Postville plant paid to settle fraud case
By CLARK KAUFFMAN • ckauffman@dmreg.com • July 7, 2008


Iowa's Agriprocessors meatpacking plant agreed to pay $1.4 million last year to settle allegations that it participated in a fraudulent scheme to hide another company's assets.

The allegations revolved around Allou Distributors, a pharmaceutical company controlled by Herman Jacobowitz of New York. Allou filed for bankruptcy in 2003, shortly after its Brooklyn warehouse was torched.

The bankruptcy trustee in the Allou case accused the Jacobowitz family of orchestrating a "long-running and massive fraudulent scheme" to loot the company of millions of dollars by artificially inflating the company's assets. By exaggerating the company's value, the trustee alleged, the family was able to gain additional leverage to borrow money from lenders and convert company assets for their own personal use.


The trustee alleged that as part of the scheme, Allou made $3.2 million worth of payments to Agriprocessors and its affiliates between 1997 and 2001. The trustee alleged the Postville meat-packing plant provided Allou with no products or services in exchange for the money.

No Agriprocessors executives were criminally charged in the matter, and company officials have declined to answer questions about the case.

But at one point, Agriprocessors Vice President Sholom Rubashkin gave a deposition in the proceedings. Court records indicate that Rubashkin said his Postville real estate company, Nevel Properties, gave Allou nothing in return for tens of thousands of dollars in cash - an admission that apparently caught his attorney off guard:

"What did Nevel do for Allou?" the trustee asked.

"Nothing," Rubashkin replied.

"Perfect," said Rubashkin's attorney, Bernard Feldman.

"Do you know of any reason why Allou would be paying Nevel?" the trustee asked.

"I said before, I need to understand before I can answer you," Rubashkin replied. "I will get back to you on that."

Rubashkin later testified that Allou's payments to Agriprocessors were made in exchange for surplus meat products. But no one from Allou or Agriprocessors offered any explanation of why a pharmaceutical company would buy $3 million worth of kosher meat.

Rubashkin testified that the sole Agriprocessors executive who handled the Allou account died at his desk in 2003, taking with him all firsthand knowledge of Allou's purchases.

Eventually, Jacobowitz was accused of fraud and attempted bribery for offering $100,000 to a fire marshal, asking him to declare the warehouse fire an accident instead of the result of arson. He was later sentenced to 15 years in prison, ordered to forfeit $130 million, and to make $177 million in restitution to Allou's lenders and investors. His brothers Aaron and Jacob Jacobowitz were sentenced to 10 years in prison.

Although the Rubashkins were not charged with any criminal wrongdoing, they agreed last year to settle the claims of the trustee by paying $1.4 million - less than half of what was allegedly received from Allou.

The money was used by the trustee to help satisfy the claims of Allou's creditors.


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