Sunday, September 9, 2018

Cattle Fraud -- Targeting Unsuspecting Investors Today

In the Old West, cattle rustling was seen by badmen as a lucrative way of making a living. Rustlers didn't care if cattlemen took the time to raise a herd of good quality beef. They simply didn't care about the endless days sweating over keeping seed stock, calves, good grass, finding feed, bills, water, and market prices. Rustlers saw stealing cattle as an easy way of making fast money.

Some writers have led people to believe that badmen rustling cattle from Mexico and bringing those scrawny cows over the border for sale here in the states was a priority for lawmen in the Old West. But frankly, that wasn't a priority for the law back in the day.

While it's true that Deputy U.S. Marshal Virgil Earp was dispatched from Prescott, Arizona to Tombstone after the Mexican government complained to Washington D.C. in the late 1870s about the problem of American rustlers stealing Mexican cattle, the Mexican government was not concerned about American rustlers taking American cattle into Mexico to sell dirt cheap. And yes, that was the real problem with rustlers on the border.

In reality, in the border states of California, Arizona, New Mexico and Texas, the vast number of cattle that were stolen from ranchers here in the United States were in fact moved as fast as possible South across the border to sell cheap in Mexico. American rustlers knew that they would be able to unload their stolen herds off at ranches in Mexico. Those ranchers would buy the cattle for a quarter or less of what the stock was worth in the States. The rustlers would make quick business of it, put money in their pockets, even if it was a lot less than what they could have gotten on American markets, and return North. Mexican ranchers would get prime American beef. Outlaws would make out. And of course, American ranchers would get screwed.

For the rustlers who wanted more than what the Mexican ranchers would pay for the stolen herds, the rustlers would re-brand the stock and attempt to sell their stolen herds to unsuspecting buyers here. Either way, either running the stolen cattle South across the border or altering cattle brands, this was a dirty business that one would find resulted in their dancing on the end of a rope if caught.

Of course, there are other sorts of crimes relating to cattle. In a post not too long ago, I talked about how "herd books" were altered to make business partners think a ranch had more cattle than one had when it fact it didn't. Of course that was only one type of cattle fraud.

As with any sort of fraud, it had to do with criminal deception intended to result in some sort of financial or personal gain. It had to do with someone being swindled by a double-dealing criminal type who had the intention of deceiving others out of money. The swindlers did what they did by typically making unjustifiably claims or spouting accomplishments that sound good. Such tricksters, those who are impostors, fakes, scam artists, use deceit to accomplish their crimes.

Cattle fraud takes place more than people know. Yes, even today. And the fraud that takes place today in the cattle industry along with the investment industry can result in the loss of millions of dollars to ranchers and investors, banks and loan companies.

The difference between a cattle rustler and cattle fraud is the scope of the theft. As with my article on how business partners could use altered "herd books" to embezzle money from their partners, modern forms of cattle fraud have now expanded to business and investment schemes all meant to defraud someone of their money.

In 1903, Frank C. Bosler of Wyoming's Iron Mountain Cattle Company had enough of his ranch manager John C. Coble known to us by his Tom Horn fame. Coble is said to have embezzled ranch operating funds and used that money to pay for Tom Horn's legal defense and later Horn's funeral after Horn was hanged for killing a child. To recoup his losses, Bosler sued Coble in court. A bitter lawsuit took place where Bosler accused Coble of cattle fraud by cooking the ranches records, it's herd books, all in an effort to steal from Bosler.

Coble cooking the books to obtain funds from Bosler to buy non-existent cattle is what criminals do when they commit cattle fraud. And while I know it has nothing to do with the point of this article regarding cattle fraud today, I know some of you may want to know what happened with the lawsuit between Bosler and Coble?

Some say it was because of Coble's political connections that Coble won the lawsuit and his counter suit against Bosler which net Coble about $20,000. As for Bosler, he did not recoup his loses but he was happy to be rid of Coble. And as for John Coble, he tried to manage other ranches but that didn't worked out. Some say it was because of his reputation of not being honest. In the long run Coble went broke and later shot himself in the head in the lobby of the Commercial Hotel in Elko, Nevada.

As for cattle fraud cases?

Cattle fraud cases usually involve large scale business investments and huge sums of money. Criminals who commit cattle fraud usually target investors in a swindle. Swindlers ask for funds from unsuspecting investors. The swindler will make promises to investors that cattle will be bought. Of course, that's a lie. The con artists, swindlers, who do this have no intention of buying cattle.

