Rep. David Valadao, R-Hanford, is named in two lawsuits against his family's Triple V Dairy business for defaulting on nearly $9 million in agriculture loans and failing to pay an animal nutrition company for its goods.
Valadao is named as a general partner for Triple V Dairy, in which he has a $1 million to $5 million stake, according to his 2016 disclosure report, the most recent disclosure available.
Rabobank in November filed a civil suit against Triple V Dairy in Tulare, including several family partners, for defaulting on a heifer loan and a herd/feed loan. The lawsuit also names other family members, including Valadao's brother, for defaulting on additional loans.
The lawsuits came to light after Valadao was named the "poorest member of Congress" by the Los Angeles Times earlier this month, mostly because of the lines of credit extended to the dairy.
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California's 21st Congressional District, where Valadao is seeking his fourth term, is considered a battleground district. Democrats outnumber Republicans by 17 percentage points —a difference of about 40,000 voters — and Hillary Clinton soundly beat President Donald Trump by 15 percentage points there. Despite the demographics, Valadao has managed to easily beat challengers in the past three elections.
Triple V in November 2012 took out a $2.5 million herd/feed credit line. Rabobank and Triple V amended the agreement four times: in December 2013, September 2014, September 2015 and February 2017. The bank sent a letter to the dairy on Sept. 8, 2017 saying it would not grant additional extensions, and the loan matured on Sept. 30, the lawsuit says. Triple V failed to pay the remaining balance, thus defaulting on the loan.
A similar story played out with a heifer loan, first entered in December 2013 between Triple V and Rabobank. That loan also matured in September 2017 after Rabobank granted multiple extensions to Triple V.
Triple V owes $2.3 million for the herd/feed loan, including more than $26,000 in interest, Rabobank's lawsuit says. The dairy company owes $5.9 million for the heifer loan, including more than $65,000 in accrued interest.
Rabobank's attorneys did not respond to a request for comment.
The matter was due in Fresno County Superior Court on Monday for a case management hearing, which was continued until May, court records show.
Valadao includes the herd/feed credit line and a January 2014 credit line with Rabobank on his disclosure report. He also includes Rabobank credit lines for his other business, Valadao Dairy in Hanford.
In the second lawsuit against Triple V, Lawley's Inc., an animal nutrition company based in Stockton, accuses the dairy of receiving more than $1 million in product over from March 2017 to early 2018 without paying.
A Lawley's salesman befriended Frank Garcia, the husband of Valadao's cousin and partner in Triple V. While Triple V continually made orders for Lawley's product, the salesman repeatedly asked Garcia to to fill out a Lawley's credit application, but he never did, the lawsuit alleges.
In 2018, the orders grew larger and larger, and Lawley's also began delivering product to various Triple V locations in California, New Mexico and Washington state, the lawsuit says. Nearly all orders were made by Garcia. Triple V currently owes Lawley's more than $1 million for the product, according to the suit.
Lawley's learned about the Rabobank lawsuit and became concerned about Triple V's ability to pay. "By placing orders with (Lawley's), Triple V, and in particular Garcia, impliedly represented that Triple V was not in dire financial circumstances, and was able to pay for the product ordered, notwithstanding the face that the polar opposite was true," the lawsuit says.
Casey Lawley, general manager of Lawley's, declined to comment to The Bee.
But in an interview with The Mercury News of San Jose, he said it's common for Valley agriculture companies to make oral agreements and trust they'll be paid.
"If it was $20,000, I wouldn’t even worry about it, but it’s a fair amount of money,” Lawley told The Mercury News. "I regret not making sure that we cut them off at a certain point."
John Samberg, the lead attorney representing Lawley's, said attorneys for Triple V have contacted him.
"We are in discussions that are confidential that we hope will resolve the matter," Samberg said. "We’re hoping to resolve the case without further litigation."
The Bee was unable to reach anyone from Triple V Dairy.
However, in an interview with The Mercury News, Valadao's brother Eddie said the company's financial troubles were caused by an industry downturn.
"As the price of raw milk continues to decline, dairy operations throughout the nation, including Triple V Dairy, are struggling," he said in an email to The Mercury News. "We will review our operations as we continue working to outlast this market downturn."
Annie AcMoody, the director of economic analysis for Western United Dairymen, said it's true the dairy industry in California is struggling. Since 2013, about 40-50 dairies throughout the state have closed per year, she said. In Tulare County — California's biggest diary county and where the Valadaoes live and operate dairies — 13 dairies closed from 2015-2016. AcMoody expects 2017 numbers to be similar.
"It’s been very difficult for the industry as a whole," she said. "California has struggled in the past three years in particular. We’ve had negative margins since the beginning of 2015."
Valadao did not respond to a request for comment.
Democrats have struggled to find a challenger to go up against Valadao. Emilio Huerta, a Bakersfield attorney and the son of civil rights leader Dolores Huerta, dropped out of the race earlier this month. Shortly after, Fresno businessman TJ Cox announced he would challenge Valadao.
Cox previously moved to Modesto to challenge Turlock Republican Jeff Denham in the 10th District. He will move back to Fresno to campaign against Valadao.
He's faced financial and legal troubles in the past as well. In 2007, Cox's company, CMSS Management, sold self-storage units to A-American Storage Managment Co. for $5.2 million, court records show. CMSS said in the purchase agreement the property free was free of any major defects, to the company's best knowledge.
But months later, A-American noticed many problems with the roof, including leaks, which caused major property damage. A-American in 2009 formally sought to implement an arbitration clause noted in the purchase agreement because of the leaky roof. In 2012, the arbitrator ordered Cox's company to pay $1.3 million to A-American.
"The arbitrator found that CMSS, via Cox, had knowledge of the roof defects at the time of the sale," court records say.