Q&A on the Latest Developments in the Rubashkin Case

As reported last week, there have been major developments in the ongoing saga of Sholom Mordechai Rubashkin. His attorneys have filed a 50-page brief in Federal court in Iowa, asking for a new sentencing hearing in light of startling revelations.

What is the new legal brief filed by Sholom Mordechai Rubashkin’s lawyers about, and why is it so important?

The reason given by the presiding judge for Sholom Mordechai Rubashkin’s shockingly long sentence — 27 years in jail— was primarily the result of the court’s finding that the loss incurred by the banks involved in this case was $27 million.

At the sentencing hearing, attorneys for Rubashkin had argued that this loss was attributable to the U.S. government’s insistence that no member of the Rubashkin family could be involved in any way in ownership or management of Agriprocessors, the company Sholom Mordechai helped run but was actually owned only by his father, Aaron.

The defense attorneys insisted that this “No-Rubashkin edict,” which the prosecutors enforced through the threat of forfeiture — a form of confiscation of assets by the government — frightened off potential buyers. In the words of the independent bankruptcy trustee, Aaron Rubashkin was “crucial” to the business. Without him the value of the business was far less. Eventually, a company with assets valued by a financial advisor to the independent bankruptcy trustee to be worth $68.6 million with $300 million in annual revenue, but without the participation or involvement of Aaron Rubashkin, sold for a fraction of that amount, a mere $8.5 million.

Had the company been sold for even $40 million — a sum offered by one would-be buyer before he was frightened off by the prosecutor’s conditions — the loss for the bank would have been zero.

In rejecting this argument, the Judge cited testimony by Ms. Paula Roby, an attorney who represented Joseph Sarachek, the Trustee appointed by the Bankruptcy court to oversee the sale of Agriprocessors.

Ms. Roby testified that she was unaware of any prohibition on the involvement of Rubashkins in the new entity, that any rumors regarding a prohibition on Rubashkins were “very unreliable,” and that Trustee Sarachek “worked very, very hard to dispel any rumors that were in the community [regarding a ‘No Rubashkin’ rule].” She also claimed that the prosecutors’ use of forfeiture ultimately had no impact on the bankruptcy sale process, and claimed not to know the government’s position on certain matters relating to Rubashkin family involvement in the new entity.

In the sentencing memorandum, the Judge declared that “the court credits Roby’s testimony and discredits testimony from Defendant’s witnesses.”

As detailed in their brief, Rubashkin’s legal team, headed by Gary Apfel, an attorney in Los Angeles, and Stephen Locher, an attorney in Des Moines, Iowa, have now gathered new evidence that they say proves that the statements of this crucial witness were false and that she misled the court.

What does this new evidence consist of?

In the course of their investigation, Rubashkin’s attorneys were able to obtain handwritten notes taken by James Reiland, another attorney representing Bankruptcy Trustee Joseph Sarachek, at a December 5, 2008, meeting between representatives of Sarachek and the U.S. attorney’s office. In addition to Reiland and his partner, Julian Solotorovsky (a former Federal Prosecutor himself) — both of whom gave affidavits confirming the accuracy of these notes — Ms. Roby (who was their co-counsel for the bankruptcy trustee) was present and actively participated in the meeting.

According to the notes, Assistant U.S. Attorney Richard Murphy said, in unmistakable terms, “No Rubashkins is very important to us — non-negotiable.”

Roby was literally the next person to speak after Murphy pronounced the “No Rubashkin” rule and asked whether there were “any other non-negotiables,” to which Murphy responded, again, that there could be “No involvement of Rubashkins from any standpoint.”

Are there any indications as to what motivated Roby to make such statements?

Among the affidavits presented to the court is an affidavit by an individual named Scott Dizack, who was a client of Ms. Roby at the same time she was also working on the Rubashkin case. Dizack states that Roby has a clear bias and contempt towards Rubashkin, a man she had never met, nor had any contact with. According to Mr. Dizack, Roby described Sholom Mordechai as the “ sleaziest … to ever walk the earth,” and had stated to him that she was going to make sure he was put away for a long time.

What other key evidence is included in this brief?

While the numerous points raised in the latest legal filing are far too many to be enumerated in this article, mention must be made of a powerful affidavit by Mr. Sarachek, the trustee that Ms. Roby represented.