Instead, the swindler uses the "new investment" money to use for his or her own expenses, to cover some of their tracks buy giving small taken payments to earlier investors as "returns" to keep them pacified, and as seed money for another scam. Profits never exist because the scam artists never makes investments as promised.

Please don't think cattle fraud con artists only target gullible investors in the livestock community. It's a fact that they also target banks, and other financial institutions, by getting loans or by obtaining lines of credit for non-existent business projects.

This has been going on for many years. And while this is not just some recent criminal fad and really has been taking place since the 1800s, other than a very lengthy case that started in the 1980s that is still not settled, below are some of the larger cattle fraud cases that I thought you might find interesting.

The first that I've listed here took place in 2011. It was a huge case where many lost their life savings. Two cattle fraud cases in 2016. They are on a smaller scale but still criminal activity and demonstrate how the scam differs. The rest are cattle fraud cases which resulted in the millions of dollars being stolen. They took place this year, 2018.

On August 29, 2011, NPR reported the following:

The Man Who Roped Investors Into A Cattle Con

Kevin Ray Asbury, who this summer pled guilty to three counts of fraud for promising the same cows to multiple investors, built a million-dollar home and drove around in a Mercedes.

What do you get if you combine the Ponzi-scheme of Bernie Madoff with a wily Midwestern rancher? While Madoff's mastermind plan was becoming clear in New York, out in tiny Howard County, Mo., there was another crook who was swindling dozens of farmers across the country.

For two years, mustachioed and smooth-talking Kevin Ray Asbury ran a racket that went a little something like this: He lured customers with top-shelf Angus cattle. They would buy into the herd, or sell their own for breeding.

The only problem was Asbury kept using the same cows, telling multiple investors they were theirs. With their money, he moved on up — built a million-dollar home and drove around in a Mercedes. Everyone in town just thought he was doing really well — until the scheme cracked.

How The Scheme Unraveled

All at once 27 people across several states — some as far away as California — began raising the alarm. They all came to one person first: small town Sheriff Charlie Polson.

Sheriff Charlie Polson, who runs a bare-bones police force in Fayette, Mo., kept a handwritten list with the names of the people across several states who raised an alarm about Kevin Ray Asbury.Jessica Naudziunas for NPR

"Evidently [Asbury] had a good line that people believed in, so you see where it gets you, and several of the victims said, 'No, I just took him for his word and wrote him a check for $90,000,'" Polson says.

The sheriff went over to the ranch, and if you are near a place with that many cattle, you can tell with your eyes shut. But, there was nothing there.

Polson knew this case was bigger than any other in his county, and the victims were getting restless, some threatening to ride into town with guns blazing. Then came a complaint from a couple nearby who reported a bad check from Asbury for $32,000. Polson wanted to arrest Asbury right there on a felony charge, but Asbury's brother Randy, who is now a state legislator, paid less than a fourth of the bad check to keep his brother Kevin out of jail.

"I felt that possibly I could've maybe brought some justice to some of these individuals if I could've arrested him and put him in jail and started the first criminal proceedings that I had," Polson says.

He urged the couple to decline the payoff, but they were out tens of thousands of dollars and wanted to pay their bills. They ended up being some of the only victims to get any restitution.

I can say and I've said many times 'If it sounds too good to be true' until I'm blue in the face, but there are still going to be willing victims out there and people who just don't listen.

The others were like Jim Steinmetz, who was a successful farmer long before he got caught up with Asbury.

On a recent day, Steinmetz is parked at the end of a rocky driveway off a rural road about 40 minutes from his home. He gets out of his black flat-bed pick-up truck, leans against it and looks down. Out here standing on the parched grass, it's well over 100 degrees and flies are buzzing in the heavy air. Behind him is huge new house that seems out of place.

"And that's the house that they built, and I know he was just getting moved into it when everything started to happen," he says.

In 2008, Steinmetz invested over a half million dollars in what he thought was a good opportunity. He expected a strong return from owning the high-quality Angus cattle. Right now in Missouri, the going price for the type of cow Asbury offered could fetch over $1,000 each. It was fine for a few months, the ranch was full of cows; then just three months after the money changed hands, the pricey Angus cattle disappeared. Squinting into the midday sun, he can hardly bring himself to look at this house because he's one of the people who helped pay for it.

"This is the first time I've been back," he says. "I didn't want to torture myself. The only thing you can possibly do is get yourself in trouble if you come back over here. That's why you don't come by. Bad memories."

The money, trust and cattle were gone. To this day, no one who was scammed could tell you where their cows ended up, or if they ever really had any.

