Northeast Farm Access nonprofit president Bob Bernstein of Antrim is denying allegations of fraud and contract breaches after a New York investor sued him and his associated LLC, which is dedicated to farmland preservation.
Bernstein dissected the lawsuit filed by New York philanthropist Joshua Rechnitz via a motion to dismiss in mid-March. The initial complaint claimed the millions Rechnitz had invested in two farms owned by Northeast Farm Access didn’t achieve the results he’d intended it for, and accused Bernstein, as well as NEFA1, an LLC contracted by NEFA to develop and manage certain projects, of fraud and breached contract. NEFA1 predates NEFA, which became a nonprofit in 2019 and is not directly implicated in the lawsuit, Bernstein said.
Rechnitz’s claims are “factually incorrect and highly misleading,” Bernstein said, and that he hopes to “deescalate the situation” in a mediation session scheduled for the end of March. He also responded to details about his work and the nonprofit’s business reported by NHPR in an interview with the Ledger-Transcript last Thursday.
Northeast Farm Access buys working farmland at risk of development, transitions the land to sustainable management practices, and then rents it to a number of farmers via renewable 30-year leases. The nonprofit has created six such “agricultural centers” so far, including one in Marlborough. The nonprofit has an ambitious vision to establish 40 more by 2030.
NEFA currently has about 70 investors across various projects, Bernstein said. Today, investors can purchase a note in Northeast Farm Capital, which pools with others for investment in one or more agricultural centers or mission-related projects. Supporters can also make a tax-deductible donation. This differs from the model Rechnitz participated in, where he became a member of the agricultural center’s LLC, along with NEFA1, Bernstein said.
Rechnitz’s initial testimony detailed the philanthropist’s 2018 infusions of more than $3 million in investments and loans for purchasing and developing the Arrowhead Farm and Esopus agricultural centers in New York’s Hudson Valley. In the complaint, Rechnitz alleged that Bernstein was misspending his money, creating work to enrich himself and the nonprofit rather than delivering what was promised: a thriving agricultural center delivering a two-percent annual return on investment.
Bernstein and NEFA 1 were, in fact, performing necessary work, Bernstein’s representatives argued in a motion to dismiss filed on March 15. Rechnitz had acknowledged certain risks in his investment in contracts he’d signed with the nonprofit, and what transpired doesn’t constitute fraud, according to the document. Rechnitz himself owns much of what he paid for, according to a statement on the Northeast Farm Access website: investments bought him a 91 percent stake in one of the Hudson Valley agricultural centers, and he owns the agricultural equipment his money purchased for use on both farms.
Agricultural centers take three years to break even financially under the most aggressive conditions, Bernstein said.
“It’s something that looks like a real estate investment, but it’s actually an intervention in a system that failed,” he said, in the case of the nonprofit buying up a defunct dairy farm. Although all six existing agricultural centers have met their agricultural objectives, it takes a while to for finances to catch up when there’s been deferred maintenance on a farm, Bernstein said, and it takes time for the land to transition to organic. When asked about the latest financial outlook on the two Hudson Valley farms, Bernstein said his information was two years out of date as he himself no longer manages the sites and hadn’t received financial updates from the new managers.
Rechnitz’s testimony detailed certain projects on the newly purchased farms that cost substantially more than expected, and others that seemed to go nowhere, such as a failed enterprise in which $100,000 went towards developing “escape cabins” as AirBnB rentals at Arrowhead – an idea proposed by Bernstein’s son. The idea had merit, Bernstein said: agritourism inspires people to support farms or become farmers themselves, he said, and NEFA is exploring similar concepts at other agricultural centers. However, although Bernstein drew up the initial budget for improving the site, he was not the one in charge of the spending when the scope of work increased before ultimately stalling. “A lot more was spent than I had budgeted or would have done,” he said.
When asked, Bernstein responded to questions about details reported by NHPR, such as a lessee’s allegation that then-landlord Bernstein charged at him over a disagreement, a NEFA board member citing a lack of financial transparency, and the Monadnock Agricultural Center falling more than $30,000 behind on taxes.
With regards to the lessee, Bernstein said that NEFA1 has arranged about 40 leases so far across all agricultural centers. “When people are in a manager/managed situation, there are opportunities for all kinds of interactions. In a very few cases, there have been conflicts,” he said, and that was one such case. “When you’re a manager, you can’t please all the people all the time,” he said, and that he’s worked to improve conditions when he receives a complaint from a renter.
With regards to a board member’s December 2020 claim that she hadn’t seen any financial statements, Bernstein said there was no financial activity for much of the first year of the nonprofit’s existence, and therefore nothing to review until a project wrapped up at the end of December. That board member saw the subsequent report, he said. “There’s nothing that’s not transparent,” Bernstein said, and that the nonprofit deliberately hired an outside accounting firm that follows “textbook” standard procedures.
Finally, the Monadnock Agricultural Center is behind in taxes, Bernstein confirmed: bad hay yields and other problems put the site’s first three years off to a rocky start. There are now new tenants representing a greater diversity of farm products, he said, and part of the property is due to sell in April, with the proceeds paying off the back taxes.
What should potential investors and supporters know, regardless of how this lawsuit pans out? An agricultural center is an appropriate investment from a community development perspective, Bernstein said, one that balances financial and non-financial benefits.
“The projects offer an opportunity to place financial capital into natural capital, in this case, organic or sustainable farmland with great soil, water infrastructure, and farmer housing,” he said, doing good for the local community as well as for perpetuating farmland in general.
The lawsuit is “extremely unlikely” to affect agricultural centers other than the two in Hudson Valley, Bernstein said. NEFA’s overall farmland acquisition schedule has been set back a couple of months due to the lawsuit but the plan remains the same, he said, and hopes that he and Rechnitz both can soon get back to work on what he sees as their mutual goals of supporting sustainable farming, farmers, and farmland. “We entered a relationship to try to accomplish something good for the farmers and farmland and community,” Bernstein said. “To the best of my knowledge, that never changed.”