Judge Orders Ex-Owners of Iowa Kosher Plant to Pay $2M

A federal judge has ordered members of the family that owned a kosher slaughterhouse in Iowa to pay more than $2 million after defaulting on financial agreements with one of their former banks, which has since collapsed.

U.S. District Judge Edward McManus entered a summary judgment in favor of the Federal Deposit Insurance Corp. and Value Recovery Group L.P. and against brothers Sholom and Tzvi Rubashkin and their father, Aaron Rubashkin.

The family owned the Agriprocessors Inc. meatpacking plant in Postville, which was the site of a 2008 raid in which 389 illegal immigrants were detained. The plant eventually filed for bankruptcy and was sold after the raid, which was the largest in U.S. history at the time.

Sholom Rubashkin, the company’s vice president, was later convicted on federal financial fraud charges, sentenced to 27 years in prison and ordered to pay $27 million in restitution. Prosecutors said he intentionally deceived the company’s lender and told employees to create fake invoices in order to show St. Louis-based First Bank the plant had more money flowing in than it did. He has appealed his conviction.

Georgia-based Omni National Bank sued the family last year after the Rubashkins stopped making payments on a $300,000 line of credit they received for a property rental company in Postville and on equipment they were renting from the bank. The equipment, including conveyor belts, labeling machines and computers, was used at the meatpacking plant.

Federal regulators shut down Omni days after it filed the lawsuit, saying it had engaged in “unsafe and unsound practices” after making bad real estate loans.

The FDIC was appointed Omni’s receiver and continued the lawsuit. Value Recovery Group, based in Ohio, bought the debt Aaron Rubashkin owed on the leases and joined the case.

Court records show the Rubashkins personally guaranteed the $300,000 line of credit for the rental company, Nevel Properties Corp., in 2007. McManus ruled the trio owes the FDIC nearly $290,000 for that loan plus interest. Nevel Properties rented out apartments and homes to many Agriprocessors employees.

McManus also ordered Aaron Rubashkin, who was president of Agriprocessors, to pay Value Recovery Group nearly $1.8 million for the equipment leases, which was the amount owed after equipment was sold during bankruptcy proceedings, plus interest.

G. Mark Rice, a Des Moines lawyer who represented FDIC and Value Recovery Group, declined comment on the ruling.

Michael Mallaney, a lawyer who represented the Rubashkins, did not return a phone message. He had asked the court for more time to file a motion opposing summary judgment after joining the case in September, but U.S. Magistrate Judge Jon Stuart Scoles rejected that request in October. Scoles said the defendants had failed to show cause for the extension.

“Here, defendants have made virtually no effort to actively defend this case,” he wrote.