It is highly likely that Sam Kane Beef Processors LLC, located in Corpus Christi, Texas, will be forced to close its doors due to financial duress, a source familiar with the matter told Feedstuffs this week. The company currently processes 1,700 head of beef cattle per day.

In July, the company entered into an agreement with the U.S. to repay nearly $38 million currently owed to local livestock sellers. The full amount is to be paid within the next 18 months; otherwise the court could appoint a receiver to manage the company’s finances.

According to the Corpus Christi Times, the first payment was made in August, but additional parties are seeking to join the federal lawsuit. The status of the September payment is unknown, and the processor also owes $400,000 in back taxes as well as a hefty $2.4 million water bill.

On June 14, 2018, two complaints were filed against Sam Kane Beef Processors for alleged violations of the Packers & Stockyards (P&S) Act. The complaints allege that Sam Kane is failing to pay for livestock in a timely manner. Sam Kane is a fed steer and heifer slaughtering plant that is subject to the P&S Act.

Both complaints allege that as of June 8, 2018, Sam Kane owed approximately $34.96 million to unpaid livestock sellers and was an average of 38 days late on payment and up to 60 days late in some instances. The complaints allege that Sam Kane’s failure to pay in a timely manner resulted in livestock sellers filing claims under the packer statutory trust totaling more than $142 million.

The U.S. Department of Agriculture filed an administrative complaint alleging that Sam Kane failed to pay the full purchase price for livestock within the time period required by the P&S Act on numerous occasions from on or about Jan. 27, 2017, through the date of the complaint. The P&S Act authorizes civil penalties of up to $11,000 per violation.

The U.S. Attorney’s Office for the Southern District of Texas subsequently filed a federal complaint seeking a preliminary injunction ordering Sam Kane to comply with the P&S Act while the administrative complaint is pending before USDA.

Both complaints follow a prior secretary of agriculture order issued Jan. 17, 2017, requiring Sam Kane to cease and desist from failing to pay when due the full purchase price of livestock. They also allege that Sam Kane violated this order.