Fraud???

Discussion in 'The Green Room' started by Azure, Oct 1, 2009.

  1. Azure

    Azure I could kick your ass

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    Considering I have absolutely no experience in anything like this, I'm looking for any kind of advice to help me here.

    About 3 years ago, my uncle and his dad(my grandfather)....sold the ownership rights to 100 of the 125 purebred Red Angus cows that they own together. Simply put, due to a bunch of stupid management decisions, bad financial decisions and a slew of other problems they needed access to cash. The bank was refusing them anything more money, and farm credit already had everything they owned mortgaged.

    So, some friends of theirs decided to buy 100 of the cows for $1,500 per head. And my uncle and grandpa would still look after them, feed them, etc, etc. Well, because the cows are purebreds, they do all kinds of procedures to get the best calves possible. This includes ultrasound, testing for marbling, semen testing, AIing, embryo implants, etc, etc. And throughout the past 15 years as they've built the herd up, they kept records of which bloodlines produced the best calves. This included both mothers and the bulls they use to breed.

    Well, over the past 6 years, IIRC, there are been one specific cow and her female calves that are also now part of the herd that constantly produce very good bulls. Year after year these bull are being sold for more than $10,000 at their yearly bull sale. This happened while I worked there, and one of my brothers who also now works for them as a part-time job, said the same thing.

    When they sold the original 100 cows to their 'investors'....these two cows, 11F, and 17, were both part of THAT herd. And both these cows produce very high selling bulls.

    Anyways, they still had 25 cows or so that belonged to them, which they set up in a fall-calving program to sell the bulls as 2 year olds. And over the past 2 years, many of the top producing cows that were part of the herd of 100 that they sold off have been replaced by some of the lower-producing cows from the 25 that they still own. The two cows I mentioned above are part of that.

    Is this fraud? The original contract as I understand it involved Company X(who bought the cows).....owning the 100 cows, and from those 100 cows, they sell 50 bulls, about 25 heifers, and rotate about 20 into the herd and sell off 5 for butchering. From that money, they pay my uncle what it costs him to feed and look after the cows every year. And IIRC, there is supposed to be some buyback program in place, but it starts in 2012 I think.

    Because the contract didn't actually say which cows specifically were part of the agreement -- it only said 100 Red Angus Purebred Cows -- it allows my uncle to freely rotate out the high-producing cows from the big herd into his own herd, and move some of the low producing cows from his own herd into the big herd.

    To me this is almost some kind of fraud. Or at least a breech of the original contract. The hell of it is, company X expects about $175,000/year to be made from the 100 cows they own, and if that price falls back to $125,000...my uncle can just claim that the bad economy affected the sale. And yet, the truth is, he has taken out of the group of 100 cows at least 10 cows that all produce bulls that normally sell for over $5,000 and replaced them with cows that produce bulls that average around $2,500.

    This has been bothering me for a while now, since the sale, and since my brother began working there and telling me about it, and yet I have no idea what to do about it.

    Would it even be illegal?
  2. Marso

    Marso High speed, low drag.

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    I'm not an expert or a lawyer, but it seems to me that if those two cows were specifically sold as part of the 100 and they haven't been resold, slaughtered, etc, then they still belong to the folks they were sold to.

    "Switching out" cows between the 25 and the 100 seems to fall under the category of a 'bait and switch' kind of deal, if not outright fraud. It seems that BOTH parties should have to agree to any 'swapping out' of head between the two herds.

    I think the owners of the 100 would be serving themselves well to have some supervision and/or oversight of your uncle's management.

    I think it's dishonest, though, and it's obviously bugging you. You may want to confront your uncle about it if you think he's cheating his partners or breaking the law. Just be prepared for him to puff up and push back, and be ready for a big family falling out. Don't know what the relationship is like there but if you insert yourself into this in any way be mindful that there will be unpleasant consequences one way or the other.

    Do what you feel is right.
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  3. Azure

    Azure I could kick your ass

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    Well, part of the reason they had to sell the cows was because of dishonest management which led to bad decisions being made and a bunch of money being lost.

    And as a result of that, we don't get along very well. This is my mom's side of the family we're talking about, and outside of hello and goodbye, we're not really on speaking terms. My uncle is desperate for help though, and its tough to find anyone that understands anything about cows and is willing to work for $10/hour, so he has hired me and my brothers the last 10 years.

    I'm not stupid though, and even if there is nothing in the agreement that would prohibit this kind of activity, I could still find a lawyer that will make one hell of a case for fraud or some kind of breech of the original contract.

    Considering the past management and financial practices, I would in no way be surprised if my uncle and his dad are purposely manipulating Company X because there really isn't any oversight involved. They very much trust that nobody is going to scam them out of their money. Probably TOO trusting as far as I'm concerned, even if they have been friends of the family for years now.

    I was hoping some of the lawyer types on here could tell me what my options are in a legal sense. I don't know if approaching them would solve anything, outside of me getting a 'mind your own fucking business' answer.

    I think it bothers me the most that I actually have to find out and maybe go to Company X about this....and it involves family.

