Lid Blown off Rubashkin Case

Employee salaries were above the minimum wage at Agri, testified another long-time company worker, and for skilled workers, could rise twice as high as the minimum wage. Periodic raises, health insurance benefits, paid vacations, and discounted prices on all meat and poultry products were extended to employees who successfully passed a training period. 

 

The Myth Of The $26 Million

 

Other damaging falsehoods were punctured during the two-day hearing. Among the most destructive of these were the government’s claims that Sholom Mordechai had caused FB lending bank $26 million in losses. As the sentencing guidelines base themselves on the amount of loss caused by the alleged fraud, the amount of loss cited by prosecutors is crucial.

 

Based on the rigid sentencing guidelines that many have said make a mockery of justice, the $26 million in losses drives up the sentencing guidelines to the twenty-years-imprisonment range.

 

But prosecutors were not satisfied with locking up Sholom Mordechai for anything less than a life sentence. Smarting from the harsh public criticism that called the prosecutions recommendations “absurd,” “grotesque” and “deeply flawed,” lead prosecutor Deegan railed against Sholom Mordechai and his supporters for organizing public protests. 

 

Slamming the 40,000-signature petition calling for fair and equal treatment, with its “Disparity Memo” that outlines the discriminatory treatment meted out to Sholom Mordechai, Deegan complained to the judge that the defendant’s supporters were “misrepresenting” the facts to the public. 

 

How ironic. With the vultures circling overhead, the predator’s attack is halted by a defensive strike, eliciting a snarl of rage from the attacker. The victim has dared to fight back. What audacity!

 

Serious Miscalculations

 

A powerful rebuttal of the $26 million figure came from financial accountant Abe Roth, who traveled from Brooklyn to the Iowa hearing, to share the results of weeks of analysis of Agri’s financial data.  Roth testified that prosecutors miscalculated the amount of loss by almost 18 million.

 

Prosecutors “made everyone believe that number of $26 million is G-d-given, and it isn’t,” Roth said. “Where did they get this number from? It’s an arbitrary number supplied by the bank. No one has produced the details and reasoning behind it.”

 

He made the striking observation that much of the bank’s loss was a product of AgriProcessors going bankrupt, not fraud. “Bankruptcy isn’t a crime, unless it’s a fraudulent bankruptcy,” he noted. “Sholom Rubashkin was convicted of bank fraud, not bankruptcy fraud; the two crimes are separate and unrelated, but they’re being confused here.”

 

In an interview with Yated, Mr. Roth elaborated. “The bank fraud consisted of inflating receivables in the amount of about $10 million—not $26 million. But let’s also remember when using the term crime, Sholom Rubashkin had a willing “partner in crime”—the bank itself. The bank chose to stay blinder than a bat in regard to AgriProcessors way of managing its finances.”

 

Roth said that even if one accepts the bank’s premise of a loss of $26 million, Sholom Rubaskin can’t be held responsible for that amount, for the following reasons:

 

a) The $26 million doesn’t factor in the $4 million the bank made in interest from the fraudulently inflated invoices. That should rightfully be deducted from the total loss figure.

 

b) After AgriProcessors declared bankruptcy, FB bank continued to pump cash into the plant to keep it running. The cash infusions totaled about $5 million.  Roth said Sholom Rubashkin cannot be held responsible for that money either, because knowing how precarious AgriProcessors’ situation was; common sense should have restrained the bank from pumping more money into it.

 

“But FB was not aware of the fraud until a month after the bankruptcy. Are you claiming it’s their fault they were cheated?” the prosecutor challenged.

 

“Had they done the slightest bit of checking, they would have found out everything they needed to know. Typical of their sloppiness all along, they failed to perform “due diligence,” Roth said. “That $5 million should be subtracted from the total loss Sholom Rubashkin is being held accountable for.”

 

c.) Roth noted that after the bankruptcy, when AgriProcessors was being run by a court-appointed trustee, the company’s inventory which consisted of millions of dollars of poultry and beef stored in freezers, was supposed to be sold by the trustee. The proceeds would then be used to pay back the lender bank. Due to inaction by both the bank and the court-appointed trustee, however, almost none of the inventory was sold.

