Stealin’ cows is still big business in Texas. Here’s how a livestock Ponzi scheme in Williamson County was dismantled and the brains of the operation brought to justice.
When I came to Williamson County from Dallas in February 2008, I knew that things were going to slow down. As I reviewed my new docket, one case stood out above all the rest. There in the back of my file drawer, where it had been clearly sent to die, was the thick, tattered, three-year-old case against Monte Sharp, who had been indicted for the first-degree felony offense of … theft of cattle. So began my journey on the road to becoming the cattle prosecutor.
A little history on cattle rustlin’
Historically, cattle thieves have resorted to many different methods of stealing cows, including simply cutting fences and taking unbranded cattle or altering the brand. In the 1930s thieves loaded and moved cattle with trucks and trailers in the dead of night. In the late 1970s helicopters were used to herd cows.
Modern-day cattle rustling in many respects can look like a white collar-fraud case, as I learned when investigating Monte Sharp. According to the Texas & Southwestern Cattle Raisers Association, strong cattle market prices and a weak economy has led to an increase in cattle theft. (In some cases a steer can fetch close to $1,000 at auction.) Today’s punishment for cattle rustling, a first-degree felony when the value is over $200,000, is a far cry from the vigilante justice that early cattlemen and legendary figures like Judge Roy Bean dispensed, which often ended with the rustler hanging from the nearest tree.
The cattle trading business is still alive and well in the great state of Texas, and nowhere is that more clear than in the small town of Schwertner. After the Second World War, James Schwertner settled in the northern part of Williamson County and named his town Schwertner. In the past six decades that family has been doing business the same way that Big Jim did in the beginning, with trust, a smile, and a firm handshake. His son, Jim Schwertner, now runs the family business. Jim is well-known and well-respected all over the country and serves as a member of the Texas A&M Board of Regents.
Schwertner Farms is the largest cattle trader in the United States. Its workers buy cattle at auctions around the country everyday, ship the cows to the farm, and resell them before they go home every night, as is company policy. This is hard work. It’s like day-trading with livestock, but instead of just clicking on a laptop, these guys are actually moving and selling cattle from all across the nation. It’s a fast-paced business, and there is no time for face-to-face meetings for every sale. A buyer may call and request a truckload of cattle to be shipped to his farm in Oklahoma or Kansas, a $50,000 deal that is sealed with the word of the rancher and a promise to pay when he receives the cattle. That’s how the cattle business has always run and likely how it always will.
On August 31, 2005, Monte Sharp, a rancher and cattleman from Alva, Oklahoma, decided to mess with the wrong cattle broker in the wrong county. He began placing large orders for cattle. Jim Schwertner personally checked his credit and personal references, who verified that they knew Sharp and that he could be trusted. This being the cattle business, in a little over a week’s time, Capital Land and Livestock (CCL), Schwertner’s cattle trading company, shipped over 1,300 head of Texas cattle to Sharp at a value of nearly $700,000 on little more than his word and a promise to pay.
Mike Mackey, another cattle trader in Alva, realized something was suspicious with Sharp’s business dealings and contacted Jim to see if he had any business with Monte Sharp. Mackey had been out to Sharp’s cattle pens and realized that the cattle he had just shipped had been quickly moved off the property. Mackey alerted cattle men that he worked with, including Jim Schwertner, who called Sharp personally. Sharp assured him that the check was in the mail. Jim explained that he would be at his doorstep in a few hours to talk further about the cattle. On September 10, 2005, Jim Schwertner, along with his salesman and banker, flew on Jim’s personal jet to Oklahoma to confront Monte Sharp.
When the cattlemen arrived at Sharp’s pens in Alva, they soon realized that the cattle were not there. Sharp explained that he had already shipped them off to feedlots in Oklahoma and Kansas. Jim wanted to know exactly where the cattle were, and Sharp wrote on invoice lists from the feedlots, “These cattle belong to CLL.” This paperwork became a key piece of evidence at trial.
Jim and his team then flew to Kansas where they met with the feedlot owner, who explained that Sharp had essentially mortgaged the cattle to the feedlot and had been paid out 70 percent of the cattle’s value. The remainder of the money would go to Sharp once the cattle were sold to the slaughterhouse and after the feedlot’s fees and costs were recovered. The plan became clear: Sharp was floating cattle like petty criminals float checks. He was borrowing money on cattle, purchasing other cattle, then trying to pay back the first seller with the second seller’s money. Monte Sharp was a smooth talker and had friends in both the cattle business and in banking, and he was able to sweet-talk ranchers all over the country into believing he was legitimate. There is no telling how long he was able to successfully run his scam, a Ponzi scheme like Bernie Madoff had used, except Sharp was using cattle instead of stocks and securities. His house of cards was about to tumble down.
As a banker and longtime businessman, Jim knew he had to gain secured creditor status to insure his standing in the line of creditors in Sharp’s inevitable bankruptcy. So Jim and Sharp agreed to execute a promissory note using all of Sharp’s assets as collateral. This also would become an issue at trial; the defense later claimed that Jim’s secured creditor status absolved Sharp of any criminal intent.
