Unraveling of Eastern Livestock continues

| Thursday, January 13, 2011

Many OOIDA members admit that they were shocked by the news that Eastern Livestock Co., of New Albany, IN, had abruptly ceased operations in November 2010, leaving them with worthless checks for loads they hauled for them.

According to recent court documents, Eastern Livestock owes $130 million to 743 sellers in 30 states. However, many cattle haulers are still owed money as well.

One OOIDA Life Member from Missouri told Land Line that if he could just get his “fuel money back” he would be OK, but that losing $10,000 “still stings.”

And the fallout continues as James A. Knauer, who has been appointed the Chapter 11 trustee by the U.S. Bankruptcy Court in the Southern District of Indiana, uncovers more information as to what led to Eastern’s collapse.

According to Knauer’s website set up to update people about the case, he stated that when he took over the company’s offices “we discovered information had been purged from computers and many records needed to prepare the schedules are missing.”

He recounts finding a check made out to Eastern Livestock for around $578,000 “allegedly in payment for a cattle shipment.” However, the person supposed to have signed the check “had been dead for some time on the date the check was issued.”

“I think this typifies the type of problem we are up against in investigating this massive fraud,” Krauer wrote.

According to Knauer, he and his staff are uncovering cattle that isn’t “reflected in Eastern’s records.” “In particular, we are finding that Eastern was purchasing cattle using all sorts of fictitious names not in the records.”

Knauer is urging people who weren’t paid by Eastern to file proof of claim forms.

While the cattle producers will be able to file on Eastern’s $875,000 bond under the USDA’s Grain Inspection, Packers and Stockyards Act, truckers who hauled cattle for Eastern don’t have the same recourse since livestock is an exempt commodity.

OOIDA Executive Vice President Todd Spencer told Land Line recently that not requiring a bond for exempt commodities is a loophole in the law that “victimizes truckers.”

“In these economic calamities, the protections that exist for the cattle industry – and for the produce growers and receivers under the Perishable Agricultural Commodities Act – are not extended to the trucker,” Spencer said.

“The trucker comes up on the short end of the stick when these things happen, and it shouldn’t be that way,” he said.

Eastern’s bank, the Fifth Third Bank of Cincinnati, OH, stated things began to unravel on Nov. 1, 2010. That is the day OOIDA members Steve and Gail Garrett tried to deposit their $4,500 check from Eastern and were told by their bank that it was no good. The Garretts are owed around $11,000 for loads they had hauled for Eastern prior to the company’s collapse.

Around the same time, a bank audit discovered the check-kiting scheme. Then the Fifth Third Bank asked the court for the emergency receivership, which a Hamilton County court granted. According to court documents, Eastern’s bank accuses the company of a “complicated bank fraud and check-kiting scheme employed by Eastern Livestock to defraud Fifth Third of millions of dollars.”