Easterday pleads guilty to fraud, faces civil charges
Washington ranch co-owner Cody Easterday defrauded Tyson Foods of $233 million and another company of $11 million by selling more than 200,000 head of cattle that only existed on invoices, according to a plea agreement unsealed Thursday.
Easterday, former manager of the Easterday Ranches feedlot
in Pasco, pleaded guilty Wednesday to one count of felony wire fraud and faces
up to 20 years in prison.
He also faces civil charges filed Wednesday by the Commodity
Futures Trading Commission for allegedly reporting false or misleading
information to the Chicago Mercantile Exchange.
Easterday, 49, entered the plea to the criminal charge in
U.S. District Court for Eastern Washington. Federal Judge Stanley Bastian in
Yakima accepted the plea and set sentencing for Aug. 4. According to the plea
deal, prosecutors agreed not to bring additional charges.
"For years Cody Easterday perpetrated a fraud scheme on
a massive scale, increasing the cost of producing food for American
families," Acting Assistant Attorney General Nicholas L. McQuaid of the
Justice Department Criminal Division said in a statement.
Efforts to reach Cody Easterday or his attorney, Carl Oreskovich,
were unsuccessful Thursday.
CFTC allegations
The CFTC alleges Cody Easterday violated the Commodity
Exchange Act by reporting false or misleading information about the ranch's
cattle inventory, purchases and sales to the CME, the world's largest financial
derivatives exchange.
The false statements were made in 2017 and 2018 to avoid
scrutiny and discipline, according to the CFTC complaint.
Easterday allegedly ran up more than $200 million in losses
over 10 years from speculative trading in the cattle and corn futures markets.
To meet margin calls, Easterday allegedly defrauded one of the feedlot's
biggest business partners of more than $233 million, according to the
complaint.
The complaint does not name the producer, and a CFTC
spokeswoman said the commission could not identify the producer.
The complaint says the producer is based in South Dakota and
operates a beef processing plant in Pasco and is "part of a family of
companies that together constitute one of the largest food suppliers in the world,"
a profile that fits Tyson Fresh Meats, which is based in Dakota Dunes, S.D.
Tyson has previously said that it led an investigation last
year and found that the misappropriation of funds had cost the company more
than $200 million.
Easterday had an agreement with the company to procure and
care for 145,000 to 180,000 head of cattle a year, according to the complaint.
The complaint alleges that from at least October 2016 to
November 2020, Easterday submitted false invoices and reimbursement requests for
cattle that it never purchased or raised for the producer.
"Given the parties' long business relationship, the
producer justifiably relied on the invoices submitted by Easterday Ranches and
paid Easterday Ranches more than $233 million to which it was not
entitled," the complaint states.
A producer's representative confronted Easterday with
evidence of the fraud last fall, according to the complaint.
The commission seeks restitution, civil monetary penalties,
and permanent trading and registration bans.
According to the plea agreement with the Justice Department
in which he pleaded guilty to wire fraud, Easterday will have to set aside no
less than 10% of his monthly income toward paying restitution.
Easterday Ranches filed for bankruptcy in February, and Cody
Easterday resigned as an officer of the business, according to court records.
Dairy plans
Cody Easterday's son, Cole Easterday, said Thursday that
other family members still plan to reopen Oregon's second-largest dairy near
Boardman and that his father is not involved in the project.
Cole Easterday and his brothers, Clay and Cutter, own
Easterday Dairy LLC. The company formed in early 2019 after the family
purchased the former Lost Valley Farm for $66.7 million.
In a statement, Cole Easterday said his father is not in
management or control of the dairy enterprise.
Easterday Dairy LLC has applied for a new Confined Animal
Feeding Operation, or CAFO, permit from the Oregon Department of Agriculture
and Department of Environmental Quality to operate the farm with 28,300 cattle.
"I cannot comment on the situation with Easterday
Ranches, as neither my brothers or I are involved in that operation," Cole
Easterday said.
"Easterday Dairy LLC will continue to comply with our
current permit, and will continue with our CAFO application. We are looking
forward to the operation and success of our dairy."
Lost Valley Farm started in 2018 on 7,228 acres in what used
to be the Boardman Tree Farm. The dairy was shut down within a year after
racking up more than 200 violations of its CAFO permit and its owner filing for
bankruptcy.
The Easterdays bought the property — excluding cattle — at
an auction and promised to invest millions of dollars upgrading wastewater
facilities to ensure environmental compliance.
"We will invest what we need to make the dairy
operational," Cole Easterday said.
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