Eastern Livestock owners sentenced

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Landmark News Service

The former owner and former chief operating officer of now-bankrupt Eastern Livestock Company, LLC, were sentenced in U. S. District Court last week, by Senior Judge Thomas B. Russell, for mail fraud arising from their part in a check-kiting scheme that caused the loss of millions of dollars to hundreds of businesses and individuals.

About 200 sellers of cattle in Kentucky, did business with Eastern Livestock in 2010, according to David J. Hale, United States Attorney for the Western District of Kentucky.

Founder and former owner, Thomas P. Gibson, 73, of Lanesville, Ind., was sentenced to 70 months in federal prison, followed by two years of supervised release, and former Chief Operating Officer Michael Steven McDonald, 61, also of Lanesville, was sentenced to 57 months in federal prison, followed by two years of supervised release, for their parts in a multi-million dollar check-kiting scheme. There is no parole in the federal system.

“Gibson and McDonald caused widespread damage to the livestock industry and devastating harm to numerous individual cattle farmers in Kentucky and elsewhere. Many other businesses associated with the livestock industry were also damaged by the Eastern Livestock fraud. These lengthy prison sentences hold Gibson and McDonald accountable for their federal crimes,” said Hale in a release. “Additionally, our seizure of $4.7 million from the defendants has preserved a significant portion of the crime proceeds, which will ultimately be distributed to victims of the fraud. Equitable disbursement of these funds to victims will be accomplished through a coordinated process involving two Eastern Livestock bankruptcy cases pending in the Southern District of Indiana, and the forfeiture action brought by my office in federal court in the Western District of Kentucky.”       

Eastern Livestock was one of the largest cattle brokerage businesses in the United States, processing cattle sales and operating branch facilities in 11 states, including Kentucky, until its closure on Nov. 2, 2010.  

According to the plea agreement, between Aug. 9, 2004 and Nov. 2, 2010, in Nelson County, and elsewhere, Gibson and McDonald engaged in an extensive check-kiting fraud in order to induce Fifth Third Bank to release funds from a $32 million line of credit issued by the bank in favor of Eastern Livestock Company.  The check-kiting scheme caused grossly inflated balances in accounts maintained by Eastern Livestock with the bank. To further support the fraudulent scheme, the defendants caused false and fraudulent documents to be submitted on a daily basis to Fifth Third, which contained grossly inflated accounts receivable figures.