Mr. Rubashkin was tried before a jury between October 13 and November 12, 2009. The heart of the prosecution’s financial case was that Agriprocessors had misrepresented the value of the collateral for the FBBC loans (in order to be able to make larger draws within its line of credit) in two ways: (1) by creating invoices that did not reflect actual sales, and (2) by channeling some customer payments toward its own cash needs and not depositing them immediately into the “sweep account.†The diverted funds ultimately were transferred from Agriprocessors to the sweep account, sometimes directly from Agriprocessors’ accounts and sometimes by being routed through bank accounts of a kosher grocery store in Postville (“Kosher Community Grocery†or “KCGâ€) and a Postville school providing Jewish education (“Torah Education†or “TEâ€). These two methods of inflating Agriprocessors’ accounts receivable were the basis for all the bank-fraud, wire-fraud, and mail-fraud counts, and all but one of the false-statement counts. The ultimate transfer of the diverted funds back to the First Bank “sweep account†– designed to repay the bank loans – formed the basis for the money laundering counts.
The prosecution also presented an alternative fraud theory: The loan agreement contained boilerplate certifications that Agriprocessors was not “in violation of any law, statute, regulation, ordinance, judgment, order, or decree applicable to [the] borrower which violation would in any respect materially and adversely affect the collateral, . . . or such borrower’s property, business, operations, or condition, financial or otherwise.†These certifications were allegedly false because Appellant knew that Agriprocessors was violating federal laws against harboring illegal aliens.
Over repeated defense objections and requests for a mistrial, the prosecution presented almost three trial days of evidence and witnesses to support the immigration-based fraud theory. This evidence included testimony about a covert meeting, near a barn on the Agriprocessors premises, between Mr. Rubashkin and the manager of the beef-kill division of Agriprocessors during the week before the raid. Although none of the prosecution’s witnesses actually heard this conversation, the prosecution argued to the jury that it concerned a scheme to pay for the purchase of fraudulent documents in anticipation of the ICE raid.
In order to satisfy the jury that Appellant had not believed Agriprocessors was violating the law against harboring illegal aliens, the defense sought to present testimony that attorneys had been advising Agriprocessors and the Appellant on immigration issues, including one lawyer who was an expert on immigration documentation and was actually present at the plant on the day of the raid in order to review the authenticity of employees’ documentation. The attorney-client privilege, assertedly held and not waived at the time of trial by Agriprocessors’ bankruptcy trustee, protected the content of the lawyers’ advice. But the district court declared that all testimony by the attorneys was irrelevant and excluded it even though it breached no privilege. Hence, the expert who had been present in Postville to review employees’ documentation was not allowed to testify that he was present even though proof of his presence would not have divulged any client confidences.
The prosecution also presented evidence that Agriprocessors had occasionally paid cattle suppliers after the strict time limits established by the Packers and Stockyards Act (“PSAâ€), which had been incorporated into a consent order between Agriprocessors and the Secretary of Agriculture. Violation of such an order is a criminal offense under the literal terms of the PSA. It was undisputed that all cattle suppliers had been paid by Agriprocessors; the company’s only error was paying late. The longest delay in payment was eleven days.
The jury acquitted Appellant on five counts of willfully violating an order of the Secretary of Agriculture, and convicted on the rest of the charges. In interrogatories relating to the money laundering counts, the jury found that the predicate transactions “did not involve profits†of any criminal activities.