A family cattle business in Poinsett County ended in a multimillion-dollar bankruptcy last year, and now one of its owners is being accused of fraud.
David Heileman, 28, of Jonesboro, owned 70% of the Heileman Cattle Co. of Harrisburg, which listed $4.1 million in debts and just $324,600 in assets when it filed for Chapter 7 bankruptcy in February 2018.
His partner was Dr. Robert Taylor, a Jonesboro cardiologist and Heileman’s father-in-law until 2017, when Heileman’s marriage to Taylor’s stepdaughter ended in divorce.
Both Heileman and Taylor have filed individually for bankruptcy protection. The partners also shared ownership of Lazy T Land Co. of Harrisburg, which was also in the farming business and filed for bankruptcy.
Then earlier this month, Arvest Bank of Fayetteville filed a complaint in Heileman’s personal Chapter 7 bankruptcy case, alleging that Heileman and his companies “defrauded its investors by not actually purchasing cattle but instead using investment money and loans to enrich” Heileman, according to the filing by J. Chad Owens of the Jonesboro law firm Snellgrove Langley Culpepper Williams & Mullally.
Heileman “obtained money and credit by false pretenses, false representation, and actual fraud,” the bank alleged. Heileman also “engaged in embezzlement and larceny,” the bank said.
The bank also said it lent money to Heileman Cattle with Heileman’s personally guarantee. But he disposed of various pieces of equipment used as collateral without informing the bank or getting permission, according to Arvest.
Arvest asked the bankruptcy court not to grant Heileman a discharge, meaning he would be left with his debts after he’s gone through the bankruptcy process. Heileman reported $511,400 in debts and $90,000 in assets. The bankruptcy also lists that he owes $125,000 to Arvest.
In an interview with Arkansas Business last week, Heileman denied that he defrauded anyone. He blamed the collapse of the business on volatile cattle prices, which started falling in 2015.
Heileman said he thought he could count on Taylor to provide funding for the cattle company, but he was wrong. Taylor, through his wife, declined to comment.
Meanwhile, Heileman, who said in his bankruptcy that he worked in construction and was a student, said he plans on repaying investors and creditors.
He reported monthly income of $2,300, which includes $750 from family contributions and $550 in rent from a roommate. In 2018, he earned $13,400, and in 2017, he reported a loss of $1.7 million.
“It’s not like I have any [money] to pay anybody, but I will eventually make this right to everybody,” Heileman said.
Bankruptcy filings and interviews provide some insight into the collapse of the cattle business and of the partnership that was supposed to sustain it.
In July 2012, Heileman married Ariel Clark, stepdaughter of Dr. Robert Taylor.
Taylor, a cardiologist, practices at NEA Baptist Clinic in Jonesboro. In his bankruptcy filing, he reported income of $400,600 in 2016 and $381,500 in 2017.
His assets were valued at $2.8 million and his debts were listed at $4.2 million, some of which were personal guarantees of loans made to Heileman Cattle.
Within months of marrying, he started raising cattle.
David Heileman said Taylor’s role in the company was “to get loans and to be a safety net in case things went wrong.”
The company appeared to start out well, but the cattle market took “a little bit of a hit” at the end of 2012, he said. “I realized pretty quickly that it would take a lot of capital to keep us safe,” Heileman said. The company never grew to more than one or two employees, he said, and “we worked our tails off.”
The company’s plan was to buy heifers and breed them, which seemed a safe move, he said. “The only risk with that was death, somebody stealing them or them not breeding,” Heileman said.
Circle A Angus Ranch, a 24,000-acre, 7,000-head ranching operation headquartered in Iberia, Missouri, featured the Heilemans in a summer 2014 newsletter under the headline “Someone You Should Know.”
“David and Ariel Heileman have built their operation from the ground up,” the newsletter said. “They … have evolved into a multi-state cow/calf, replacement heifer and feedlot operation.”
The newsletter said the Heilemans’ company had 250 cows and 250 heifers and fed about 4,500 cattle in its feedlot.
The Heilemans said that by 2019 they hoped to be feeding 10,000 cattle in the company’s own indoor feeding facility, according to the newsletter.
At that time, between 2013 and 2014, cattle prices were climbing.
“Calves saw a tremendous increase in price,” said Cody Burkham, executive vice president of the Arkansas Cattlemen’s Association. “That was some of the best money that cattlemen probably have ever made.”
In 2013, calves were selling for about $160 per hundred pounds. In 2014, prices had jumped to more than $200, according to the U.S. Department of Agriculture.
But the high prices wouldn’t last.
Heileman said he decided he would ask his friends and family to invest in cattle. “I’d put [the cattle] on the farm for them,” he said. “I’d feed them and take care of them.”
