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Trust But Verify (Gwen Moritz Editor’s Note)

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Pro tip: Never trust a man who talks about his “smoking hot mom.”

Cody Easterday is a piece of work, as you undoubtedly know if you read Senior Editor Mark Friedman’s front-page article last week. Easterday is the 49-year-old rancher from southeast Washington who pleaded guilty in March to defrauding Tyson Foods Inc. of $233 million and an unidentified company of $11 million.

To be fair, it wasn’t until his father died on Dec. 10 — a few days after he confessed his scheme to Tyson executives — that Easterday shared a decades-old photo of his parents on Twitter and described his mother as “smoking hot.” By then, Tyson executives were grappling with the fact that they had, over a period of years, paid hundreds of millions of dollars for cattle that didn’t exist and nonexistent feed to fatten them up. And that Easterday, in his words, “had pissed it away” trading commodity futures contracts.

His confession was striking to at least one executive of the Tyson Fresh Meats subsidiary for what it lacked: remorse.

“I was struck by Mr. Easterday’s demeanor during these meetings,” Kevin Hueser, senior vice president for beef management, said in a document filed in court. “While he did get a little teary-eyed at times, he was largely very straightforward and stoic. He did not show the remorse that I expected from someone who had defrauded our company out of hundreds of millions of dollars.”

That lack of remorse might come, in part, from Easterday’s original position — eventually abandoned in favor of a plea deal — that he hadn’t really stolen from or defrauded Tyson. “Rather he said he was overcharging Tyson on the front end and fully intended to pay Tyson back,” according to an affidavit by Jason Wenglarski, Tyson’s vice president of internal governance. It seems Easterday had even invented a bland-sounding name for his criminal scheme: “forward billing.”

The Easterday story was ripe for telling due to the breathtaking size of the fraud perpetrated by one man against one of the 100 largest corporations in America. But in other ways, it felt like a remake of so many other stories we’ve covered in the pages of Arkansas Business over the years. Back when he was on the bench, I heard U.S. District Judge Leon Holmes say more than once that the story of an otherwise upstanding member of society who accesses someone else’s money with the intention of paying it back promptly is a common plot.

Hard to believe that a man who would “forward bill” almost a quarter of a billion dollars was otherwise upstanding, but Tyson Fresh Meats clearly trusted Easterday. Last August, accountants pointed out to Heuser that his company had 286,000 head of cattle at Easterday Ranches. That seems like a lot, huh?

As soon as Heuser sent someone out to take a look, the scam crumbled. Because Easterday had a lot of cattle — 54,000, Tyson estimated — but nothing like the number Tyson had paid to buy and feed.

Misplaced trust is a common theme in the fraud cases I’ve observed over the past two decades, as is the failure to make simple, routine checks. I still marvel that Bank of America honored $2 million worth of M. David Howell’s worthless checks because he assured his bankers that he would be receiving wire transfers to cover the amounts. As soon as the bank stopped trusting and checks started bouncing, an $80 million Ponzi scheme collapsed.

How did Dennis Smiley Jr. manage to borrow $5 million from more than 20 lenders using the same half-million in collateral over and over again? Well, he was a banker, and he seemed to know that other bankers would trust him too much to actually check the Uniform Commercial Code claims on the collateral with the secretary of state’s office.

A lot of them didn’t even bother to file their own claims.

Kevin Lewis, the former Little Rock lawyer who went to federal prison for peddling phony improvement district bonds to multiple banks as investments and collateral, similarly counted on the laziness of lenders. As soon as bank examiners questioned First Southern Bank of Batesville’s concentrated investment in improvement district bonds, Lewis’ $40 million scam was dunzo. (And so was First Southern.)

There has to be a lesson in here somewhere.


What are the chances that Easterday, who lost an average of $17 million a year trading commodities futures, claiming a positive return in only one year out of 10, is the only one smart enough to figure out that Tyson Fresh Meats did not have its eye on the ball?

Tyson is, a spokesman said, working with its outside auditor “to implement additional financial controls to help prevent or detect this type of activity in the future.” No duh.


Gwen Moritz is the editor of Arkansas Business.
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