Easterday hires restructuring team to negotiate phony cattle claims, bankruptcy
One of the region’s largest farm operations has hired a Nevada firm to restructure its multimillion-dollar business as it navigates a stunning claim it falsified records for 200,000 cattle and a subsequent bankruptcy.
Easterday Ranches Inc. of Pasco hired Paladin Management Group LLC in a sign the Easterday board is looking to preserve the business. The move comes after Tyson Fresh Meats Inc. filed a $225 million lawsuit alleging it breached a cattle management agreement by inventing 200,000 head of cattle that do not exist to cover separate commodity market losses.
Easterday filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for Eastern Washington on Feb. 1, five days after Tyson sued in Franklin County Superior Court.
According to the bankruptcy petition, Cody Allen Easterday, Debby Easterday and Karen Easterday resigned as officers. The three collectively own 100% of Easterday Ranches Inc.
In their place, Paladin Management Group LLC installed T. Scott Avila and Peter Richter as co-chief restructuring officers, with Richter taking on the added title of “secretary.”
Avila is co-founder of Paladin and a 20-year veteran of corporate restructuring. Richter is a certified turnaround professional with a background in bankruptcy.
The duo is managing the Easterday companies as they develop a restructuring plan.
Both are independent of Easterday and are not considered employees. Easterday paid a retainer for their services and agreed to the restructuring officers’ $795 hourly billing rate.
Richter and Avila submitted the bankruptcy request, working with attorney Thomas Buford of the Seattle firm of Bush Kornfeld LLP. Easterday’s legal bench also includes the Seattle office of law firm Davis Wright Tremaine LLP and Pachulski Stang Ziehl & Jones LLP of Los Angeles.
The dispute between Easterday and Tyson stems from a cattle management agreement that dates to at least 2017.
Under the agreement, Easterday housed and fed cattle owned by Tyson on its feedlots.
Easterday acquired cattle on Tyson’s behalf. When cattle were ready for market, they were delivered to Tyson’s Wallula processing plant. Easterday would then be paid the market value for the cattle less the costs paid by Tyson.
As of Oct. 3, 2020, the end of its fiscal year, Tyson said its records showed Easterday held 286,000 head of cattle valued at $321 million.
In the following months, Tyson discovered significant errors in the inventory records, according to court records. Its investigation indicated 200,000 cattle on the books did not exist. The lawsuit accuses Easterday of submitting false invoices for reimbursement for expenses, leading to losses in excess of $225 million.
According to the suit, Cody Easterday blamed investment losses.
“In meetings with (Tyson’s) representatives, defendant’s President Cody Easterday admitted to the fraudulent scheme, and has explained that he concocted the scheme in order to offset over $200 million in losses he incurred in the commodities trading markets,” the complaint alleged.
Tyson, represented by Perkins Coie LLP, is pressing to have Easterday placed in receivership, alleging it is unable to pay its bills and is insolvent.
It also asked the court to issue a temporary restraining order to prevent Easterday from selling or transferring its “North Lot,” a 1,545-acre feed lot at 8230 Blanton Road in Eltopia, one of its most valuable assets.
However, Easterday sold the property to a Tyson competitor on Jan. 22, according to Franklin County property records. The price was $16 million.
The Blanton Road property was included as an Easterday asset in the
Feb. 1 bankruptcy petition, along with properties in Royal City, Mesa, Basin City and Othello.
Easterday is in possession of 54,000 head of Tyson-owned cattle that are not yet ready for market, according to the suit.
Tyson’s $225 million claim makes it Easterdayʼs largest unsecured creditor, followed by Segale Properties, owed $8.6 million, Animal Health International of Sunnyside, owed $1 million, and Sun Basin Operations of Quincy, owed $500,000.
The bankruptcy case is assigned to Judge Whitman L. Holt.