Eastern Livestock: Cattlemen want trustee with ag knowledge to manage business | TSLN.com

Eastern Livestock: Cattlemen want trustee with ag knowledge to manage business

Katie Micik

OMAHA (DTN) – The National Cattlemen’s Beef Association (NCBA) has urged an Indiana bankruptcy court to choose a trustee with experience in the cattle business to oversee Eastern Livestock’s business as the involuntary bankruptcy case proceeds. NCBA also wants that trustee to create a notification system of case developments for cattlemen whose hands were burned by hot checks.

“It’s important there’s a trustee that understands agriculture,” Colin Woodall, NCBA’s vice president of government affairs, told DTN. “As we all know, the cattle business is a little bit of a different animal and in bankruptcies like these, it’s helpful to have people in charge that know what they’re talking about.”

Some of Eastern Livestock’s creditors filed to push the company into Chapter 11 bankruptcy proceedings, and court filings to date show that the petitioning creditors claim the cattle brokerage owes them more than $21 million dollars. The Grain Inspection, Packers and Stockyards Administration (GIPSA) estimated that more than 740 livestock sellers received bad checks that may total $130 million.

Typically in a Chapter 11 bankruptcy, the owner is allowed to operate the business while it’s restructured. But because of Eastern’s alleged wrongdoings, the court has removed Eastern Livestock’s management and ordered the appointment of a trustee, who has not yet been named.

An Ohio court appointed a receiver to take over the books and business of Eastern Livestock after Fifth Third bank alleged it identified a check kiting scheme. The receiver has been appointed as a temporary trustee in the Indiana bankruptcy proceedings until a permanent trustee is decided.

Fifth Third of Cincinnati, OH, alleged in court proceedings in Ohio, which are separate from the bankruptcy case, that Eastern Livestock ran a sophisticated scheme that took advantage of the time between when a check is deposited and when the funds are transferred. Once Fifth Third froze the cattle brokerage’s accounts, which caused checks nationwide to bounce, Eastern’s accounts were overdrawn by $13 million. The bank also alleges that Eastern inflated its total sales for fiscal year 2010 to $3.9 billion by creating $2.5 billion of fictitious transactions with its affiliate companies.

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Woodall said there’s very little information available about Eastern Livestock’s finances. Creditors decided to go forward with the bankruptcy, a process that will shed light on the company’s books, and “once that had been done, we felt like we needed to engage,” he said.

NCBA filed a letter in the bankruptcy case advocating for a trustee that understands agriculture and offering support to the trustee in that regard. The letter also suggests the trustee “develop a system of public notification of activities of the court so that producers across the nation have a reliable source of information regarding the filing of claims, payment of monies owed to Eastern, and the clearance of title to livestock by said Trustee accepting or canceling contracts for the delivery of cattle.”

Woodall said there’s no preconceived idea of the notification system’s form, but he said it’s important that news of what happens in the New Albany, IN, courtroom gets out to the countryside. Cattle country’s interest in the case is high, but information is rare.

“We need to make sure all producers involved have a clear idea of what’s going on,” he said. “At end of the day, we’re trying to help the people left holding the bag become as whole as possible. We want to get more details, and right now, we really don’t have them.”

OMAHA (DTN) – The National Cattlemen’s Beef Association (NCBA) has urged an Indiana bankruptcy court to choose a trustee with experience in the cattle business to oversee Eastern Livestock’s business as the involuntary bankruptcy case proceeds. NCBA also wants that trustee to create a notification system of case developments for cattlemen whose hands were burned by hot checks.

“It’s important there’s a trustee that understands agriculture,” Colin Woodall, NCBA’s vice president of government affairs, told DTN. “As we all know, the cattle business is a little bit of a different animal and in bankruptcies like these, it’s helpful to have people in charge that know what they’re talking about.”

Some of Eastern Livestock’s creditors filed to push the company into Chapter 11 bankruptcy proceedings, and court filings to date show that the petitioning creditors claim the cattle brokerage owes them more than $21 million dollars. The Grain Inspection, Packers and Stockyards Administration (GIPSA) estimated that more than 740 livestock sellers received bad checks that may total $130 million.

Typically in a Chapter 11 bankruptcy, the owner is allowed to operate the business while it’s restructured. But because of Eastern’s alleged wrongdoings, the court has removed Eastern Livestock’s management and ordered the appointment of a trustee, who has not yet been named.

An Ohio court appointed a receiver to take over the books and business of Eastern Livestock after Fifth Third bank alleged it identified a check kiting scheme. The receiver has been appointed as a temporary trustee in the Indiana bankruptcy proceedings until a permanent trustee is decided.

Fifth Third of Cincinnati, OH, alleged in court proceedings in Ohio, which are separate from the bankruptcy case, that Eastern Livestock ran a sophisticated scheme that took advantage of the time between when a check is deposited and when the funds are transferred. Once Fifth Third froze the cattle brokerage’s accounts, which caused checks nationwide to bounce, Eastern’s accounts were overdrawn by $13 million. The bank also alleges that Eastern inflated its total sales for fiscal year 2010 to $3.9 billion by creating $2.5 billion of fictitious transactions with its affiliate companies.

Woodall said there’s very little information available about Eastern Livestock’s finances. Creditors decided to go forward with the bankruptcy, a process that will shed light on the company’s books, and “once that had been done, we felt like we needed to engage,” he said.

NCBA filed a letter in the bankruptcy case advocating for a trustee that understands agriculture and offering support to the trustee in that regard. The letter also suggests the trustee “develop a system of public notification of activities of the court so that producers across the nation have a reliable source of information regarding the filing of claims, payment of monies owed to Eastern, and the clearance of title to livestock by said Trustee accepting or canceling contracts for the delivery of cattle.”

Woodall said there’s no preconceived idea of the notification system’s form, but he said it’s important that news of what happens in the New Albany, IN, courtroom gets out to the countryside. Cattle country’s interest in the case is high, but information is rare.

“We need to make sure all producers involved have a clear idea of what’s going on,” he said. “At end of the day, we’re trying to help the people left holding the bag become as whole as possible. We want to get more details, and right now, we really don’t have them.”

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