PASCO – The president of one of the largest agricultural operations in Washington state has admitted concocting a scheme to defraud Tyson Foods and another company out of more than $244 million.
Cody A. Easterday, 49, pleaded guilty Wednesday in U.S. District Court in a case that federal prosecutors are calling a “ghost-cattle scam.”
Easterday, who’s also chief executive officer of Easterday Ranches Inc., charged the two companies under various agreements for the costs of buying and feeding 200,000 cattle, when those cattle did not actually exist, according to a U.S. Department of Justice news release.
That money was used to offset approximately $200 million lost in commodity futures contracts trading.
The news release does not name the second victim in the scheme, instead referring to it as “Company 1.”
“For years, Cody Easterday perpetrated a fraud scheme on a massive scale, increasing the cost of producing food for American families,” said Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division.
“The Criminal Division’s prosecutors are committed to swiftly and thoroughly prosecuting frauds affecting our nation’s agricultural and other commodities markets, whether in the heartland or on Wall Street.”
The Mesa man faces up to 20 years in prison on one count of wire fraud, and must repay $244 million in restitution. Sentencing is scheduled Aug. 4.
The news release did not say in which federal jurisdiction Easterday entered his guilty plea, and a search of online court records in the Eastern District of Washington does not show a criminal case against him.
New lawsuit
However, his plea came the same day the Commodity Futures Trading Commission sued Easterday and his company for three violations of the Commodity Exchange Act.
“For more than 10 years, defendant Cody Easterday accumulated staggering losses speculatively trading in the cattle futures markets, ultimately amassing more than $200 million in losses in his personal and corporate accounts,” according to the 24-page complaint. “To meet margin calls, Easterday concocted a scheme to defraud one of his biggest business partners.”
The lawsuit states that the fraud started around October 2016 and lasted until December 2020 – one month after Easterday admitted to a Tyson representative that he had been submitting fake invoices.
The suit also notes Easterday’s recent statements to the Department of Justice for submitting “false cattle inventory, purchase, and sales figures to the Chicago Mercantile Exchange.”
The CME Group operates the world’s largest financial derivatives exchange.
According to federal investigators, Easterday submitted falsified paperwork to the CME on two separate occasions “that resulted in the CME exempting Easterday Ranches from otherwise-applicable position limits in live cattle future contracts.”
Tyson had listed the beef producer’s loss on its December filing with the federal Securities and Exchange Commission, but did not name the responsible cattle supplier until filing its own lawsuit in January in Franklin County Superior Court.
Tyson is based in South Dakota. Its beef division operates 12 facilities around the country, including a meat processing plant in Wallula.
The company is looking to get its money back, along with 54,000 head of cattle on an Easterday feedlot north of Pasco.
The two Franklin County-based family-owned businesses – Easterday Ranches and Easterday Farms – filed separately in February for Chapter 11 bankruptcy protection.
An attachment to one of the bankruptcy filings shows that Easterday and his wife Debby, along with his mother Karen L. Easterday, all resigned their officer positions with family businesses before seeking protection.
The longtime family patriarch, Gale Easterday, died in a Dec. 10 head-on crash on Interstate 182 in Pasco.
The family transferred control of the partnership to a group of “independent directors,” who adopted changes on Jan. 31, one day before the first bankruptcy filing.
The Justice Department’s news release Wednesday did not disclose Cody Easterday’s custody status after his guilty plea.
The release said the white-collar crime was investigated by the Federal Deposit Insurance Corporation – Office of Inspector General, or FDIC-OIG, and the U.S. Postal Inspection Service.
“Today’s guilty plea holds the defendant responsible for his extensive and coordinated fraud over many years, resulting in more than $240 million of illicit gains,” said Inspector General Jay N. Lerner of the FDIC-OIG.
“(Easterday) submitted false and fraudulent documentation, and then brazenly used the proceeds to cover his losses and for his personal benefit,” Lerner continued. “This scheme was unraveled through rigorous and diligent investigative work with our law enforcement partners, and the FDIC-OIG remains committed to helping preserve the integrity of the banking sector.”
According to the news release, Easterday Ranches had longstanding agreements with Tyson and Company 1 to buy and raise cattle. The two companies advanced money for those costs.
Then once the cattle were slaughtered and sold at market price, Easterday Ranches would repay the money with interest, and keep whatever came in above sale price as profit.
However, as a result of the scam, there was no money to repay Tyson and the other company because the hundreds of thousands of cattle for which they had previously paid Easterday were never on the feedlot.
“Producing and providing false invoices and information on goods and services never delivered, were the fundamental key in defrauding an American multinational company out of hundreds of millions of dollars,” said Inspector in Charge Delany De Le’on-Col’on of the U.S. Postal Inspection Service Criminal Investigations Group.
“This case highlights the collaborative investigative work undertaken by the U.S. Postal Inspection Service and its law enforcement partners to protect consumers and businesses from duplicitous practices,” said De Le’on-Col’on. “Anyone who engages in these fraudulent and deceptive activities will be brought to justice.”
