A federal bankruptcy judge will appoint a trustee to take over management of Oregon's second-largest dairy farm, Lost Valley Farm, citing owner Gregory te Velde’s lifestyle habits that led to Chapter 11 bankruptcy earlier this year.

Lost Valley Farm is just one of te Velde’s three dairies located in two states. He owns approximately 53,000 animals and has assets with an aggregate value of $248 million. However, he owes $160 million, and $68 million of that is owed to the largest creditor, Rabobank.  

According Judge Frederick Clement, presiding bankruptcy judge, te Velde sought the protection of Chapter 11 bankruptcy three months ago, citing low milk prices, construction cost overruns and environmental costs related to his Oregon dairy. However, the U.S. Trustee and creditors perceive that “darker forces” have caused his insolvency or have prevented him from being able to resolve his debt problems.

Clement noted that after filing for Chapter 11 bankruptcy, te Velde continued long-standing habits of methamphetamine usage and gambling. Drug usage has occurred once or twice per week, and he has gambled estate monies of $2,000-$7,000 monthly post-petition, the judge noted. Further, he has admitted that his drug use has negatively impaired his health, family and business, the decision added.

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Additionally, te Velde borrowed $205,000 without court authorization and, in a one-month period, took person draws of approximately $28,000 more than authorized.

The court said it found cause that te Velde is “unwilling, or unable, to comply with his duties as a fiduciary."

Having found cause, the court had to decide whether to order the appointment of a trustee or dismiss the case. Clement said dismissing the case “would return the parties to the same dysfunctional debtor-creditor relationship.” Additionally, the judge said several creditors have particularly indicated a preference for a trustee.

“Placing weight on creditors, who are likely the most affected, the court will order the appointment of a trustee,” Clement concluded.