Payment of $1 Million State Fines by Agriprocessors "Unlikely"

As state and trustee quibble over who gets paid first, both agree it is unlikely Agriprocessors will pay Iowa anything of the more than $1 million it owes.

Beef kill to resume Monday, source says.

Payment of state fine by Agriprocessors plant called unlikely
BY GRANT SCHULTE • Des Moines Register

Agriprocessors Inc. might never pay a $1 million state labor fine because of the debts it owes to higher-priority creditors, a lawyer for the company's bankruptcy trustee said Monday.

Iowa Workforce Development agreed last week to reduce a $10 million penalty against the meatpacking plant to $1 million, in hopes that the state might collect some money for alleged paycheck deductions that violated state law.

State labor investigators and the plant's court-appointed bankruptcy trustee also consented to a $4,900 fine for the plant's alleged failure to send 42 workers their final paychecks.

But Dan Childers, who represents the trustee, said the agreement still places the state among the lowest-priority creditors. He said the deal was reached to avoid further court battles over the alleged violations.

"I would at this point consider it unlikely that (the state) gets paid," said Childers, a Cedar Rapids lawyer who represents plant trustee Joseph Sarachek. Litigation over money that the plant might not have "would be a giant waste of money, not only for us but for the state," he said.

The plant must first pay its two secured creditors, First Bank Business Capital and MLIC Asset Holding, who hold collateral against money loaned to Agriprocessors. Both firms had to consent to last week's sale of the plant to SHF Industries, an Iowa company formed in May.

Any remaining money will go to unsecured creditors, including scores of Postville businesses, many of whom are unlikely to receive payment.

Court papers filed in U.S. Bankruptcy Court show the agreed-upon fines "will be assigned a priority status in accordance with the bankruptcy code." U.S. bankruptcy law gives government fines a lower priority than many business debts, Childers said.

Kerry Koonce, a spokeswoman for Iowa Workforce Development, said the deal "is probably the only way we're going to get the chance to collect anything" from Agriprocessors.

Koonce contended the deal makes the fines a "priority claim" against the plant, which elevates them above the claims of many business creditors. But Childers, whose firm filed the proposed deal in court, said the priority status was unchanged.

A U.S. bankruptcy judge must still approve the agreement, Koonce said. Any money received from the settlement will go into the state's general fund.

Agriprocessors was the nation's largest kosher meat producer before a May 2008 immigration raid gutted the work force and triggered a series of events that led the plant to seek bankruptcy protection six months later.

The plant was sold for $8.5 million last week at a bankruptcy hearing in Cedar Rapids.

Top- and mid-level managers at the plant also face federal immigration, bank fraud, money laundering and wire fraud charges.

Meanwhile, a source tells me the new Agriprocessors is planning to restart its beef kill Monday.