Prosecutors Detail Fraud Allegations Against Rubashkin

Sholom Rubashkin gave employees orders to write fake invoices and cover the tracks through a school and a kosher grocery store. Two top financial officers were paid six-figure salaries under the table for their cooperation, the government alleges.

Prosecutors detail fraud allegations against Rubashkin

By GRANT SCHULTE • Des Moines Register

Sioux Falls, S.D. – A former eastern Iowa meat plant manager at the center of a high-profile immigration and fraud case ordered his employees to falsify sales records for millions of dollars in a scheme to make his company grow, prosecutors alleged today.

Sholom Rubashkin pulled employees from several departments into the alleged plot, with orders to write fake invoices and cover the tracks through a school and a kosher grocery store, said Assistant U.S. Attorney C.J. Williams.

Two top financial officers were paid six-figure salaries under the table for their cooperation, Williams said in his opening statements in federal court in Sioux Falls.

And Rubashkin, who approved every check, persuaded the plant’s St. Louis lender to pay advances on a $35 million credit line with made-up sales to show money that had not yet been received, Williams said.

The new details of alleged shady business dealings came during the second day of Rubashkin’s trial on 91 fraud-related charges.

Rubashkin worked as a top executive at the former Agriprocessors Inc. kosher meat plant, now Agri Star, that was raided by immigration agents in May 2008. Nearly 400 illegal immigrants were arrested in a crackdown that pushed the plant into bankruptcy.

Williams promised to show jurors “evidence beyond a reasonable doubt, through scores of witnesses and volumes of evidence, that the defendant is guilty as charged by the grand jury.”

Rubashkin’s lawyer, meanwhile, cast the plant’s troubles as a series financial mistakes and criminal actions by others. Defense lawyer Guy Cook said prosecutors had distorted the activities of “a good man” and his family-owned business.

Cook described the plant as a “true American success story” that generated up to $300 million annually at its peak, but floundered because of Rubashkin’s mistakes.
The plant operated on slim margins because of the high cost and technical requirements to produce kosher meat, Cook said.

Rubashkin was “a guy in over his head, a well-intentioned fellow, a man trying to keep his father’s business afloat,” he said.

Cook said others in the company, such as former controller Toby Bensasson, were responsible for the alleged financial crimes. Bensasson pleaded guilty to a conspiracy charge in August and has agreed to testify against Rubashkin.

“This man did his best,” Cook said, pointing to his client. “Maybe it wasn’t good enough. But it was not a crime.”

Cook also blamed First Bank Business Capital, the plant’s St. Louis-based lender, for overlooking alleged immigration and financial crimes at the plant despite a requirement that the plant operate lawfully. The $35 million line of credit to the plant was a “risky loan” because of the slim profit margins and sloppy business practices, Cook argued.

“The fact that you’re unable to pay on your account, and you default, doesn’t make you a criminal,” he said. “This is a business dispute.”

Rubashkin also will testify on his own behalf, Cook confirmed, despite his legal right to remain silent throughout the trial.

Rubashkin watched the opening arguments from the defense table, his chin resting in his hands. Behind him sat his wife, Leah, and four of their 10 children. Hasidic Jews, members of Rubashkin’s faith, sat with their heads bowed and read psalms in Hebrew. U.S. Attorney Matt Dummermuth, a leading figure in the May raid, watched from the front row.

The opening arguments in Sioux Falls, where the trial was moved because of pre-trial publicity, offered new details into the 91 fraud-related charges against Rubashkin. The 49-year-old also faces 72 charges related to the alleged plot to hire and harbor illegal immigrants from Guatemala, Mexico and other impoverished nations.
The alleged financial fraud was discovered by Marc Ross, a partner at the New York-based Triax Capital Advisers which took control of the plant after it filed for bankruptcy in November.

Ross testified today that he discovered the alleged fraud when the court-appointed trustees went to collect payments from customers.

Many Iowa customers – who, according to plant documents, owed a combined $20 million – said they had never bought the products that were documented.

The sales records turned out to be fake, Ross said. Further investigation revealed that roughly $10 million of the reported sales had never taken place, he said.

Williams told jurors in his opening statements that Rubashkin told a customer services employee to create the fake invoices for the amount of money he wanted, and store them in an area separate from the legitimate business records.

Ross also told jurors that only 20 employees remained at the plant after the May 2008 immigration raid. Roughly 140 worked at the plant one week later, he said, but the work force has since grown to about 300.

Comments

[AGRI-vated Angel]

Thanks for the update-Shmarya. :)

BTW ~ (FM readers)

Have you ever met Sholom? He has a way of speaking so passionately, he is able to mesmerize others with his words . . . to a point one becomes spellbound. Hopefully, his passion will not overtake the courtroom.

[AGRI-vated Angel]

. . . lest the jury will be 'hood'winked, quite literally.

:)

[nachos]

There is absolutely no way Shalom will be speaking to the jury. In order for him to speak to the jury Shalom would have to so from the box. It is then the prosecution will have the right to cross examine.

Speaking to the jury requires one to waive their fifth amendment rights.

[TheTruthAsItIs]

Um... okay...

"Two top financial officers were paid six figure salaries under the table for their cooperation, etc etc"

Wouldn't it had made a little more sense to take that money and, oh, I dont know, pay some bills with it?!?!?! Maybe they wouldn't have gone broke to begin with?!?!

I am sure all the legitimate employees, who got stiffed their last paychecks, their vacation, their health insurance, child support, etc really appreciated reading this.

"A well intentioned guy who was way over his head".. and "others were responsible, like former controller, etc etc"

You know what is really disturbing already? Is that no one is denying that these events took place. They are all just pointing fingers back and forth at each other saying the other guy did it.

What a crew.

And let lay some more truth as it is on all of you. There is no way. NO WAY other family members, siblings or in-laws, didnt know money like that was being thrown around. NO WAY.

I hope the Internal Revenue Service is taking notes.

[state of the Jews]

The IRS was part of the original crew that conducted the raid. All records and computers were seized and returned after copying the contents. I'm sure the IRS has its own case waiting to be sprung.

[state of disgust]

Since Popper isn't reporting from Sioux Falls, it's pretty clear they took this story from FM. How sad they couldn't dig this story up on their own. Second rate journalism.

[FirstGenerationBavarianAmerican]

I re-read the affadavit posted here about the time the defendant was arrested for the second time:
http://failedmessiah.typepad.com/failed_messiahcom/2008/11/rabbi-sholom-m.html

After hearing about all the "clawbacks" being attempted in the aftermath of the Madoff case, I wonder if First Bank was interested in pressing bank fraud charges to "clawback" money upon a successful conviction from assets of the owners of Agriprocessors that were shielded by the bankruptcy filing.

Page 5 of the affadavit is interesting. It quotes First Bank's loan officer being told by the defendant that he did not know the (approx) 389 persons arrested were illegal aliens. I would love to have been a fly on the wall when the loan officer went back to St. Louis and reported this to bank senior management. My guess is that at that point, they knew they were "had".