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(Tribune file photo) A U.S. Bankruptcy Court judge has approved the sale of Lehi Roller Mills' assets for $4.68 million to KEB Enterprises, a holding company headed by Kenneth E. Brailsford, a former top executive at several Utah-based multilevel marketing companies including Nature’s Sunshine Products and Enrich International.
Lehi Roller Mills seeks way out of bureaucratic, financial tangle

Stripped of ability to obtain loans, century-old business fights for survival.

First Published Jul 28 2012 07:36 pm • Last Updated Aug 20 2013 05:01 pm

Lehi • A Utah flour mill whose distinctive architecture made it an icon in art and film has made news in recent weeks for being enveloped in a financial mess that’s imperiling its future.

What is only now emerging is that the 107-year-old business also is caught up in a web of bureaucratic entanglements that has fueled its troubles, the details of which are growing more perplexing by the day.

At a glance

Lehi Roller Mills

Founded » 1905 at its present site, 833 E. Main St., Lehi.

All in the family » In 1910, George Robinson purchased the mill, of which grandson Sherman is the current owner

Products » Wholesale flour, mixes for pancakes, brownies, cookies and muffins sold by grocery chains and others

Retail store hours » 9 a.m. to 6 p.m., Monday through Saturday

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The latest dustup came after the U.S. Department of Labor sent letters earlier this month to customers of Lehi Roller Mills, telling them to "voluntarily" refuse any shipments of flour and bakery goods. The action apparently was in response to several workers taking to the streets in early July to protest that they and others had missed several paychecks.

The Labor Department made its move July 20 by filing a complaint in U.S. District Court for Utah seeking to force the Roller Mills to stop all shipments. The agency also sent letters to customers, telling them that if they accepted shipments from the Mills, they could be in violation of federal law. That was the same day the owner says he promised investigators that all 38 workers would be paid back wages. On Thursday, federal officials withdraw the motion — saying that the Mills had provided proof on Wednesday and Thursday that the workers had been paid.

But by then, Roller Mills’ owner Sherman Robinson said, the damage had been done.

"I’ve already gotten calls from my customers," he said. "One said I must have done something terrible to get that letter."

Los Angeles labor attorney Jesse Atilano, who has worked on similar cases but is not involved with the Roller Mills issue, questioned the agency’s tactics. He argues that for the Labor Department to notify customers to refuse shipments prior to going before a judge not only is a violation of due process but also typically results in forcing businesses into bankruptcy — leaving all employees out of a job.

"It may make sense to do that with a bad employer or a repeat offender," he said. "But there may be a better way to get employees their money. If wages are due, the department could sit down and work out a solution, but they’re not doing that."

Labor Department spokeswoman Elizabeth Todd, who said she could not discuss the case directly, referred only to the agency’s website, which says it may seek to suspend shipments when an employer does not "voluntarily" correct wage, overtime or child labor violations.

Were that the beginning and the end of Roller Mills’ troubles, Robinson might find peace, but there’s so much more to the Roller Mills saga.

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Through thick, thin • Robinson actually traces many of his financial difficulties to yet another federal agency, the U.S. Department of Agriculture, whose stated mission is to help farmers and agricultural businesses.

For years, the USDA has refused to disclose whether it has completed a wide-ranging investigation into one of Roller Mills’ customers, dating to nearly a decade ago. Even as the probe has ensued, the USDA had guaranteed a loan to Lehi Roller Mills, which Robinson said no bank would touch, in part because he had to disclose on financial applications that he also was under investigation for reasons that have never been made clear to him.

"You have no idea how much damage my government has done to this business and to the families of our employees," said Robinson, 64. "I rightfully expected more of those who represent our government, and who take an oath."

Robinson thought he put the investigation behind him when he secured a line of credit through America West Bank, based in Layton. But in 2009, regulators closed the bank and appointed the Federal Deposit Insurance Corp. as receiver. The action not only cut off the Roller Mills’ line of credit. But it also froze liens the bank held against the property — leaving Robinson with no collateral to obtain a loan elsewhere.

"This can be a real complication for businesses when a bank fails," said George Sutton, an attorney and former commissioner of Utah Department of Financial Institutions. "You need collateral to get a new line of credit, but when the first bank fails, it still has a lien on your buildings, equipment and receivables. If you have to set up a new line of credit, your collateral is tied up with the failed bank."

Robinson is making do with a purchase-order loan at an interest rate of 35 percent that is wiping out profits and eating up his cash. With so-called asset financing — often called Pay Day lending for businesses — he can obtain working capital only for orders already sold. The arrangement means Internet sales have been discontinued and that Robinson has no inventory on hand to fill orders quickly.

Sales have plummeted from $18 million in 2006 to about $10 million today.

Despite Roller Mills’ financial troubles, some are sticking by Robinson.

Jim Smith, 55, who farms 7,000 acres in Cedar Valley on the west side of Utah County, acknowledges that he’s holding an unpaid note, "but I won’t say how much because some people might think I’m stupid and others might say it’s nothing to talk about. He’s paid me for every kernel of wheat for the past two years, and he’s an honest man. I trust him. I absolutely do."

Smith still has a check made out to his grandfather, Earl Smith, from Robinson’s grandfather, George Robinson, dated 1916.

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