The bankrupt Farmers Cooperative Assn. will be sending out checks totaling more than $600,000 later this month to about 3,000 area farmers.

Mel Squyres, chief financial officer for the co-op, which closed its operations in 2000 when it was forced into bankruptcy, said farmers should expect to receive a check on or before Jan. 15.

Members of the former Lawrence-based cooperative are owed about $6.5 million in patronage, or equity, payments. Squyres said board members for the bankruptcy trust agreed this week to pay 10 percent of the total. Board members hoped to be able to pay at least 10 percent a year until the entire amount was paid off.

“We think this should be the first of many checks that the members will receive,” he said. “We think we should have all of our members paid off in a 10- to 12-year time frame.”

Squyres said many of the checks would be in the $1,000 range, some as high as $5,000.

The payments are designed to redeem the ownership interest each member had in the co-op. Squyres said the approximately 3,000 members still were owed $6.48 million in equity payments.

The co-op is able to make the payments to its members — even though it hasn’t been in operation for more than two years — because it still is receiving money from its investments in other regional agriculture cooperatives.

For example, Farmers Cooperative still has about a $4.9 million ownership stake in Ag Processing Inc., an Omaha-based cooperative. Under bylaws established by Ag Processing, however, Farmers Cooperative is not able sell its ownership interests all at once.

Instead, Farmers Cooperative must request to receive a patronage payment. AGP’s board of directors then decides each year how much of a patronage payment, if any, to make. The amount of the payment is directly tied to the company’s financial performance during the year.

Farmers Cooperative also had about a $5.75 million ownership stake in the now-bankrupt Farmland Industries. But Squyres said board members with Farmers Cooperative recently decided to write off that ownership interest because they were convinced Farmland never would be able to pay the money.

“Because of Farmland’s financial condition, our stock in it wasn’t worth a dime, not even a penny,” Squyres said.

Farmers Cooperative, however, was able to receive a $300,000 federal tax refund as a result of writing off the Farmland ownership interest.

Squyres said even though the agriculture industry remains depressed, board members were optimistic that they would be able to receive their money from Ag Processing.

“AGP is a strong regional co-op that is well-managed,” Squyres said. “Farmland was a different deal. It had been mismanaged for 15 years and has been going down the tubes for 15 years.”

Farmers Cooperative officials also are holding out hope that a $12 million lawsuit it has filed against Denver-based CoBank will be successful.

The cooperative is claiming that CoBank, which was Farmers’ primary lender, improperly pulled its line of credit and forced Farmers unnecessarily into bankruptcy. CoBank officials have denied any wrongdoing.

The case has been filed in federal court in Wichita, but a trial date has not yet been set. If Farmers is successful in the suit, Squyres said the co-op would be able to pay off its members in full much sooner than the 10-year period.