An explosive motion filed this week by attorneys for Sholom Rubashkin brings to an entirely new level evidence of government misconduct and abuse of power in a by-now notorious case that robbed Sholom of due process.
The Merits Brief, a dynamic fusion of investigative and lawyering genius, contains a bombshell; previously undisclosed evidence confirming facts and scenarios about the Rubashkin case that took place eight years ago, and were later denied under oath by the government.
Filed by attorneys Gary Apfel of Los Angeles and Stephen Locher from Des Moines, Iowa, the document powerfully supports the 2255 petition filed in 2014 that calls for judicial relief for the immense harm the misconduct caused Sholom Rubashkin, now in his seventh year of a 27-year prison sentence. The sentence arose out of his conviction for financial offenses that the Court determined caused an Iowa bank a $27 million loss.
The 2255 Petition presented cogent arguments for vacating Sholom’s sentence, granting a new trial or at the minimum, a resentencing. The Petition showed how the government knowingly gave misleading and false testimony at sentencing on issues related to loss amount, and withheld exculpatory evidence that would have resulted in a vastly lower Sentencing-Guidelines range.
Citing sworn affidavits from prospective buyers, the 2255 Petition established that systematic government interference blocked the sale of the company and significantly devalued it by unlawfully imposing the threat of forfeiture on would-be buyers.
As the affidavits make clear, the threat of forfeiture was tied to government-imposed restrictions on hiring Rubashkin family members to help run the company – an intimidation tactic that came to be known as the “No Rubashkin” rule.
The documents show that these tactics, implemented by prosecutors in the Iowa U.S. Attorney’s Office, brought the meat-packing plant to ruin. The prosecutors hampered the trustee’s efforts to re-sell the plant and to keep it operating during bankruptcy so that it could generate revenue to repay the company’s debts. At the time of bankruptcy, Agriprocessors was valued by an independent expert at close to $70 million.
The prohibition against having anything to do with the Rubashkins and the fear of government forfeiture scared off potential buyers at the time the company was being auctioned. From being a flourishing business that brought in $300 million in annual revenue, the plant’s value plunged during its bankruptcy as one by one, interested bidders dropped out. The plant was finally sold for a fraction of its original value.
The sale price was too low to repay the company’s largest creditor, FBBC. That set the stage for prosecutors to ascribe to Sholom Rubashkin what they charged was a $27 million loss, ramping up his sentencing range to a shocking 27 years.
FALSE AND MISLEADING TESTIMONY
The 2255 Petition argues that by concealing the scope of its intrusion into the bankruptcy and denying the no-Rubashkin agenda, the government robbed Sholom Rubashkin of crucial exculpatory evidence needed for his defense. The government’s denials and its false and misleading testimony prejudiced the Court in its evaluation of an appropriate sentence, the Brief contends.
The denial of the “No Rubashkin” policy came after the government consistently, over an 8-month period, implemented this very policy with all bidders and would-be buyers during Agriprocessors’ bankruptcy and auction period, the Brief attests. Insistence on “No Rubashkins” in the new company extended to SHF Industries which ultimately purchased the plant.
During Sholom Rubashkin’s sentencing hearing in June 2010, the defense called witnesses to testify about the No-Rubashkin policy and how it impacted the fate of Agriprocessors and Sholom himself. The government in turn called key witness Paula Roby who denied there had ever been such a policy. Incredibly, the very same prosecutor who had formulated the policy, the Brief attests, is the one who elicited this denial from her in court.
Incredibly, this prosecutor filed papers in the 2255 case continuing to deny that false testimony was presented at Sholom’s sentencing.
‘SMOKING GUN’ DISCLOSURES
The ‘smoking gun’ uncovered by Sholom’s attorneys comes in the form of an attorney’s detailed handwritten notes that recorded a fateful December 2008 as the meeting unfolded. This transcript was obtained by Rubashkin’s legal team during their investigation after filing the 2255 Petition.
The meeting took place after Agriprocessors had declared bankruptcy and a court-appointed bankruptcy trustee, Joe Sarachek, had been appointed to oversee the plant. The notes were taken by Attorney James Reiland, who at the time was an associate with the respected national law firm, Kelley Drye and Warren LLP.
Rieland and his partner, Julian Solotorovsky, were retained to represent the Agriprocessors bankruptcy trustee. They had – and continue to have – no connection to Sholom Rubashkin.
On December 5, 2008, the three men were meeting with two U.S. attorneys in Iowa’s Northern District, Richard Murphy and Peter Deegan, prosecutors in the Rubashkin case. Also present was bankruptcy trustee Joe Sarachek and his counsel, Paula Roby [mentioned above as the government’s key witness], who served as liaison between Sarachek, the bidders at the Agriprocessors auction and the prosecutors.
