The U.S. Department of Agriculture has fined a Billings livestock auction $31,000 for allowing an auctioneer to buy more than $1 million worth of cattle and for accounting practices that fell short of “strict conformity” to federal rules.

Vermilion Ranch Co., doing business as the Billings Livestock Commission Co., paid the fine without admitting to the violations that the USDA said occurred in 2007.

Pat Goggins owns BLS at 2443 N. Frontage Road, the Public Auction Yards at 1802 Minnesota Ave. and Vermilion Ranch Co. of Billings. He was personally dismissed from the complaint.

Brett Offutt, director of the policy and litigation division of the USDA’s Grain Inspection, Packers and Stockyards Administration in Washington, D.C., said BLS was fined for allowing a custodial account to fall short twice and for allowing auctioneer Ty Thompson to buy cattle at consignment sales.

Thompson bought 50 head of cattle directly while he was auctioneering and another 1,567 head indirectly from March 1 through May 24, 2007, transactions worth more than $1 million, according to the complaint.

“The violation for us is the auction allowing a key employee to buy from consignment,” Offutt said.

In June at a Minnesota competition, Thompson won his industry’s top prize and was named the World Livestock Auctioneer Champion of the year by the Livestock Marketing Association.

Thompson said he and his wife buy and sell a lot of livestock for their Billings business, Thompson Cattle Co., and they pay a buyer a commission to purchase cattle at stockyards throughout Montana.

“We’re a self-regulating industry in my mind,” he said.

“I’ve lived in Billings 14 years. My family’s been in the auction business nearly 50 years. If you’re not treating people fairly, we wouldn’t stay in business very long.”

After this complaint, Thompson said he has changed his focus.

“Packers and Stockyards wants strict adherence, so I probably auction 50 percent less than I used to,” he said.

PAYS, BLS, Northern Livestock Video and Western Livestock Auction in Great Falls, all owned by the Goggins family, now sell close to 400,000 head a year.

“We’ve become one of the largest livestock marketers in the United States,” Thompson said.

The federal Packers and Stockyards Act, written into law in 1921, promotes fair and competitive marketing of livestock, meat and poultry. Its rules prohibit auctioneers working the sale from bidding on consigned livestock.

“It’s kind of an unfair advantage to other buyers,” Offutt said.

Thompson said he thinks it is legitimate to bid on cattle to support the market, “but we don’t do it while auctioneering anymore.”

The second violation involved failure to strictly follow rules on handling sales proceeds.

Under federal rules, an auction yard has to keep sales proceeds in a custodial bank account and pay the sellers the close of the next business day following the sale, Offutt said. The account guarantees that the seller will be paid if the auction business runs into financial trouble.

The USDA found that BLS allowed a custodial account to fall short by up to six days: $65,788 in November 2006 and $66,062 on January 2007.

“It’s considered a trust account because the money in that account doesn’t belong to the auction yard because they aren’t the ones selling the animal. They are holding that money in trust for the seller,” Offutt said.

The two Billings auctions are the largest livestock market in Montana and can auction off livestock worth $5 million on a busy fall week.

Bob Cook, general manager at PAYS and an officer of Vermilion Ranch Co., said these were the first violations in 40 years of selling livestock and his company decided not to contest allegations.

“We work hard at protecting our customers and getting the best price we can. This was basically a slip-up that was corrected immediately,” Cook said. “We’ve been audited since and everything has been 100 percent.”

Contact Jan Falstad at jfalstad@billingsgazette.com or 657-1306.