “and hopefully they’ll be able to pay those back, and also pay myself back with money I’m owed.”
‘A big deal’
The company was started in 2006 by four cousins in northeast Georgia who encouraged farmers to grow canola and sunflower seed and invest in local plants that would give them equity — and pay them dividends for their earnings.
The cousins recruited farmers, developed a canola seed that would thrive in the balmier Southern climate and designed a pilot plant that quickly proved the business model could work.
Robert Davis, the company’s chief executive and an engineer, did not respond to requests to comment. Neither did other company officials who were sent emails and contacted in person.
But a promotional video helps outline the company’s course. In the clip, Davis emphasized his extensive agricultural background and his faith-based mission to help farmers find new ways to make money off their land. Religious pamphlets that greet visitors to the Kentucky plant back up the message.
"If we could establish a structure where Christian families could be able to have their own businesses in agriculture, and be able to put a lot of idle land in production, that would be a means for those families" to succeed, Davis said in the video.
The company’s promise attracted a range of financial backers that included Kemp, who first invested in the company in 2008 and reported owning a roughly one-quarter stake in 2010. He said he wanted to “invest early in a company that was creating jobs and economic opportunity.”
It opened its first seed-crushing plant in Bowersville in 2009 and soon expanded to Kentucky. The groundbreaking here in 2014 attracted then-Gov. Steve Beshear, who touted the firm's promise to hire 25 people and invest $7.3 million. The state shelled out a $450,000 tax credit to help land the deal.
It was a monumental development for the town, where rows of corn and grain crowd around tidy homes and silos dot the skyline. Newspaper clips of the plant’s opening still cover walls of local businesses, and local officials heralded it as a new lifeline for the country town.
“It’s a major stakeholder in the community,” Mayor Jo Ann Holder said. “And any time you have an industry of that size come into a small town, it’s a big deal.”
$1.6 million still owed
Within a few years, though, the finances took a turn.
Local farmers, many who wouldn’t comment publicly because they still work with Hart AgStrong, blame an overaggressive expansion strategy and machinery problems.
Davis told The Progressive Farmer that high moisture levels in storage bins caused "catastrophic damage" to the oilseed, and generous contracts to growers who had a bumper crop amplified the problem.
Soon, Hart AgStrong was grappling with financial fallout. The company’s license in Kentucky to buy grain directly from farmers was suspended in 2017 over its failure to immediately repay farmers a debt of more than $2 million.
Agriculture officials in Georgia and Kentucky did not return requests for comment on the business or the litigation. State records show at least $400,000 has been repaid and roughly $1.6 million is still owed.
At the same time, lenders have ratcheted up the pressure. Two separate lawsuits filed last year claimed Kemp and other investors failed to pay back more than $700,000 in loans — and that Kemp was among the firm’s leaders who signed documents agreeing to personally guarantee them.
One of those lawsuits has since been settled for about $200,000; the other by Phillips is still pending.
In legal filings, the company has denied any wrongdoing. Kemp, meanwhile, steadily sold off his stake in the company as its financial problems mounted. A campaign disclosure filed in March showed he owned roughly 16 percent of the company; his campaign said he now owns about 8 percent of the firm.
On the campaign trail, he’s said his stake in the company is one in a range of his business investments, which include a stone supply yard and real estate developments. He said he worked to help Hart AgStrong grow but was detached from its daily operations and has never visited the Kentucky plant.
“I’ve been a business person for 30 years. I started my own companies, I’ve invested in others. This is one that’s just struggled,” Kemp said. “The company is working hard to resolve that issue.”
Others said he was more involved in Hart AgStrong than he has let on. A warranty deed for Hart AgStrong filed in 2009 lists Kemp as an “assistant manager” in the firm. And Phillips said he played an influential behind-the-scenes part.
When the firm needed an initial $600,000 loan, Phillips said Kemp personally requested it. After that was repaid, it was Kemp who came to him in January 2016 to ask for an additional loan of $500,000 to buy more canola seed, according to court filings.
Two missed payments later, Phillips said Kemp apologized to him and said he would take a more “active” role to ensure he was repaid. The loan eventually went into default in May 2017, and Phillips filed a lawsuit naming Kemp and other company officials.
The next hearing in a Gwinnett County court is set for July 25 — the day after the runoff.
“I hate to put it this way, but I don’t loan this type of money to people. I trusted Brian,” said Phillips, who said he considered Kemp a friend. “But how can I trust him to run a state when he can’t handle his business?”
‘I want my money back’
The company’s struggles have fast become one of the competing narratives in the race.
Cagle has tried to cast Kemp’s legal woes as a part of a broader strategy to brand him as an incompetent politician, and Cagle and his allies have aired TV ads accusing Kemp of walking away from his debts to struggling farmers. “Insincere,” one ad branded Kemp over the Hart AgStrong investment.
“His efforts to cover up his consistent incompetence proves he’s untrustworthy,” said Scott Binkley, Cagle’s campaign manager. “If he personally guaranteed loans by himself for a company where he is just the bit player he claims to be, then he isn’t someone who needs to control our tax dollars.”
For his part, Kemp said he expects Hart AgStrong “to not only meet their obligations but to turn a profit.” And he invoked the recent revelations that Cagle supported what he called “bad public policy” to woo a super PAC that supports school choice measures.
“Unlike Casey Cagle, I will always do the right thing,” Kemp said, “even when no one is looking.”
Many in the rolling fields that surround Trenton, which is about 55 miles north of Nashville, chuckle at the thought that the seed-crusher on the outskirts of town is now a mainstay of attack ads in Georgia. But they have little use for the political back-and-forth.
The mayor, for one, said the company still hasn’t paid city taxes it owed from the past year. She would not specify how much the company owed, though she suggested it was a big part of a small budget.
“Hopefully they will work through their problems and we will get through this,” Holder said. “But they need to follow through with paying their taxes.”
Katie Hancock sounded a similar refrain. She has farmed in nearby Fulton for about a decade, mostly growing corn, beans and winter wheat. But a few years ago, when Hart AgStrong dangled the opportunity to grow seeds for its business, she pounced at the opportunity.
“This was something new that could offer a different stream of revenue,” Hancock said. “It was risky, but anything in farming is risky.”
She wound up having little problem growing the crop — and plenty of problems getting paid. She said the company still owes her about $70,000. In an interview, she took pains to be polite — but her frustration was clear.
“The people have been nice and worked with us, but I still don’t have my investments back,” Hancock said. “I don’t hold it against anyone individually. It’s just a bad situation. I don’t have anything bad to say about them — I just want my money back.”
Staff Writer Mark Niesse contributed to this article.
COVERING BOTH SIDES
»The Atlanta Journal-Constitution is covering all angles in a busy election year.
»So far, the AJC has explored how immigration, tax policy, the gun debate and the growing number of female candidates influenced the Republican and Democratic primaries.
»The AJC will continue exploring the issues that will influence the campaigns as the state approaches the next political milepost: the primary runoffs on July 24.