Reiland took down the statements made by each with attribution. In sworn affidavits, he and Solotorovsky affirm the accuracy of the transcript. Frozen in time, their notes open a window into a breathtaking abuse of government power, fully documented in the Merits Brief and the 2255 Petition.
THE NO-RUBASHKIN RULE IS ANNOUNCED
At the December 2008 meeting, the notes recount, AUSA Murphy articulated a policy that prohibited any purchaser from involving any Rubashkins in the new company in any capacity, and injected the threat of government forfeiture to give that policy “teeth.”
Murphy fretted that even the threat of forfeiture would not be enough.
According to notes of the meeting, Murphy announced to those present, “‘No Rubashkins’ is very important to us–non-negotiable. The problem is, we don’t have a seat at the table.”
Paula Roby spoke up. “We’re going to set one up for you. Are there any other non-negotiables?”
“No Rubashkin involvement from any standpoint,” AUSA Rich Murphy reiterated.
According to this government stance, later denied by both Paula Roby on the witness stand, and by AUSA Peter Deegan in court papers, the buyers of the plant would face forfeiture of their assets were they to hire a Rubashkin family member.
Trustee Sarachek was advised to spread this warning among bidders. According to the notes we now have of the meeting, Sarachek protested that forfeiture “would kill off bidders” and “enormously hurt [his] ability to do his job [to maximize the value of Agriprocessors for sale purposes.]”
ORCHESTRATING THE COMPANY’S DECLINE
Trustee Sarachek in an affidavit filed with the Merits Brief relates that he had no choice but to comply with the No-Rubashkin rule regardless of his reservations, even though it made no sense from any standpoint. Except for Sholom, no member of the Rubashkin family, including the plant’s owner, Aaron Rubashkin, had ever been charged with a crime in the case. On what grounds did the government appropriate the right to bar these law-abiding citizens from a privately owned company?
As he predicted it would, the “No Rubashkin” rule coupled with the government’s improper use of forfeiture led to a severely depressed sales price for the meat-packing plant. From an initial net worth of close to $70 million with annual revenue of $300 million, its value dropped to a fraction of that amount. The plant was finally sold for $8 million.
The declarations from trustee Sarachek and prospective bidders and other evidence demonstrate that the government played the key role in causing the plant’s considerable erosion in value.
Prosecutors not only took no responsibility for this disaster, they falsely ascribed the entire loss amount to fraudulent business practices committed by Sholom Rubashkin.
The insufficient purchase price caused FBBC, which held the senior security interest in most of Agriprocessors’ assets, to suffer a loss that the Court found totaled approximately $27 million.
This later became the loss amount for sentencing purposes, resulting in a substantial increase of 22 levels under the Sentencing Guidelines that equates roughly to 24 years of additional imprisonment for Sholom Rubashkin.
Had significant offers for the meat-packing plant not been thwarted, Agriprocessors would have been sold at substantial profit, more than covering the debt from FBBC. That would have eliminated the massive “loss amount” to the bank that drove the sentencing guidelines range so high.
Entrepreneurs who came to bid on the plant understood they could not run the business effectively without input from the former owners. Once the “No Rubashkin” policy was invoked in their meetings with government officials—meetings the U.S. Attorney’s Office insisted upon—these potential buyers withdrew. This swiftly led to the collapse of the plant’s value, attorneys said, and destroyed all possibility of FBBC recovering its loan.
Sholom Rubashkin presented evidence of government interference with the sale of Agriprocessors at his 2010 sentencing hearing. He called witnesses and submitted a sworn affidavit from a prospective buyer attesting that he had been scared off at the bankruptcy auction, after being forced to meet with hostile government officials who reiterated the “No Rubashkin” rule and threats of government forfeiture.
Here is where the cover up officially began.
GOVERNMENT STAR WITNESS GIVES FALSE TESTIMONY
As mentioned above, the government countered by putting on the stand star witness Paula Roby. AUSA Peter Deegan asked Roby questions designed to refute the existence of a “No Rubashkin” agenda. She fully accommodated him, saying she knew of no such policy and would surely have remembered such an agenda, if it existed.
Having Rubashkins employed by a new owner of the plant “would not be a deal-breaker,” Roby insisted. She denied that prosecutors had strong-armed any of the bidders at the bankruptcy auction and stated that anyone who met with prosecutors about any of their concerns came away “satisfied.”
Observers at the sentencing hearing, including this writer, were witness to what appeared to be government endorsement of Roby’s misleading and false statements.
