Published: October 15, 2008 10:39 pm      

Defense lawyer says cattle scandal not ‘typical fraud case’

Legal documents filed by a defense lawyer for Kevin Scott O’Brien, the central figure in the multimillion-dollar Greenbrier County cattle and banking scandal, say it’s not the “typical fraud case” and many of his victims’ losses were “unintended.”

O’Brien, 28, pleaded guilty to one count of mail fraud in February which prosecutors say included sophisticated Ponzi schemes and phantom herding — the selling of cattle to more than one buyer — to cheat more than a dozen victims of more than $5 million in less than one year.

“His family is well regarded in the community. His scheme succeeded, in part, because he traded on his family’s reputation,” Assistant U.S. Attorney L. Anna Forbes wrote in a presentencing memorandum. “Some of the victims were banks; a few were relatively wealthy people; but several were just hard-working folks who did business the way it always had been — with a firm handshake and an expectation that the defendant would do what he said he would do.”

Defense lawyer Rodney Smith said in his presentencing memorandum to the court that O’Brien began acquiring cattle while still attending Greenbrier East High school, and by the age of 23 was operating a cattle broker business in the county.

“He (O’Brien) initially profited by raising cattle and engaging in relatively small cattle deals,” Smith wrote. “When an opportunity presented itself to engage in cattle deals with well-established cattle brokers in the Greenbrier Valley, Mr. O’Brien, against his father’s advice, embraced the opportunity.”

Smith said O’Brien participated in several large cattle deals “with cattle dealers around the country,” but “due to poor business decisions ... by 2005, at the age of 25, he soon found himself deep in debt and unable to meet financial obligations.

“To keep his business afloat and pay creditors, Mr. O’Brien began engaging in illegal conduct, including ‘kiting’ checks and selling a group of cattle to more than one buyer,” Smith wrote. “For a short period of time, (his) illegal conduct allowed him to remain in the cattle business ... by March 2006, however, (his) tenuous financial situation collapsed.”

Smith said an investor stopped payment on a big check and a First National Bank account was frozen to recover funds owed on outstanding loans, thus pushing him into “financial ruin.”

“Mr. O’Brien’s illegal efforts to prolong the life of his business resulted in debts that far exceeded his assets, and he had no viable option other than to file for bankruptcy,” Smith wrote. “(His) conduct can be distinguished from ‘typical’ fraud cases because even though the losses were foreseeable, the vast majority of the losses suffered by the victims were unintended.”

Smith then argued O’Brien continued cheating people in order to be able to pay back the other people he was already cheating.

“He engaged in most of his illegal conduct to allow him to continue to be a cattle broker with the hope that he could pay his investors and make a living,” Smith wrote.

For these reasons and others, according to Smith, O’Brien’s prison term should be less than the eight to 10 years that’s been recommended by his probation officer and agreed to by the U.S. Attorney’s Office.

Smith also cites O’Brien’s cooperation in helping convict former First National Bank president Charles A. Henthorn and former FNB board president G. Thomas Garten.

Henthorn pleaded guilty to taking $9,700 in bribes from O’Brien and Garten pleaded guilty to aiding and abetting those bribes earlier this year.

O’Brien wore a tape-recording device when speaking to Henthorn to gain evidence against him for prosecutors.

His client has already paid a steep price for his criminal conduct, Smith wrote, by losing respect in his small community, disappointing loved ones and suffering tremendous financial losses of his own that will have a life-long effect.

Furthermore, Smith said, O’Brien will never be able to operate the same type of scams again because of his newfound notoriety.

“Because (his) criminal prosecution has received a tremendous amount of media coverage in his community, it is highly improbable that individuals will place the trust in him necessary to engage in the same criminal conduct upon his return to the community.”

A new twist to the case may also decrease O’Brien’s prison term. Documents filed by the United States last month indicated O’Brien has given evidence which could possibly produce more indictments in this complicated case.

O’Brien, along with Henthorn and Garten, is scheduled to be sentenced Friday by U.S. District Judge Thomas E. Johnston in Beckley.

O’Brien’s multimillion-dollar bankruptcy cases continues to play out in federal bankruptcy court.

— E-mail: cgiggenbach@register-herald.com