A Washington state rancher has been sentenced to 11 years in prison for a nearly quarter-billion-dollar ripoff of Tyson Foods Inc. TSN, -1.48% in which it sold the meat processor more than 260,000 head of cattle that didn’t exist.
Prosecutors say Cody Easterday, 51, of Mesa, Wash., ran the “ghost cattle” scam for more than four years in order to cover over $200 million in losses he had incurred trading commodity futures.
“The sheer magnitude of the fraud that Easterday perpetrated is staggering,” federal prosecutors wrote in court filings. “The $244 million that Easterday stole would have funded the combined police, courts, and fire budget of Yakima — a city of nearly 100,000 people — for more than four years.”
Investigators say that Easterday, who ran a family farm and feedlot in southeastern Washington, went into business with Tyson in 2016, offering to purchase and feed cattle on the company’s behalf, until the cattle were ready for slaughter.
As part of the arrangement, Tyson would front Easterbay the money to purchase and feed the cattle, paying back those funds at 4% interest when the cattle were sold for slaughter. Easterbay would keep the difference in price as his profit, according to court documents.
Over the course of four years, prosecutors say, Easterday submitted invoices to Tyson for over $2 billion in cattle. But prosecutors say Easterday padded the invoices by over 10% with so-called ghost cattle, or animals that didn’t actually exist.
“Easterday never purchased the cattle. Instead, Easterday betrayed his victims’ trust and diverted a large amount of the proceeds of his fraud to cover huge losses he incurred while recklessly trading commodity futures contracts,” prosecutors wrote in court filings.
In 2020, Easterday entered into a similar arrangement with a smaller, unnamed firm in Washington, prosecutors said. In all, prosecutors say, he stole $233 million from Tyson and $11 million from the smaller company.
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The scam came unwound in 2020, when Tyson grew suspicious and asked for a full inventory of the cattle Easterday claimed to have bought for it. He admitted he had been ripping the company off, prosecutors said.
A message to representatives of Tyson was not immediately returned.
Easterday was hit in March 2021 with federal wire-fraud charges and pleaded guilty a month later.
Easterday’s attorney, Carl Oreskovich, said his client had built a company that brought in $250 million in revenue a year but suffered from a gambling addiction that led him to make increasingly risky commodity trades, causing him to fall into a deep financial hole.
Oreskovich said Easterday began trading in cattle futures in 2010 as a hedge against fluctuating market prices but began taking riskier bets as his father, with whom he had started the business, fell ill and started pulling back from management. The elder Easterday was killed in a car accident in 2020.
“[The younger Easterday] had built a very successful business and had helped a lot of people along the way, but he got stuck in a very tough business situation and made some poor decisions about how to get out of it,” Oreskovich said. “The amount of money being transferred back and forth in a business like this is astronomical, so when you lose, you lose big.”
Once he had admitted what he had done, Easterday declared bankruptcy and began selling off his farm to pay back Tyson and the other company he had defrauded.
Prosecutors said that Tyson was still “out over $170 million.”