Two of the highest ranking officials at Eastern Livestock have been sentenced to years in prison for mail fraud in a check kiting scheme that left cattle producers with millions of dollars in bad checks.
In addition to serving 10 years in state prison after pleading guilty to charges of fraud, Eastern Livestock founder and CEO Thomas Gibson was sentenced to almost six years in federal prison after pleading guilty to mail fraud. The company’s CFO, Michael Steven McDonald, was sentenced to almost five years for his role in the check kiting scheme.
According to Businessweek, Eastern Livestock officials failed to maintain an adequate bond to cover its debts. The company received a $32 million line of credit for Fifth Third Bank and was unable to cover the funds. Eastern Livestock’s account was closed in November 2010 and the company was unable to pay Fifth Third, Wells Fargo, auction houses and cattle owners.
According to the Louisville Courier-Journal, the government seized $4.7 million from the defendants, which will be distributed to victims partly through the company’s bankruptcy cases.
Although some cattle producers who lost money call Gibson and McDonald modern day cattle rustlers, others have defended Gibson, calling him an honest businessman.
Businessweek reports a letter sent to U.S. District Judge Thomas B. Russell asked him for leniency in sentencing the CEO.
L.E. "Jim" Byrd, owner of Oak Lake Cattle Company in Okeechobee, Fla., who claimed to be a victim of the Eastern Livestock scheme, claimed his business transactions with Gibson were “fair” and Fifth Third Bank was also guilty for its role handling Eastern Livestock’s account. Another man who had conducted business with Gibson said Gibson has a reputation from coast to coast for honesty in business dealings.
Prior to being forced into involuntary bankruptcy, Eastern Livestock had stockyards in 11 states and worked with ranchers in 30 states.