Accountant testifies government miscalculated bank’s loss in Iowa kosher slaughterhouse case

Thursday, April 29, 2010

Accountant testifies in slaughterhouse fraud case

CEDAR RAPIDS, Iowa — An accountant testified Thursday that prosecutors who won a conviction in the financial fraud trial of an Iowa kosher slaughterhouse manager miscalculated the millions of dollars in losses suffered by a bank.

The amount of money lost by the bank is key because it could affect the sentence for Sholom Rubashkin, who was convicted in November of 86 counts of financial fraud. He was charged following a May 2008 immigration raid at the former Agriprocessors slaughterhouse, where 389 workers were arrested on immigration charges.

Prosecutors are seeking a sentence of life in prison.

During the second day of testimony before U.S. District Court Judge Linda Reade, New York accountant Abe Roth countered prosecutors’ claims that a St. Louis-based bank lost $26 million because of Rubashkin’s fraud.

Roth, a longtime friend of Rubashkin’s, said much of that loss had nothing to do with the fraud. He claimed the purported loss of $26 million doesn’t factor in the $4 million the bank made in interest from the loan, or how much of the loan came from fraudulently inflated invoices.

Prosecutors “made everyone believe that number of $26 million is God-given, and it isn’t,” Roth said.

Roth said only about $10 million was artificially inflated, and that the rest “was pristine, wasn’t influenced by any corrupted” accounts.

Rubashkin, 50, was convicted of creating phony invoices to show First Bank Business Capital that the slaughterhouse had more money flowing in than it did. After the Postville operation declared bankruptcy, the bank continued to pump cash into the plant to keep it running.

The cash infusions totaled about $5 million, but Roth said the bank is to blame because it failed to do due diligence on the company. Roth said the $5 million should not be factored into the bank’s loss and Rubashkin’s sentence.

“So your testimony is really that it’s the bank’s fault,” Assistant U.S. Attorney Pete Deegan said while cross-examining Roth.

“It is their problem if they did not do proper due diligence,” Roth replied.

Defense attorneys also tried to show that Rubashkin was under pressure because of other issues that could have led him to make poor decisions. They pointed to problems raised by unions, religious groups and the media in the years before the immigration raid.

Rabbi Asher Zeilengold, of Brooklyn, N.Y., said a 2006 video released by the animal welfare group PETA and a 2007 walkout by workers put pressure on Rubashkin. Zeilengold also said Rubashkin was worried when a faction of conservative Jews based in Minnesota sought to change the kosher certification process traditionally done by Orthodox Jewish rabbis.

Rubashkin’s wife, Leah, said her husband at times would cry for hours in the years before the raid while he struggled with the weight of operating the plant. She said Rubashkin’s relationship with his autistic son, Moishe, has suffered since his incarceration and that their family will likely return to New York after Rubashkin is sentenced.

“There’s a deep feeling of hurt,” Leah Rubashkin said.

She said her husband was never happy as a manager at Agriprocessors and wants to return to teaching, his first profession.

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