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Bank: Agriprocessors Defaulted On $35M Loan
By NIGEL DUARA
Associated Press Writer
CEDAR RAPIDS, Iowa — A St. Louis-based bank is seeking to seize and auction all of Agriprocessors’ assets, claiming the slaughterhouse defaulted on a $35 million loan.
First Bank said in a lawsuit filed Thursday in U.S. District Court in Cedar Rapids that Agriprocessors overstated how much money it has available and that the company is either unable or unwilling to meet its loan payments.
The suit names Agriprocessors owner Aaron Rubashkin, his son and former CEO Sholom Rubashkin and slaughterhouses in Postville, Iowa, and Gordon, Neb. In addition to livestock and plant equipment, the suit includes the Rubashkins’ personal property as collateral.
“(Agriprocessors) have repeatedly made misrepresentations to First Bank by providing inaccurate and misleading Notices of Borrowing and other documents that misstated the value of the Collateral,” the lawsuit states.
The bank and the slaughterhouse held a phone hearing Friday in U.S. District Court in Cedar Rapids, and agreed to reconvene next week. If the bank prevails, the suit states it will hold foreclosure sales of the company’s assets.
The lawsuit follows a May immigration raid at Agriprocessors’s Postville plant that resulted in 389 arrests. The Rubashkins and others at the plant also have been charged with violating state child labor laws, and on Thursday Sholom Rubashkin was charged with illegally helping illegal immigrants get fake documents.
Agriprocessors did not immediately return calls seeking comment Friday.
The suit follows the announcement Friday that Des Moines-based Jacobson Staffing pulled its 450 workers from the plant this week. The staffing company, which had served as the slaughterhouse’s human-resources and recruitment arm, did not give a reason for the decision.
The departure of the 450 Jacobson staffers leaves the company with about 250 workers.
In the suit, First Bank said Agriprocessors and Aaron Rubashkin are liable for repayment of a 1999 loan for $35 million to its branch in nearby Decorah called Decorah Bank & Trust Co.
First Bank said Aaron Rubashkin made a $2 million down payment on the loan, but that the total amount could exceed the remaining balance because of interest, late charges and costs of collection.
The suit said the slaughterhouse bounced about $1.3 million in checks in October, and the bank wants the court to appoint an overseer, or receiver, to make sure the money is repaid.
First Bank said Agriprocessors kicked bank representatives off company property on Thursday.
The suit also said Sholom Rubashkin is liable for up to $1 million plus interest. Federal agents arrested Rubashkin on Thursday on charges of conspiracy to harbor undocumented immigrants for financial gain, aiding and abetting document fraud and aiding and abetting aggravated identity theft. He made an appearance later that day in federal court, then was released on his own recognizance.
His attorney said he will plead not guilty to the charges.
First Bank said Agriprocessors defaulted on the loan when it claimed multiple times to have more money in the bank than it did, and also when it opened a second account at the Luana Savings Bank in nearby Luana, where it deposited $1.3 million for checks that bounced this month.
“Due to (Agriprocessors’) various misrepresentations and diversions of First Bank’s Collateral, (Agriprocessors) have exceeded their available borrowing limits under the Borrowing Base, constituting further defaults,” the suit stated.
First Bank said in the suit that it warned Sholom and Aaron Rubashkin on June 19 and again on Oct. 23 that the slaughterhouse had spent and borrowed beyond its limit.
First Bank also said in the suit that the plant owes its electric company $188,000 and an $88,000 deposit. If it doesn’t pay, the suit states the company will cut the plant off on Nov. 3.
Alliant Energy, the plant’s electric company, did not immediately return calls seeking comment.
Collection of collateral could be a tricky issue at a meatpacking plant, and First Bank notes in the suit that much of the collateral is livestock.
“First Bank’s Collateral is in imminent danger of losing value before First Bank can conclude the process of collection and foreclosure,” according to the suit.
The suit notes that if electricity is cut off, millions of dollars in fresh and frozen meat could spoil. The bank also claims that millions of chicks and chickens in the plant’s inventory are in danger of starvation.
The administrator of kosher law for the Chicago Rabbinical Council said Friday that if the plant does shut down, Orthodox communities in smaller cities around the U.S. could be left without a supplier of kosher meat.
“That the saddest part of this whole thing,” said Rabbi Sholem Fishbane. “A city like Austin (Tex.) that has many, many kosher consumers could be left out.”