The following is excerpts of that affidavit:

“In my view, the buyer who would pay the most money for the business was either a member of the Rubashkin family or someone associated in the Lubavitch community as they knew the business better than anyone else and they would naturally have to satisfy the existing creditors in order to continue operating the business. On several occasions, I encouraged buyers to consult with the Rubashkins. Aaron Rubashkin, in particular, was vital to maximizing the value of the Company on a going forward basis, as he had the relationships with large customers and unmatched experience and knowledge in the industry. Mr. Rubashkin was the namesake for the ‘Aaron’s Best’ and ‘Rubashkin’ trademarks, which had significant meaning and value in the glatt kosher meat industry and were among Agriprocessors’ most valuable assets. Aaron Rubashkin’s ongoing involvement was crucial to maximizing the company’s value in a bankruptcy sale and I met with him numerous times during the sale process.

Mr. Sarachek continues, “The potential forfeiture claims were of substantial concern to me. I worried they would have a chilling effect on the bankruptcy sale and therefore hurt my ability to do my job of maximizing the value of the estate. First Bank, the largest secured creditor, shared my concerns, as did United States Bankruptcy Trustee for the Northern District of lowa, Habbo Fokkena. My attorneys and I met with prosecutors shortly after my appointment as Trustee to express our concerns regarding the potential forfeiture claims. The prosecutors listened to our concerns, but ultimately made clear that they believed the assertion of forfeiture was necessary and appropriate regardless of the effect it would have on the bankruptcy sale. The prosecutors wanted to be actively involved in the bankruptcy sale process and felt the assertion of forfeiture was necessary to ensure the company would not be sold without their approval. They were particularly focused on making sure the Company was not sold to Aaron Rubashkin or any other member of the Rubashkin family, and that no member of the Rubashkin family would have any involvement in managing the business on a going forward basis. Prosecutors made this restriction very clear to my attorneys and me during the meeting shortly after my appointment as Trustee.

“Several potential buyers who appeared to be well-capitalized and had the wherewithal to purchase the business, including, among others, Meyer Eichler and Abraham Shaulson, expressed interest in having an ongoing relationship with the Rubashkins if they purchased the company. However, at the government’s direction, I disclosed to Eichler, Shaulson, and others that members of the Rubashkin family could not be involved in buying or managing the Company.

“In January 2009, a potential buyer named Eli Soglowek submitted a $40 million bid for Agriprocessors on behalf of an entity with which he was affiliated. I chose not to accept the $40 million bid outright, but rather to treat it as a ‘stalking horse’ bid to try to drive higher bids from other interested parties. I believed an auction process would lead to a bid even higher than $40 million.

“I informed Mr. Soglowek, Mr. Eichler, and other potentially interested parties that they would need to meet directly with prosecutors prior to consummating any purchase of Agriprocessors to discuss the issue of forfeiture and the conditions on which the government would waive its forfeiture rights. Many such meetings occurred in the early months of 2009, including meetings during the bankruptcy auction in Cedar Rapids, Iowa, in March 2009.

“The offers submitted by various bidders at the bankruptcy auction in March 2009 were insufficient to satisfy First Bank and MetLife and ultimately resulted in a “failed auction.”

“Shortly after the auction, I received a letter from First Bank declaring a default on certain loans the Bank issued to Agriprocessors subsequent to the company filing for bankruptcy. First Bank declared the default on the basis of, among other things, “discussions with certain government officials on or about March 24, 2009 … with respect to the actual or potential assertion by the United States of a right to forfeiture of assets of the Estate and the actions of the United States in pursuit of such claim or right.”

Sarachek concludes his affidavit by stating, “Among other things, the government’s assertion of forfeiture claims and restriction on the involvement of members of the Rubashkin family clearly had a chilling effect on the Agriprocessors’ bankruptcy sale process and resulted in the Company selling for a lower amount than it otherwise would have.”

This affidavit powerfully refutes the testimony of Paula Roby.

Did any of the would-be buyers come forward to tell their experiences?

Included in the Appendix accompanying the brief are affidavits from nearly a dozen other prospective and actual bidders confirming the “No Rubashkin rule.”

