About $3 million worth of cattle was stolen from an Arizona family by a man they once considered a friend, prosecutors said in court documents.
The fraud has pushed both families to the brink of financial ruin, the Arizona Daily Star reported .
Longtime cattleman and rodeo cowboy Clay Parsons discovered last August that $1.3 million was missing from the accounts of the Marana Stockyards and Livestock Market, which his family has run since the early 1990s. It is one of the busiest stockyards in all of Arizona.
The stockyard's line of credit also was drawn down by nearly $2 million, according to court records.
A trail of fraudulent documents led to Seth Nichols, the stockyard's 29-year-old office manager, who pleaded guilty to federal bank fraud in February and faces up to five years in prison.
Nichols is the son of Donald Hugh Nichols, a cattle broker who had been friends with Parsons for decades, court records show. Donald was indicted last month as a co-conspirator in $1.6 million of fraudulent cattle sales at the stockyard's auctions.
A federal prosecutor said the stockyard is operating "week to week" as it recovers from the fraud and Parsons has already spent $100,000 on audits and rebuilding the stockyard's accounting system.
Donald Hugh Nichols, who goes by Hugh, and his wife, Jane Nichols, filed for bankruptcy in federal court Aug. 10.
The scheme began after Parsons hired Seth Nichols in June 2013 to run the stockyard's day-to-day business.
At the auctions, cows are brought to the stockyards each week to be sold to the highest bidder. Some recent auctions have seen more than 2,000 head of cattle sold, according to the stockyard's market reports.
The stockyard uses a line of credit to allow sellers to be paid quickly while the buyers' payments are processed, according to court records. Seth Nichols admitted to manipulating the line of credit to buy cattle at the auctions on behalf of the Nichols Cattle Co., which then sold the cattle elsewhere without reimbursing the stockyard. He also admitted to sending the stockyard's money directly to the cattle company.
Seth Nichols agreed to pay restitution to the Parsons, which was capped at $3 million in his plea agreement. But those funds won't be available until after he is sentenced Sept. 24.
Clay Parsons declined to comment. The attorneys involved in the case did not respond to requests for comment.
Donald Hugh Nichols' arraignment is scheduled for Friday.
Information from: Arizona Daily Star, http://www.tucson.com