According to a new filing in federal court, the Assemi family pushed a secret plan allegedly dubbed “Project X” in an attempt to edge out Stewart Resnick and The Wonderful Company from pistachio dominance.
But that plan failed, leaving the family’s farming operations in deep financial trouble, and U.S. Bank has joined a lender pile-on in Federal court, with a second lawsuit filed this week against the family for breaching a loan agreement.
Flashback: Earlier this week, Prudential filed a lawsuit against the Assemis alleging the family has defaulted on over $705 million in loans this year.
- Prudential is asking the court to appoint a receiver to manage over 50,000 acres of distressed Assemi farmland.
The big picture: U.S. Bank, which was the crop lender for Mariocpa – the Assemis’ farming operation – was approached by the family to finance the expansion of an existing plant owned by a third party, which it would purchase upon completion.
- The family approached U.S. Bank through its pistachio operation, Touchstone.
- U.S. Bank claims the effort was referred to as ‘Project X.’
- Part of the plan, U.S. Bank claims, was a daisy-chain of loans where Prudential would loan Maricopa $50 million, and Maricopa in turn would loan that money to Touchstone. Touchstone would deliver some of the equipment it had purchased for another plant once the building shell was constructed, for installation into Project X.
- U.S. Bank repeatedly told Touchstone that any loan by Maricopa to Touchstone required U.S. Bank’s consent.
- Touchstone stopped pursuing the plan with U.S. Bank, and instead went ahead with Project X without the bank’s knowledge or consent.
Go deeper: Maricopa allegedly borrowed $50 million from Prudential and loaned it to Touchstone, which then used the money to make the construction loan to Dry Ranch.
- U.S. Bank did not find out about the loan until one year later, after they had gone into default.
- While Project X was underway, the Assemis were hit with a series of blows: the 2022 pistachio crop was “one of the worst in years,” interest rates increased and COVID-19 hit supply chains and increased labor costs.
- Project X took longer to complete and was more costly than anticipated. Touchstone had told U.S. Bank repeatedly that it was obtaining a major loan from Prudential to enable to to finish Project X.
- U.S. Bank delayed taking enforcement action on the defaulted loans, based on promises by the Assemis. But the Prudential financing fell through, and Touchstone was never able to close its purchase of Project X.
- U.S. Bank stated in the lawsuit that “the Assemi brothers gambled their companies, their creditors and their own financial futures on Projext X – and lost.”
State of play: U.S. Bank claims that Touchstone is insolvent and owes around $196 million to its secured creditors.
- Touchstone allegedly “has no equity in its assets, and no way to purchase new inventory,” the lawsuit states.
- Touchstone’s bank account only had $91,465.23 on the morning of Sep. 17, U.S. Bank claims. Touchstone’s bi-weekly payroll is around $450,000.
What we’re watching: U.S. Bank is asking the court to appoint a receiver to oversee a sale of Touchstone’s assets, otherwise the bank will proceed with foreclosure and “turn off the spigot” of cash collateral.
What they’re saying: Darius Assemi wrote a message on GV Wire, which he publishes, on Wednesday, saying the family is still hopeful a resolution can be achieved with the banks.
- “In football terms, we’re at the 1-yard-line but disagree on the remaining technical details,” Assemi wrote.
- Assemi did not address any of the specific claims in the lawsuits, instead saying that he has not had an active role in the family’s farming empire and that Granville Homes is not affected by the issues in the agricultural sector.