Jim Steinmetz, who was a successful farmer well before he met Asbury, invested more than a half million dollars on Asbury's Angus cattle. And Steinmetz lost it all.

In the summer of 2008, Kevin Asbury was getting nervous; he knew what everyone else now knows, too. So, he fled to Florida. His victims were out more than $5 million.

The drama crested when officials at the oldest bank in Missouri, The Callaway Bank, realized they'd been hit. They had provided Asbury with a $4 million line of credit almost sight unseen, after he showed their agriculture specialist some cattle that, it turns out, were on someone else's land. The FBI was called in. Later, the bank ended up losing more than $2 million. Asbury and his lawyers declined to comment for this story.

'If It Sounds Too Good To Be True...'

So, thousands of nonexistent cows, and a local boy rolled around in luxury out of nowhere, but no one asked any questions. Were these victims or fools, taken in by rural America's Bernie Madoff of cows?

"You can be a victim and a fool," says Jeff Lanza, a retired FBI agent who spent 20 years investigating corruption and fraud in Kansas City. He's seen it all.

"You know, I can say and I've said many times 'If it sounds too good to be true' until I'm blue in the face, but there are still going to be willing victims out there and people who just don't listen," he says.

That's little consolation back in Howard County, where you might say Sheriff Polson is Kevin Asbury's last victim, though he didn't lose money or cattle. This was actually the second cattle-rustling Ponzi-type scheme in Howard County in the last five years.

Kevin Ray Asbury pled guilty this summer to three counts of fraud and now awaits his sentence from a federal judge. At the most, it's expected he'll serve nine years in prison — about as long as it took him to turn from cattle rancher to Ponzi-scheme rustler.

--end of article.

On July 7, 2016, Iowa's WQAD News reported:

Iowa man sentenced, ordered to pay nearly $400k in restitution for cattle fraud scheme

OTTUMWA, Iowa — An Ottumwa man was sentenced Thursday, July 7, to two years in federal prison for defrauding nearly $400,000 from 11 victims.

Jeffrey Lewis DeWitt, 28, will also serve three years of supervised release following his prison term and must pay a total of $395,968 in restitution to his 11 victims, says a press release from United States Attorney Kevin VanderSchel.

Last December, DeWitt pleaded guilty to wire fraud and conversion of mortgaged property.

DeWitt sent an email to the victim with information and details on the purchase of cattle, which DeWitt promised would be sold within three weeks for a guaranteed profit. The email included purchase prices, resale prices and information on who would repurchase the cattle.

DeWitt knew that information was needed for the victim to get a loan. He used the loan money to purchase the cattle, but only gave his victim a check that was returned for insufficient funds.

DeWitt also admitted to selling the livestock and hay he had mortgaged to the Farm Service Agency without authorization, depositing the funds into accounts held by his parents. He admitted to selling more than $200,000 of collateral.

Other victims had been told that DeWitt would purchase cattle, seed and hay on their behalf but didn’t. He also created fake invoices and checks.

-- end of article.

On October 11, 2016, The Caldwell County News reported:

Joe Nelson Sentenced To Prison Term For Cattle Fraud

A Braymer man was sentenced to two years in prison without parole for cattle fraud schemes that cost his victims $262,000.

Federal prosecutors announced Monday that Garland Joseph Nelson, 22, of Braymer, also was ordered to pay restitution.

Nelson admitted that he sold at least 114 mortgaged cattle that were pledged to the Farm Service Agency and spent funds for himself, rather than remitting sale proceeds to the FSA. He also received two loans to buy and raise cattle but then sold livestock under different names to keep the proceeds.

Nelson also removed identification from cattle that were owned by others. He co-mingled the cattle with his own and with those owned by his neighbor and landlord, in order to sell livestock undetected.

-- end of article.

On January 5, 2018, Agweek Wire Reports reported the following:

Arrest made in four-state cattle rustling, fraud, embezzlement case

EXETER, California — A California man has been arrested for a scheme involving stealing cattle, investment fraud and embezzlement that spanned four states, Tulare County, Calif., Sheriff Mike Boudreaux says. Seven victims from California, Colorado and Wyoming lost a total of $1.5 million.

"This is 21st Century cattle rustling and embezzlement at the highest level," Boudreaux says.

According to a statement from Boudreaux's office, agricultural crimes detectives from the Tulare County Sheriff's Department traveled to Texas to arrest Justin Tyler Greer, 36, in the case.