 

“In addition, millions of dollars in accounts receivable were supposed to be collected and applied the same way,” Roth said. “Yet nowhere in the bank’s paperwork is there an assessment of how much it was trying to recover from Agri’s inventory and accounts receivable. If the bank neglected to liquidate these assets for their own use, the loss is their own fault.  These millions should rightfully be subtracted from the total loss Sholom is being held accountable for.”

 

Reporters Snap To Attention

 

In the final analysis, said Roth, “after subtracting the amounts for which the bank itself is liable, you’re left with $8.5 million in losses supposedly caused by Sholom. That’s a far cry from $26 million. It drastically lowers the level of the sentencing guidelines.”

 

With the prosecution’s mantra of “$26 million in fraud” unraveling, Deegan tried to shake Roth’s testimony. Unable to refute the logic, he tried to undermine Roth’s credibility. “You’re taking this position because you’re a friend of the defendant,” he shot at the accountant. 

 

“I’m taking this position because I’m a professional accountant and I know what I’m talking about,” Roth shot back.

 

The tense exchange snapped dozing reporters to attention. An AP article on the hearing released the following day opened with Roth’s testimony as its centerpiece. 

 

Seeking AgriProcessors’s Financial Ruin

 

In one of the most disturbing disclosures to surface at the hearing, defense witnesses uncovered the government’s role in driving AgriProcessors to complete financial ruin, after it had declared bankruptcy but was still valuable enough to command a good price from potential buyers.

 

The revelations came toward the end of the hearings held over two days in Cedar Rapids, Iowa. Defense counsel had told the court that that the government’s actions, in excluding all Rubashkins from the business under threat of forfeiture, had scared off potential buyers. Deprived of the know-how and expertise the Rubashkin family possessed, no buyer felt capable of undertaking the business.

 

By blocking the sale of AgriProcessors in this way, the government caused its value to plunge until it was worth only pennies on the dollar. At that point, funds from its sale could no longer repay its debts to the bank or to creditors.  

 

This caused the bank to lose the collateral it had invested in the plant. Those losses, pegged in government papers at $26 million, were then laid at Sholom Mordechai’s doorstep in a falsified sentencing  memorandum that accused him of extraordinary  “massive fraud” –one of the largest in Iowa history!

 

The Cover-Up  

 

In response to defense claims in court papers that the government had orchestrated the ruin of AgriProcessors, prosecutors called attorney Roby who represented the court-appointed trustee. Roby denied the existence of any “edict” to prevent a new buyer from hiring anyone linked to Rubashkin.

 

“The government was only concerned that Sholom Rubashkin himself would not re-acquire ownership in the plant,” Roby stated. “Having Rubashkins in the business was not at all a “deal-breaker.”

 

Under cross-examination by defense counsel Montgomery Brown, Roby insisted there was no prohibition leveled by U.S. attorneys to exclude from employment at AgriProcessors anyone linked to Sholom Rubashkin.

 

One could see jaws drop in the gallery where scores of observers—most of them Iowa residents—sat listening.  People clearly recalled a slew of press reports quoting officials that no one from the Rubashkin family would be permitted to serve in the new AgriProcessors management. [See Sidebar] And here was official confirmation of this edict being denied under oath!

 

Astonishment in the gallery grew as Mr. Brown highlighted on a large screen in the courtroom a sworn affidavit from a Brooklyn businessman. Mr. Meyer Eichler affirmed that in his negotiations as an interested purchaser, he had been informed by government authorities that he would be subject to prosecution were he to employ a Rubashkin in management after buying the plant. [See Affidavit at Sidebar]

 

In an interview with Yated, Mr. Eichler affirmed that he had been scared off by the warnings made to him by U.S. attorneys. “Despite being very interested in purchasing AgriProcessors, I didn’t feel confident we could operate the plant successfully without input from the Rubashkins,” he said. “These people are the experts in the kosher slaughter industry. In addition, the no-Rubashkins policy would kill the whole appeal to investors.”

