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United States v. Malone

United States Court of Appeals, Seventh Circuit

March 31, 2014

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
ELBEA EDWARD MALONE, Defendant-Appellant

Page 482

January 21, 2014, Argued

Appeal from the United States District Court for the Central District of Illinois. No. 12-CR-40053 -- Sara Darrow, Judge.

For United States of America, Plaintiff - Appellee: D. Gregory Weddle, Office of The United States Attorney, Rock Island, IL.

For Elbea E. Malone, Defendant - Appellant: Kristen N. Nelson, Nelsonhill Law, Llc, Cedarburg, WI.

Before KANNE and SYKES, Circuit Judges, and GILBERT, District.[*]

OPINION

Page 483

Gilbert, District Judge

Elbea Edward Malone is a cattle farmer who got in over his head when the cost of running his cattle business began exceeding its income. For a while he kited checks with his codefendant Richard Anderson to keep his business afloat, but when that plan fell apart, he and Anderson turned to fraud, specifically, selling nonexistent cattle to Larry O'Hern. Malone eventually confessed and pled guilty to bank fraud and money laundering. As part of his sentence, the district judge ordered Malone to pay restitution to O'Hern. Malone now challenges that component of his sentence. For the following reasons, we affirm the district judge's restitution order.

I. Background

Malone owned and ran a cattle feedlot where he housed and cared for other people's cattle, including some owned by Galesburg Livestock Sales, Inc. (GLS). Anderson was GLS's president, but the company was owned by two other individuals. Malone also worked as an agent of GLS to buy cattle to fatten up and sell later. GLS's cattle served as collateral for its loans.

In 2008, the feedlot started losing money due, in part, to a higher than usual rate of cattle death, environmental problems at the feedlot, and other economic challenges to the cattle industry generally. This jeopardized Malone's business as well as GLS's business loans for which its cattle served as collateral. Malone and Anderson, on behalf of GLS, turned to check kiting to keep their respective accounts from being overdrawn; one would write a check to the other, and before it was collected, the other would write a check back to the first, so it appeared there were funds in Malone's and GLS's bank accounts when there really were none. The details of the check kiting scheme between Malone and Anderson are not relevant, but the manner in which Malone sought to extricate himself from debt once the banks involved detected the check-kiting scheme is.

Malone was overdrawn by $400,000 in late 2009 when his bank threw a wrench into the check kiting scheme. To obtain funds to cover the debt, Malone and Anderson arranged to sell O'Hern 700 cattle that they said GLS had acquired for a buyer who had backed out of the deal. O'Hern paid $400,000 for the cattle, which Malone deposited into his overdrawn bank account. In reality, there were no cattle, no reneging buyer, and, ultimately, a very angry O'Hern. Malone gave O'Hern $115,000 in an effort to appease him.

O'Hern was not appeased and instead turned to self-help. In February 2010, he visited Malone's feedlot and removed an undetermined number of cattle from the lot. The cattle, of course, did not belong to Malone, who only kept other people's cattle--including some belonging to O'Hern--on his feedlot. O'Hern also obtained liens on real property owned by

Page 484

Malone and Anderson. Eventually O'Hern filed a civil suit in state court seeking to sort out, among other things, who owed what to whom as a result of Malone's cattle selling antics and O'Hern's resorting to self-help. That case is ongoing.

In the meantime, Malone and Anderson came to the attention of law enforcement. Malone was indicted in July 2012 on ten counts of bank fraud and one count of money laundering. In January 2013, he pled guilty ...


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