Federal Court Appoints Receiver to Oversee Affairs of Portales-Based Livestock Auction Business
ALBUQUERQUE – A U.S. Magistrate Judge has appointed a receiver for High Plains Livestock, LLC (HPL), a livestock auction business located in Portales, N.M. The receiver will be responsible for conducting a review of HPL’s viability and, if viable, will take over all aspects of HPL’s operations.
The court’s order was entered yesterday in a civil case initiated in Aug. 2015, by the United States against HLP, its owner Michael Flen, and its operators Darcie and Calvin Pareo. In its civil complaint, the United States alleged that HLP, Flen and the Pareos were violating the Packers and Stockyards Act (PSA) which outlaws unfair and deceptive practices in the cattle livestock market. According to the civil complaint, HPL operates a stockyard that primarily auctions cows from the dairy industry for a commission; the auctioned cows are sold to buyers who resell the cows for slaughter. HPL allegedly violated the PSA by failing to properly maintain custodial accounts, misusing custodial accounts, failing to maintain accurate records, generating false documents, altering sales documents, and misrepresenting the true purchasers of livestock.The order appointing the receiver was entered in response to the United States’ motion for a preliminary injunction and after a four-day hearing on the motion. According to the order, the court found “overwhelming and uncontroverted evidence of rampant violations of the PSA,” including the altering auction records, known as scale tickets, and falsifying buyer and seller invoices. “A review of the hundreds of scale tickets admitted into evidence that appear altered, the testimony of auction clerks that they do not fix mistakes in this way, and the admission of the Pareos that they altered scale tickets makes it extraordinarily probable that fraudulent conduct has occurred,” the court found. Prices were marked down after auction to benefit the Pareos, and they were sometimes marked up at the expense of the buyer of the cattle. The order noted that at least once, Mr. Pareo even marked a particular cow dead to avoid paying the seller for it, only to turn around and pocket the money he got by sending the live cow to the slaughterhouse.
The order noted that the Pareos compounded their wrongdoing by lying repeatedly to law enforcement to avoid detection. As the court found, “the Pareos demonstrate no remorse for their violations of the PSA and no intent to rectify those deficiencies. Instead, the Pareos have shown an absolute willingness to mislead authorities.”
The court appointed a receiver to, first, audit HPL’s business and determine whether it is viable as an ongoing business. If it is not viable, the court will determine whether a receiver will oversee HPL’s “winding up.” If the receiver determines the business can afford to continue operations, “the receiver will be responsible for overseeing all aspects of HPL’s operations, including all financial decisions, banking, recordkeeping, and regulation compliance.” Meanwhile, “Defendants Calvin and Darcie Pareo and Michael Flen will have no control over the business.”
This case was investigated by the Grain Inspection, Packers and Stockyards Administration of the U.S. Department of Agriculture. Assistant U.S. Attorneys Ruth F. Keegan and Karen F. Grohman are litigating the case on behalf of the United States with assistance from Auditor Julie Chappell.