The government charged bank fraud and money laundering. Laundered money, explained defense counsel Cook, must come from an illegal activity. Moreover, laundered money moves in circles, never arriving at its legal source. But in this instance, the money always ended up with St. Louis-based First Bank Business Capital, which is why they continued to lend to Agriprocessors.
Inflating invoices is irrelevant to bank fraud, as the felony involves deliberate scheming to cheat and rob the lender, which was never the instance. It was a desperate attempt to save Agri from bankruptcy and never – did even the prosecution suggest – that Shalom Rubashkin pocketed a cent for himself or deprived the lender of the company’s timely interest payments.
The bank earned $13.5 million on asset-based loans that carried high interest rates. Anyone with an accounting background – of which there were surely no shortage in First Bank – must have realized that not everything was financially kosher with Agriprocessors. Yet they continued to lend money to Agri, failed to scrutinize Agri’s paperwork and never conducted an audit.
Banks are the last ones to loan if they fear they will not be repaid. Obviously there was much in it for them, which is why First Bank continued to lend the company millions of dollars even after the government raid. This must be interpreted as deliberately turning a blind eye and tacit consent.
The arrangement, Cook explained to the court, was akin to a man who falsely claims to be 6’ 3” on a dating web site in order to attract women. But the woman — in this case, First Bank — continued to “date” Rubashkin even after discovering that he was much shorter, as the relationship had other redeeming qualities. Likewise, although the defendant engineered a way to take more cash than he was entitled to on his line of credit, he still paid interest on what was withdrawn. Charging interest and making money is what banks do; they had no objection.
Guy Cook showed the jury a copy of the bank’s web page dated from just a few weeks prior to the trial touting the Agriprocessors loan as a success. First Bank lost money only after Agriprocessors was forced into bankruptcy, subsequent to the government raid. The bank had filed a civil lawsuit in 2008 that did not include allegations of fraud. This raises the question, if the bank was content, why was the government crying fraud on its behalf?
Perforce, one must conclude – to use the words of author and historian, Conrad Black – the government was possessed with prosecutiamania and transformed what should have been a civil case into a criminal one. Would this not explain why the government ignored a letter from Agriprocessors’ lawyer on the eve of the raid stating that the company wished to cooperate? Alas, the prosecutors wanted the dramatic blitz, entailing over six hundred agents, Black Hawk helicopter et al, so the letter was irrelevant and ignored.
Cook argued that the husband and father of 10 lacked the training and motivation to commit the alleged crimes and was guilty of nothing more than incompetent management. “He was in over his head and was nothing more than a well-intentioned, energetic, jump-on-the-spot fireman. You know those people. They think they can handle everything, and they can’t.”
While maybe not the most flattering way of portraying the defendant, Cook’s depiction rings true. Fundamentally, Shalom, like all of the Rubashkins, was a butcher. As the business grew, Shalom shifted from the cleaver’s block to the conference table, and the transition was neither smooth nor in full grasp of his competence. Managing a major company requires a modicum of finesse regarding management and public relations – neither of which were Shalom’s strong suits.
Cook concluded his defense by stating to the court, “My client is guilty of incompetence and oversight. That doesn’t make him a criminal. Defaulting on a bank loan is not a crime.”
The jury did not buy it, and Rubashkin was convicted on most of the charges.
Since sentencing is governed, in part, by the magnitude of loss, the government’s intervention in obstructing the sale would play heavily in the number of years to which the defendant was sentenced. The guidelines require that the court use either the amount of the “intended loss” or the “actual loss” – whichever is greater.
Indisputably, Shalom Rubashkin never intended the bank to suffer any loss. Furthermore, he no longer had control as to how the business assets were distributed, nor could he prevent the trustee from frittering them away. For example, the company had frozen meat that it would sell at a reduced rate. The bankruptcy trustee was against selling frozen meat, so it had the millions of dollars of meat thawed and ground up for animal fodder, which sells for far less than what kosher frozen meat can demand.
The drop in value left Agriprocessors’ bank – the victim of Sholom Rubashkin’s money scheme – with a $27 million “actual” loss. Had the plant sold for $40 million, Rubashkin would have faced a roughly three-year term under the federal sentencing guidelines.
Chodesh Tov – Have a pleasant month!
(To be continued)