Fishbane said Agriprocessors shipped kosher meat to smaller cities where it wasn’t financially viable to do so.
First Bank said in a lawsuit filed Thursday in U.S. District Court in Cedar Rapids that Agriprocessors overstated how much money it has available and that the company is either unable or unwilling to meet its loan payments.
The suit names Agriprocessors owner Aaron Rubashkin, his son and former CEO Sholom Rubashkin and slaughterhouses in Postville, Iowa, and Gordon, Neb. In addition to livestock and plant equipment, the suit includes the Rubashkins’ personal property as collateral.
“(Agriprocessors) have repeatedly made misrepresentations to First Bank by providing inaccurate and misleading Notices of Borrowing and other documents that misstated the value of the Collateral,” the lawsuit states.
The bank and the slaughterhouse held a phone hearing Friday in U.S. District Court in Cedar Rapids, and agreed to reconvene next week. If the bank prevails, the suit states it will hold foreclosure sales of the company’s assets.
The lawsuit follows a May immigration raid at Agriprocessors’s Postville plant that resulted in 389 arrests. The Rubashkins and others at the plant also have been charged with violating state child labor laws, and on Thursday Sholom Rubashkin was charged with illegally helping illegal immigrants get fake documents.
Agriprocessors did not immediately return calls seeking comment Friday.
The suit follows the announcement Friday that Des Moines-based Jacobson Staffing pulled its 450 workers from the plant this week. The staffing company, which had served as the slaughterhouse’s human-resources and recruitment arm, did not give a reason for the decision.
The departure of the 450 Jacobson staffers leaves the company with about 250 workers.
In the suit, First Bank said Agriprocessors and Aaron Rubashkin are liable for repayment of a 1999 loan for $35 million to its branch in nearby Decorah called Decorah Bank & Trust Co.
First Bank said Aaron Rubashkin made a $2 million down payment on the loan, but that the total amount could exceed the remaining balance because of interest, late charges and costs of collection.
The suit said the slaughterhouse bounced about $1.3 million in checks in October, and the bank wants the court to appoint an overseer, or receiver, to make sure the money is repaid.
First Bank said Agriprocessors kicked bank representatives off company property on Thursday.
The suit also said Sholom Rubashkin is liable for up to $1 million plus interest. Federal agents arrested Rubashkin on Thursday on charges of conspiracy to harbor undocumented immigrants for financial gain, aiding and abetting document fraud and aiding and abetting aggravated identity theft. He made an appearance later that day in federal court, then was released on his own recognizance.
His attorney said he will plead not guilty to the charges.
First Bank said Agriprocessors defaulted on the loan when it claimed multiple times to have more money in the bank than it did, and also when it opened a second account at the Luana Savings Bank in nearby Luana, where it deposited $1.3 million for checks that bounced this month.
“Due to (Agriprocessors’) various misrepresentations and diversions of First Bank’s Collateral, (Agriprocessors) have exceeded their available borrowing limits under the Borrowing Base, constituting further defaults,” the suit stated.
First Bank said in the suit that it warned Sholom and Aaron Rubashkin on June 19 and again on Oct. 23 that the slaughterhouse had spent and borrowed beyond its limit.
First Bank also said in the suit that the plant owes its electric company $188,000 and an $88,000 deposit. If it doesn’t pay, the suit states the company will cut the plant off on Nov. 3.
Alliant Energy, the plant’s electric company, did not immediately return calls seeking comment.
Collection of collateral could be a tricky issue at a meatpacking plant, and First Bank notes in the suit that much of the collateral is livestock.
“First Bank’s Collateral is in imminent danger of losing value before First Bank can conclude the process of collection and foreclosure,” according to the suit.
The suit notes that if electricity is cut off, millions of dollars in fresh and frozen meat could spoil. The bank also claims that millions of chicks and chickens in the plant’s inventory are in danger of starvation.
The administrator of kosher law for the Chicago Rabbinical Council said Friday that if the plant does shut down, Orthodox communities in smaller cities around the U.S. could be left without a supplier of kosher meat.
“That the saddest part of this whole thing,” said Rabbi Sholem Fishbane. “A city like Austin (Tex.) that has many, many kosher consumers could be left out.”
Fishbane said Agriprocessors shipped kosher meat to smaller cities where it wasn’t financially viable to do so.
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