Rubashkin Claims Israeli Offer To Buy Agriprocessors Was Turned Down By Court; FBI Refutes Claim

Rubashkin tries to claim Soglowek's $40 million offer was nixed by the trustee and the court.

From Rubashkin's summary of exhibits for today's sentencing hearing:

Sentencing Exhibit 11127-11129 (PSR ¬∂ 314, 316, 334, 345, 351, 352, 354, 356): Eli Soglowek visited the plant March 26, 2008 (Trial Exhibit 6260) Sogolowek Nahariya LTD made a $40,000,000 offer to purchase Agriprocessors in January of 2009. The offer was rejected. Another offer was made in April of 2009. Rejection of such a substantial offers that would have substantial reduced FBBC‚'s unpaid loan principal was not reasonably foreseeable to Sholom.

Today in court, the FBI refuted that claim, noting Soglowek withdrew its offer:

Sentencing hearing begins in slaughterhouse case
  
CEDAR RAPIDS, Iowa (AP) — An FBI agent says an Israeli company withdrew its $40 million bid for a troubled Iowa kosher slaughterhouse because of concerns with the plant's bookkeeping.

Agent Randy Van Gent testified Wednesday during the sentencing hearing for Sholom Rubashkin, a former manager at the Agriprocessors Inc. plant. Rubashkin faces a possible life sentence after being convicted of financial fraud.

The Israeli company's bid set the initial price for Agriprocessors, which filed for bankruptcy months after a massive immigration raid in May 2008.

At issue is a $35 million bank loan. How much the bank lost could affect the length of Rubashkin's sentence.

During the hearing, defense attorney F. Montgomery Brown said the original $20 million loan, which grew to $35 million by 2007, was not affected by the fraud.

Soglowek's withdrawal was widely reported in February 2009, including here:

Under the bidding procedure, Soglowek's $40 million offer was to be the foundation for further bidding for the assets of the company by other companies in a court-administered auction.

Soglowek couldn't complete an asset purchase agreement in time to meet a deadline this week because the company hadn't completed its due diligence, according to Joseph Sarachek, court-appointed trustee for the Agriprocessors bankruptcy.

Sarachek told The Gazette after a bankruptcy hearing Tuesday that the problem was the multitude of equipment leases, vendor agreements and purchase agreements that had to be evaluated and potentially renegotiated to determine how much Agriprocessors was worth.

"It is mind-boggling," Sarachek said.

Sarachek said Soglowek remains "engaged" in the purchase process despite having no firm agreement.

Soglowek's failure forced Agriprocessors to be sold at auction. The trustee expected Soglowek to bid at that auction. But a month later when the auction was held, Soglowek did not bid.

After a long process of bids from a small number of potential buyers, Agriprocessors was sold to Hershy Friedman for $8.5 million – only about 1/5 of Soglowek's stalking horse offer.

Soglowek's initial offer was never meant to be final. Instead, it was supposed to serve as the foundation for other bids.

But when Soglowek withdrew because of the complexity of the financials (and because $40 million was way too much to bid for Agriprocessors because $40 million was far more than Agriprocessors was worth) no other company or individual stepped in at that level.

One of the reasons qualified buyers could not be found (past the financials) was that buyers had to be independent of the Rubashkin family because the government said it would seize Agriprocessors through forfeiture if the buyer was linked to the Rubashkins.

In short, it was the Rubashkins' way of doing business – including falsely inflating accounts receivable – that doomed the sale.