Those present may recall the coy exchange between the two when Deegan then asked Roby if she had any reason to withhold information about the alleged “No-Rubashkin” policy (to counter any suspicion that she wanted to protect the government.)
Roby gave an amused response as if the two shared an inside joke. “No, sir, I don’t work for you.”
Under cross-examination, Roby continued to insist there was no basis for “unreliable rumors” about a “No Rubashkin” rule. “Trustee Sarachek is ‘trying very, very hard to dispel these rumors in the community,’” she said.
Various bidders refuted her statements, testifying in sworn affidavits filed with the Merits Brief that they had received warnings from Trustee Sarachek regarding the inability to use members of the Rubashkin family in running the new business.
Sarachek himself testified to this in his own affidavit, saying “[prosecutors] made very clear to me and my attorneys shortly after my appointment as trustee the restrictions about hiring Aaron Rubashkin or any Rubashkins in the company.”
Roby also gave false testimony about why a $40 million offer for Agriprocessors from an investor named Soglowek fell through. “It’s because he did his due diligence and realized the company was not worth the amount he had offered for it,” she told the prosecutor.
BIDDERS SET THE RECORD STRAIGHT
“That is untrue,” claims Mr. Soglowek in a sworn statement. He describes how he was intimidated by the government’s forfeiture threats and warnings of “very bad consequences” if he employed any Rubashkins.
Affidavits from nine other would-be buyers painted similar scenarios of government interference and intimidation. Excerpts from some of their respective affidavits, attached as exhibits in the Merits Brief, follow below:
Prospective bidder Sid Borenstein said “the position of the U.S. Attorney’s Office had a chilling effect on our interest in purchasing the assets of Agriprocessors. We viewed Aaron Rubashkin as a ‘key man’ without whose involvement we would have no ability to manage this business. Accordingly we did not submit a bid.”
Other bidders described similar reactions.
Abraham Shaulson: “The inability to have an employment or consulting relationship with any member of the Rubashkin family drove the value of the business down substantially.”
Meyer Eichler: “The exclusion of Rubashkin family members pronounced by the US Attorney’s Office prevented the group of investors from making a formal offer for the company.”
Nathan Tzivin: “Mr. Soglowek also told me that the threats and demands of the United States Attorney’s Office is the principal reason [his company] withdrew the offer reflected in the $40,000,000 term sheet, and didn’t appear to bid at the bankruptcy auction held on March 23rd and 24th, 2009.”
Wagschal, whose company, Kosher Standard, was the highest bidder during the bankruptcy auction in March 2009 said he was forced to meet with prosecutors during the auction:
“The U.S. Attorney’s Office representative told me that if my company bought Agriprocessors, the U.S. Attorney’s Office would confiscate the brand names and trademarks. He told me the business would have to ‘start from scratch’ and there could be no remnants of any connections to the Rubashkins. He said the U.S. Attorney’s Office would be ‘watching [me]’ and that it would not be easy to get funding or run the business.”
Wagschal’s partner, Jeff West, said:
“The prosecutor was hostile and threatening. He accused my partner and me of being connected in some way to the Rubashkins… The prosecutor said he would be watching us closely and said or implied that the government might exercise its forfeiture rights after our purchase of the business.”
Another bidder, Meyer Eichler, said:
“[AUSA] Murphy forewarned us in no uncertain terms that if he (or members of his office) were to discover that any member of the Rubashkin family had either an equity interest or a management role in the company after we purchased it, the U.S. Attorney’s Office would not allow this.”
Eichler’s colleague, Sid Borenstein, reiterated the point:
“During the meeting, the U.S. Attorney’s Office representative informed us that ‘under no circumstances’ would the government permit a sale to take place to a buyer that had Aaron Rubashkin as a minority investor, nor would the government permit him to play a management role.”
FALSE TESTIMONY USED IN JUDGE’S CALCULATION OF LOSS
When the government deprives an individual of his life or liberty on the basis of evidence that it knows to be false, it betrays its fundamental obligation to provide a fair impartial trial, the Merits Brief states.
The Brief quotes a Supreme Court ruling that “government may not knowingly suppress evidence capable of vindicating the defendant, or of impeaching government witnesses.” In other words, the government was obliged to correct statements from Roby it knew to be false.
Roby’s inventions and falsifications were allowed by the government to stand unchallenged.
Faced with conflicting testimony from Roby who denied the no-Rubashkin rule and from the entrepreneurs who all attested to it, and lacking the “smoking gun” transcript of the December 2008 meeting that fully corroborates the testimony of the bidders, Judge Linda Reade made her call.
“The Court credits Roby’s testimony and discredits testimony from defense witnesses,” she wrote in her Sentencing Order. Accordingly, the Court declines to consider this theory [that government maneuvering brought the meat-packing plant to ruin] in arriving at an actual loss calculation.
