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Eastern Livestock troubles

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redrobin

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Some of you have heard by now but I found this on the web.


US officials investigate unpaid bills at cattle brokerageDow Jones Newswires
11/05/2010 @ 3:44pm

Federal agricultural officials said Friday they are investigating an Indiana cattle brokerage in connection to unpaid bills that may exceed $10 million.
The Grain Inspection, Packers and Stockyards Administration, or Gipsa, is investigating cattle brokerage Eastern Livestock Co., said Jay Johnson, a regional director for Gipsa in Des Moines, Iowa. Gipsa is part of the U.S. Department of Agriculture.

Eastern Livestock, which is located in New Albany, Ind., describes itself on its website as one of the largest cattle brokerage companies in the U.S. The company declined to comment when contacted Friday.

"Currently, Gipsa has investigators at Eastern Livestock," Johnson said. "There appears to be a significant amount that is owed for cattle to sellers in several states. The amount unpaid likely exceeds $10 million."

Cattle brokers buy feeder cattle, which haven't yet grown to full size, from ranchers, and through auctions, and sell them to feedlots where they are fattened before slaughter. Friday, auction yards were working to recall feeder cattle sold to Eastern Livestock, turning around trucks set to deliver them, said Mark Mackey, chief executive of the Livestock Marketing Association, a trade group for livestock auction markets.

He said association members started getting checks from Eastern Livestock returned and marked insufficient funds on Thursday. Mackey described Eastern Livestock as one of the largest feeder cattle brokerages in the U.S. operating in all 48 contiguous states. Checks have been returned in states from the East Coast through the Great Plains, but not in the Western U.S., he said.

Cattle traders said some buyers were staying out of the cash market for cattle because of the uncertainties connected with Eastern Livestock, while others were stepping in looking for potential bargains. As for cattle futures, traders didn't expect spillover at the Chicago Mercantile Exchange, saying the size of the potential unpaid bills wasn't big enough to affect the markets.

Mackey said the association will be watching the financial status of Eastern Livestock over the weekend and advising its members about what to do next.

Johnson, the official from Gipsa, asked any unpaid sellers to contact his office at 515-323-2579 to obtain bond claim information. He didn't expect to have further information on the investigation until next week.

-By Lester Aldrich, Dow Jones Newswires; 913-322-5179; [email protected].

(Tom Polansek in Chicago contributed to this story.)

(END) Dow Jones Newswires

November 05, 2010 15:28 ET (19:28 GMT)

Copyright (c) 2010 Dow Jones Company, Inc.

http://www.agriculture.com/news/livestock/us-officials-investigate-unpaid-bills_3-ar12057
 
Looks like they were slightly off on the first estimates:

The Grain Inspection, Packers and Stockyards Administration opened an investigation of Eastern Livestock Co. last week after counterparties reported getting checks returned. The agency estimates the total for unpaid checks at $94 million, far greater than its original estimate of $10 million.

http://online.wsj.com/article/SB10001424052748703514904575602120933029264.html


It's a lot of money, either way. When I went to load some Saturday calves I couldn't help but laugh thinking that my check is now probably accepted at more salebarns than Tommy Gibson's. :lol:
 
pasted from LMA website.

Eastern Livestock Company –
LMA Statement 11/10/2010 2:00 p.m.
LMA has learned that Fifth Third Bank, Cincinnati, Ohio, Wednesday morning filed suit against Eastern Livestock Company, New Albany, Ind. In connection with that suit, summons have been issued to Eastern and Thomas Gibson. The bank has filed a motion for a temporary restraining order and permanent injunction, and for the emergency appointment of a receiver.
LMA is in the process of acquiring the suit documents, and will provide more information as it becomes available.

Eastern Livestock Company –
LMA Statement 11/8/2010 2:30 p.m.
The Livestock Board of Trade (LBT) a service division of Livestock Marketing Association (LMA) has learned from the Des Moines, Iowa, office of the Grain Inspection, Packers and Stockyards Administration that Eastern Livestock Company, New Albany, Indiana, has a total of $94 Million in unpaid livestock transactions. The LBT has also obtained financing statements from the Kentucky Secretary of State's office. The secured party on file is Fifth Third Bank, Cincinnati, Ohio. In these documents, Fifth Third claims a security interest in all of Eastern Livestock Company's assets. Assets include livestock (farm products), inventory, accounts receivable and general liabilities (contracts, contract rights, etc.).
LMA will continue to monitor the situation with Eastern Livestock Company and will release updated facts to our membership as soon as they are made available. Members are urged to contact the Livestock Board of Trade and LMA's legal team VanHooser & Eftink, P.C. if they are holding returned checks or otherwise unpaid livestock transactions.

