In the Tri-Cities region of rural Washington, many in the ranching business call it Cattlegate, a multiyear saga of fraud involving over 200,000 fictitious cattle sold to Big-Four meat packer Tyson.
The losses were so huge that Tyson had to file with the U.S. Securities and Exchange Commission (SEC) to revise four years of earnings.
The story sprawls across the agricultural and business landscape of the inland Northwest with appearances by Bill Gates, the Church of Jesus Christ of Latter-day Saints and Agri Beef of Boise, with potential consequences for the Rathdrum Prairie Aquifer in Kootenai County, among many others.
Easterday Ranches Inc. (ER) and Easterday Farms (EF) sprawled over 22,500 acres in the Tri-Cities area with offices in Pasco. The farm grew over 18,000 acres of onions and potatoes. The ranch operation was centered on two feedlots, which raised tens of thousands of cattle at a time. The Easterday family also held several other smaller properties, including a 1,141-acre farm that wraps around the western end of the Twin Lakes in Kootenai County.
The Easterday empire began in 1958 when Nampa farmer Ervin Easterday bought 300 acres of undeveloped land in the then-new Columbia River irrigation project, which made a new source of water from the Grand Coulee Dam available for creating agricultural development in south central Washington, just north of where the Snake River runs into the Columbia.
Ervin and his son Gale built the initial 300 acres into one of the largest family-owned agricultural operations in the northwest. Gale was 79 at the end of 2020, when a Tyson company agent visited Gale’s son, Cody, age 49, about Tyson’s cattle on the Easterday feedlots.
Tyson was there to check on its cattle. ER had a “formula contracting” arrangement with Tyson, established in 2014. Tyson loaned money at 4% interest to Easterday to buy, feed and raise calves. When the calves became steers ready for slaughter, Tyson bought the cattle for market price. Easterday would pay off the loan plus interest out of that revenue. The ranch made money by pocketing the difference. More than half of the beef in the United States is currently raised this way on feedlots.
When Tyson visited, the only place its cattle existed was on paper. Easterday admitted to the fraud. He also admitted he used most of the money trading cattle futures on the Chicago Mercantile Exchange. Over the span of a decade, he had lost over $200 million in cattle futures.
After Tyson caught him red-handed, Cody told his wife. He may have also told his father Gale. On Dec. 10, 2020, Gale Easterday drove the wrong way onto an off-ramp of I-182 in Pasco. Washington State troopers investigating the crash found no tire marks that suggest Gale tried to avoid the head-on collision between his Dodge Ram and a semi hauling Easterday Farms potatoes.
Shortly after Gale’s death, Tyson filed a form 8-K on Dec. 21, 2020, with the SEC, announcing its losses due to the Easterday fraud and revising its financial statements back to 2017. After the news broke about the cattle swindle, the Tri-Cities area was ripe with speculation that Gale Easterday’s death was really a suicide.
The Agri Beef sale
On Jan. 22, 2021, ER sold its north feedlot to AB Livestock, a subsidiary of Agri Beef of Boise. According to the Franklin County (Washington) assessor’s office, the property sold for $16 million. Tyson filed a civil suit in Franklin County Superior Court on Jan. 25 against Easterday to recover its losses. On Feb. 1, 2021, ER filed for Chapter 11 bankruptcy. A few days later, EF filed for Chapter 11 bankruptcy.
Tyson cried foul over the sale of the north feedlot before the Chapter 11 filing by ER. The giant meat packer claimed that Easterday should have solicited bids. Tyson filed to block the sale after the deed was recorded.
Four months after Agri Beef bought the lot, Tyson put up a counteroffer for $25 million on the table through an adversarial filing in bankruptcy court. Agri Beef and Tyson are both meat packers, but Agri Beef also runs feedlots whereas Tyson does not. Both companies have slaughterhouses near the ER’s north feedlot.
Agri Beef also cried foul on Tyson, arguing that Tyson was after the lot in order to disrupt Agri Beef’s business. The Oregon farming periodical Capital Press quoted Agri Beef attorney Chris Harris that the company paid above market value for the feedlot appraised at $9 million: “They (Tyson) don’t even own feedlots, which makes this lawsuit look to us like an attempt to use this bankruptcy court to disrupt our business.”
On Sept. 23, 2021, Judge Whitman L. Holt of the eastern Washington bankruptcy court ruled against Tyson and upheld the sale to Agri Beef. In the Capital Press, Holt was quoted that it was possible that reselling the feedlot would raise more money for creditors but it would be offset by further litigation legal fees: “I cannot conclude that the preponderance of the evidence concludes a clear cost benefit.”
