GIPSA, Justice Dept. still investigating Eastern Livestock

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SALEM, Ohio — Eastern Livestock owes more than twice what was originally estimated to cattle sellers across the United States.

Money owed

As of Nov. 16, USDA’s Grain Inspection, Packers and Stockyards Administration documented returned checks totaling $81 million; total transactions are estimated at $130 million.

Eastern Livestock Company, LLC, a market agency that buys and sells feeder cattle as a dealer and on an order buying basis, began issuing unfunded checks to producers for livestock purchased by Eastern in different markets on or around Nov.3 2010.

According to the USDA, Eastern Livestock Company is considered one of the largest cattle brokerage companies in the United States. It has operations in 11 states across the Mid-South, Midwest and West.

One of the producers to not get paid is C.W. Haines, of Glens Fork, Ky. He told the Farm and Dairy he sold five heifer calves totaling $3,565 to Eastern Livestock directly Nov. 2. Each of the cattle weighed between 725 pounds and 1,090 pounds.

Other farms in the area and through Kentucky could have sold their cattle through the auction ring. Eastern Livestock could still have bought them but the auction barn has made some checks good because it went through them. The auction barns are now stuck and have to try to secure the money from Eastern Livestock. This makes it hard to determine just how many farmers are affected by the shortage in funds by Eastern Livestock.

Haines went to cash the check Nov. 5 and he received notice Nov. 10 that it has returned “refer to the maker.”

“I’m frosted. It was such a surprise. It’s a total disappointment,” Haines said. He estimates he has been selling cattle and dealing with Eastern Livestock for the past six years.

He went into the cattle business after the terrorist attacks in 2001 when he decided to leave the corporate world and move to Kentucky where his mom had purchased a farm several years prior.

Haines said he expects hardships in farming, but this is not acceptable.

“You don’t expect to sell cattle, come home and find out the check is not good,” Haines said.

He received a certified letter in the mail dated Nov. 5 and received Nov. 10 from USDA GIPSA, stating they have received information indicating he had not been paid for livestock. The letter also contained what proof was needed to submit a claim to the bond Eastern Livestock posted.

Haines is concerned though that the bond posted by Eastern Livestock is not enough for all of the claims possible. For example, GIPSA is estimating there are $130 million in total transactions that have went unpaid. The bond is only for $875,000.

He worries that the bond posted simply is not enough to pay for the cattle that was sold and were not paid for by Eastern Livestock. He said he did some math and he could end up with less than $1 depending on the way the court decides to split the bond.

Haines said he feels the USDA needs to set higher bonds so that this situation doesn’t happen.

“It appears this bond is just inadequate,” said Haines.

He also feels that something needs done at the state level to prevent something like this from hitting farmers. One idea he suggested is taking as little as 10 cents from beef checkoff dollars and create an indemnity fund in each state to cover the farmers if a livestock market goes out of business or a business like Eastern Livestock.

Haines said there is not much a farmer can do to protect themselves when the cattle are sold so something needs to be done to prevent the fallout.

“Lots of things in life aren’t right, but screwing the American farmers over livestock is pretty low,” Haines said.

GIPSA investigation

GIPSA is onsite at Eastern’s headquarters in New Albany, Ind., investigating the violations of the Packers and Stockyards Act.

“We are working to ensure that all protections available are afforded to producers that might be impacted,” said Jim Brownlee, USDA Office of Communications.

GIPSA is working with the Department of Justice to address the situation.

Producers

Producers who have not received payment due from Eastern are encouraged to contact the GIPSA Midwestern Regional Office, Des Moines, Iowa, 515-323-2579, for complete information on available financial protections, and for forms necessary for filing a bond claim on payments due from Eastern.

Bond claims must be filed within 60 days from the date of the transaction on which the claim is based.

In addition, Fifth Third Bank, of Cincinnati, has filed a lawsuit against Eastern Livestock Co.

The bank’s court filing Nov. 10 included the emergency appointment of a receiver. Elizabeth M. Lynch, of Development Specialists Inc., of Cleveland, has been appointed as such by the Hamilton County Common Pleas Court.

About the Author

Kristy Foster Seachrist lives in Columbiana County raising sheep and horses. She earned her degree from Youngstown State University and has worked in both print and broadcast journalism. You can follow her on Twitter at http://twitter.com/fosterk96. More Stories by Kristy Foster Seachrist

6 Comments

  1. Jim Hertzog says:

    As a livestock market owner. I feel sorry for everyone that lost money. In this big scam!! But I want everyone to know from what I can gather is that not one produce lost money that sold there cattle through a livestock auction market. The auction market made there checks good. The auction markets are let holding the bag. That is how we are I would do the same!!! For those producers that sold there cattle throught buying stations lost there money.that’s on them why they chose a buying station over a auction is beyond me. Why would you let one man tell you what your cattle are worth??? Let this be a lesson. Sell your next load at a auction market!!! For all market owners now is the time to demand a bank letter of credit from all of your order buyers it is as good as gold!!! Ask your banker he will tell you the same. Good luck everyone I have been there before it is not fun.

    • Mike Loula says:

      Thanks Jim for the advice, but I have sold cattle at auction markets and through order buyers. The #1 cattle do seem to sell better at the auction but I have always been able to get more from #2′s through order buyers. Yes I sold eastern 1 load ( 63 hd) and now am holding a hot check for $52,731.60. I have done business with them for several years and thought they were as solvent as any would be. Any advice on what I should do now is welcomed from you Jim or any others that might read this comment. Thanks, Mike Loula, Colony OK.

  2. andy says:

    Ain’t that something, farmers and ranchers throwing a fit again. Wanting the govt’ to step in and provide safeguards and protection, when the independent transportation sector deals with this sort of thing everyday. Where’s the public outcry when transportation gets stiffed for loads hauled or only get paid a percentage of the actual cost by some unscrupulous broker,such as Eastern? There isn’t !! Go ahead let the Govt’ take care of you.The independent transportation industry stands on it’s OWN

  3. Mike says:

    Nobody said anything about the government bailing us out. If it’s the bond you are talking about, well it’s a big joke when you consider $81 million in bad checks and $875,000.00 dollar bond. You do the math. And by the way I do stand on my OWN!!!!!!

  4. Macy says:

    What about the trucking companies effected by this??? I understand the producers of the cattle but what about the ones who took the cattle hauled them??? Average load of cattle to haul is $1500.00 do the math on much much is owned to them also. Where did all the money Eastern made go??? It is so unreal!!!

  5. Macy says:

    Wonder if they were operating of a line of credit?? and the bank cut the account off. or they didn’t depoist monies into the account??

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