A Washington man has pleaded guilty to defrauding Tyson Foods Inc. and another company (Company 1) out of more than $244 million by charging them under various agreements for the purported costs of purchasing and feeding more than 200,000 head of cattle that did not actually exist.
According to court documents, Cody Allen Easterday, 49, of Mesa, Wash., used his company, Easterday Ranches Inc., to enter into a series of agreements with Tyson and Company 1 under which Easterday Ranches agreed to purchase and feed cattle on behalf of Tyson and Company 1. Per the agreements, Tyson and Company 1 would advance Easterday Ranches the costs of buying and raising the cattle. Once the cattle were slaughtered and sold at market price, Easterday Ranches would repay the costs advanced (plus interest and certain other costs), retaining as profit the amount by which the sale price exceeded the sum repaid to Tyson and Company 1.
Beginning in approximately 2016 and continuing through November 2020, Easterday submitted and caused others to submit false and fraudulent invoices and other information to Tyson and Company 1. These false and fraudulent invoices sought and obtained reimbursement from the victim companies for the purported costs of purchasing and growing hundreds of thousands of cattle that neither Easterday nor Easterday Ranches ever purchased, and that did not actually exist. As a result of the scheme, Tyson and Company 1 paid Easterday Ranches over $244 million for the purported costs of purchasing and feeding these ghost cattle.
Easterday used the fraud proceeds for his personal use and benefit, and for the benefit of Easterday Ranches, including to cover approximately $200 million in commodity futures contracts trading losses that Easterday had incurred on behalf of Easterday Ranches. In connection with his commodity futures trading, Easterday also defrauded the CME Group Inc. (CME), which operates the world’s largest financial derivatives exchange. On two separate occasions, Easterday submitted falsified paperwork to the CME that resulted in the CME exempting Easterday Ranches from otherwise-applicable position limits in live cattle futures contracts.
“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 McQuaid of the Justice Department’s criminal division. “The criminal division’s prosecutors are committed to swiftly and thoroughly prosecuting frauds affecting our nation’s agricultural and other commodities markets, whether in the heartland or on Wall Street.”
Easterday pleaded guilty to one count of wire fraud and agreed to repay $244 million in restitution. He is scheduled to be sentenced on August 4 and faces a maximum penalty of 20 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
In a separate action, the Commodity Futures Trading Commission (CFTC) filed March 31 a civil enforcement action in the U.S. District Court for the Eastern District of Washington charging Easterday Ranches and Cody Easterday for engaging in fraud in connection with the sale of more than 200,000 non-existent head of cattle to a 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.
“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.