According to court records released on April 1, Cody Easterday, co-owner and former president of Pasco, WA-based Easterday Ranches, has pleaded guilty to one count of felony wire fraud. In the process, Easterday has also admitted to defrauding Tyson Fresh Meats, as well as another unnamed company, out of approximately $244 million over a period of five years. According to Easterday’s lawyers, the fraud scheme was concocted in an effort to raise funds to offset substantial losses incurred by Easterday on the commodities market.
According to Easterday’s defense attorney, while he initially began trading commodities contracts as a hedging tool, Easterday eventually became addicted to speculative trading, ultimately gambling away hundreds of millions of dollars.
In 2014, according to records, Easterday Ranches entered into a series of agreements with Tyson Fresh Meats, wherein Easterday agreed to purchase and feed cattle for Tyson. Under the agreement, Tyson would reimburse Easterday for these costs. Once the cattle were fattened, Easterday would deliver them to Tyson’s slaughter facility at Wallula, WA, where he would receive market value for the cattle, minus the balance already paid by Tyson.
In October of 2016, Easterday began submitting invoices to Tyson for the purchase of cattle that he had never actually acquired, as well as for the cost of feeding these nonexistent animals. These bills were submitted to Tyson’s corporate office in South Dakota.
By December of 2020, records show Easterday had submitted invoices and received payment for nearly 266,000 head of calves that existed solely on paper. The resulting loss claimed by Tyson amounts to $233 million. A similar agreement and fraud scheme, with another company, listed only as “company 1” in the court records, yielded Easterday an additional $11 million in fraudulent funds from that company.
Tyson executives indicate that they became aware of the discrepancy in their inventory with Easterday in December, alleging that Easterday admitted his guilt to them at that time. However, the matter did not reach a courtroom until mid-January, when Easterday Ranches signaled intent to sell its 25,000-head North Feedlot. Citing concerns over how that money would be distributed, Tyson and Washington Trust Bank, another Easterday creditor, sued Easterday in an effort to block the sale on Jan. 25, only to find that Easterday had already closed a deal on the lot three days earlier, selling to competitor Agribeef for $16 million.
On Feb. 1, Easterday Ranches filed for Chapter 11 bankruptcy, followed one week later by its sister company, Easterday Farms, also managed and partially owned by Cody Easterday.
Meanwhile, the U.S. Department of Justice also began quietly conducting a criminal investigation into the matter, ultimately resulting in a federal summons and Easterday’s guilty plea on March 31. As part of the plea agreement, Easterday has agreed to make restitution to Tyson and the unnamed company in the amount of $244 million. At the same time, however, he faces civil charges from the Commodity Futures Trading Commission (CTFC), for allegedly providing fraudulent information to the Chicago Mercantile Exchange (CME).
Documentation from the bankruptcy case shows that, between 2011 and the end of 2020, Easterday had amassed more than $200 million in losses trading in commodities on the CME. In 2017, and again in 2018, Easterday was notified that he held more contracts than was allowed for speculative trading.
Under CME rules, any one entity cannot hold more than 300 feeder cattle contracts (each contract represents 50,000 lbs.). The CME does allow exemptions to this limit, but only if the trader can prove that they are hedging actual cattle, not trading speculatively. In order to circumvent this rule, the CTFC complaint alleges Easterday on both occasions, submitted applications for exemptions that substantially overstated Easterday Ranches’ actual cattle inventory. While this case is ongoing, records indicate that Easterday has admitted to these allegations as well.
According to testimony by Easterday’s lawyers in the bankruptcy case, it is all but a foregone conclusion that Easterday Ranches will have to be liquidated in order to satisfy its debts. Records show that this process has already begun, with the company seeking approval from the court late last month to sell approximately 22,500 acres of farmland. Additionally, with nearly $420 million in outstanding debt across both companies and their finances closely intertwined, the lawyers have indicated that it is likely Easterday Farms will be forced to liquidate as well.
What will happen to Cody Easterday himself is not yet known. While wire fraud at the level he has admitted to carries a maximum sentence of 20 years in prison, he is not due to be sentenced until August of this year.
The loss of both companies represents a significant upheaval in the agricultural community of the Columbia Basin region, where they have been a mainstay for decades. Despite the potential for turmoil, however, experts in the region’s cattle industry say that the local markets do not appear to be significantly impacted.
“[Easterday] is one of the biggest and most aggressive buyers, depending on the time of year, anywhere in the country,” said Jack Field of the Washington Cattle Feeders Association. “But the good news is, as you look around the region, feedlots are full, the buyers are hard at it, and the markets remain very strong.
“There’s definitely room for optimism going into this fall,” he added. — Jason Campbell, WLJ correspondent
