Thursday, December 16, 2010

Federal regulators unable to keep cattle dealer from defaults, bad checks of up to $130 million

Bill Bishop of the Daily Yonder writes about the collapse of Eastern Livestock, a company based in New Albany, Ind. "The losses are still coming in, but already it appears that Eastern Livestock has done for rural America what Bernie Madoff did for Manhattan," writes Bishop.

At last count, Eastern may owe 740 ranchers in 30 states as much as $130 million for cattle sold but never paid for. The firm issued $81 million in bad checks Nov. 3-9, and trucking firms say they are owed hundreds of thousands. Superior Livestock, an online and satellite auction service, says Eastern owes it more than $19 million, and Cincinnati-based Fifth Third Bank says Eastern has defaulted on a $32 million loan and has overdrawn its account by $13 million, according to DTN’s Katie Micik. The bank says Eastern is "engaged in a massive check-kiting scheme."

Inadequate regulation of the livestock market may be to blame. The company was required to have a dollar-for-dollar bond, but only for up to the first $75,000 in sales. Any amount above that was 10 cents for each dollar in sales. The federal Grain Inspection, Packers and Stockyard Administration asked Eastern to increase its bond to $1.15 million, but the company never complied, and GIPSA never took any action against it. GIPSA has recently proposed rules that would give it greater oversight of the livestock business — regulations that meatpackers and some farm groups say are too intrusive, according to Bishop. (Read more)

Cattle producers who have done business with Eastern Livestock and have not received payment should contact the GIPSA regional office at 515-323-2579 for 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. Kentucky producers are asked to file a complaint with the Office of the Attorney General by calling 502-696-5300. Even if you have already filed documents with GIPSA, according to The Farmer's Pride. (Read more)

The Courier-Journal of Louisville has also reported on the collapse of Eastern Livestock. (Read more)

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