And when the cattle sold, the investors would receive his profits.
Wayne Harlan of Onia (Stone County), owner of T.H.E. Cattle Co., said he decided to buy cattle from Heileman in 2014 after learning that he and Heileman were related by marriage, according to Harlan’s July 22 letter to a bankruptcy judge included in the cattle company’s case file.
Harlan said he told his wife that the transaction seemed “to have a safety net built into this deal” because of the family relationship.
Heileman said that he would feed the cattle inexpensive feed, which meant no cost to Harlan. “I asked him how he could do that,” Harlan said. “He stated he was a good manager and that it would work out.”
Heileman projected the cattle would be paid for in three years.
Harlan said he didn’t sign an agreement with Heileman or his company. Between January and April 2014, Harlan invested about $600,000 with Heileman. In May 2014, Harlan received payment of more than $200,000 from Heileman Cattle, but that was followed by a request for a payment of about the same amount for cattle Heileman had bought on Harlan’s account.
“I complained to David that I could not make any progress on my cost of investment if every sale was accompanied with basically a demand for an equal amount of reinvestment,” Harlan said. “At this point, I was hooked up, like it or not, for the duration of the ride, wherever it went.”
He said he received no invoices or receipts on the cattle bought or sold.
Harlan said each time he went to Heileman’s farm, he saw new equipment and upgrades. “I asked David how he could afford all of this, and his response was, ‘You are responsible for making it happen,’” Harlan said. “When I heard that, I knew this would not end well.”
And it didn’t.
In December 2015, Heileman told Harlan that there were more than 150 head of cattle on the farm. A year later, the number of cattle had fallen to 98. Harlan said he told Heileman he wanted to take the animals to his farm, but “David could not get them up because of mud, etc., with always a reason I could not retrieve them,” Harlan said.
Harlan said that he never received his cattle or money for the animals. Harlan estimated Heileman, Heileman Cattle or both owe T.H.E. Cattle Co. $240,000. He said the basis of the claim is breach of contract and fraud.
Another investor also said he lost money with Heileman. Steve Brooks, 61, of Harrisburg, has a claim against Heileman Cattle Co. for $120,900 for money loaned and invested in the company at the end of 2012 or in 2013.
In an interview with Arkansas Business, Brooks said that he is disabled and used his life savings for the investment.
Brooks said that just before he had open heart surgery, Heileman came to him with an investment pitch. “He came to me with this, ‘God sent me to you,’” and promised to take care of him, Brooks said.
Heileman said he would buy Brooks’ farm and asked him to invest in the cattle company.
Brooks said Heileman told him the investment return could be between 6% and possibly up to 16%. “Well, that kind of gets a person’s attention,” Brooks said.
Between 2014 and 2015, Brooks received more than $20,000, but then the payments slowed down, with the last one $2,250 in March 2017.
“All he done was lied to me,” Brooks said. “I’m probably not going to get a penny.”
Heileman, for his part, accused Brooks of not telling the truth.
During 2016, Heileman Cattle reported gross revenue of $955,000. But by then the cattle market was showing signs of strain as the cost of feed climbed.
In 2017, the company’s gross revenue fell by 57% to $425,500.
Heileman said that the heifers that the company bought for $1,400 or $1,700, and which weren’t then pregnant, were worth only $725 to $850 pregnant in 2017.
“We kind of had all our eggs in that basket,” Heileman said. “Looking back, … that was really our Achilles’ heel.”
Heileman said the company’s plan was to hold onto the pregnant cows until the calves were born. “But the problem was we were having to sell cows cheap to pay our feed bill,” he said.
He said Taylor refused to put money into the business. And in 2017 Heileman filed for divorce from Ariel.
Six months after the divorce was final, Heileman Cattle filed for Chapter 7 liquidation in February 2018.
Heileman said the other investors have told him that they knew that the collapse of the company wasn’t intentional. “I know it doesn’t make it hurt any less, but they understand this is not a malicious act,” Heileman said. “It was just a crappy situation.”
Heileman Cattle Co. and its Co-debtors
Dr. Robert and Pamela Taylor, Harrisburg
Date Filed: Feb 19, 2018
Heileman Cattle Co.*, Harrisburg
Date Filed: Feb 23, 2018
Ariel Heileman, Jonesboro
Date Filed: Feb 19, 2018
Lazy T Land Co., Harrisburg
Date Filed: Feb 23, 2018
David Heileman, Jonesboro
Date Filed: Feb 22, 2019
*Many of Heileman Cattle’s debts are also listed in its co-debtors’ filings
Source: U.S. Bankruptcy Court