KANSAS CITY, Mo. – Two defendants working together in a cattle investment business were sentenced in federal court for the largest financial fraud ever prosecuted in the Western District of Missouri.
The $160 million “Phantom Cattle Scheme” involved victims in several Midwestern states.
Defendants. George L. Young, 73, of Grant City, Mo., and Kathleen I. McConnell, 55, of Kansas City, Mo., co-owners of United Livestock Services LCC and Professional Business Services, were sentenced by U.S. District Judge Fernando J. Gaitan Jr. May 24.
Young was sentenced to nine years in federal prison without parole; McConnell was sentenced to seven years and three months in federal prison without parole.
The court also ordered Young and McConnell jointly and severally liable to pay $182,981,100 in restitution, which represents the gross amount of the loss suffered by victims of the fraud scheme.
Some assets available for restitution are under the control of the bankruptcy trustees, but have not been distributed.
Beginning June 28. The court ordered Young and McConnell to self-surrender June 28, 2004, to begin serving their sentences.
On Oct. 24, 2003, Young and McConnell pleaded guilty to all five counts of an indictment returned by a federal grand jury in Kansas City Nov. 7, 2002.
The charges. Through their businesses, Graves explained, Young and McConnell offered to purchase cattle for their clients, to provide care and feeding of those cattle, and to sell the cattle at a profit.
Young and McConnell admitted they did not purchase the cattle as claimed, but instead falsified records and made misrepresentations in order to defraud numerous ranchers, farmers, business associates, and federally insured financial institutions.
These were phantom cattle that never existed and were never purchased or sold. The defendants used their clients’ money to pay off other investors and cover cash shortfalls, rather than to buy real cattle.
Although Young and McConnell paid clients rates of return far above industry averages, those payments were not generated by the livestock operations.
Instead, they were generated by other clients, who were also told that their money was being used to purchase cattle and have them fattened for market.
Only on paper. At the time Young and McConnell ceased doing business Aug. 10, 2001, records indicate that the defendants had nearly 344,000 head of cattle under their control.
Instead, less than 17,000 head of cattle actually existed.
The defendants admitted that they made false representations and concealed material facts from financial institutions, by falsely representing in financial documents submitted to those financial institutions that cattle inventories were much higher than they actually were.
The defendants also admitted that Young deliberately misled clients and representatives of their financial institutions who attempted to inspect the cattle.
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