On his return to Texas, Jim received two checks from Sharp for nearly $100,000, but both bounced. Jim contacted the Williamson County Sheriff’s Office and the Texas Cattle Raisers Association, and with the help of the Texas Rangers and DA Investigator Howell Williams, the investigation began. As Sharp’s house of cards continued to fall, at least six other cattle brokers across the country were identified as victims of the scheme—Sharp owed these people over $4 million. He was forced into bankruptcy by an Oklahoma federal judge.
By the time I received the case, Monte Sharp had already agreed to waive his right to a jury and have a bench trial. We also offered him probation in exchange for a guilty plea and full admission, but he turned down our offer.
Before we could try him, we had to wait for the bankruptcy court to conclude. If Sharp were convicted in criminal court before the conclusion of the bankruptcy case, the ranchers who were owed money, including Jim Schwertner, Dean Goll of Oklahoma, and Tommy Welch of North Carolina, would be less likely to recover their losses through bankruptcy; apparently, a conviction would have prompted the bankruptcy courts to reorganize the entire estate. So we waited, and waited, and waited for nearly four years.
The first issue we had to deal with in preparation for trial was simply whether this was a crime or just a bad business deal. Some people thought it should be treated as a bad check case. Was it theft at all? Truly, the livestock were delivered per the (verbal) agreement, and there was never anything in writing as to when payment was to be received. I reviewed the file, and my investigator and I spent several afternoons meeting with Jim before deciding that this wasn’t a bad check case. It was theft, plain and simple.
Monte Sharp was indicted for first-degree theft of over $200,000 of cattle. The State’s theory was that Sharp formed the specific intent to commit theft at the time he made the deal and knew he could not possibly pay for the cows. We had learned of Sharp’s other schemes and had taken statements from ranchers who had fallen prey to his slick business dealings and country charm. We filed a lengthy notice of extraneous offenses and bad acts and gave notice of every witness who had bad dealings with the defendant.
After nearly four years of delay, Jim Schwertner recovered $800,000 as a secured creditor in bankruptcy court, thus prompting Sharp’s defense to argue that Jim had been made whole and that Sharp had satisfied the terms of the sale with the payment from the bankruptcy trustee. Not so fast, cattle thief. The delay from the bankruptcy proceedings had worked to our advantage because Jim’s civil attorneys were extremely helpful in providing me with copies of depositions, motions, and discovery from the bankruptcy case. These documents were key in securing a conviction at the criminal trial.
Learning the business
I knew absolutely nothing about the cattle business. To properly try this case, I had to become an expert in the cattle trade—or at least be able to fake it. Two weeks before trial, I asked Jim Schwertner if he could come to my office and spend the day educating me about his business. Without hesitation, he agreed. We spent all day in the conference room just talking about the cattle business, which proved invaluable at trial. Jim and I went through hundreds of documents and dissected them piece by piece. The best nugget we found was a letter Monte Sharp had written to Tommy Welch at another cattle company, which was never part of the bankruptcy. This letter was an attachment to an addendum of some motion that was never really at issue in bankruptcy court, but it just might have been the smoking gun that we needed to prove intent.
August 25, 2005
“Tommy, I apologize for misleading Eastern that the cattle were here. I sent the cattle to the feed yards and got them financed. I kept trying to get the loan through. All I did was dig me a deeper hole with you. I got behind and kept trying to let get my loan through. I’m still trying as I write this letter—all I did was dig me a deeper hole. I can’t tell you how bad I feel about this. I worked every day trying to take care of this matter. I will get this taken care of with you. I have wanted and will get you paid. If you want to shoot me, I understand. I think everybody understands. Ed has represented Eastern with utmost respect and courtesy to me. I apologize for misleading Ed through this ordeal. My intent all along has been to pay in full and I will do it.”
This was it. Sharp had admitted in writing that he committed a criminal act with another cattle broker, just six days before he began his scam in Williamson County. We had him. But how best to use this smoking gun? It would be great for cross-examination as long as he testified, but we couldn’t bank on that, so we prepared our case expecting that he wouldn’t. We brought Tommy Welch in from North Carolina, and the day before the trial began, Jim Schwertner flew to Oklahoma and picked up Mike Mackey, the original whistleblower, and Dean Goll, another of Sharp’s victims. We also flew in the owner of the feedlot to testify that Sharp made a deal representing that he had complete control and interest in the cattle to further prove the element that he permanently deprived Jim of the cows. We were ready.
After weeks of preparation, the trial flowed extremely well. Tommy Coleman, our civil prosecutor, sat with me and was extremely helpful in keeping me organized. Tommy’s civil experience in dealing with voluminous paperwork was valuable in keeping the document trail in order.
