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Reuters reports this morning that a number of produce and packaged goods vendors are saying that Fleming owes them as much as $100 million – and that the bankrupt wholesaler cannot use that money for any purpose other than paying them because the Perishable Agricultural Commodities Act of 1930 says the funds are to be held in trust.

“They're literally holding onto someone else's money,” said Michael Keaton, one of the attorneys representing the vendors, which include Dole Fresh Fruit Co. Inc., Cavendish Farms, Continental Tomato Packers, DiMare Fresh Inc., TAM Produce and Weis-Buy Farms. Keaton said that the vendors object to Fleming’s stated plan to use the cash owed to them as collateral for new credit.

In other news, Fleming announced that it had been notified that the New York Stock Exchange (NYSE) has suspended trading in Fleming common stock, with plans to delist the company.

While Fleming common stock is now trading in the Pink Sheets, a centralized quotation service that collects and publishes market maker quotes in over-the-counter securities, the company plans to ask the Over-The-Counter Bulletin Board (OTCBB) to review its eligibility for trading on that exchange. However, this isn’t likely to happen until the company files its annual report for the 2002 fiscal year.
KC's View:
You have to admire the kind of initiative it takes to reach back to the Depression to find a law that says a bankrupt company has to pay off existing bills before it starts using any money it has to generate new funding we’re pretty sure it isn’t going to be helpful to Fleming’s long-term prospects if the courts uphold the Perishable Agricultural Commodities Act of 1930, but it certainly will make the whole mess more interesting.

As for the change in where Fleming’s stock is sold, we don’t much care. There’s a bigger issue here, one that we hope Fleming deals with better than Kmart has.

In its reorganization, Kmart clearly is managing for Wall Street, not for the stores and not for the customers. We believe that it why ultimately Kmart will fail -- it just doesn’t get it.

Fleming doesn’t have to make that mistake. It should reorganize with and around its customer base, which will be sensitive to the needs of their customers. It may not be as attractive to the guys on Wall Street, but it might actually create a business that has some longevity to it.