    :clyde:
  4. $corp

    $corp Dirty Old Chinaman

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    If the original contract didn't actually specify the specific 100 cows the other company owned, then I think the farmers are free to decide WHICH 100 they are selling and/or breeding. The contract really should've listed the cows, by name if possible.

    Dishonest, for sure. But in this case, due diligence was not done, IMHO.
  5. Azure

    Azure I could kick your ass

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    I would need to see the contract to be absolutely sure.

    I asked my dad about it, and he said that as far as he knew, they paid $1,500 per cow, and the buyback was facilitated as 15% of the $150,000 + interest for 10 years. After 10 years they would own the cows again. From there, whatever the calves from the 100 cows made at the bull sale in March, and from being sold for slaughtering, etc, etc....that money went to Company X, and they would payback my uncle based on how much it cost him for labor and feed. They would subtract the $15,000 + interest from that amount, and pay whatever it cost for labor and feed. Don't really know what this number is.

    So, IIRC, while I worked there, the bullsale would generate around $125,000 in sales(this has since gone up I think).....and numerous other bulls would be sold as 2 year olds, or sold to high-end restaurants in Lethbridge for meat. Also, some of the heifers would also be sold, and some would be incorporated back into the herd. Add all of this together and the sales throughout the year were more than $175,000. Sometimes as much as $200,000 especially when they started selling bulls for meat.

    So, Company X would walk away with a decent amount of return on their investment, plus the annual buyback on the cows. Basically it was setup like a loan, but with the return of a normal investment.

    This is why I have such a problem with these cows being moved around. I realize that if it was explicitly put into the original contract that there were a specific 100 cows sold, then legally, there is nothing binding. And nothing I can do. But I still feel that on top of not only being dishonest, my uncle is also scamming Company X out of the highest possible return on their investment.

    Like I said earlier, if the money brought in by the bull sale in March each year, my uncle can claim, and actually has claimed that it was the fault of the slow economy. Yet, even if the economy was at fault in certain ways, that still doesn't excuse the fact that he is moving around cows from one herd to another so that his OWN group will make more money, but the group owned by Company X will make less.
  6. Scott Hamilton Robert E Ron Paul Lee

    Scott Hamilton Robert E Ron Paul Lee Straight Awesome

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    Your uncle is trying to maximize his return on the deal. It sounds like what he's doing is allowable within the terms of the contract, and it also sounds like the folks are still going to make money.

    Perhaps you're angry because you know a lot about this industry when the investors did not, and you expect everyone to perform at your level. I would bet that the investors are perfectly happy and pleased with the return on their money. :shrug:
  7. Azure

    Azure I could kick your ass

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    The investors actually don't give a shit about the return. They simply did the loan/buying program as a way to help a friend out.

    They're getting their money back plus some, which obviously will make anyone happy. Especially if they're doing no work.

    My problem is that I'm seeing the manipulation that is resulting in Company X losing out on what rightly should be their money. I don't care if they don't give a shit, to me it is still wrong. Or dishonest and highly suspicious.

    You don't build a successful business by being a dishonest fuckhead like my uncle is.
  8. Scott Hamilton Robert E Ron Paul Lee

    Scott Hamilton Robert E Ron Paul Lee Straight Awesome

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    If the contract doesn't call for specific cows, I'm not seeing a problem. Do you know for a fact that your uncle doesn't have an understanding with them?

    If they were doing this to "help a friend out" wouldn't it make sense that they would want him to have the best cows and the best breeders so he could be helped as much as possible?

    I mean, your uncle might be a shitbag, but maybe he's the walls balls to these guys.
  9. Azure

    Azure I could kick your ass

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    I haven't read the finer details of the contract. Probably will never as there is no way it would be shown to me.

    You could be right, but I highly doubt it. There are a few different things going on that are part of the reason that I'm suspicious as well. They're quite technical though, so I won't get into them. Unless you want to hear about the process of implanting embryos, and using ultrasound to check the marbling of the bulls.

    Its a tough thing to explain. :clyde:
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  10. 14thDoctor

    14thDoctor Oi

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    I suppose that sort of arrangement could work both ways. Maybe they're entitled to the middle 100, losing out on the best of the bunch, but protected from the risk of getting stuck with any duds?

    If one of the 100 dropped dead one day, would it be switched out for a live one?
  11. Azure

    Azure I could kick your ass

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    I was wondering the same thing today. If one of the cows dies or has to get replaced(which happens every year)....who is obligated to pay the money to replace it?

    Guess I would have to read the contract to find out.

    My issue is, again....knowing how my uncle operates. If anything, what he is doing here is highly suspicious, which gives me perfectly good reason to think he is trying to manipulate things dishonestly so that it benefits him.

    I suppose a lot of people probably do that. I just don't think its a very good habit especially if you're dealing with million dollar companies.

    If I would be dishonest about the stuff I'm in charge of at Vestas, I would expect them to get rid of me. But I'm honest, even annoyingly so(according to a few of the bosses).....and as a result of that, I've done well.