In early February 2009, prosecutors met with Eli Soglowek, a successful businessman in the food industry for whom Agriprocessors would be a strategic acquisition and who just days earlier had submitted a term sheet offering $40 million for Agriprocessors’ assets.

According to Soglowek, “Representatives of the United States Attorney’s Office told me that if [my company] purchased the assets of Agriprocessors, no member of the Rubashkin family or any related entity could have any management, consulting, or ownership role in the business going forward. I was told by representatives of the United States Attorney’s Office that if it was discovered that any Rubashkin was involved in the business going forward, there would be ‘very bad consequences’ for me and [my company]. “

David Wagschal, whose company, Kosher Standard, was the highest bidder during a failed bankruptcy auction in March 2009, said he was forced to meet with prosecutors during the auction.

David relates in his affidavit, “The U.S. Attorney’s Office representative told me that if my company bought the Agriprocessors business, the U.S. Attorney’s Office would confiscate the brand names and trademarks. He told me the business would have to ‘start from scratch’ and there could be no remnants of any connections to the Rubashkins. He said the U.S. Attorney’s Office would be ‘watching [me]’ and that it would not be easy to get funding or run the business.”

Wagschal’s partner, Jeff West, said in an affidavit that “The prosecutor was hostile and threatening. He accused my partner and me of being connected in some way to the Rubashkins or having the intention of buying the business and reselling it back to the Rubashkins … The prosecutor said he would be watching us closely and said or implied that the government might exercise its forfeiture rights after our purchase of the business.”

Another bidder, Meyer Eichler, said in yet another affidavit that Assistant U.S. Attorney Murphy “forewarned us in no uncertain terms that if he (or members of his office) were to discover that any member of the Rubashkin family had either an equity interest or a management role in the company after we purchased it, the U.S. Attorney’s Office would not allow this.”

Eichler’s colleague, Sid Borenstein, reiterated the point in his affidavit. “During the meeting, the U.S. Attorney’s Office representative informed us that ‘under no circumstances’ would the government permit a sale to take place to a buyer that had Aaron Rubashkin as a minority investor, nor would the government permit him to play a management role.”

Was the prosecutor aware that Roby was giving misleading information to the court?

According to the brief, not only were the prosecutors aware that Ms. Roby was giving false testimony when they produced her as their key witness to deny the existence of the “No Rubashkin Edict,” but they themselves were the ones who had made the “No Rubashkin Edict” in the first place.

Is there legal precedent for a court to overturn a sentence based on these types of revelations?

The brief cites a long list of previous cases, including some decided by the U.S. Supreme court to illustrate that there is ample precedent for overturning the sentence.

They include a 1959 landmark Supreme Court decision named Napue v. Illinois, which found that “The failure of the prosecutor to correct the testimony of the witness which he knew to be false denied petitioner due process of law in violation of the Fourteenth Amendment.”

In that decision, the court said the established principle that a State may not knowingly use false testimony to obtain a tainted conviction does not cease to apply merely because the false testimony goes only to the credibility of the witness.

“It is of no consequence that the falsehood bore upon the witness’ credibility, rather than directly upon defendant’s guilt. A lie is a lie, no matter what its subject, and, if it is in any way relevant to the case, the district attorney has the responsibility and duty to correct what he knows to be false and elicit the truth. … That the district attorney’s silence was not the result of guile or a desire to prejudice matters little, for its impact was the same, preventing, as it did, a trial that could in any real sense be termed fair.”

Another landmark case that is extremely pertinent to the Rubashkin brief is Brady v. Maryland. In that famous 1963 Supreme Court decision, the court declared that “We now hold that the suppression by the prosecution of evidence favorable to an accused upon request violates due process where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution.

“Society wins not only when the guilty are convicted, but when criminal trials are fair; our system of the administration of justice suffers when any accused is treated unfairly… A prosecution that withholds evidence on demand of an accused which, if made available, would tend to exculpate him or reduce the penalty helps shape a trial that bears heavily on the defendant. That casts the prosecutor in the role of an architect of a proceeding that does not comport with standards of justice…”

What happens next?

The government now has 60 days to file its reply. After that reply is filed, Rubashkin’s attorneys will have 30 days to respond to the government’s brief.