A farm in Kootenai County
The demise of the Easterday ag empire has been a morass of litigation. Both ER and EF were placed under independent management by the U.S. Trustee. Both filed a voluntary Chapter 11, though the final disposition of the two businesses is liquidation. Certain creditors like Tyson filed adversarial bankruptcy suits, and at one point members of the Easterday family filed to remove the trustee-appointed management of ER and EF, arguing that the management was not negotiating in good faith, was delaying a viable settlement to increase their fees and were trying to include Easterday family properties and other assets not within the purview of the two bankruptcy cases. One of those other Easterday properties was the 1,141-acre farm in Kootenai County, named specifically in discovery and proposed settlement motions.
The Easterday Kootenai County farm is north of the City of Rathdrum. It is situated in an east-facing valley surrounded by two forested ridges owned by the Inland Empire Paper Company. Fish Creek is the only surface water in the valley, draining the ridges and pastures into Twin Lakes. The lakes that rim the aquifer provide 20% of its inflow. Twin Lakes feed into a channel of groundwater flow on the northeast (upgradient) end of the aquifer. Changes in the water quality and sediment transport of Fish Creek could have a large impact on the future health of this water source, which is the sole source of potable water for Spokane and its environs.
Court documents list appraisal values for the farm between $7 and $10 million, depending on the source. The Kootenai County Appraiser’s Office lists an appraisal value of $1.49 million for the five parcels that make up the farm. The two lakefront parcels are zoned restricted residential and the other three parcels are zoned for rural use.
In coverage of the case by the Northwest News Network, which is a consortium of NPR stations in Washington and Oregon, one Twin Lakes resident summed up local concerns: “We’re concerned that this will go into bankruptcy, and then someone will buy it out, because land up here is just going crazy nowadays. It’s a nice setting up there, and I could see someone wanting to put a bunch of houses up there. And then that would kind of mess up that part of the lake. And there would be some runoff.”
The potential impact of Fish Creek on local water supply and lake health was underscored by a recent restoration and mitigation project to curtail the erosion of sediment from the stream banks into the lakes. The Twin Lakes Improvement Association started working on the Fish Creek restoration project in 2013. The work was possible through the cooperation of the Easterday family and was supported by a $140,000 grant from the state government with a $56,000 match from local public and private sources.
After the consternation that the Idaho farm might be dragged into the ER and EF settlement, the April 2022 settlement hearing excluded it. The farm was the personal property of the late Gale Easterday. Given its exclusion from the ER and EF settlement, Gale’s widow Karen Easterday will continue to hold and control the property through the remaining probate process.
On May 24, 2022, U.S. District Court Judge Stanley A. Bastian for eastern Washington granted a request by Carl Oreskovich, the lawyer for Cody Easterday, for a postponement of Easterday’s sentencing until Sept. 19, 2022. Easterday pleaded guilty to a single count of wire fraud on March 31, 2021 in a plea arrangement where he agreed to making $233 million of restitution to Tyson and $11 million to Segale Properties LLC of Tukwila, Washington.
This is the fourth sentencing date for this case, all set by Bastian, for the reason of continuing Easterday’s participation and cooperation in the acrimonious bankruptcy-driven liquidation of the two largest Easterday agricultural businesses.
Cody Easterday lost over $200 million gambling on cattle futures. The Commodities Futures Trading Commission ordered ER to pay $233 million in restitution and a $30 million fine. These actions all deal with the ghost cattle swindle. The bankruptcy court handled the other issue that ER and EF owed an additional $223 million in other debts, according to documents obtained through the PACER federal court records system.
There were nine different case numbers associated with the bankruptcy and liquidation of ER and EF. Most of the complaints and remedies from those cases were ultimately consolidated into the main bankruptcy case for ER (21-00141-WLH11). This case has over 1,600 separate filings. All nine cases taken together have over 2,000 filings.
Farmland Reserve, which is a nonprofit business owned by the Church of Jesus Christ of Latter-day Saints, bought the remaining assets of ER and EF at auction in June 2021 for $209 million, which combined with the $16 million for the north feedlot sale in January 2021 is not enough to cover all the creditor claims. Farmland Reserve beat out a competing bid by just $1 million, offered by 100C LLC, an investment group led by Bill Gates.
The list of creditors in the court records is two pages, single spaced. It lists several Idaho business and entities as creditors, including: Bison Pipe of Jerome, Commercial Tire in Meridian, Holland & Hart in Boise, NW Mixer Feeders in Caldwell, Northwest Equipment Sales Inc. in Boise, Performix Nutrition Systems in Nampa, the Idaho Transportation Department, Total Scale Service Inc. in Boise, Wagner Transportation Co. in Twin Falls, Western Trailers in Boise and Whiteman Lumber in Cataldo.
The final details of the settlement are projected to be completed sometime this summer. Cody Easterday will be sentenced in September, assuming there is not another postponement of his sentencing.