GIPSA, Justice Dept. still investigating Eastern Livestock

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.