An article in Petaluma’s local newspaper last week prompted more questions than it answered.
On Monday, July 17, the Argus-Courier reported that a commercial real estate firm was advertising one of the city’s largest ag-processing facilities and a few neighboring properties for sale. However, the Creamery’s owner, Larry Peter, was quick to quash the story, telling the paper “I’ve never listed the Petaluma Creamery for sale.” The online real estate listing, first posted on June 8, was quickly deactivated, and the Argus-Courier has yet to do more reporting on the oddity.
That’s not the end of the story, though. An investigation by the Bohemian found that while the Creamery has successfully paid off a long-standing debt to the city for wastewater fees and fines, Peter continues to juggle other bills—and recently reached an agreement with the city cutting off the Creamery’s access to the sewer system for the foreseeable future.
In 2004, Peter made his name in the local agricultural community by purchasing the Petaluma Creamery, a cornerstone for the North Bay’s shrinking dairy community.
However, by September 2010, the business owed the city of Petaluma $604,720 in unpaid water bills and fines, according to press coverage from the time. Despite a 2018 court order to pay off the remaining balance over 24 months, the Creamery continued to fall behind.
In late 2020, the issue came to a head. The Creamery had accrued a bill for over $1.4 million in unpaid water fines and fees and the city, apparently finally having lost patience, threatened to revoke the Creamery’s crucial wastewater permit if the company did not pay up.
After the Bohemian broke the story, drawing attention by the Argus-Courier, Peter delivered a cashier’s check for more than $800,000 to city hall and later signed a March 2021 agreement with the city, agreeing to pay off the Creamery’s remaining debt and to foot the bill for third-party monitoring of the Creamery’s compliance with various regulations.
In a response to questions last week, Petaluma deputy city attorney Jordan Green confirmed that the Petaluma Creamery has paid off its debt to the city, with the lien on the Creamery property being removed in February.
However, the release coincided with bad news.
“Towards the end of 2022, Petaluma Creamery’s … wastewater discharges slowed, and eventually stopped in early 2023 due to a stop in production,” Green told the Bohemian in an email last week.
On June 13, the city locked the Creamery’s wastewater system, preventing any discharge into the city’s sewer from the facility. Two weeks later, Peter signed a third amendment to the Creamery’s March 2021 Consent Order agreement with the city, which allows the Creamery to stop paying for the third-party wastewater inspector while the facility’s sewer access is shut off.
It is not clear whether the Creamery is able to produce anything or employ anyone without discharging wastewater. Peter and his attorney did not respond to multiple requests for comment on this story last week.
While Peter and the Creamery were paying off the city, other creditors came calling.
In July 2021, David Bianchi sued Creamery milk suppliers Jack and Olivia Dei over an outstanding debt of $381,788 used to pay for feed supplies. The Deis in turn counter-sued Peter and Spring Hill Jersey Cheese, the company which operates the Creamery. Peter, the Deis argued in court, had agreed to pay off their debt to Bianchi as part of a deal to settle his outstanding $674,138 debt to them for a variety of unpaid bills—and interest payments—dating back to 2016.
“Through the years, Spring Hill began having a variety of financial and other difficulties, some of which have been widely reported in the news. The financial problems led Spring Hill to take milk from the Deis (and others) repeatedly while failing to pay or underpaying them. Spring Hill obviously used and profited from the milk it took,” a legal filing by the Deis’ attorney states.
“Spring Hill’s president Larry Peter continually acknowledged Spring Hill’s outstanding obligations to the Deis and repeatedly assured them that payments would be made when he had the funds. But he never paid the debt. After three or four years of problems, there came a point where the Deis’ sons, Chris and Brian, got involved. They were understandably concerned that their aging parents needed the money in their final years,” the document continues.
According to legal filings, Spring Hill has paid the Deis enough so that they could cover their debt to Bianchi, who has dropped his suit against the Deis. However, the Deis’ debt has not been fully paid. This April, the Sonoma County court ruled in favor of the Deis, recording a judgment of $508,521 against Spring Hill.
In a separate San Joaquin County Superior Court case, Pacific Gold Milk Producers, Inc., a Stockton-based dairy collective, has alleged that Spring Hill owes them nearly $3 million for milk Pacific Gold delivered between February and May 2022.
“Petaluma Creamery never disputed the June  statement, but it canceled the contract in or about September 2022,” Pacific Gold’s attorneys wrote in a November 2022 legal filing.
In a May 18, 2022 email included in court documents, a Spring Hill employee requested documents from Pacific Gold to compare the companies’ records. After receiving documentation from Pacific Gold, she wrote “Well the great news is our numbers match exactly!”
Peter stated in a March filing that the Spring Hill employees working on reconciling the Pacific Gold account were unaware that he had a separate arrangement with a Pacific Gold representative for some of the milk sales under question. “This is still unresolved,” Peter wrote.
In April, the Sonoma County Sheriff’s Office recorded a “writ of attachment,” an order of the court creating a lien on the property, for nearly $3 million on the Creamery properties on behalf of Pacific Gold. The case is ongoing.
Court filings also show that rumors about the sale of the Creamery did not begin last week with the Argus-Courier’s article.
“Pacific Gold recently learned that Petaluma Creamery is in the process of selling its business to a third party. [Pacific Gold] now files this action to protect its rights and obtain provisional relief pending trial,” a Nov. 22, 2022 filing states.
A month later, just ahead of Christmas break, a Petaluma Creamery employee emailed a Pacific Gold employee: “I don’t have any planned days off. We are close[d] Dec 26th and Jan 2 for the holidays but barring us going out of business (could happen), I will be here.”
Peter himself has recently referenced the idea of selling as a means of paying off his debts, according to a legal filing by the Deis’ attorneys.
“Mr. Peter has sworn under penalty of perjury that if he won the lottery, the Deis would be paid the balance of their Note and much more. But he claims Spring Hill cannot pay because it does not have the funds to make the payment at the moment (though he has held out the specter of a possible future sale of Spring Hill which would allow it to repay the debt),” a March 29, 2023 filing states.
Juggling various debts is nothing new for Larry Peter. A review of county property records associated with Peter’s various companies reveals a decades-long history of property purchases, sales and debts in addition to fines levied by various state and local agencies.
Peter himself acknowledged that he started his dairy empire with high-interest loans in a December 2020 radio interview with then-Sonoma County Farm Bureau executive director Tawny Tesconi for The Crush’s Farm to Table segment.
“My dream was to own a dairy, so I went out and borrowed blood money—high-interest money—and went out and bought a dairy on Spring Hill Road… The first 20 years were pretty hard because I always had to borrow money at 20–25% interest to get started,” Peter told Tesconi.
It appears the debt dance has continued to the present. Last June, county records show, Peter and Spring Hill Jersey Cheese received a loan for $5.75 million from Socotra Capital, a Sacramento-based firm which specializes in “direct hard money loans to meet your real estate needs.”
Socotra is a “money lender specializing in financing real estate investors on projects that may not be possible through traditional methods,” the firm’s CEO Adham Sbeih said in an interview with River City Bank last month. “We are filling the space that many banks aren’t filling, whether it be a bridge loan, fix and flip loan, commercial refinance, construction projects, or other real estate projects.”
In return for the loan, records show, Peter staked the Creamery and the neighboring properties listed in the June real estate listing which the Argus-Courier reported on. The length and interest rate of the loan are not publicly available.