Rubashkin trial puts focus on bank loans

The eastern Iowa meat plant at the center of a massive fraud and immigration case failed several times to comply with the terms of a loan that kept the business afloat, a bank official said Tuesday.

Phil Lykens, a senior credit officer at First Bank Business Capital, acknowledged that the St. Louis bank continued to lend to the kosher slaughterhouse even after immigration agents arrested one-third of the plant’s workers.

First Bank Business Capital sent the kosher meat plant four loan payments totaling at least $3.45 million after a May 2008 immigration raid, according to financial documents shown to a South Dakota federal jury.

The testimony during week two of the financial fraud trial for Sholom Rubashkin, a former Agriprocessors Inc. executive, touched on a central question for the jury:

Did Rubashkin lie to First Bank, with fake sales records that cost the bank millions when the plant defaulted? Or did bank executives overlook sloppy business practices and illegal workers at the plant while collecting at least $13.5 million in interest payments?

Rubashkin sought loan money from sources not approved by the bank, which defense lawyer F. Montgomery Brown said the bank could have stopped.

The bank’s payments to Agriprocessors were part of a $35 million credit line extended to the northeast Iowa slaughterhouse.

Rubashkin faces 91 fraud-related charges, including bank, mail and wire fraud, money laundering and ignoring an order to pay livestock providers on time.

Lykens said First Bank downgraded the $35 million loan, tightening the restrictions, after the immigration raid, where 389 illegal workers were arrested.

But the bank continued to send money to help feed chickens and keep the plant operational, he said.

Lykens testified that Rubashkin denied knowing that the workers were illegal during a meeting with bank executives.

Gary Pratte, a First Bank vice president, said borrowers such as Agriprocessors were routinely monitored by bank employees. When pressed by defense lawyer Guy Cook, he said he had not reviewed the loan.

“I have thousands of calls to make each day, and I can’t read every loan document,” he said.

Cook said the evidence “goes directly to the bank’s blind indifference, that it was willing to take risks because (the loan) was highly lucrative. They were making a lot of money off of this loan, and they were not concerned with a lot of the details.”

Assistant U.S. Attorney Peter Deegan said talk about the bank’s loan losses was “simply an effort to take the amount of fraud here and dilute it.”

Prosecutors alleged that Rubashkin directed a plant employee to write fake sales invoices, which he then presented to First Bank to obtain loan advances that went beyond what the slaughterhouse could handle.

Defense lawyers acknowledged that business and record-keeping at Agriprocessors, Postville’s largest employer, was sloppy. But they deny that the records were fake.