Greer was arrested on December 28, 2017, in Tarzan, Texas, with assistance from a Fugitive Task Force made up of officials from the Texas Rangers, Midland County, Texas, Sheriff’s Office, Martin County Sheriff’s Office, U.S. Marshals Service and the Texas & Southwestern Cattle Raisers Association Special Ranger Unit.

On June 13, 2017, Sheriff’s Agricultural Crimes Detectives were contacted by seven victims who provided statements and evidence that showed a combined loss of $1.5 million through cattle theft, investment fraud, embezzlement or a combination of all three. Each victim identified Greer as the suspect.

For many years, Greer had been a widely-known and respected cattleman in Tulare County. He bought and sold large numbers of cattle on a regular basis as a broker and managed several herds of cattle for various people across Tulare County. Many of the cattle managed by Greer were owned by ranchers in other parts of California, Wyoming and Colorado.

According to victims, in April and May, Greer failed to meet his financial obligations, causing them to look closer at their business dealings with him. Two of the victims issued audits into the numbers of cattle they owned that had been managed by Greer. Those audits showed hundreds of cattle had been stolen.

Other victims in this case had invested as partners with Greer. They later learned that the cattle they had invested in either weren’t Greer’s to sell in the first place or the cattle never existed at all, Boudreaux says.

During the investigation, detectives worked closely with the California Bureau of Livestock Identification Brand Unit, as well as criminal investigators with the State of Wyoming Livestock Board. Working together, detectives learned that more than 900 head of cattle had been shipped into Wyoming by Greer.

"We recovered 900 head of cattle back to our agricultural partners," Boudreaux says. "These cattle had been illegally placed on pasture in Wyoming."

They were later recovered by investigators with assistance from the State of Wyoming Livestock Board. The Sheriff’s investigation of Greer spawned a parallel criminal investigation by the U.S. Forest Service, which is handling the investigation of the cattle Greer sent to Wyoming.

Greer had been doing business through a multitude of financial institutions with various accounts within each institution. Detectives authored and served more than 25 search warrants for these accounts as well as various offices, residences and a variety of electronic devices. From these searches, detectives obtained and reviewed thousands of financial documents and associated evidence which strongly corroborated the victims’ statements and losses.

Greer, who faces charges of grand theft, investment fraud and embezzlement, was extradited to Tulare County on December 31, 2017. His bail is set at $1.9 million.

The investigation was overseen by the sheriff’s cattle liaison who was appointed to the special position last spring. He worked closely with detectives from the Sheriff’s Agricultural Crimes Unit. The investigation lasted more than six months.

"We, at the Sheriff's Office, placed no limits on the use of resources for this investigation and the protection of our agricultural partners. Given the complexity of this case, I am proud of the amount of progress they made to get this case to this point. And I very much appreciate the assistance of other law enforcement agencies throughout the Western United States.” said Sheriff Boudreaux.

-- end of news article.

On June 26th, 2018, Missouri television news KCTV5 reported:

Clinton, Missouri, man pleads guilty to cattle fraud scheme

A Clinton, MO man pleaded guilty in federal court Tuesday to a $4.7 million investment fraud scheme in which he defrauded 89 investors who believed they were purchasing cattle for resale at a profit.

Cameron J. Hager, 42, pleaded guilty to one count of wire fraud and one count of money laundering.

He admitted to engaging in the fraud scheme from July 2015 to September 2017 in which he solicited victims to invest in a "cattle fund" used to purchase herds of cattle to be sold at a profit.

The United States attorney of Missouri says Hager never actually purchased or intended to purchase any cattle.

From the $4.7 million that he received from 89 investors, Hager deposited more than $394,000 into his business bank account, as well as to make payments on the mortgage of his residential property and to purchase multiple trucks and vehicles.

Hager convinced the victims that he would locate herds of cattle that farmers in distress needed to sell and use investor funds to buy the herds.

Hager is subject to a sentence of up to 30 years in federal prison without parole and a sentence hearing will be scheduled after the completion of an investigation by the United States Probation Office. The wire fraud charges related to e-mails sent to a victim investor.

-- end of news article.

On June 28, 2018, Drovers News reported the following:

Arrest In Texas Over 8,000 Cattle In Fraud Scheme

A Wichita Falls, Texas, man has been arrested on theft charges in a case that encompasses more than 10 counties in Texas and Oklahoma, 8,000 head of cattle and outstanding loans of more than $5.8 million.

Howard Lee Hinkle, 67, was arrested without incident on June 27, 2018, and booked into the Wichita County Jail. He was subsequently released on bond pending trial.