Statement from LMA regarding Eastern Livestock Co.:
The Livestock Marketing Association is aware of the current situation with Eastern Livestock Company based in New Albany, Indiana: That numerous checks written by Eastern Livestock Company for livestock purchased have been returned as "Refer to Maker" and are now being returned as "Insufficient Funds".
The LMA Livestock Board of Trade and our legal team is closely monitoring the financial status and dealings of Eastern Livestock and is working diligently to assist our LMA members in deciding upon an appropriate course of action. We will provide ongoing updates on the financial status of Eastern Livestock to our members as new information becomes available.
Click to expand...
 
Derry Brownfield (who I seldom listen to) said today that they are a huge purchaser of cattle offered on Superior Livestock Auction. Wonder what that will do to Superior. He also said they were looking into who owns
Superior Livestock currently. This could be of great magnitude.
 
I don't know the details, but Friona filed a suit against Eastern yesterday in the Northern District of Texas in Amarillo. I heard that Superior was also named as a defendant.

OT, do you know any way to access stuff like that to see the details?
 
Texan said:
I don't know the details, but Friona filed a suit against Eastern yesterday in the Northern District of Texas in Amarillo. I heard that Superior was also named as a defendant.

OT, do you know any way to access stuff like that to see the details?
Click to expand...

Not really...

The LMA website has a little more tonight:

On Thursday, LMA learned the court had appointed a receiver, Elizabeth M. Lynch, of Development Specialists, Inc., Cleveland, Ohio.
LMA will provide more information as it becomes available.


http://www.lmaweb.com/
Click to expand...

Superior can't stand much more problems-- as their sales have dropped off dramatically already.....Some of the old 2-3 day sales are now over in 1/2 a day...
 
Texan I looked for you name , seems your safe thus far.

http://dockets.justia.com/docket/texas/txndce/2:2010cv00266/201090/
 
redrobin said:
Texan I looked for you name , seems your safe thus far.

http://dockets.justia.com/docket/texas/txndce/2:2010cv00266/201090/
Click to expand...

His name is about the only one not included as a defendant :shock: :wink:
 
Up to 130M. Probably going higher.

http://westlawnews.thomson.com/National_Litigation/News/2010/11_-_November/Restraining_order_sought_on_Indiana_cattle_firm/
 
Faster horses said:
Derry Brownfield (who I seldom listen to) said today that they are a huge purchaser of cattle offered on Superior Livestock Auction. Wonder what that will do to Superior. He also said they were looking into who owns
Superior Livestock currently. This could be of great magnitude.
Click to expand...

Superior is owned, or mostly owned by Farm Credit. They(we, the taxpayer) could be holdng a big bag of nothing.
 
Eastern pretty well controls the markets in Ky and it could put several yards out of business. Tommy Gibson has had some big problems in the past but this sounds to be the granddaddy of em all.
 
Pretty sure Farm Credit still holds the note from a previous owner that went down. I can't imagine Eastern going down this big and Superior coming out untouched by all of this. Tommy Gibson would buy more cattle on Superior than any other one person or company.
 
Faster horses said:
I'm curious how you found who owns Superior Livestock Auction. I did a
search and couldn't find it and Derry Brownfield wouldn't say; except it was owned by some guys 'well-known in the livestock industry'.

Thanks.
Click to expand...
Not sure if they've changed hands again, but OT posted this news release last year about Farm Credit:

http://ranchers.net/forum/viewtopic.php?p=428508#428508
 
From what I'm picking up from some of the web sites-- it sounds like there are quite a number of cattlemen with their cattle sold and gone- now holding bad checks... :(
 
http://www.agweb.com/blog/Out_to_Pasture_149/did_fdic_cause_eastern_livestock%E2%80%99s_problem/

Did FDIC Cause Eastern Livestock's Problem?
Nov 15, 2010

If the rumors are true, and some pretty savvy people think they are, Eastern Livestock may have had less than a million dollar bond to cover the more than $100 million the company had in outstanding checks when it was forced into bankruptcy.
I call it a "rumor" because nobody at USDA's Grain Inspection, Packers and Stockyards has called back to verify or deny it.

