Photo: Getty Images
(Cedar Rapids, IA) -- An Iowa corporation and four of its top managers have been sentenced in federal court in Cedar Rapids in a wide-ranging scheme to defraud Midwest livestock producers, causing more than $3 million in losses. Investigators say the fraud dates back two decades.
Lynch Family Companies, Inc., of Waucoma, Iowa, also known as “Lynch Livestock,” pled guilty on July 29, 2022, to one count of Failing to Comply with an Order of the Secretary of Agriculture. On February 10, 2023, Lynch Livestock was sentenced to five years of probation, fined $196,000, and ordered to pay over $3 million in restitution to livestock producers and farmers.
Billie Joe Wickham, age 51, of Waucoma, Iowa, pled guilty on July 15, 2022, to one count of Conspiracy to Defraud the United States. On January 13, 2023, Wickham was sentenced to six months of imprisonment and fined $3,000. Wickham must also serve a three-year term of supervised release after the prison term. There is no parole in the federal system.
Charlie Lynch, age 65, of Fort Atkinson, Iowa, pled guilty on July 25, 2022, to one count of Conspiracy to Defraud the United States. On January 13, 2023, Lynch was sentenced to five years of probation and fined $3,000.
Leland “Pete” Blue, age 60, of Fredericksburg, Iowa, pled guilty on July 28, 2022, to one count of Conspiracy to Defraud the United States. On January 13, 2023, Blue was sentenced to five years of probation and fined $1,000.
Tyler Thoms, age 31, of Fayette, Iowa, pled guilty on August 9, 2022, to one count of Causing a Livestock Dealer to Keep Inaccurate Accounts and Records. On January 13, 2023, Thoms was sentenced to one year of probation.
Lynch Livestock admitted in its plea that it was registered with the Secretary of the United States Department of Agriculture (“USDA”) as a dealer under the Packers and Stockyards Act of 1921 (“the Act”). Lynch Livestock operated buying stations in the Northern District of Iowa and elsewhere. Lynch Livestock bought swine from livestock producers and sellers at these stations, and the prices Lynch Livestock paid was based on the numbers, classifications, and weights of the swine.
Investigators say beginning in about the early 2000s, and continuing through at least late March 2017, Lynch Livestock’s second-ranking official directed other managers and employees to falsely reduce and downgrade the numbers, quality classifications, and weights of swine that producers and sellers had delivered to Lynch Livestock’s buying stations throughout the Midwest.
The practices largely concerned large, corporate swine producers. Investigators say managers at Lynch Livestock's headquarters created false and fraudulent scale tickets bearing the initials of the managers at the buying stations, and false invoices. Managers and employees then shredded and burned evidence of the fraud.
In late 2017, Lynch Livestock and the USDA entered an administrative consent decision under the Act in which Lynch Livestock agreed to pay nearly $800,000 in restitution to two of its corporate customers on account of fraud committed at two Iowa buying stations. In its plea agreement, Lynch Livestock agreed the amount of loss from the fraudulent conduct prior to 2018 was greater and not isolated to the two corporate customers or two buying stations.
Evidence found between about 2018 and March 2021, Lynch Livestock’s managers and employees used a crowbar or other similar object to manipulate the scales on which livestock producers’ swine was weighed at its buying stations. As a result, Lynch Livestock created, kept, and provided to livestock producers scale tickets that contained false information because they understated the actual weight of the swine. Consequently, Lynch Livestock paid livestock producers less than what was owed and violated the 2017 consent decision with the USDA. In 2021, Lynch Livestock and the USDA entered a second administrative consent decision. Lynch Livestock agreed to pay over $400,000 in restitution to various farmers and producers.
Evidence at various hearings in the cases established that Wickham reported directly to the second-ranking official and participated in the fraud for over fifteen years. Wickham also had a leadership role in the conspiracy, directing other employees to stamp fraudulent scale tickets and to manipulate the sorting of swine to lower the values for producers. Charlie Lynch was involved in sow procurement and marketing for Lynch Livestock and, from no later than 2013 until about 2017, reduced classifications on sows that producers sold to Lynch Livestock. Blue managed Lynch Livestock’s sow inventory and, no later than 2012, joined the scheme. Thoms initially worked as a bookkeeper in Lynch Livestock’s headquarters building with Wickham, Lynch, and Blue and then, from about 2018 to early 2021, managed Lynch Livestock’s buying station at Waucoma, Iowa. While working in the headquarters building as a bookkeeper, Thoms participated in forging scale tickets and then, as a manager, used a crowbar to lift up on a scale to cheat producers.
Cedar Rapids by United States District Court Judge C.J. Williams referred to Lynch Livestock’s fraud scheme as “a systematic method of cheating and stealing” from livestock producers and sellers and noted “the nature of the fraud [was] to rip off people little by little, day by day.” Lynch Livestock cooperated with the government’s criminal investigation and has agreed to various compliance measures as a part of its plea agreement.
In its plea agreement, Lynch Livestock agreed to pay over $3 million in restitution with credit for approximately $1.2 million that Lynch Livestock has already paid because of the 2017 and 2021 USDA consent decisions. With respect to the $1.8 million in new restitution that will be available for livestock producers and sellers, Judge Williams indicated further proceedings will be scheduled to allocate the restitution among Lynch Livestock’s victims.
The Lynch Family Companies has released a statement:
“The company has taken full responsibility for all past sorting and weighing issues and we are ready to close this painful chapter,” said Gary Lynch, Chairman of Lynch Family Companies. “Our company is built on a strong foundation of integrity and trust, which is essential to our relationship with our customers.”
Gary Lynch, on behalf of the Lynch Family Companies, entered into a plea agreement with the US Attorney’s Office for one count of failing to comply with an order of the United States Secretary of Agriculture. The settlement agreement was accepted by the court on February 10, 2023. As part of the agreement, the company has paid over $3 M in restitution and fines.
Listed below are key facts related to this case:
Initial Notice in 2017
In April 2017, Lynch Livestock was made aware of potential violations regarding the weighing and sorting of hogs that resulted in the company underpaying some customers. In response to these concerns, Gary Lynch self-reported violations to the Grain Inspection, Packers and Stockyards Administration (GIPSA), requested an audit, and cooperated with the GIPSA investigation.
After the investigation was completed, GIPSA determined three customers were affected. These irregularities were reported to the United States Department of Agriculture (USDA), which ordered Lynch Livestock to cease and desist from these practices and to pay a $15,000 fine, along with $794,378 in restitution to the three affected companies. As a result of this matter, Lynch Livestock took immediate action, including personnel changes, retraining all employees, and requiring all employees to sign new compliance forms.
Enhanced Measures in 2021
The USDA received an additional complaint in January 2021 regarding similar weighing violations at one of the company’s hog buying stations. As a result, some producers received artificially low payments for their hogs. Lynch Livestock took action upon receiving the report, including:
§ fully cooperating during the agency’s investigation
§ terminating employees who manipulated the scales and issued false tickets
§ implementing additional employee training and an internal whistleblower process
§ installing cameras at facilities as a safeguard so employees and customers can see how animals are sorted and weighed
Under a settlement with the USDA, the company entered a consent decree, paid a civil penalty and restitution of $445,626, which has been distributed to producers who were underpaid. New leadership was hired, and the company developed an industry leading, robust compliance plan that included enhanced processes and the installation of cameras.