Bank Defrauders! (Asset-Based Lending # 2!)

Recently I wrote about a bank which lent millions secured by concrete blocks that proved to have little value because the cost to transport them exceeded their value.  That borrower was not a crook, but in many cases, asset-based borrowers defraud their lenders.

 My favorite involves the esteemed Rabbi Sholom Rubashkin, father of ten and businessman.  He was the chief executive of Agriprocessors, a kosher slaughterhouse and meatpacking plant in Postville, Iowa. 

The Rubashkins set up shop in Postville, Iowa, in 1987, buying a defunct non-kosher plant.  The town drew national attention in 2000 when journalist Stephen Bloom published his book, Postville, describing the culture clash that resulted when the group of Hasidim moved into a farming town of 1,500.  At the time, the manual labor at the plant was performed by Eastern European immigrants.  Some complained to Bloom about working conditions.  Sholom’s father Aaron previously had problems with the National Labor Relations Board for abusing workers at his textile mill in New Jersey, and Sholom didn’t fall far from the tree.

The Rubashkins started to fly in undocumented Hispanics to fill their growing needs, and immediately began underpaying or not paying them, and abusing them.  One 26-year-old man from Mexico said, "There is somebody outside waiting to take your job – so you just keep working, or else."

"They feel like they’re not only treated unfairly, but treated as lesser beings – as second-class citizens," said Caitlin Didier, who lived in Postville for nine months in 2004 and interviewed more than 50

Hispanic workers for her dissertation at the University of Kansas on ethnic cooperation in Postville.

On May 12, 2008, the FBI and Department of Homeland Security agents raided the plant and arrested 389 workers who had fraudulent identity documentation, no doubt provided by Rubashkin or his henchmen.  At that time, it was the largest raid into a workplace in the United States. 

Later that year, after the Iowa labor commissioner fined Agri processors $10 million for wage violations, Sholom was arrested on federal conspiracy charges of harboring undocumented immigrants and aiding and abetting aggravated identity theft.  Federal officials claimed that he intentionally helped undocumented workers obtain false documentation. 

For some reason I don’t  understand, St. Louis’s First Bank, which was known for being conservative, had lent Agriprocessors $35 million secured by a lien on its accounts receivable.  When First Bank started to become suspicious about its collateral because of questionable borrowing base certificates signed by Sholom, it filed suit to have ATEC’s Paul "Buddy" Lerman (my uncle-in-law whom I have mentioned before) appointed  Receiver.  Buddy found that Rubashkin had used Agriprocessors cash to fund the growing orthodox community’s yeshivas.  Most of the alleged receivables had either been paid or were from non-existent buyers. 

Sholom was arrested again at his Postville home on federal charges of bank fraud and convicted in November 2009 on 86 charges of financial fraud, including bank fraud, mail and wire fraud, and money laundering.  He was sentenced to 27 years in prison by Judge Linda Reade, who had a reputation for being tough on white collar criminals. 

Because Iowa is in the Federal Eighth Circuit, Sholom's appeal was heard in St. Louis and I attended the argument.  He was well represented by Nathan Lewin, a lawyer known in Haredi circles.  The argument was held in the large en banc courtroom at the top of the 28-story Federal courthouse.  I had never seen so much security in that court building.  Apparently, Judge Reade and the Appellate Court judges had received threats.  

It was standing-room only for what may have been the largest group of Haredi men to gather in St. Louis.  After the argument, Lewin asked for and received permission to hold a minyan service in the courtroom after the judges left. 

Sholom’s appeal failed and the United States Supreme Court did not take the case, which was based in part on a false claim of antisemitism. 

Sholom was then transferred to the Club Fed in Otisville, New York, long known as the prison of choice for white collar religious Jews.  The New York Times in a story, mentioning that Trump lawyer Michael Cohen served his sentence at Otisville, observed: 

"For a Jewish person, there is no place like Otisville," said Earl Seth David, 54, a former inmate who attended kosher meals, religious classes and weekly Shabbat services in the prison shul,

a shared space where the Torah scrolls are locked up every night.”

The Haredi community, which votes as a block, cashed in all of its cards (political contributions?)  trying to get Sholom released and had help from many elected officials.  Prominent lawyer Alan Dershowitz asked President Trump personally to pardon him.  Virtually all of the pleas mentioned that Rubashkin was charitable.  (Of course, it was with First Bank’s Money.) 

After seven years, President Trump commuted Sholom's sentence (it was Trump's first commutation).  Sholom was released and welcomed to his home in Monsey, New York, by what the New York Post called a throng of thousands.  

I’m guessing that First Bank never recouped its money, and the undocumented immigrants mentioned above, who were preyed upon to fund Rubashkin’s frauds, didn’t  have such a welcome when they were released. 

The entire time the Haredi community, and some in the secular Jewish community, claimed Sholom was a victim of antisemitism.  I disagree.  Sholom was a cause of it! 

Like I said in a previous blog, "Be more like Einstein than Weinstein.”

Someone should have given Rubashkin that advice.