And it isn't that I didn't try. I spent serious hours last week talking to people about the company's problems. I'm still not sure exactly what happened or how such a respected, long-time firm could run into such problems in what was basically a sideways to up market. This sort of thing is expected during surprise down markets—I can't begin to tell you how many "broke cattle feeder" rumors I chased back after the dairy buyout. But everybody is a bit surprised this would happen in this market. I can't tell you many facts. Too many folks didn't call back.

But this is a blog and not a news story, so I can tell you want sounds most likely to most people. First, let's get one rumor out of the way: Jim Odle at Superior Livestock assured me Eastern was current with them and was always "prompt" in paying for cattle purchased on that auction.

So here's what I think because smarter guys than me think it: I think the Federal Deposit Insurance Corporation told the Fifth Third bank to call Eastern's notes. Without, obviously, much regard to how many thousands of innocent cattle producers, cattle truckers, cattle traders, cattle auction markets and—by the way, FDIC-insured country bankers—would be impacted.

The last official thing I saw last week from USDA said they had found more than $80 million in bad checks. They said there were a total of $120 million written. That won't all be lost money. The cattle are still there. One would assume there is also a lot of money in Eastern's account as well.

So it won't all be lost to the people who earned it. But nobody knows how long it will be before they—or the bankers holding their notes—get paid, or how much they will get when it's all over.

A lot of people—and I found nobody who has actually talked to founder and owner Tommy Gibson since the bankruptcy—figure the bond may cover the losses. They say that there is probably a dollar's worth of asset for every dollar's worth of float. The key word, of course, being "probably."

Those folks say commission firms like Eastern seldom get paid for cattle until after they've written checks to the sellers. Given Eastern's size—by some estimates it handles 10%-15% of the stocker and feeder cattle selling in the U.S. every year, and probably a higher percentage than that during the fall run—it would be easy to believe $120 million could be out at any time.

However, those are folks who say they trust Tommy Gibson. Most of them say they'd be shocked to learn this was the "Ponzi scheme" others believe it was. But even they say, if the rumors of Eastern having just an $800,000-$900,000 bond are true, GIPSA may expect some unfriendly scrutiny from the industry. The P&S regulation says bonds should cover two day's trade, and GIPSA is charged with making sure that traders keep their bonds up to date.

Lots—lots and lots, judging from the cattle insiders I talked to—say that the agency has been strict on auction markets and their bonding requirement, but much less so on traders.

No surprise, probably, but several suggested that GIPSA should have been enforcing the laws Congress told them to rather than tying itself into knots trying to develop new, controversial, laws on their own.

Whatever the case, this looks to be a royal train wreck in the cattle industry.

No few of those hot checks went to ranchers and farmers who had delivered their year's calf crop to Eastern—or into Eastern's web of cooperating dealers and brokers. Another big chunk was written to sale barns, especially those in the Southeast where fall calf harvest was in full swing.

In many if not most cases, cattle moving through those auctions were combined with larger lots and there is not way to find them. At any rate, the livestock auctions, not the producers who sold the cattle, will stand any loss. Some auctions—there are scores of them holding bad checks--may well fail, in which case their own bonding agencies should protect sellers and buyers alike.

For direct sellers, the challenge is much worse. Some of them heard about the wreck in time to turn trucks around. Some auctions did the same. In those cases, they may have a hot check, but they still have their stock.

I talked with a couple of feedyard folks who said they are trying to find affected sellers and pay them directly. Chandler Keys at Five Rivers, for instance, said they were "doing everything we can to find them and see that they get paid."

But many loads of the cattle this time of year would have been weaned calves going to stocker operations, where the new owners will have to worry about how sound their titles to the cattle are. And the sellers and their bankers may be caught in a geologically-slow bankruptcy process.

It's early in this. The bank has sued to force Eastern into bankruptcy. GIPSA has sued to get a cease business order. No doubt, later people will start returning phone calls.

For now, it's just conjecture and rumor. But one thing is for sure: It's the start of a nightmare for a lot of people who did nothing wrong. One would hope that the folks at FDIC and Fifth Third thought long and hard about all the other dominos in the line before pushing one over so suddenly and without warning to such an interdependent industry.
 

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