PASCO, WA – The president of one of the largest agricultural operations in Washington state has admitted concocting a scheme to defraud Tyson Fresh Meats, Inc., Dakota Dunes, SD, and another – as yet unnamed 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.”
The Commodity Futures Trading Commission has filed a civil enforcement action in the United States District Court for the Eastern District of Washington charging Easterday Ranches, Inc., for engaging in fraud in connection with the sale of more than 200,000 non-existent head of cattle to the beef processor, making false statements to an exchange, and violating exchange-set position limits.
The CFTC’s complaint seeks restitution, disgorgement, civil monetary penalties, permanent trading and registration bans as to Easterday, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC regulations, as charged.
“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 DOJ’s Criminal Division.
“The Commission will vigorously prosecute fraud committed in connection with derivatives trading, including making false statements to exchanges to exceed the applicable limits on their positions,” said Acting Director of Enforcement Vincent McGonagle.
According to the complaint, Easterday accumulated more than $200 million in losses over a 10-year period from speculative trading in the cattle futures markets. To meet margin calls, Easterday devised a scheme to defraud one of his biggest business partners, Tyson Fresh Meats, Inc., based in Dakota Dunes, SD.
The complaint alleges that, from at least October 2016 to November 2020, Easterday caused Easterday Ranches to submit false invoices and reimbursement requests relating to more than 200,000 head of cattle that Easterday Ranches never actually purchased or raised on the producer’s behalf. Through the use of fraudulent invoices and reimbursement requests, Easterday Ranches received from the producer more than $233 million to which it was not entitled.
In addition, the complaint alleges that Easterday caused Easterday Ranches to report false or misleading information concerning its cattle inventory, purchases, and sales to the Chicago Mercantile Exchange in at least two hedge exemption applications seeking permission to exceed the exchange’s position limits.
Easterday allegedly made the false statements to the exchange in 2017 and 2018 to avoid disciplinary actions and scrutiny when Easterday Ranches exceeded exchange-based position limits in the live cattle and feeder cattle futures markets. Because they were based on false or misleading information, the hedge exemptions were invalid. As a result, Easterday Ranches violated exchange-set position limit violations on at least two occasions.
The Division of Enforcement staff members responsible for this case are Ben Sedrish, Ashley J. Burden, Joseph Patrick, Yusuf Capar, Allison V. Passman, Scott Williamson, and Robert Howell.
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.
