Nearly $13 million was also taken out of United Finance when it was showing a loss.Kiwi business entrepreneur Eric Watson's grand plans to build a US$400 million ($562.5 million) dairy and beef empire in the United States based on New Zealand farming practices appear to be floundering.
The chairman and chief executive of Cullen Agricultural Corp has warned shareholders, in quarterly filing to the US Securities and Exchange Commission this month, that there is considerable doubt about the company's ability to continue as a going concern.
He said the reasons were that financial institutions were unwilling to lend development money because of the economic downturn and the performances of other farms in the area.
Adding to Watson's woes, the fledgling company - which made a US$1.72 million loss in its first year to June 30, including US$515,260 in the June quarter - also faces class action from a group of disgruntled investors.
They filed a claim in the Court of Chancery in Delaware last December seeking to have the register of Triplecrown Acquisition Corp restored.
Cullen Agricultural was merged with New York Stock Exchange-listed Triplecrown in October last year.
The class action seeks US$9.74 a share to be distributed to those taking part in the claim.
The number of participants or total amount claimed is not disclosed in Cullen Agricultural's account, but Triplecrown has already paid US$149 million to investors who didn't want to buy into the agricultural business.
Triplecrown, since delisted, was what is known as a blank cheque company, created by Watson and his US business partner billionaire Jonathan Ledecky to find a private company to invest in.
It raised US$539 million and eventually chose Cullen Agricultural after plans to invest in financial services fell over.
Watson and Ledecky have also been in the spotlight over the the US-listed international T-shirt leisurewear chain American Apparel.
They invested US$130 million and took on US$110 million of debt in American Apparel through another blank cheque enterprise, Endeavour Acquisition.
American Apparel has reported a second-quarter loss of US$7.3 million, its auditors have quit and it has warned about its ability to continue as a going concern, putting it at risk of bankruptcy.
But this week, a spokesman for Watson said Endeavour had sold out of American Apparel.
Watson is also in the gun in New Zealand, where retired accountant John Hepburn is on his and fellow Hanover Finance director Mark Hotchin's tails because they took $45.5 million of the company funds in dividends in the June 2008 year, three weeks before Hanover shut up shop leaving 17,000 investors owed more than $527 million.
The pair used the money to pay their own related party debts to Hanover, even though accounts filed that year during a company moratorium proposal showed the company made only a $10.176 million profit that year.
Nearly $13 million was also taken out of subsidiary United Finance when it was showing a loss.
The company's financial situation was far worse than the results posted at that time because they had been based only on past financial performance for the purpose of restructuring.
Accounts restated in March last year showed Hanover made a $10.856 million loss in the period.
Hepburn is campaigning for regulatory watchdogs to take action to retrieve some of the money.
Meanwhile, Cullen Agricultural has started selling land to repay Watson who issued a promissory note to the company for US$6.869 million as a loan to complete the merger.
He was supposed to be repaid on conclusion of the merger but there was not enough money.
The land now under negotiation is 35 per cent of the total land bank and will return another US$2 million to Watson, leaving an outstanding balance after a previous payment of US$2.1 million.
Watson initially identified 16,187ha on 40 farms in Georgia for a pasture-based forage system.
He said it was a more economical alternative to the US dairy farming practice of using grain-fed cows in barns or on concrete pads.
He calculated costs would be cut up by to 50 per cent by feeding cows grass, which is 80 per cent cheaper than grain.
He also said grass-fed cows were leaner and produced more milk.
Cash crisis hits Kiwi's US farming empire
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