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11/14/2008

Former Agriprocessors CEO arrested again, charged with multi-million dollar bank fraud

CEDAR RAPIDS, Iowa - The former chief executive officer (CEO) of Agriprocessors Inc., in Postville, Iowa, was arrested by federal agents Friday and charged with bank fraud. The arrest was announced by U.S. Attorney Matt M. Dummermuth, Northern District of Iowa.

Sholom Rubashkin, 49, was arrested at about 8 a.m. Friday at his home in Postville by U.S. Immigration and Customs Enforcement (ICE) agents and U.S. Marshals on a charge of bank fraud. Rubashkin made an initial appearance at 11 a.m. in U.S. District Court in Cedar Rapids and was ordered held by Magistrate Judge Jon Scoles until a detention hearing Wednesday.

Rubashkin was arrested just two weeks ago on Oct. 30, and then charged with conspiracy to harbor illegal aliens for profit, aiding and abetting document fraud, and aiding and abetting aggravated identity theft.

The new complaint alleges that Rubashkin, the former CEO of Agriprocessors Inc., carried out a scheme to defraud a bank using Agriprocessors' $35 million line of credit by allegedly diverting millions of dollars in customer payments on Agriprocessors' accounts receivable. According to the complaint, the customer payments were part of the bank's collateral on the line of credit, and they were supposed to be sent directly to a depository account for the lending bank. At the direction of Rubashkin, the diverted customer payments were not posted to the customers' accounts in Agriprocessors' accounting system until a later date. The complaint alleges that as a result, the value of the accounts receivable appeared inflated on Agriprocessors' books. And because the amount the company was allowed to borrow was tied directly to the value of its accounts receivable, the scheme gave Agriprocessors the ability to borrow additional funds from the bank without proper collateral.

The complaint also alleges that Rubashkin instructed an Agriprocessors employee to delete evidence of the scheme from company computers the day after he bonded out on the original harboring, document fraud, and identity theft charges. If convicted on the bank fraud charge, Rubashkin faces a maximum sentence of 30 years in prison and a fine of $1 million or twice the loss caused, whichever is greater.

On the harboring charge, Rubashkin faces a possible penalty of 10 years in prison and a $250,000 fine. On the document fraud charge, he faces 10 years in prison and a $250,000 fine. On the aggravated identity theft charge, he faces a mandatory consecutive two years in prison and a $250,000 fine.

As with any criminal case, a charge is merely an accusation; a defendant is presumed innocent until and unless proven guilty.

The case is being prosecuted by Assistant U.S. Attorneys Peter Deegan, C.J. Williams, and Matthew Cole. The case was investigated by U.S. Immigration and Customs Enforcement and the FBI.