EDMONTON, Ky. — Four Eastern Livestock executives, including the company’s owner, were indicted Thursday for an alleged check kiting scheme that rocked the livestock industry last year.

According to a press release by Kentucky Attorney General Jack Conway, the scheme resulted in a loss of more than $840,000 by 172 Kentucky cattle producers and others in late 2010. Eastern Livestock is accused of failing to pay nearly 800 cattle producers nationwide an estimated $130 million.

Those allegations prompted a nine-month investigation by Conway’s Department of Criminal Investigations beginning in December.

A grand jury in Metcalfe County, Ky., returned a multi-count indictment against Thomas “Tommy” Gibson, 71, Steve McDonald, 59, and Grant Gibson, 48, all from Lanesville, and Darren Brangers, 43, of Louisville.

All four were involved in directing the operations of the now-defunct Eastern Livestock, LLC, and related corporations, according to the attorney general. Thomas Gibson is listed in bankruptcy court records as the owner of Eastern Livestock, while McDonald is listed as chief operating officer and Brangers as administrator and bookkeeper.

Eastern, which dates back to the 1950s and has branches in 11 states, has its headquarters located at 135 W. Market St. in New Albany. At the time the investigation began, Eastern Livestock was one of the largest cattle brokerages in the nation. The company would purchase cattle at auction and then sell them to feed lots where they gain weight and are prepared for slaughter.

“I am particularly appreciative of the help we’ve gotten from Kentucky farmers who were caught up in this scheme,” Conway said in a statement. “These are hard-working families who have struggled to buy farm equipment, pay their mortgages and even put food on the table after being swindled out of money they were owed for cattle.”

The indictment alleges that all four defendants engaged in organized crime between 2009 and 2010 by collaborating on a continuing basis in a criminal syndicate in order to commit theft.

The men are also charged, by complicity, with 17 counts of theft by deception over $10,000, 144 counts of theft by deception over $500 and under $10,000 and 11 counts of theft by deception under $500.

Engaging in organized crime is a class B felony, carrying 10 to 20 years imprisonment. Theft by deception over $10,000 is a class C felony carrying five to 10 years imprisonment, theft by deception over $500 is a class D felony carrying one to five years imprisonment and theft by deception under $500 is a misdemeanor carrying up to 12 months jail.

The grand jury also issued a report referring all matters involved unindicted defendants to a subsequent grand jury. A person who answered the phone at Eastern’s headquarters said the company would have no comment at this time.



problems revealed in November

The first complaint came Nov. 3 when a cattle seller told the U.S. Department of Agriculture’s Grain Inspection, Packers and Stockyards Administration that a check received for livestock sold to Eastern had been returned due to insufficient funds.

Just days after the complaint, Fifth Third Bank filed a complaint against the company at a court in Hamilton County, Ohio, and froze the company’s bank accounts. The complaint alleged $20 million were being sent back and forth each day between accounts belonging to Eastern and Thomas Gibson in order to use the lag time to create an “artificial balance.”

The U.S. Department of Agriculture filed a complaint against Eastern later that month alleging the company did not pay for livestock purchases or maintain an adequate bond, and in December, three creditors filed a motion that ultimately forced Eastern Livestock into involuntary Chapter 11 bankruptcy.

The bankruptcy case is still ongoing, and several lawsuits have been filed as cattle sellers attempt to recover at least a small portion of the money lost. The Federal Bureau of Investigation seized $4.7 million from a personal bank account of Thomas Gibson.



Cattle ranchers devastated by lost money

The attorney general’s investigation identified more than 280 alleged victims of Eastern Livestock who live in Kentucky.

Conway’s Consumer Protection office established a hotline for victimized cattle producers after reviewing a multitude of complaints from producers who had received bad checks for livestock sales.

Paul Milligan, 63, of Columbia, Ky., told the News and Tribune in early November that he sold nine head of cattle to Eastern Livestock on Nov. 2 at an auction in Edmonton. He said he received a call two days after the auction warning him he should check with the bank because checks from Eastern were bouncing. The following Monday, he received word that the payment did not go through.

At the Edmonton auction, 1,800 head of cattle were sold at about $500 a head to Eastern, according to his figures.

“They just really gave us a big screwing,” Milligan said.

Milligan said his neighbor received a bad check for $32,000. The neighbor had borrowed money to buy the calves and resell them, and he was unable to repay that money. He said another farmer he knows had planned to make his farm payment with his check.

“I’m just tickled to death,” Milligan said on Thursday when informed of the indictment. “From the beginning, I’ve thought they’re cattle thieves, and you know what they used to do with cattle thieves? They’d hang them.”

Milligan said he was able to survive the loss, although he was in a financial “bind.” He said he heard of at least one other person who lost his farm because he was already behind on his payments and needed the money from the sale. He said others have been forced to sell equipment.

Milligan said he has not received any money yet from the sale, and he doubts he will see any money from Eastern during his lifetime. His hope now is that those responsible face prison time.