Ex-president: Growers raised chickens for Bo, not Pilgrim's
By Robin Y. Richardson East Texas Community Newspapers
June 20, 2011 at 11 p.m.
MARSHALL - Lindy M. "Buddy" Pilgrim, former president of Pilgrim's Pride Corp. and nephew of Lonnie "Bo" Pilgrim, the company's founder, took the stand Monday to describe practices his uncle used in business.
Pilgrim's Pride is being sued by 257 contract poultry growers who raised chicken for Pilgrim's. The first case being tried here in federal district court involves El Dorado, Ark., growers.
The Arkansas farms in Farmersville, El Dorado and Douglasville are idle.
Buddy Pilgrim said the company decided to idle the farms instead of selling them in 2008 in order to increase the revenue in their company.
The growers say the company manipulated the supply of chicken in order to substantially and illegally raise the price.
Buddy Pilgrim testified the decreasing price of corn and the increasing price of chicken saved the company.
The company asserted, however, that by idling the three facilities, it would actually save money - $23.3 million by shutting El Dorado down.
Buddy Pilgrim testified, though, that idling the facilities was not necessary for the company to survive.
"Pilgrim wanted appraisal value and claimed they didn't want to put a competitor in business at a cost advantage to them," he said. "That's why Pilgrim said it idled El Dorado instead of selling it."
Buddy Pilgrim said his uncle paid himself for growing chickens by buying the baby chicks and feed from the company. He then raised the chickens and sold the mature ones back to the company on a formula price index rather than pay cents per pound for the caretaking of the birds as a normal grower would.
Buddy Pilgrim said the system used by his uncle was preferable to that used for other growers.
"There was a substantial personal tax benefit to him," he said. "He had the ability to manage the payments that he made to the company and the receipt of income from the company. That timing of payments and received income allowed him to create tax losses on cash bases, accounting bases in the year where he had other income where he needed to offset and then roll that tax liability into the next year and repeat the same process the next year."
He said his understanding is the arrangement was an accounting transaction.
"Flocks of chickens that would go to an independent farm were selected by people in the company as Bo's flocks, and he would pay the company for those baby chicks and (for) the feed that's going into those farms."
He said when the birds were taken to market, their weight was tracked, and his uncle paid the company for those services.
Thus, Buddy Pilgrim testified, many contractors weren't raising chickens for Pilgrim's Pride, with whom they had a contract; but were raising them for Bo Pilgrim without realizing it.
The growers' attorney, Mark Brodeur, asked if this was ever revealed to any of the growers, and Buddy Pilgrim said he did not believe it was.
"It wasn't revealed to me, and I was the president of the company," he said.