Pa. Launches Pigeon King Inquiry

Nearly $4 million Owed to Farmers in Pa., N.Y., Va.

Chris Torres
Staff Writer

Even though no formal complaints have been received as of yet, the Pennsylvania Securities Commission is looking into the dealings of Pigeon King International, according to information received from the Pennsylvania Attorney General’s Office this week.

Nils Fredericksen, deputy press secretary at Attorney General Tom Corbett’s office, said Wednesday that information that “warranted review” had been forwarded to the Pennsylvania Securities Commission.

The commission is in charge of investigating cases relating to investment fraud and deceptive investment practices in the state.

Fredericksen did not indicate if any formal investigation was ongoing or if any complaints had been received by the office. Michael Byrne, chief counsel with the Pennsylvania Securities Commission, said Thursday that the commission was going to refer the case to the enforcement division.

Pigeon King or PKI, based in Ontario, Canada, sold pigeon breeding contracts to prospective investors, some of which were worth hundreds of thousands of dollars. The company claimed it was stocking pigeons for the squab market and that it was in the process of setting up contracts to sell squab on a large scale.

A former salesperson for the company said the company’s founder, Arlan Galbraith, lacked a market for the pigeons and that later investors were used to pay earlier investors, essentially constituting a pyramid or “Ponzi” scheme.

Last month, the company filed for bankruptcy with Galbraith declaring the company “dead”. He blamed what he called “fear mongers” and the struggling economy for the company’s downfall.

On June 26, Galbraith released the names of his investors and the liabilities and assets the company had.

According to the statement of affairs released by BDO Dunwoody LLP, the bankruptcy trustee in charge of Pigeon King’s affairs, the company owes more than $23 million to its “unsecured creditors” which includes $20 million owed to investors and $2.8 million owed in barn rental fees.

Total company assets were listed at $46,000, which includes two vehicles as well as trade fixtures.

The company employed 16 people.

About $3.25 million is owed to 85 investors in Pennsylvania, many of which are Plain Sect farmers. Several of these investors are listed on the petition as being owed more than $100,000, with one investor owed $225,000.

The statement also shows the company owes a more than $12,000 in barn rental fees collectively to six farmers in the state.

The company owes $366,300 to 10 investors in New York State; $235,000 to five investors in Virginia; and $34,000 to one investor in Maryland, according to the statement.

All told, nearly $4 million is owed to investors in the region, according to the bankruptcy petition. But given the fact that several farmers Lancaster Farming contacted in the past about the company were not listed on the petition, it’s possible the list is incomplete.

According to a Canadian news Website, therecord.com, the bankruptcy trustee has also confirmed that as many 500 other investors had signed personal contracts with Galbraith, most of which were before 2007, when Galbraith operated his business as a sole proprietorship. None of these investors will be included in Pigeon King’s bankruptcy petition.

Results of an inquiry into the company’s bank records will be released at a creditor’s meeting on July 30 in Kitchener, Ontario. There has been no indication on whether investors will recoup any of the money they have lost.

Many farmers are now left with pigeons they didn’t expect to be caring for and very few markets for their birds.

A look at some of the markets that offer pigeon sales shows that the price of pigeons ranges anywhere from 25 cents to about $4 each, depending on the market.

Kenneth Dillman, who raises American bison on his farm in Blairs Mills, Pa., got involved with the business last December, seeing pigeons as an alternative to working as a construction maintenance mechanic, something made difficult by the fact he has a degenerative bone disease and working on concrete makes his condition worse.

“We went around to a lot of farmers and everyone was happy,” Dillman said. “There was no wondering if they (PKI) were doing the right thing.”

Dillman invested more than $100,000 to get his birds and said the company was honest and straightforward with him when he had questions about the birds and his contract.

He was in disbelief when he heard the company filed for bankruptcy, just like many of the other farmers he knew raised pigeons for PKI. He didn’t even have a chance to sell back offspring to the company.

But even in the face of massive debt, Dillman still believes the company had an honest mission and would do it again given the chance. He even said Galbraith was in the final phase of breaking ground on a processing plant in Canada to make squab.

“We believed in it 100 percent and I still believe in Arlan,” Dillman said. “We felt we were actually going into a business to help feed hungry people.”

He doesn’t know what he’ll do with the 250 breeding pairs and 300 offspring he has on his farm. Many markets he has contacted have said they can’t take any more birds.

“We’re just going to hold onto our birds,” he said. “Surely someone is going to pick them up. Right now, everybody is spinning their wheels. Everybody is trying, but no one is coming up with the answer.”

Annette Gehman and her husband Sam from Reinholds, Pa. purchased 50 breeding pair from the company in December to supplement their income on their small farmette.

They too were shocked to hear the company filed for bankruptcy and like Dillman, are left with hundreds of birds to feed and nowhere for them to go.
They have contacted several markets, along with a couple of game farms and researched the Internet on where to take their birds.

“We’ve met deadends everywhere,” Annette said.

Still, she is taking the whole thing in stride and doesn’t hold any hard feelings towards PKI or Galbraith.

“I think it was a good plan. I think he had a good idea to help our small farmers. I think it would have worked if he wouldn’t have had opposition,” she said. “I don’t think it was any malice, I think it was just circumstances.”