Fallout for truckers, cattle industry from Eastern Livestock collapse
OOIDA members Steve and Gail Garrett say they are still shocked by the news that the company they hauled livestock for over the past 16 years, Eastern Livestock Co., has ceased operations.
The U.S. Department of Agriculture stated that Eastern wrote more than $94 million in worthless checks to cattle producers in early November. The Garretts were among countless livestock haulers who also received bad checks from Eastern, based in New Albany, IN.
Gail Garrett told Land Line on Friday, Nov. 19, that when she first received a phone call from her bank in early November stating that her $4,500 check from Eastern didn't clear, she said she was "shocked."
"I immediately got on the phone with someone at Eastern's headquarters. She assured me it was a glitch and to deposit the check again on Nov. 5, which my bank did," she said. "That one didn't work either."
The Garretts are out the $4,500 for the bad check, but also another $6,500 for outstanding loads they hauled for Eastern.
"We don't expect to see our money, but I made sure to send the paperwork to anybody and everybody I could so they had it," Gail Garrett said. "We are hoping for the best, but I guess we'll see what happens after the dust settles."
While the cattle producers will be able to file on Eastern's $850,000 bond under the USDA's Grain Inspection, Packers and Stockyards Act, truckers who hauled cattle for Eastern don't have the same recourse since it's an exempt commodity.
OOIDA Executive Vice President Todd Spencer told Land Line that not requiring a bond for exempt commodities is a loophole in the law that "victimizes truckers."
"In these economic calamities, the protections that exist for the cattle industry in this instance – and for the produce growers and receivers under the Perishable Agricultural Commodities Act – are not extended to the trucker," Spencer said.
"The trucker comes up on the short end of the stick when these things happen, and it shouldn't be that way," he said.
In court documents, Eastern's bank, the Fifth Third Bank of Cincinnati, OH, stated things began to unravel for one of the largest cattle brokerages on Nov. 1, which is the day the Garretts tried to deposit their check from Eastern at their local bank and were told it was no good.
Around the same time, a bank audit discovered the check-kiting scheme. Then the Fifth Third Bank asked the court for the emergency receivership, which a Hamilton County court recently granted. According to court documents, Eastern's bank accuses the company of a "complicated bank fraud and check-kiting scheme employed by Eastern Livestock to defraud Fifth Third of millions of dollars."
The complaint also alleges that Eastern overstated its assets and receivables, which led Fifth Third Bank to lend the cattle brokerage millions of dollars.
Elizabeth M. Lynch of Development Specialists Inc., in Cleveland, OH, is handling the receivership.
Ernest Van Hooser of the law firm Van Hooser and Eftink, P.C., based in Raymore, MO, is representing the Livestock Marketing Association and its members who were financially harmed by Eastern's abrupt closure.
"Some of our folks, like yours, have bad checks from Eastern," Van Hooser said. "For some of them, it will create some serious problems; for others, they will be able to borrow the money or figure something else out and go on."
He added that the fallout from this will be financially devastating, not just for the cattle producers and the livestock haulers, but many others involved in the cattle industry.
"There's no telling how many people this is actually going to impact. From the banks that loaned to your truckers and to LMA members, it's going to impact the farmers, the feed lots, the veterinarians who have bills that haven't been paid," Van Hooser said. "This will be huge for a lot of folks."
Gail Garrett, who handles all of the dispatching and bookkeeping duties for their one-truck operation, said she still can't believe Eastern, one of the largest cattle brokerages in the U.S., is gone.
"I want to believe that they didn't set out to deliberately do this to us all," she said. "They were a big cattle buyer. Maybe Tommy Gibson bought more than he could pay for, thinking his line of credit would cover it. Unfortunately, he brought a lot of people down with him."
http://www.landlinemag.com/todays_news/Daily/2010/Nov10/111510/111910-02.shtml
