Texas Jury Finds for Nebraska andColorado Cattlemen in Fraud Conspiracy
Involving Alleged Cattle Purchases and Check Kiting Scheme
DALLAS (Jan. 24, 2017) –On January 20 in the 271st Judicial District of Texas in Jack County, a jury found Tony Lyon, Owen Lyon and Monna Lyon responsible for defrauding Sidney, Nebraska-based cattle broker Midwestern Cattle Marketing, LLC through the use of a check kiting scheme involving the alleged purchase and sale of cattle in one of the largest cattle fraud cases in Texas history. The Jack County jury awarded $23.1Mto Midwestern Cattle in a unanimous verdict.
“At its heart, this case was about the reputation of the Texas livestock industry. I told the jury they had the power to send a message to the rest of the country that Texans do not tolerate cattle fraud and they would protect all people who buy and sell cattle in the Lone Star State. And, God Bless Texas, this jury definitely sent that message,” said Bell Nunnally Partner Chris Trowbridge. Trowbridge representedMidwestern Cattle along with Bell Nunnally Partner Heath Cheek and local counsel Todd Parks of Walters Balido & Crain in Decatur, Texas.
In 2011, Midwestern Cattle, a cattle brokering company with roots in Sidney, Nebraska and Greeley, Colorado,began doing business withLyon Farms – a cattle business operated by the defendants Owen and Monna Lyonfrom Perrin, Texas. Tony Lyon, Owen and Monna Lyon’s sonand the representative of Lyon Farms, bought and sold cattle through Lyon Farms to Midwestern Cattle, coordinating the sale of the cattle to third-parties. After three years of doing business together and conducting hundreds of transactions, to allow the simultaneous exchange of money for cattle, Midwestern Cattle allowed Tony Lyon to use a Midwestern Cattle checkbook and signature stamp. Lyon Farms, in turn, sent the cattle broker checks pre-signed by Monna Lyon to be filled out with the amounts of transactions.
In 2014, Tony Lyon informed Midwestern Cattle that he had met a “big money” cattle buyer named John George who owned George Cattle Company in Fort Worth, Tex. Midwestern Cattle then began receiving numerous invoices from Lyon Farms for proposed transactions with George Cattle Company,all coordinated through Lyon Farms with all aspects of the transactions – from purchase, to payment and delivery of cattle – handled by Lyon Farms. In total, 133 transactions occurred over several months involving over 50,000 heads of cattle and $87M.
Unbeknownst to Midwestern Cattle, George Cattle Company was fictitious, invented by Tony Lyon. While Tony Lyon was purportedly facilitating the purchase and sale of cattle from and to George Cattle Company, he was engaging in a check kiting scheme wherein he would issue a large check from the Owen and Monna Lyon Cattle Account at Legend Bank in Decatur, Tex., overdrawing its balance, and then replenish the account with a check from the Midwestern Cattle account. Lyon Farms sent fictitious invoices from the George Cattle Company that were then paid by Midwestern Cattle – thus inducing deposits into the Lyon Farms account. Lyon Farms took advantage of the float, overdrawing the Lyon Account and then using funds from Midwestern Cattle to make it appear positive before sending funds back to Midwestern. In reality, the Lyon Account at Legend Bank was consistently overdrawn.
On June 26, 2015, the scheme collapsed when a check from the Lyon Account signed by Monna Lyon was written to Midwestern Cattle to purchase cattle for $5,020,231.11 andrepresentingpurported sales to George Cattle Company.Midwestern Cattle deposited the $5M check, but shortly before doing so, Lyon wrote three checks totaling $4,551,515.18 to Owen Lyon. Owen Lyondeposited these funds into the Owen and Monna Lyon Cattle Account and used them to cover Owen and Monna Lyon’s pre-existing $4.3 million negative balance.When Midwestern Cattle’s bank,Points West Community Bank in Sidney, Nebraska, contacted Legend Bank to confirm that the initial check for more than $5M would clear, they were informed it would not. Pressed by Midwestern Cattle, Tony Lyon responded that he was waiting on a wire transfer from the George Cattle Company.
Midwestern Cattle’s President Jason O’Connell of Greeley, Colorado, alarmed by the developments of late June 2015, drove all night from the company’s headquarters in Nebraska to confront Lyon. O’Connell testified that Tony Lyon then confessed to him that “there were no cattle, there was no George Cattle Company, and there was no money to turn over.” Later, when deposed, Tony Lyon refused the question and asserted his Fifth Amendment right against self-incrimination.
In a separate federal criminal matter, on Nov. 4, 2016, Tony Lyon plead guilty to wire fraud on a related transaction and is awaiting sentencing in March.The checks written from Midwestern Cattle to the Lyons Account by Tony Lyon covered the overdraft in the Lyon Account and paid off other obligations of Owen and Monna Lyon to Legend Bank. At the same time, Midwestern Cattle was left with all of the damages from Tony Lyon’s check kiting scheme, and its account was overdrawn by more than a million dollars.
After a four-daytrial and four hours of deliberation, a jury determined that Tony Lyon, Owen Lyonand Monna Lyon engaged in a conspiracy to commit fraud against Midwestern Cattle, awarding $23,193,765.02 to Midwestern Cattle.The jury also determined Owen Lyon and Monna Lyon aided and abetted Tony Lyon’s fraud against Midwestern Cattle and determined that Owen Lyon and Monna Lyon had independently committed fraud and civil theft against Midwestern Cattle. The case is styled Midwestern Cattle Marketing, LLC vs. Tony E. Lyon d/b/a Lyon Farms, Owen Lyon, and Monna Lyon, Cause No. 15-07-061, in the 271st District Court in Jack County, Texas.
“Cattlemen from North Texas to North Dakota and beyond had their eyes on this case. I am heartened that through this verdict, the Texas livestock industry -- where a man can and should rely on a handshake -- will remain strong,” said Bell Nunnally’s Trowbridge.