Even when its bank account ran dry, it was seemingly business as usual for Eastern Livestock Co., LLC. After all, it was the peak of the fall calf weaning and marketing season. But now, one of the country’s largest cattle buying companies is in receivership, which means 734 producers in 30 states are holding bad checks, says USDA spokesperson Jim Brownlee.
On Nov. 9, Fifth Third Bank of Cincinnati filed a motion with the Hamilton County, Ohio, Court of
Common Pleas requesting issuance of a temporary restraining order against Eastern Livestock and the appointment of a receiver. The court appointed Elizabeth M. Lynch of Development Specialists Inc., Cleveland, Ohio, as receiver to work on behalf of Eastern Livestock’s creditors, among which Fifth Third Bank is the secured creditor. The court also granted a temporary restraining order that enjoins Eastern Livestock’s access to and dissipation of its financial assets.
Investigation continues. On Nov. 19, USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) filed an administrative complaint charging Eastern Livestock and its owner, Thomas P. Gibson of New Albany, Ind., with failure to pay for livestock purchases; failure to pay timely for livestock purchases; and failure to maintain an adequate bond.
With millions of dollars in bad checks, this fiasco will not only impact producers but also the rural economies caught in the chain reaction. Mark Mackey, CEO of the Livestock Marketing Association, says a number of auction markets are holding bad checks from Eastern Livestock but have already covered their checks to individual farmers.
“If you went through an auction,” Mackey tells sellers, “you’re safe. The auctions are bonded.” Some auctions may take losses, though how large remains to be seen. Mackey says that several auctions tracked down trucks carrying Eastern-bought cattle after news of the problem broke, fearing their own checks would not cash.
While Eastern was bonded for $875,000, the debit of bad checks to date totals more than $130 million. Producers who have not received payment due from Eastern Livestock are being told to contact GIPSA’s Midwestern Regional Office in Des Moines, Iowa, at (515) 323-2579 for information on available financial protections. Bond claims on payments due from Eastern Livestock must be filed within 60 days from the date of the transaction.
In addition, producers should seek legal advice to determine the next step. Unfortunately, many may never see their money and it could take months or years before the dust settles.
- December 2010