Kentucky Cattle Scheme With 78,000 Ghost Cattle Unravels
A massive fraudulent cattle scheme allegedly orchestrated by a Kentucky cattleman conned dozens of investors and a prominent agricultural lender out of $100 million, while his family – still grieving over the man’s suicide – is facing financial peril.
On Wednesday, USDA’s Agricultural Marketing Service (AMS) issued notification to anyone who sold livestock to and has not received payment from businesses operated by Brian McClain, 52, Benton, Ky., to promptly file Dealer Trust claims. Additionally, the three entities, McClain Farms Inc., Benton, Ky.; 7M Cattle Feeders Inc., Hereford, Texas; and McClain Feed Yard Inc., Friona, Texas, filed bankruptcy petitions with the U.S. Bankruptcy Court for the Northern District of Texas on April 28.
McClain’s scheme allegedly dates back six years when, as sources told Drovers under condition of anonymity due to the nature of the allegations, he began seeking investors for his cattle operations with the “guarantee” of a 30% return on investment. Over time McClain’s inventory of cattle grew and some investors did see hefty profits. But those investors were apparently paid with more borrowed money.
McClain’s lender was Rabo AgriFinance, which sources claim became suspicious in April as the inventory of cattle on paper had reached 88,000 head. The scheme unraveled quickly when Rabo Agrifinance officials ordered an inventory check and found only about 10,000 head of live animals.
Following McClain’s death on April 18, Rabo AgriFinance's representatives went to McClain’s operation in Kentucky and gathered the cattle, which were then sold at Blue Grass Stockyards.
Rabo AgriFinance officials were contacted by Drovers but had no comment on this story.
Many of McClain’s alleged investors were local friends and neighbors, many of whom say they were shocked to be swindled by someone they considered a friend.
In its notice on Wednesday, USDA-AMS said unpaid sellers to McClain’s businesses must promptly file Dealer Trust claims. “Unpaid sellers must act quickly as the law requires that claims be filed with USDA and McClain within 30 days after payment is due, or within 15 business days after a payment instrument issued to the livestock seller has been dishonored. Claim amounts should be for the gross amount McClain agreed to pay for livestock,” the AMS statement said.
Unpaid livestock sellers might be protected under a provision of the Packers and Stockyards Act of 1921 that requires all livestock purchased by a dealer in cash sales and all receivables or proceeds from such livestock to be held in a trust for the benefit of all unpaid cash sellers.
Claims should be submitted to: Agricultural Marketing Service, Fair Trade Practices Program, Packers and Stockyards Division, Midwestern Regional Office, 210 Walnut Street, Room 317, Des Moines, IA 50309. Claims can also be emailed to PSDDesMoinesIA@usda.gov.
For questions regarding the claims process, contact the PSD Midwestern Regional Office at (515) 323-2579.
