Tyson seeks to wrest control of Easterday feedlot from Agri Beef
Tyson Fresh Meats has gone to court to forcibly acquire the Pasco, Wash., feedlot that bankrupt cattleman Cody Easterday sold to a major competitor last year after bilking Tyson out of $233 million.
Tyson is offering $25 million — $9 million more than Agri Beef paid — for the cattle feeding operation known as North Lot. Tyson is asking a bankruptcy judge to void the sale to Agri Beef, arguing the deal shortchanged it and other unpaid creditors.
“The $16 million purchase price was woefully inadequate,” Tyson claims in a complaint filed Monday, Aug. 9 in U.S. Bankruptcy Court for Eastern Washington.
The dispute leaves final ownership of the feedlot uncertain. Agri Beef President Matt Buyers said in a court filing that the Idaho-based company bought the feedlot in good faith in an arm’s length transaction.
Easterday, 50, pleaded guilty in March to defrauding Tyson out of $233 million and another company out of $11 million by billing them for cattle he never actually bought or fed. Easterday delivered cattle to Tyson’s processing plant in Pasco.
In a plea deal with federal prosecutors, Easterday agreed to pay restitution. He is scheduled to be sentenced Oct. 5 on one count of wire fraud.
Several Easterday farms in the Columbia Basin have been sold through bankruptcy court for $209 million to Farmland Reserve Inc., owned by The Church of Jesus Christ of Latter-day Saints.
Tyson supported the sale to Farmland, which operates in Washington as AgriNorthwest, but says it was blindsided by the pre-bankruptcy sale of North Lot.
Tyson uncovered Cody Easterday’s fraud in December and discussed acquiring the feedlot to begin making amends. Easterday estimated the lot’s worth at $20 million, according to Tyson.
In late January, on a Friday, Tyson executives learned in a conference call with Easterday and his financial adviser, Pete Richter of Paladin Management Group, that Easterday planned to sell the lot within a few days.
Easterday and Richter declined to identify the buyer. Over the weekend, Tyson prepared to go to court to stop the sale, but learned Monday that the sale had closed the previous Friday.
Besides claiming it was duped, Tyson also criticizes how the $16 million was distributed.
According to a spreadsheet sent to Tyson by Easterday’s lawyer, Richard Pachulski, more than $11.7 million went to Easterday Farms and the English Hay Company, two other companies owned by Easterday family members.
Pachulski’s Los Angeles law firm got $600,000, while Richter’s management group got $625,604.
Creditors got only $2.1 million, leaving some bills unpaid.
Six unpaid balances shown on the spreadsheet topped six figures, including $804,000 owed one business for veterinarian services. None of the money shown distributed went to Tyson.
Pachulski’s law firm was later retained as lead counsel for Easterday’s Chapter 11 bankruptcy, and Richter and another Paladin partner were retained as co-chief restructuring officers.
Tyson claims Pachulski’s law firm and Paladin have conflicts in reconsidering the pre-bankruptcy sale to Agri Beef. Efforts to reach Pachulski and Richter were unsuccessful.
A post-sale appraisal valued North Lot at $9 million. Tyson calls the appraisal self-serving and flawed, considering Tyson’s standing offer to pay $25 million.
In the face of Tyson’s bid to obtain the feedlot, Agri Beef went ahead Tuesday and paid the bankrupt Easterday Ranches $1 million for trucks, tractors and other equipment at North Lot.
Bankruptcy Judge Whitman Holt in Yakima approved the equipment sale. Agri Beef certainly owns the rolling stock, but Tyson’s bid to acquire the ground will be decided later, the judge said.
If Tyson prevails, “it creates a logistical issue. You (Agri Beef) have to come and get your stuff off the property,” Holt said.
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