He allegedly defaulted on several loans at the First United Bank in Sanger, Texas, with past due balances totaling more than $5.8 million. Hinkle’s arrest is the result of an investigation led by Texas and Southwestern Cattle Raisers Association (TSCRA) Special Ranger John Bradshaw and Troy McKinney.

The investigation began in March of 2017, when bank officials contacted Bradshaw about the past due loans. When bank representatives acted on a court order to gather the approximately 8,000 yearling cattle put up as collateral they were unable to locate any of the animals.

Hinkle had purportedly told the bank the cattle were located on properties scattered across 10 counties in both Texas and Oklahoma.

Bradshaw enlisted the assistance of fellow Special Rangers to help identify and interview numerous witnesses and collect vital evidence across the two states. As the investigation continued the Rangers identified the various properties and cattle listed in the loans, but found that none were legitimately owned by Hinkle.

It is suspected that Hinkle deceived the bank by showing them fraudulent documentation and cattle that belonged to other individuals.

Bradshaw presented the evidence to a Denton County grand jury on June 14, 2018, and an indictment was handed down the following week for first-degree felony charges of theft of more than $200,000. If convicted Hinkle could face up to life in prison along with possible fines and restitution.

-- end of article.

Two days ago, on September 8, 2018, FOX News reported:

$3M cattle fraud puts 2 Arizona families on financial brink

About $3 million worth of cattle was stolen from an Arizona family by a man they once considered a friend, prosecutors said in court documents. The fraud has pushed both families to the brink of financial ruin, the Arizona Daily Star reported .

Longtime cattleman and rodeo cowboy Clay Parsons discovered last August that $1.3 million was missing from the accounts of the Marana Stockyards and Livestock Market, which his family has run since the early 1990s. It is one of the busiest stockyards in all of Arizona.

The stockyard's line of credit also was drawn down by nearly $2 million, according to court records.

A trail of fraudulent documents led to Seth Nichols, the stockyard's 29-year-old office manager, who pleaded guilty to federal bank fraud in February and faces up to five years in prison. Nichols is the son of Donald Hugh Nichols, a cattle broker who had been friends with Parsons for decades, court records show. Donald was indicted last month as a co-conspirator in $1.6 million of fraudulent cattle sales at the stockyard's auctions.

A federal prosecutor said the stockyard is operating "week to week" as it recovers from the fraud and Parsons has already spent $100,000 on audits and rebuilding the stockyard's accounting system.

Donald Hugh Nichols, who goes by Hugh, and his wife, Jane Nichols, filed for bankruptcy in federal court on August 10, 2018.

The scheme began after Parsons hired Seth Nichols in June 2013 to run the stockyard's day-to-day business. At auctions, cows are brought to the stockyards each week to be sold to the highest bidder. Some recent auctions have seen more than 2,000 head of cattle sold, according to the stockyard's market reports.

The stockyard uses a line of credit to allow sellers to be paid quickly while the buyers' payments are processed, according to court records.

Seth Nichols admitted to manipulating the line of credit to buy cattle at the auctions on behalf of the Nichols Cattle Co., which then sold the cattle elsewhere without reimbursing the stockyard. He also admitted to sending the stockyard's money directly to the cattle company.

Seth Nichols agreed to pay restitution to the Parsons, which was capped at $3 million in his plea agreement. But those funds won't be available until after he is sentenced September 24, 2018. Donald Hugh Nichols' arraignment is scheduled for September 14, 2018.

--end of news article.

Once upon a time, the Old West had rustlers on horseback. Rustlers in the 20th century were known to back up a cattle truck up to a loading chute and steal a number of head of cattle. Today, the same things are going on. We still have cattle rustling taking place. None of this is new to the cattle industry. Fact is, as long as there have been cattle -- there have been people stealing them.

As I said before, the difference between rustling and cattle fraud is that size and scope of the crime. While these are a few examples of what's taken place across the country fairly recently, they show that the bigger thieves are the con artists, the fakes, those criminals who swindle ranchers, investors, banks and others. These criminals have been able to steal more money than any rustler on horseback would have ever imagined.

Some folks have written me to ask why I have so much disdain for con artists and crooks of this sort? Well, though not related to cattle, I've been the victim of some slick talking con artists who made a venture sound better than it was. I believed it was a great investment for the future, but I was scammed out of thousands of dollars. Little did I know that it was a swindle. And the no-goods who took me, well they vanished without a trace of where they headed when I tried to recoup my money. As an investor, it was a tough lesson that cost me a great deal of my life's savings. A lesson that I hope you never have to learn the hard way.   

That's just the way I see it.

Tom Correa

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