CHS sues former employee for conflict of interest with major Mexican grain broker

CHS Inc. is suing one of its former top managers, alleging he was negotiating contracts for CHS with a Mexican grain broker in which he was a business partner.

CHS, a cooperative based in Inver Grove Heights, said in the lawsuit it is still figuring out the damages it suffered from the relationship between Joaquin Galindo and Gradesa S.A. de C.V., a Mexican brokerage that purchased large volumes of grain from Mexican farmers and sold them to CHS.

CHS transacted tens of millions of dollars of business with Gradesa, according to the lawsuit filed last month in Ramsey County District Court.

Galindo worked for CHS for 20 years until 2015, and oversaw substantial business in Latin America without disclosing his business ties with Gradesa that began around 2008, according to the lawsuit.

"While Mr. Galindo was purporting to negotiate opposite Gradesa on CHS's behalf, he was actually investing substantial amounts of money in Gradesa-affiliated entities," the complaint said.

As such, the company said, Galindo benefited financially from contracts favorable to Gradesa and had a conflict of interest that amounted to breach of his duty of loyalty to CHS.

Minneapolis attorney Art Boylan, representing Galindo, said that he is in the preliminary stages of analyzing the case, but that it appears to be a new tactic by CHS after previous litigation in Mexican courts has not been favorable for the company.

"There are other proceedings in Mexico involving other companies and CHS has been unsuccessful in that litigation," Boylan said. "As a result we view this as an attempt by CHS to find a new forum in order to take advantage of just a single employee, and that's inappropriate."

The lawsuit alleges that Galindo helped to orchestrate payments from CHS to Gradesa for services that CHS never received. In 2015 alone, those payments were in the millions of dollars, the complaint said.

CHS is seeking damages that include those payments, as well as money that Galindo received from Gradesa or any of its principals or affiliates while he was a CHS employee, and all compensation that it paid Galindo during the time he had a financial stake in Gradesa.

The full scope of Galindo's alleged self-dealing is not yet known, the company said, and an investigation is continuing.

Also named as a defendant in the lawsuit is Consuagro, a Mexican company that is principally owned by Galindo and is heavily invested in Gradesa-controlled entities.

CHS is the nation's largest farmer-owned cooperative and Minnesota's second-largest privately held company, with $31.9 billion in annual sales in fiscal 2017. It was formed from the merger of Cenex and Harvest States Cooperatives, and has grown to become a global presence in more than two dozen countries selling energy, grain marketing, food processing and farm supply products.

Tom Meersman • 612-673-7388