Meatpacker claims rendering consultant steered contract for personal gain, caused $8.5M in overruns
ABERDEEN, S.D. – A consultant hired by DemKota Ranch Beef is denying he caused the Aberdeen processor millions in cost overruns through lax management and poor hiring decisions, according to court records.
After retaining Michael Rempe to oversee installation of beef rendering equipment at the slaughterhouse in 2021, DemKota is now accusing the veteran renderer’s two companies that convert inedible animal parts into usable products of hiring a shoddy contractor. DemKota also accuses Rempe of profiting from a kickback.
In a federal lawsuit filed in July, DemKota contends Rempe, through his Purple Isle rendering operation, breached fiduciary duties as an agent for the beef plant because a $1 million commission from a Danish rendering equipment company was not previously disclosed.
The meatpacker also accuses another Rempe firm – Bone Crusher – of breach of contract and professional duties, alleging in the same lawsuit that the renderer’s services led to expenses that were nearly $8.5 million more than necessary.
While Rempe did not return a message left by The Dakota Scout at a number registered in his name, he denies that he or his companies were responsible for the cost overruns in court documents filed in response to DemKota’s lawsuit.
“Bone Crusher and Rempe assert that any losses or damages, if any, incurred by plaintiff were the result of their own doing, or the doing of others, that neither Bone Crusher nor Rempe had any control over and for which they cannot be held liable for,” according to his filing.
The litigation is the latest chapter in a beef processing plant that was ultimately born in scandal, starting nearly two decades ago. The shadow of that scandal led to the current showdown.
The slaughterhouse was originally built by Northern Beef Packers and had the support of then-Gov. Mike Rounds, who had promoted it as part of his South Dakota Certified Beef Initiative. Supporters hoped it would give regional beef producers a processing plant that bypassed major beef packers who control the industry.
But from its start, the project was undercapitalized. That led backers to look for creative financing alternatives. Richard Benda, who served as Rounds’ economic chief, solicited investments from about 160 foreign nationals, mostly Chinese, who could potentially qualify for a green card through the national EB-5 Immigrant Investor Program.
Under EB-5, an investor who contributed $500,000 to an economic development project that created 10 jobs could get on the pathway to a coveted green card, allowing legal access to the United States.
Despite the foreign investment, the project was still undercapitalized. Northern Beef foundered and declared bankruptcy in 2013. Benda, who was under federal investigation, committed suicide on Oct. 13, 2013.
DemKota revived the project and got the slaughterhouse operational in 2015. Although the plant had been built with capacity to render, no rendering equipment had been installed.
By 2021, DemKota was looking to change that. There was only one rendering facility within a day’s drive of the plant, according to its lawsuit, and it subjected DemKota to “unfavorable financial terms for rendering costs.”
DemKota “expected that it would profit from selling the products resulting from rendering, namely tallow, meat and bone meal, and blood meal,” the lawsuit says.
Enter Rempe, who had 40 years of rendering experience. DemKota signed an agreement with Purple Isle on May 1, 2021, to provide consulting and engineering. Rempe recommended that the packing house buy rendering equipment from a Danish company, an allegation Rempe denies.
DemKota signed a contract with Bone Crusher to provide construction management. The agreement called for Bone Crusher to have DemKota up and rendering by September 2022 at a cost of $18.7 million.
Rempe recommended that DemKota hire Daniel San Miguel to serve as general contractor, but Rempe was not always at the site to manage the project, the company alleges.
San Miguel proved to be a bad hire. Although DemKota paid invoices totaling $1.8 million to San Miguel, only $163,452 in goods and services were provided by the contractor. Most of San Miguel’s employees quit because they hadn’t been paid, and San Miguel was not present at the site after April 2022.
DemKota was awarded a default judgment against San Miguel for $1.7 million a year later, but he declared bankruptcy in October 2023. The company had to pay off two liens to subcontractors and suppliers for goods and services that San Miguel failed to pay, even though he had billed DemKota for the expenses.
DemKota is represented by James Moore and Jordan Feist of Woods, Fuller, Shultz & Smith in Sioux Falls. Rempe is represented by Joshua Finer and Jack Hieb of Richardson, Wyly, Wise, Sauck & Hieb in Aberdeen.