Illinois A.G. Reports Ty-Walk Officials Plead Guilty to 32 Criminal Counts; Prison Terms Handed Out

June 24, 2004

Illinois Attorney General Lisa Madigan announced that two agri-business executives involved in the largest financial failure of a grain elevator operation in Illinois history each have pleaded guilty to 16 criminal counts and been sentenced to lengthy state prison sentences.

John C. “Buzz” Gibbons, of New Lenox, former chief executive officer of Ty-Walk, has been sentenced to up to 10 years in the Illinois Department of Corrections (IDOC). Kathleen L. Lestina, of Braidwood, former vice president of the company, has been sentenced to up to six years in IDOC.

A federal judge sentenced Gibbons and Lestina in February for mail fraud convictions stemming from the Ty-Walk collapse. Gibbons received 46 months and Lestina received 37 months in federal prison. Both Gibbons and Lestina will serve their state sentences concurrently, or at the same time, as their federal sentences in federal prison. However, because their state sentences are longer, they will be moved to state facilities to serve out the remainder of their sentences once the federal sentences have been completed.

The 2001 failure of Ty-Walk Liquid Sales Inc. grain elevator reportedly financially devastated hundreds of Illinois farmers and their families, drained the state’s grain insurance fund and left several financial institutions with unpaid loans totaling tens of millions of dollars.

Following Gibbons’ guilty plea, Judge Leonard Wojtecki sentenced Gibbons to 10 years in IDOC for each of nine counts of Theft, a Class 1 felony; three years in IDOC for each of three counts of Forgery, a Class 3 felony; three years in IDOC for each of two counts of Issuing Warehouse Receipts Without Authority, a Class 3 felony; three years in IDOC for one count of Violation of Record Keeping Provision, a Class 3 felony; and two years in IDOC for one count of Failure to Maintain Sufficient Assets, a Class 4 felony.

Following Lestina’s guilty plea, Judge Wojtecki sentenced Lestina to six years in IDOC for each of nine counts of Theft, a Class 1 felony; three years in IDOC for each of three counts of Forgery, a Class 3 felony; three years in IDOC for each of two counts of Issuing Warehouse

Receipts Without Authority, a Class 3 felony; three years in IDOC for one count of Violation of Record Keeping Provision, a Class 3 felony; and two years in IDOC for one count of Failure to Maintain Sufficient Assets, a Class 4 felony.

“The damage that Gibbons and Lestina caused can never be fully repaired, but they will pay a stiff penalty for their actions,” Madigan said. “These sentences send a clear message that criminals who prey upon our farmers will have plenty of time to think about their crimes from the inside of a prison cell. I commend the work of my staff, the State’s Attorneys and state law enforcement who worked hard to ensure that the farmers’ voices are heard and this conduct is punished.”

“Today is a significant day in Kendall County. The interests of Kendall County and surrounding area farmers have been represented here,” Kendall County State’s Attorney Tim McCann said. “The sentences imposed send a clear message to those who would steal from the agricultural community. Dishonesty will not be tolerated, and those who commit crimes while cloaking themselves with slick sales talk will receive the punishment they deserve.”

“I’m very happy that this very complicated case has been brought to successful conclusion. While the defendants will receive convictions and prison, I am disappointed that the law does not allow us to receive compensation for the farmers who were the true victims in this case. In that regard, justice seems incomplete,” Grundy County State’s Attorney Sheldon Sobol added. “At the same time, I appreciate the dedication of Attorney General Madigan to seeing that these defendants were prosecuted and the hard work that her staff put into this case.”

“I will never forget the meeting with area farmers before referring this case to the Attorney General’s Office,” Will County State’s Attorney Jeff Tomczak said. “The Ty-Walk failure had a major impact upon the farmers and families, and today’s sentencing is a major step toward closing a terrible chapter in their lives.”

Madigan and the State’s Attorneys also thanked the farmers and the Kendall, Grundy and Will County Farm Bureaus for their support.

In August 2001, Ty-Walk surrendered its operating license to the Illinois Department of Agriculture (IDOA) for elevators in Minooka, Elwood, Joliet and Seneca after an audit uncovered a series of alleged violations of the law.

In March, Madigan unsealed a 49-count indictment of Gibbons and Lestina that alleged the two defendants acted illegally by:

* transferring ownership of farmers’ grain to financial institutions to obtain financial credit;
* altering cancellation dates on warehouse receipts to inflate the amount of company-owned grain;
* issuing a series of warehouse receipts that transferred the ownership interest on farmers’ grain to financial institutions;
* creating false records on several dates in August 2001 that misrepresented the number of bushels of corn unloaded at Ty-Walk; and
* failing to maintain sufficient assets equal to 90 percent of the unpaid balance that grain customers had under contract at Ty-Walk.

After the state shut Ty-Walk down in 2001, its assets were auctioned and a portion of the proceeds were used to partially reimburse farmers. However, the proceeds from the sale of assets and approximately $5 million in the Illinois Grain Insurance Fund were not enough to offset claims filed by more than 300 Ty-Walk customers.

To pump funding into the depleted Illinois Grain Insurance Fund, the General Assembly passed emergency legislation to cover an estimated $4 million in additional claims. Lawmakers also passed legislation to strengthen the Illinois Grain Code by requiring greater IDOA oversight and allocating more money to the fund to cover future catastrophic losses.

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