FBI seizes $4.7 million from Eastern Livestock owners’ accounts

| 1/26/2011

Since the financial collapse of one of the country?s largest cattle brokerages -- Eastern Livestock of New Albany, IN ? many livestock haulers are struggling to stay afloat after receiving worthless checks for their transportation costs from the now defunct company.

OOIDA members Charlie and Cherie Jacobs of Saint Paul, VA, had four trucks that were running for Eastern before its abrupt shutdown in November 2010. The Jacobs are still owed more than $82,000 from Eastern, which has since filed for Chapter 11 bankruptcy protection.

Cherie Jacobs told Land Line on Tuesday, Jan. 25, that she had her first inkling that Eastern was in financial trouble when she was notified by her bank in late October 2010 that their check from Eastern for approximately $40,000 was no good. This was just days before a bank audit by the Fifth Third Bank discovered a ?complicated bank fraud and check-kiting scheme employed by Eastern Livestock.?

?Eastern kept us pretty busy,? Jacobs said. ?This was the busy time of the year for us, and this really caught us off guard.?

Estimates are that Eastern Livestock wrote nearly $130 million in worthless checks to both truckers and cattle producers in the days before the company?s shutdown.

Then on Jan. 20, the FBI seized approximately $4.7 million in bank accounts belonging to Tom Gibson and possibly Eastern Livestock, according to Eastern?s bankruptcy trustee James Knauer. While the accounts were listed in Tom and Patsy Gibson?s personal bankruptcy schedule at Your Community Bank in New Albany, IN, they listed the amount in those accounts as ?unknown.?

Besides Eastern, the Gibsons list ownership interest in approximately 17 other companies, including East-West Trucking, which has also filed for Chapter 7 bankruptcy protection.

Michael J. Walro, who has been appointed the bankruptcy trustee for East-West Trucking, told Land Line on Wednesday, Jan. 26, that it appears there ?will be quite a bit of money available to pay claims? for the owner-operators who drove for East-West Trucking. However, he added that he isn?t sure what can be done for those who were paid by Eastern Livestock. Walro said he?s encouraging Eastern Livestock truckers to file claims with East-West Trucking as well.

?If they do so, they must make sure the claim states they drove for Eastern Livestock and were paid by Eastern Livestock prior to the filing of the East-West?s bankruptcy and are filing this claim contingent on whether a basis can be found under which East-West would be found liable for their claim,? Walro said.

Walro said since both companies were owned by Tom Gibson, he?s not ?ruling out the possibility that such a basis might be discovered in the future.?

Knauer told Land Line that East-West Trucking was set up as a separate company and has separate creditors, assets and liabilities. He said, though, that there is ?some question whether Eastern Livestock and East-West Trucking were truly maintained as separate entities in actual practice.?

?If they weren?t, there is a possibility a claim could be made that the two companies? assets, liabilities and creditors should be combined,? Knauer said.

Walro said that drivers who were paid by East-West may be entitled to priority status for up to $11,725.

He said his plan is to file an application to pay priority claims within 30-45 days after the claims? bar date of April 12 if there are no objections to the applications.

If you did business with Eastern Livestock and are owed money, the trustees are encouraging claimants to file proof of claims with the court. Here are ?cause? numbers and filing deadlines:

Thomas P. Gibson and Patsy M. Gibson
Deadline to file Proof of Claim:  April 25, 2011
Cause Number: 10-93867

East-West Trucking
Deadline to file Proof of Claim:  April 12, 2011

Cause Number: 10-93799

?It is my hope to provide them as speedy relief as possible,? Walro said.