By TIM THORNBERRY
Kentucky Correspondent

FRANKFORT, Ky. — A familiar player in the nation’s livestock industry has come under fire for possibly mishandling millions in funds owed to producers.
Eastern Livestock Co. (ELC) allegedly began issuing unfunded checks to producers for livestock purchased in different markets on or around Nov. 3, according to information from the Kentucky Department of Agriculture (KDA.)
The company, one of the largest cattle brokers of its kind in the country, is headquartered in New Albany, Ind., and has been in existence since the 1950s with facilities in 11 states. The USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) received a complaint by a seller that a check issued for sold livestock by ELC had been returned due to insufficient funds.

On Nov. 19 the GIPSA filed an administrative complaint charging ELC and one of its owners, Tommy P. Gibson with failure to pay for livestock purchases, failure to pay timely for livestock purchases and failure to maintain an adequate bond.
“We take very seriously our responsibility to ensure that producers receive all protections afforded them by law and we will be working closely with the Department of Justice and law enforcement officials in the weeks and months ahead, “ said John Ferrell, deputy under secretary for marketing and regulatory programs.

The GIPSA estimates the company to owe more than $130 million to 743 sellers in 30 states and has documented $81 million in returned checks.

The agency has been on-site at ELC headquarters to make evaluations and look into the possibility that the company violated the Packers and Stockyards Act.
Kentucky Agriculture Commissioner Richie Farmer and Attorney General Jack Conway are working together to determine whether the cattle broker violated any state laws.

“Many Kentucky farmers are deeply upset over this turn of events,” said Farmer. “For many producers, the amount of money involved is a significant part of their livelihoods. I will work with the attorney general to determine if any state laws were broken, and we will pursue this case to the fullest extent of the law.”

The KDA noted that those producers who have conducted business with ELC and not received payment could contact GIPSA’s Midwest Regional Office in Des Moines, Iowa, to find out about their rights under the bond provisions of the Packers and Stockyards Act.

“I strongly encourage Kentucky farmers who are owed money by Eastern Livestock to assist in the investigation by filing a complaint through my Office of Consumer Protection,” Conway said. “We are mobilizing all of our resources to identify Kentucky’s farmers who have been victimized by Eastern Livestock and to help with the federal investigation.”

Timetable of events

The USDA issued an outline of events leading up to actions taken against ELC beginning with the initial complaint.

“On Nov. 4, 2010, GIPSA deployed investigators to Eastern’s headquarters to investigate the original and subsequent complaints of failure to pay for livestock. GIPSA also began deploying rapid response teams to markets nationwide that could be impacted by Eastern’s financial failure.
“The agency also began issuing letters to unpaid sellers encouraging affected producers to submit bond claims. As of Nov. 17, 2010, GIPSA issued 743 letters.”

On Nov. 9, 2010, the “USDA issued a news release, Bond Information for Producers Who Sold Livestock to Eastern Livestock Company, LLC, explaining the situation and providing information on how to file bond claims under the Packers and Stockyards Act.”

Also on that date, “Fifth Third Bank filed a motion with the Hamilton County Court of Common Pleas in Ohio requesting issuance of a temporary restraining order and the appointment of a receiver. The court appointed Elizabeth M. Lynch, of Development Specialists Inc., of Cleveland, Ohio, as receiver to work on behalf of Eastern’s creditors, among which Fifth Third Bank is the secured creditor. The court also granted a temporary restraining order enjoining Eastern’s access to and dissipation of its financial assets.”

On Nov. 10, 2010, “Capital Indemnity Corporation served notice on Eastern cancelling Eastern’s surety bond for $875,000 effective Dec. 30, 2010.”
For those needing information on available financial protections and for forms necessary for filing a bond claim on payments due from ELC, the GIPSA regional office can be reached at 515-323-2579.

According to information from the KDA, bond claims must be filed within 60 days from the date of the transaction on which the claim is based.

Producers can also contact the Kentucky Office of Attorney General by calling 502-696-5300 or by e-mail at consumer.protection@ag.ky.gov to file a complaint.