UNITED STATES-CATTLE FRAUD.
North Dakota cattle buyer who drove bankers around Eastern Montana showing them cattle he falsely claimed were his was convicted Thursday in a $7.8 million scheme to defraud banks.
The jury deliberated about an hour and a half in the four-day trial before finding Todd Kenneth Horob, 40, of Williston, guilty of all seven counts in an indictment. The charges included false statements to a bank, bank and wire fraud, money laundering, bankruptcy scheme to defraud and aggravated identity theft.
Testifying in his own defense, Horob claimed that other witnesses were wrong and denied providing false brand inspection certificates and other false documents to hide the fraud.
Assistant U.S. Attorney Ryan Archer said Horob had built a "house of cards" through deceit and money laundering. The business world, especially the cattle industry, is based on trust and handshakes, Archer said, and "Mr. Horob abused that trust on many levels."
Horob’s scheme collapsed into bankruptcy, where he continued lying on his petition and in a deposition, Archer said.
The investigation by the FBI found that Horob spent money loaned to buy cattle on other things and that he lost more than $2 million in the cattle futures market.
Wells Fargo Bank, which loaned Horob $5.8 million, caught on and sent bankers searching for cattle Horob claimed to have purchased with the money, Archer said. "They didn’t find cows," he said.
There were only the 60 cows that Horob listed in his bankruptcy petition, not the 6,800 cows he told Wells Fargo he had a few weeks earlier, he said. Horob filed for bankruptcy March 2006 in Billings.
Horob was president of Horob Livestock Inc., a North Dakota company with big debt and lines of credit with Wells Fargo in Minot, N.D. From March 2003 until September 2005, Horob borrowed $5.8 million from the bank to finance his cattle-buying business.
Horob also formed H&J Livestock LLC with his partner and ranch hand, James Johnson, and borrowed more than $2 million from Dakota West Credit Union, based in Watford City, N.D. Horob used Johnson’s personal checking account with the Wolf Point Federal Credit Union to launder money, Archer said.
In one instance, Horob used Johnson’s account to redirect a Wells Fargo loan of $950,000 to buy 775 stock cows to pay off a loan of $858,543 that H&J had at Dakota West. No cows were purchased, Archer said.
In another loan, Horob got $950,000 from Dakota West to buy 1,276 steers and provided the credit union with a fake buyer’s bill for the purchase. Horob used most of the money for purchases unrelated to livestock, Archer said..
Johnson, of the Wolf Point area, testified that he let Horob use his checking account but didn’t understand at the time what Horob meant about the account looking better to the banks. Johnson said he gave Horob a book of signed blank checks and that Horob filled in the rest. He didn’t know what the money was for or where it went, Johnson said.
Horob also asked him to find "a big bunch of cows" to show bankers, Johnson said. He complied even though he knew the cows didn’t belong to Horob, he said. Johnson and Horob drove bankers to pastures to see cattle belonging to other ranchers in the Brockway area.
Both men have pleaded guilty to state felony charges in McCone County for the bogus cattle tours. Johnson was sentenced last year to a three-year deferred term for deceptive practices by accountability. Horob is to be sentenced March 5 for deceptive practices.
Two feedlot owners in Montana and Nebraska also testified they lied for Horob when they showed bankers cattle purportedly owned by Horob.
Steve Lunderby, who owns a feedlot in Sidney, said that in March 2006, he let Horob show bankers about 390 head of cattle he claimed were his. In fact, Horob had no cows at the lot, Lunderby said. When the bankers returned to repossess the cattle, Lunderby said he lied and told them Horob had shipped out the cattle. Lunderby called his actions stupid and said he had trusted Horob.
Chief U.S. District Judge Richard Cebull set sentencing for May 14 and continued Horob’s release. Horob faces a maximum of 30 years in prison and a $1 million fine on most of the fraud counts plus a mandatory consecutive two years on the identity theft count.