As is well-known, Reade accepted the prosecutors’ narrative and their calculation of loss, imposing a 27-year jail sentence, two more years than prosecutors had requested.
SHINING A LIGHT ON THE COVER UP
The Merits Brief presents stunning disclosures that, like a post-mortem elucidating how the victim died, shine a light on government misconduct “backstage” and its later attempt to cover up their conduct with denials and concealment of the truth.
With meticulous documentation supporting its arguments, the Merits Brief is a shattering expose of government malfeasance in the Rubashkin case that cries out for justice.
Burning questions continue to swirl about this case. One recalls how, in response to the gross disparity of the 27-year sentence and the discovery of secret meetings between the government and the judge in the case, eighty-six legal experts—including former attorneys general, senior officials at the Department of Justice, United States attorneys and federal judges — signed an amicus curiae brief supporting Rubashkin’s first appeal in 2012, asserting that the judge should have recused herself.
Over the course of the following two years, nearly 70 congressmen separately wrote letters to then Attorney General Eric Holder demanding a review of this case and expressing concern over what they condemned as judicial and prosecutorial misconduct.
The government’s response to the 2255 filing was to issue a terse categorical denial of all wrongdoing. The Merits Brief shreds these denials and exposes the government’s egregious misconduct in violating Sholom Rubashkin’s right to due process.
The brief calls for Sholom Rubashkin to be granted a resentencing free from false and misleading testimony. If the government will not concede the “due process violation,” the brief says, an evidentiary and discovering hearing in “light of the overwhelming evidence in Petitioner’s favor” is surely called for.
That includes depositions of AUSA Murphy and Deegan to determine the truth about the issues raised in the 2255 and the Merits Brief, and all communications between the government and third parties including Paula Roby, Trustee Sarachek and all bidders regarding forfeiture and the “No Rubashkin” rule.
Justice has certainly failed Sholom Rubashkin until now. But his case, so emblematic of prosecutorial abuse in some quarters, is very much alive. Despite the many delays and setbacks it has faced plodding its way through the slow-moving justice system, it refuses to die.
As additional pieces of the story surrounding his criminal prosecution come to light through the Recusal Motion, the 2255 Petition and the Merits Brief—with who knows what other sordid surprises around the corner—this singular travesty of justice cries out more than ever for relief.
DRAMATIC DISCLOSURES AT RUBASHKIN SENTENCING HEARING BLOW LID OFF GOVERNMENT CASE
[AS REPORTED IN YATED
IN JUNE 2010]
In response to defense claims in court papers that the government had orchestrated the ruin of AgriProcessors, prosecutors at Sholom Rubashkin’s Sentencing Hearing last week called attorney Paula Roby who represented the court-appointed Trustee Joe Sarachek.
Roby denied the existence of any “edict” or government rule barring a purchaser of Agriprocessors from hiring anyone linked to Rubashkin and repeated her testimony under cross-examination by defense counsel Brown.
One could see confusion register in the gallery where scores of observers—most of them Iowa residents—sat listening. People clearly recalled numerous press reports quoting officials that no one from the Rubashkin family would be permitted to serve in the new AgriProcessors management. [See Sidebar] This was now being denied under oath.
Mr. Brown then highlighted on a large screen in the courtroom a sworn affidavit from Brooklyn businessman Meyer Eichler. In his affidavit, 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.
In an interview with Yated, Mr. Eichler affirmed that he had been scared off by the warnings from 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 overturned her testimony that no rule against employing Rubashkins was ever formulated by the government, Roby shifted uncomfortably. She left the witness stand, followed by a defense witness whose testimony further punctured her testimony.
Steve Cohen, owner of Twin City Poultry, testified that in his negotiations to purchase AgriProcessors in January 2009, he had been informed by Trustee 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 hire as manager or consultant anyone from the Rubashkin family.
Had a buyer purchased the company when it was still a flourishing 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 would have been cause for celebration for the Postville population, but would not have pleased certain parties who were apparently determined to drive the company to financial ruin.
The “No-Rubashkin” Rule Reported in the Press
“The issue of possible ties to the Rubashkins would be crucial to the new company negotiating the purchase of AgriProcessors. Federal prosecutors, who have threatened to seize the business as part of their criminal case, reportedly have agreed to drop that effort if a new owner proves it has no links to the old owners.” WCF Courier, June, 2009
A federal bankruptcy judge Monday approved the sale of a troubled Postville meatpacking plant to a Canadian businessman and his partners. The buyer, SHF Industries, filed papers Monday swearing that it had no connection to the previous owners. Des Moines, Register, July, 2009.