Fallout for truckers, cattle industry from Eastern Livestock collapse

By Clarissa Kell-Holland, staff writer

OOIDA members Steve and Gail Garrett were shocked by the news that Eastern Livestock Co., the outfit they hauled livestock for during the past 16 years, ceased operations in late 2010.

The U.S. Department of Agriculture stated that Eastern wrote nearly $94 million in worthless checks to cattle producers in early November 2010. The Garretts were among countless livestock haulers who received bad checks from Eastern, based in New Albany, IN.

Gail Garrett told Land Line that when she received a phone call from her bank in early November 2010 stating that her $4,500 check from Eastern didn’t clear, she was “shocked.”

“I immediately got on the phone with someone at Eastern’s headquarters. She assured me it was a glitch and to deposit the check again on Nov. 5, which my bank did,” she said. “That one didn’t work either.”

The Garretts are out not only the $4,500 for the bad check, but also another $6,500 for outstanding loads they hauled for Eastern.

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 said 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.

As of press time, James A. Knauer had been appointed the Chapter 11 trustee by the U.S. Bankruptcy Court in the Southern District of Indiana. 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.

Unraveling of Eastern Livestock
Eastern’s bank, the Fifth Third Bank of Cincinnati, OH, stated things began to unravel on Nov. 1, 2010. That is the day the Garretts tried to deposit their check from Eastern and were told it was no good.

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.”

Gail Garrett said she still can’t believe Eastern, one of the largest cattle brokerages in the U.S., is gone.

“I want to believe that they didn’t set out to deliberately do this to us all,” she said. “They were a big cattle buyer. Maybe Tommy Gibson bought more than he could pay for, thinking his line of credit would cover it. Unfortunately, he brought a lot of people down with him.” LL