 

Shown the affidavit that collapsed her testimony that there existed no edit against employing Rubashkins, the government witness representing trustee Joe Sarachek squirmed in discomfort. She left the witness stand, followed by a defense witness whose testimony further exposed her false testimony. 

 

Witness Exposes  Government’s Attempt To Hide Tracks

 

Steve Cohen, owner of Twin City Poultry, testified that in his negotiations to purchase AgriProcessors in January 2009, he had been informed by trustee Joe Sarachek that he had to deal with federal authorities.

 

He and his lawyers conferenced with U.S. attorney Murphy and Sarachek, who confirmed that there was no prospect of allowing Steve Cohen to buy the plant unless he promised not to include anyone from the Rubashkin family in management. (This although no Rubashkin except for Sholom Mordechai had been charged or even implicated in any criminal activity.)

 

Only then would the government drop its forfeiture claims against the company, the U.S. attorney said.

 

Had a buyer purchased the company when it was still a running $80 million operation, all of AgriProcessors loans would have been repaid. New ownership of the plant would have satisfied the banks and the creditors. It would have been especially hailed by Postville residents whose town had been so eviscerated by the ICE raid.

 

“When the beleaguered Agriprocessors meatpacking plant first filed for Chapter 11 bankruptcy protection, a small glimmer of hope emerged in Postville,” wrote the Iowa Independent. “There was an opportunity for another company to take over operations at the plant, for production to continue and for the community not to lose its largest employer.”

 

But it was not to be. The survival of AgriProcessors, cause for celebration for the Postville population, would not have pleased the federal attorneys who were counting on this high-profile case to win them national recognition. It would also displease certain parties who were determined, for their own private agendas, to drive the AgriProcessors and the Rubashkin to complete financial ruin.  

 

The Strategy: Cast AgriProcessors As Criminal Enterprise

 

Some strategy had to be devised that would keep Sholom Mordechai in the government’s crosshairs and legitimatize the harshest possible action against both him and AgriProcessors. Casting the meat-packing plant as nothing more than a criminal enterprise, whose owners were not entitled to its ill-gotten gains, armed U.S. attorneys with a near-perfect strategy.

 

Not only did they use this strategy to seize of all of AgriProcessors assets, they exploited it to impose forfeiture claims –whose legality is highly questionable—on all Sholom Rubashkin-owned assets, including a chicken farm, a real estate corporation and even life insurance policies.  

 

Their strategy achieved an important aim: It brought about the total destruction of AgriProcessors and Sholom Rubashkin’s complete financial ruin. In the process, it caused vast losses to the company’s lender bank from which Agri had borrowed millions. This too, was used to advance the government’s agenda.

 

The bank’s losses, pegged in government papers at $26 million, were then laid at Sholom Mordechai’s doorstep in a trumped-up fraud case. Additional phony charges rigged by prosecutors were used to “enhance” the sentencing guidelines so that prosecutors could demand a life sentence. 

 

Kangaroo Court Proceedings

 

Anyone who doubts the government’s singular malice and vindictiveness against Sholom Rubashkin should take note that it is far from over. Although he stands to be sentenced on May 27, beginning this week he is being made to stand trial again, this time on state charges of having violated child-labor laws.

 

The alleged witnesses to these crimes are a group of child-age Guatemalans who were jailed and deported to their native country after the raid. These are the alleged “child-laborers.” To win their cooperation after treating them so brutally, the government has bribed them to come back to Iowa to testify against their former employer.

 

Sholom Mordechai’s attorney has requested a delay in the trial for at least thirty days. “Any conviction on the state labor violations could also have an effect on Rubashkin’s federal sentence, which is supposed to be announced May 27,” Brown said. 

 

“It puts Mr. Sholom Rubashkin in a horrible quandary,” Brown told the court this morning. The judge in the case, Judge Callahan, denied the request.

 

The emerging story of on ongoing, ruthless miscarriage of justice, and the corruption in government offices that continues to engineer it, cries out for investigation. The Jewish community as well as all people of conscience cannot afford to remain silent. 

 

In the meantime, stay tuned for the next installment of kangaroo court proceedings in Iowa.