First, I called Jim’s salesman, Ben Sublett, to testify to the initial dealings with Sharp. Jim Schwertner then testified at length about the cattle business and ranchers’ ordinary accepted practices of making million-dollar deals on trust and a handshake. He explained that in six decades, Schwertner Farms had done business the same way. Interestingly, the defense really didn’t dispute or challenge this assertion—it was true! Jim then described his trip to Oklahoma to confront Sharp. He explained that Sharp said that he knew what he did was wrong and that he could go to jail for his actions. We offered the invoices from the feedlot that Sharp had signed, indicating that the cattle belonged to Capital Land and Livestock. The defense tried to say that this paperwork was evidence of Sharp transferring ownership back to Jim, but again, preparation pays off, because we marched the owner of the feedlot into court next to offer the security agreements that he had executed with Monte Sharp, proving that argument didn’t hold up.
All along we knew that this case hinged on intent, so we called three other victims of Sharp’s scam to prove up that element. Mike Mackey, an Oklahoma cattle trader, had been duped out of $50,000 the same way Jim had. Mr. Mackey got some of his money back through the bankruptcy proceedings, but in a side note, he bought Sharp’s ranch in a foreclosure sale. Next, Tommy Welch from North Carolina testified about how he was similarly taken for several hundred thousand dollars through Monte Sharp’s slick tricks. Tommy even said, “I just wanted to believe him, but when the checks went to bouncin’, I stopped sending cattle.” Tommy told the judge that he had made it through all right financially, but the worst part was when he saw his grown son (who was Tommy’s business partner) crying out by the barn. (This 404(b) evidence showed the extent of damage that Monte Sharp’s greed had on his victims.) Finally, Dean Goll, a businessman from Oklahoma, testified. He explained through detailed business records how Sharp sold him fictitious cattle and even charged him for feed and medicine, all to fund his scam of juggling other people’s money. Goll’s testimony ended when he explained to the judge that he did not have a secured interest and got no money from the bankruptcy settlement. He was out nearly $2 million and had to sell three family farms just to pay the banks back the money he had borrowed. It nearly bankrupted him, and this life-long cowboy and rancher broke down on the stand. The State rested its case.
The defense case focused on Sharp’s intent, as we expected. Defense counsel called several witnesses to claim that Sharp was in the process of securing business loans from various banks and venture capital firms. Our cross-examination focused on the irrefutable fact that at the time the deal was made, Sharp had no way to pay for Schwertner’s cattle. Finally, Monte Sharp took the stand.
Sharp was exactly as I expected. He was slick, arrogant, and melodramatic—but almost charming. He tried to play the victim and claim that a bank loan was just around the corner and that he always intended to pay Jim the money he owed. He explained that if he hadn’t been forced into bankruptcy and his assets frozen by the courts that everyone would have been paid in full. He even cried a little, and then it was time for cross-examination.
We went step by step through the facts. Sharp admitted to shady dealings with Goll and Mackey—he knew he wasn’t on trial for that. Then I pulled out copies of an old notebook, one that the sheriff of Wood County, Oklahoma, had taken from Sharp when he was first arrested. The notebook had pages and pages of numbers, most of which were important only to Sharp, but there were three pages that were important to me. The first two were an accounting of the debt he owed to various cattlemen, including Schwertner, Goll, and Mackey. Sharp authenticated the writing as his own and verified that that was the money that he intended to pay. The last page, in the same handwriting, had similar accounting of his debts but had the words “STAY OUT OF JAIL” at the top. Sharp had written that he needed to pay off these people to stay out of jail! We argued at the trial’s conclusion that this was consciousness of guilt.
Finally, the letter
After I passed Sharp for redirect, his attorney attempted to rehabilitate him on his intent. She asked if he had known how badly he would hurt people whether he would do it again. He sobbingly said that he never would and that he was sorry. His attorney passed him and I walked straight to the witness stand with the letter to Eastern Livestock. He authenticated the letter as his own writing, and it was admitted into evidence. Sharp admitted he had written the letter to Tommy Welch at Eastern Livestock six days before he made any deals with Jim Schwertner and Capital Land and Livestock. I asked him to read his letter to the judge, and I heard a classic objection, “Your Honor, now the prosecutor is just trying to embarrass him.” I read the letter to the judge myself and passed the witness.
The judge heard arguments, and Sharp was immediately found guilty of first-degree theft. The judge ordered a pre-sentence investigation (PSI), and sentencing was scheduled for two weeks later. I held firm to my offer of 20 years in prison. The day of sentencing, Sharp decided that the risk of spending life in prison was too great and he agreed to my offer and to waive appeal. I am very happy with the results of this case, and Jim Schwertner was thrilled. It took over four years, but justice was done. The biggest cattle thief in Williamson County history is safely locked behind bars, and the message “Don’t mess with Williamson County” was sent loud and clear to would-be cattle rustlers.
Monte Sharp was sentenced for his crime in December 2009. Right before I left for Christmas, I found a new file waiting on my desk with a familiar seal that said, “Texas Cattle Raisers Association: Special Rangers.” Here we go again!