Two cattle brokers plead guilty to $160 million fraud

Saturday, October 25, 2003

KANSAS CITY, Mo. -- Two Missouri cattle brokers pleaded guilty Friday to five federal charges for bilking more than $160 million from investors.

George Young, 72, of Grant City, and Kathleen McConnell, 54, of Kansas City, entered guilty pleas in U.S. District Court to two counts of felony wire fraud, one count of mail fraud, one of false representation and one of criminal forfeiture.

Federal sentencing guidelines call for Young and McConnell to face up to 68 years in prison each and a fine of up to $2.2 million. But U.S. Attorney Todd Graves said Young likely will face between nine and 11 years in prison, while McConnell faces between seven and nine years.

Graves said the plea agreement does not stipulate lighter sentences or leniency, even though the two cooperated in the investigation. No sentencing date has been set.

Young and McConnell co-owned United Livestock Services, a business that raised cattle for investors and sold them at a profit, and Professional Business Services, which provided bookkeeping and accounting for the cattle business. They primarily did business with investors in Missouri, Kansas, Nebraska and Iowa.

Through their businesses, Young and McConnell offered to buy cattle for their clients, to provide care for those cattle, and then sell the cattle at a profit and provide financial returns to investors, Graves said.

Instead, the two used millions of dollars in loans and investments to pay off business debts and satisfy accounts of investors whose cattle had supposedly matured, Graves said. The two also provided false documents to investors that showed the business had used the money to buy cattle.

"Ninety-five percent of their cattle existed only on paper," Graves said. "These phantom cattle would be carried on the defendants' books and records as inventory, which made it seem that their inventory of cattle was far higher than it actually was."

FBI investigator Jim Kiely said there were individual victims in at least 11 states, and 37 financial institutions that lost substantial money because of the scheme. Three small Nebraska banks nearly became insolvent because of their losses, Graves said.

He said some investors lost farms that had been in their families for more than 100 years because the properties had been used as collateral for loans -- money that was invested in the phantom cattle operation.

When United Livestock Services quit doing business on Aug. 10, 2001, records showed the company had 343,937 cattle on hand worth $175 million, when the actual number of cattle in its control was 16,946, worth about $9.2 million.

"Young and McConnell claimed that their companies had the expertise, financial capacity and industry contacts to generate higher profits for their clients," Graves said. "In reality, their livestock operation was losing money and had to be subsidized by this massive fraud."

He said the scheme was "a house of cards that was falling down" by the time attorneys for Young and McConnell brought the case to the attention of the U.S. Attorney's Office. By that time, the USDA also had started looking into the duo's dealings, Graves said.

"Undoubtedly this matter has caused considerable anxiety and stress to our clients and lenders," McConnell said in a joint statement outside the federal courthouse Friday. She said she and Young had spent more than 100 hours helping investigators go over the case.

With the criminal case resolved, bankruptcy proceedings can continue, Graves said. Young and McConnell were limited in what they could discuss in bankruptcy court while their criminal case was pending.

Respond to this story

Posting a comment requires free registration: