Rubashkin v. United States of America -

Filing 55

ORDER Regarding 3 Motion to Vacate/Set Aside/Correct Sentence (2255): The movant's 45 Motion for Leave to Take Discovery is denied. The movant's 46 Motion for an Evidentiary Hearing is denied. The movant's 3 Motion to Vacate/Set Aside/Correct Sentence (2255) is denied. A certificate of appealability is denied. Signed by Chief Judge Linda R Reade on 01/26/2017. (jjh)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
EASTERN DIVISION

SHOLOM RUBASHKIN,
Movant,

No. 13-CV-1028-LRR
No. 08-CR-1324-LRR

vs.
UNITED STATES OF AMERICA.

ORDER REGARDING
MOTION TO VACATE, SET ASIDE
OR CORRECT SENTENCE

TABLE OF CONTENTS
I.

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

II.

RELEVANT BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

III.

PARTIES’ ARGUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
A.
B.

C.

IV.

The Movant’s Merits Brief . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
Ground one . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
Ground three . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Government’s Responsive Brief . . . . . . . . . . . . . . . . . . . . .
1.
Ground one . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
a.
Disclosure of forfeiture position and reliance on
newly discovered evidence . . . . . . . . . . . . . . . . . . .
b.
Legality of forfeiture position . . . . . . . . . . . . . . . . .
c.
Testimony of Paula Roby . . . . . . . . . . . . . . . . . . . .
d.
Impact of forfeiture on loss amount . . . . . . . . . . . . .
e.
Cause and prejudice to overcome procedural
default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
Ground three . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Movant’s Reply Brief . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
Ground one . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
Ground three . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10
10
14
14
14
15
18
19
21
22
23
26
26
32

MOTION FOR LEAVE TO TAKE DISCOVERY . . . . . . . . . . . . . . . . . 34

V.

MOTION FOR AN EVIDENTIARY HEARING . . . . . . . . . . . . . . . . . . 35

VI.

ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
A.
B.

VII.

Proceedings Under 28 U.S.C. § 2255 . . . . . . . . . . . . . . . . . . . . 36
The Movant’s Grounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
1.
Sentencing Error . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
a.
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(1)
Judicial proceedings . . . . . . . . . . . . . . . . . . 42
(2)
Record in relation to bankruptcy matters . . . . . 48
(3)
Additional information . . . . . . . . . . . . . . . . . 83
b.
Applicable legal principles . . . . . . . . . . . . . . . . . . 100
(1)
Framework relied upon after conviction . . . . . 100
(2)
Nature and extent of due process rights when
a failure to disclose occurs during trial . . . . . 108
c.
Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
(1)
Procedural obstacles . . . . . . . . . . . . . . . . . 111
(2)
Cognizability . . . . . . . . . . . . . . . . . . . . . . 114
(3)
Merits of the sentencing error claim . . . . . . . 115
(a)
Parties’ positions/arguments . . . . . . . . 117
(b)
Understanding of the court . . . . . . . . . 123
(i)
Variables or factors . . . . . . . . . 123
(ii)
Estimate of loss . . . . . . . . . . . 128
(c)
Application of the sentencing
Guidelines . . . . . . . . . . . . . . . . . . . 133
(4)
Summary . . . . . . . . . . . . . . . . . . . . . . . . . 136
2.
Trial Error . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

CERTIFICATE OF APPEALABILITY . . . . . . . . . . . . . . . . . . . . . . . 139

VIII. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
I. INTRODUCTION
Before the court is Sholom Rubashkin’s motion to vacate, set aside or correct
sentence (civil docket no. 3). Sholom Rubashkin (“the movant”) filed such motion on
September 30, 2013. With leave of court, the movant filed an amended motion pursuant

2

to 28 U.S.C. § 2255 (“motion pursuant to 28 U.S.C. § 2255”) on March 18, 2014 (civil
docket no. 27-2).1
II. RELEVANT BACKGROUND2
In October and November of 2008, the government commenced criminal
proceedings against the movant by filing criminal complaints against him. An October 30,
2008 criminal complaint charged the movant with immigration crimes, and a November
14, 2008 criminal complaint charged the movant with financial crimes. In November and
December of 2008, the government presented evidence to the grand jury, and, after
considering the evidence, the grand jury returned multiple indictments that charged the
movant with immigration and financial crimes. The government alleged in a November
13, 2008 superseding indictment (criminal docket no. 80) that the movant committed
immigration crimes, and the government alleged in a November 20, 2008 second
superseding indictment (criminal docket no. 94) that the movant committed bank fraud

1

The motion pursuant to 28 U.S.C. § 2255 asserts three grounds for relief. All of
them are premised on Brady v. Maryland, 373 U.S. 83, 87 (1963), and related legal
authority. They are as follows: (1) the government (i) failed to disclose exculpatory
information concerning actions it took to influence the bankruptcy trustee overseeing
Agriprocessors’ bankruptcy and prospective parties looking to buy Agriprocessors during
bankruptcy proceedings and (ii) presented inaccurate testimony during the sentencing
hearing; (2) the government failed to disclose material, favorable facts concerning pre-ICE
enforcement action communications and, consequently, defense counsel failed to timely
seek disqualification based on the appearance of bias; and (3) the government failed to
disclose exculpatory information concerning the purpose of transferring money among
accounts. See generally (civil docket nos. 3 & 27-2). Only ground one and ground three
are at issue because the movant concedes that the court essentially rejected ground two
when it denied his motion to recuse. See Merits Brief (civil docket no. 44) at 44-45.
2

The facts and history of this case are well established. See generally Oct. 27,
2010 Order (criminal docket no. 958) (addressing motion under Rule 33); Jan. 20, 2016
Order (civil docket no. 42) (addressing motion to recuse); United States v. Rubashkin, 655
F.3d 849, 853-57 (8th Cir. 2011) (addressing the factual history of the criminal case and
the issues raised on direct appeal).
3

when he diverted customer payments on accounts receivable and caused Agriprocessors’
books to reflect an inflated amount for accounts receivable which in turn he offered as
collateral for bank loans.3 On December 11, 2008, the grand jury returned a third
superseding indictment (criminal docket no. 150), which, among other things, sought the
criminal forfeiture of property connected to the immigration crimes under 8 U.S.C. §
1324(b), 18 U.S.C. § 982(a)(6)(A) and 28 U.S.C. § 2461(c). The government’s criminal
forfeiture allegation provided:
Upon conviction . . ., [Agriprocessors, the movant and other
defendants] shall forfeit to the United States the proceeds and
gross proceeds of such violations, and any property traceable
to such proceeds, and any property, real or personal, that was
used to facilitate, or was intended to facilitate, the commission
of the offenses of which the defendants are convicted,
including but not limited to the following:
1.

the corporate name “Agriprocessors, Inc.”;

2.

any and all trademarks of Agriprocessors, Inc.,
including but not limited to: Iowa Best Beef
(registration number 2679189); Shor Habor
(registration number 2036953); Aaron’s Best
(registration number 2029970); and Rubashkin
(registration number 2031920); and

3.

any and all corporate stock of Agriprocessors,
Inc.

Third Superseding Indictment (criminal docket no. 150) at 14-15.
On January 15, 2009, the grand jury returned a fourth superseding indictment
(criminal docket no. 177), which, among other things, greatly expanded the number of
counts alleging that the movant committed financial crimes.

On March 31, 2009, the

grand jury returned a fifth superseding indictment (criminal docket no. 413). On May 14,
2009, the grand jury returned a sixth superseding indictment (criminal docket no. 464),
3

Agriprocessors, Inc. was named as a defendant in the November 20, 2008 second
superseding indictment. See Second Superseding Indictment (criminal docket no. 94).
4

which, among other things, greatly expanded the number of counts alleging that the
movant committed immigration crimes.
On July 16, 2009, a grand jury returned a 163-count seventh superseding indictment
(criminal docket no. 544) against the movant.

Count 1 charged the movant with

conspiracy to harbor undocumented aliens for profit, in violation of 8 U.S.C.
§§ 1324(a)(1)(A)(v)(I) and 1324(a)(1)(B)(i). Counts 2 through 70 charged the movant with
harboring and aiding and abetting the harboring of undocumented aliens for profit, in
violation of 8 U.S.C. §§ 1324(a)(1)(A)(iii), 1324(a)(1)(A)(iv), 1324(a)(1)(A)(v)(II) and
1324(a)(1)(B)(i). Count 71 charged the movant with conspiracy to commit document
fraud, in violation of 18 U.S.C. § 371. Count 72 charged the movant with aiding and
abetting document fraud, in violation of 18 U.S.C. §§ 1546(a) and 2. Counts 73 through
86 charged the movant with bank fraud, in violation of 18 U.S.C. § 1344. Counts 87
through 110 charged the movant with the making of false statements and reports to a bank,
in violation of 18 U.S.C. § 1014. Counts 111 through 124 charged the movant with wire
fraud, in violation of 18 U.S.C. § 1343. Counts 125 through 133 charged the movant with
mail fraud, in violation of 18 U.S.C. § 1341. Counts 134 through 143 charged the movant
with money laundering and aiding and abetting money laundering, in violation of 18
U.S.C. §§ 1956(a)(1)(A)(i), 1956(a)(1)(B)(i) and 2. Counts 144 through 163 charged the
movant with willful violation of an order of the secretary of agriculture and aiding and
abetting a willful violation of an order of the secretary of agriculture, in violation of 7
U.S.C. § 195 and 18 U.S.C. § 2.
Pursuant to the movant’s motion (criminal docket no. 497), the court ordered
separate trials on counts 1 through 72 (“Immigration Counts”) and counts 73 through 143
(“Financial Counts”).4 Id. Also upon the movant’s motion for a change in venue

4

The government filed the seventh superseding indictment after the court granted
the movant’s motion for separate trial. See June 25, 2009 Order (criminal docket no.
(continued...)
5

(criminal docket no. 624), the court ordered the trial to take place in South Dakota. See
Sept. 1, 2009 Order (criminal docket no. 656). From October 13, 2009 to November 12,
2009, a jury trial on the Financial Counts, which the court renumbered as counts 1 through
91,5 took place. See Minute Entries (criminal docket nos. 700-01, 704, 708-11, 715-18,
725, 727-32 & 734).
[The movant’s] trial on the [Financial Counts] focused on
Agriprocessors’ fraudulent inflation of collateral. The
government also introduced some evidence related to
immigration violations which was relevant to the fraud
charges. The [seventh superseding] indictment alleged that
Agriprocessors had fraudulently told [First Bank Business
Capital, Inc. (“FBBC”),6 a wholly-owned subsidiary of St.
Louis based First Bank,] it was not “in violation of any law,
statute, [or] regulation . . . which . . . would in any respect
materially and adversely affect the collateral . . . or
[Agriprocessors’] property, business, operations, or
condition.” The immigration evidence both provided an
alternative theory of bank fraud and formed the basis for
fifteen counts of false statements to a bank. 18 U.S.C. §
1014.
Rubashkin, 655 F.3d at 855 (fourth through ninth alteration in original). On November
12, 2009, the jury returned guilty verdicts on renumbered counts 1 through 71, 73 through
80, 84 through 89 and 91—fourteen counts of bank fraud, twenty-four counts of making

4

(...continued)
519). The seventh superseding indictment altered the numbering of the Immigration
Counts and Financial Counts and added counts 144 through 163, which were tried with the
Financial Counts.
5

The renumbered counts were as follows: counts 73 through 86 became counts 1
through 14, counts 87 through 110 became counts 15 through 38, counts 111 through 124
became counts 39 through 52, counts 125 through 133 became counts 53 through 61,
counts 134 through 143 became counts 62 through 71 and counts 144 through 163 became
counts 72 through 91.
6

FBBC frequently did business as FB Commercial Finance, Inc.
6

false statements and reports to a bank, fourteen counts of wire fraud, nine counts of mail
fraud, ten counts of money laundering and fifteen counts of violating an order of the
Secretary of Agriculture to timely pay suppliers of livestock. See Verdict Forms (criminal
docket no. 736). The jury returned not guilty verdicts on renumbered counts 72, 81, 82,
83 and 90—five counts of violating an order of the Secretary of Agriculture to timely pay
suppliers of livestock. Id. On November 19, 2009, the court granted the government’s
motion to dismiss without prejudice the Immigration Counts and related criminal forfeiture
provisions.

See Nov. 19, 2009 Order (criminal docket no. 746).

The allegations

underlying the Immigration Counts dealt with the May 12, 2008 worksite enforcement
action by Immigration and Customs Enforcement (“ICE”).
On February 22, 2010, the probation office filed a draft presentence report. See
Draft Presentence Report (criminal docket no. 845). On March 1, 2010, the court denied
the movant’s motion for judgment of acquittal and combined motion for judgment of
acquittal and motion for new trial. See Mar. 1, 2010 Order (criminal docket no. 854).
On March 8, 2010, the parties filed objections to the draft presentence report. See
Gov’t Objection (criminal docket no. 859); Defendant Objection (criminal docket no. 860).
On April 12, 2010, the movant filed a sentencing memorandum (criminal docket no. 879),
and a motion for downward departure and/or variance (criminal docket no. 880). On that
same date, the government filed a sentencing memorandum (criminal docket no. 883). On
April 14, 2010, the probation office filed the final presentence report (criminal docket no.
887).7 On April 20, 2010, the government filed a response to the movant’s motion for
downward departure and/or variance (criminal docket no. 892). On April 21, 2010, the
movant filed an amended sentencing memorandum (criminal docket no. 895) and an
amended motion for downward departure and/or variance (criminal docket no. 896).

7

After the court entered judgment against the movant, the probation office filed a
revised final presentence report (criminal docket no. 930).
7

From April 28 to April 29, 2010, the court held a sentencing hearing. The court
heard evidence and gave the movant his right of allocution. See Minute Entries (criminal
docket nos. 910 & 912). The court took the sentencing issues, including the issue that the
loss amount was too high because the government threatened forfeiture of Agriprocessors’
assets, which allegedly reduced the sale price of Agriprocessors’ assets during bankruptcy
proceedings, under advisement.

On June 21, 2010, the court filed a sentencing

memorandum, detailing the court’s interpretation and computation of the Guidelines,
revealing the sentence the court intended to impose after considering all of the factors
under 18 U.S.C. § 3553(a), discussing the evidence supporting the court’s sentence and
declining to vary from the advisory Guidelines range. See Sentencing Memorandum
(criminal docket no. 927). On June 22, 2010, the sentencing hearing reconvened, and the
court imposed a sentence at the low end of the advisory Guidelines range. See Minute
Entry (criminal docket no. 928); Judgment (criminal docket no. 929). On that same date,
judgment entered against the movant. See Judgment (criminal docket no. 929). On July
2, 2010, the movant filed a notice of appeal. See Notice of Appeal (criminal docket no.
932).
On August 5, 2010, the movant filed a motion for a new trial under Federal Rule
of Criminal Procedure 33(b)(1). See Motion for New Trial (criminal docket no. 942). On
October 27, 2010, the court denied the movant’s motion for a new trial. See Oct. 27, 2010
Order (criminal docket no. 958). On November 8, 2010, the movant filed an additional
notice of appeal. See Second Notice of Appeal (criminal docket no. 959).
On September 16, 2011, the Eighth Circuit Court of Appeals addressed several
issues, including: (1) whether the court’s meetings with ICE and the United States
Attorney’s Office created an appearance of partiality that necessitated recusal; (2) whether
the court erred in ordering the jury trial on the Financial Counts to commence first,
deciding a number of evidentiary issues and instructing the jury; (3) whether the court
correctly determined that there was sufficient evidence of money laundering; and (4)
8

whether the court miscalculated the loss involved in the movant’s fraud and failed to
consider all of the sentencing factors under 18 U.S.C. § 3553(a). See Rubashkin, 655
F.3d at 857-69. After the Eighth Circuit Court of Appeals resolved the movant’s claims
on direct appeal, the movant filed a petition for a writ of certiorari. See Notice of Petition
for Writ of Certiorari (criminal docket no. 972). The Supreme Court denied such petition
on October 1, 2012. See Rubashkin v. United States, ___ U.S. ___, 133 S. Ct. 106
(2012).
On October 4, 2013, the court considered the parties’ proposed scheduling of the
proceedings under 28 U.S.C. § 2255 and directed them to respond in a particular manner.
See Oct. 4, 2013 Order (civil docket no. 4). On November 22, 2013, the government filed
a motion to dismiss and an answer. See Motion to Dismiss (civil docket no. 5); Answer
(civil docket no. 6). On December 11, 2013, the government filed an amended answer.
See Amended Answer (civil docket no. 10). On January 29, 2014, the movant filed a
motion to recuse. See Motion to Recuse (civil docket no. 12). On March 18, 2014, the
movant filed a motion to amend his motion pursuant to 28 U.S.C. § 2255. See Motion for
Leave to Amend (civil docket no. 27). On January 20, 2016, the court denied the
movant’s motion to recuse. See Jan. 20, 2016 Order (civil docket no. 42). On that same
date, the court granted the movant’s motion to amend his motion pursuant to 28 U.S.C.
§ 2255, denied the government’s motion to dismiss and established a briefing schedule.
See Jan. 20, 2016 Order (civil docket no. 43).
On March 21, 2016, the movant filed a merits brief, a motion for leave to take
discovery and a motion for an evidentiary hearing. See Merits Brief (civil docket no. 44);
Motion for Leave to Take Discovery (civil docket no. 45); Motion for Evidentiary Hearing
(civil docket no. 46). In addition, the movant submitted an appendix. See Movant App’x
(civil docket no. 44-1). On May 19, 2016, the government filed a responsive brief
opposing the motion pursuant to 28 U.S.C. § 2255, the motion for leave to take discovery
and the motion for an evidentiary hearing. See Responsive Brief (civil docket no. 52).
9

In addition, the government submitted an appendix. See Gov’t App’x (civil docket no. 521). On June 20, 2016, the movant filed a reply brief. See Reply Brief (civil docket no.
53). On that same date, he submitted a supplemental appendix. See Movant Supplemental
App’x (civil docket no. 53-1). The motion pursuant to 28 U.S.C. § 2255 and related
issues are fully submitted and ready for decision.
III. PARTIES’ ARGUMENTS
A. The Movant’s Merits Brief
1.

Ground one

The movant generally asserts that he presented evidence of the government’s
improper use of forfeiture and interference in the bankruptcy case during the sentencing
hearing and, after hearing the testimony of a rebuttal witness, the court incorrectly
calculated the loss amount. The movant alleges that previously undisclosed evidence
proves that the government knowingly presented false and/or misleading sentencing
testimony. He states that detailed notes from a meeting involving prosecutors and the
bankruptcy trustee indicate that prosecutors did in fact impose restrictions that they denied
imposing during the sentencing hearing. He also states that the government failed to
disclose information regarding the impact that the government’s assertion of its rights to
criminal forfeiture had on the bankruptcy process and information regarding the nature and
extent of its role in the bankruptcy process. He maintains that, if the government had
disclosed the truth, it is likely that the court: (1) would have found that the government’s
pursuit of criminal forfeiture depressed the bankruptcy auction sale process such that the
bankruptcy trustee could not realize a sale price in excess of the fraud victims’ debt and
(2) would have calculated a sentencing Guidelines range between thirty and thirty-seven
months imprisonment. The movant asserts that the court must vacate his sentence and
resentence him in a hearing that is free from false and/or misleading testimony and that
fully takes into account the effects of the government’s conduct on the loss amount.

10

The movant asserts that the government cannot plausibly claim that it pursued
forfeiture to protect against the dissipation of assets. He maintains that it is clear that: (1)
the government used forfeiture to impose restrictions on the future ownership and
operation of Agriprocessors, that is, to prevent the movant’s father, Aaron Rubashkin,
from having a role even though the government never charged him; (2) the government’s
use of criminal forfeiture hurt the victims it is duty-bound to protect; (3) the government
focused on punishing Aaron Rubashkin rather than protecting the victims of the fraud
offense; and (4) neither FBBC nor the bankruptcy trustee wanted the government to pursue
forfeiture.
After observing that the government’s use of forfeiture suffered from numerous
defects and noting that the government unlawfully sought to forfeit either assets that an
uncharged third-party held or assets that had no nexus to criminal offenses, the movant
makes numerous assertions relating to the purpose for pursing forfeiture, the effect it had
on potential bidders, the sale price and the sentencing Guidelines range, the government’s
misconduct, the testimony of Paula Roby and the need to readdress the calculation of loss.
The court summarizes them below.
The government pursued forfeiture because it did not
want to rely on the bankruptcy process to determine a good
faith purchaser and because it sought to punish Aaron
Rubashkin. The government’s interference in the bankruptcy
process undermined the Bankruptcy Code’s goal of protecting
creditors. Throughout bankruptcy proceedings and even after
it became clear that the sale of Agriprocessors’ assets would
not generate sufficient revenue to satisfy creditors, the
government used the threat of forfeiture to prevent Aaron
Rubashkin and his family from having a role in
Agriprocessors.
The government’s forfeiture threats and attempts to
dictate who could own and operate Agriprocessors scared off
potential bidders, prevented the bankruptcy trustee from
maximizing the value of the bankruptcy estate, drove the sale
price down, caused FBBC’s losses to increase and impacted
11

the sentencing Guidelines range. The government interrupted
the free operation of market forces, which includes having a
prior owner with valuable expertise and experience participate
in the reorganization effort, and it played a key role in causing
considerable shortfall in value.
Rather than accept responsibility for its role in causing
the loss amount to increase, the government withheld evidence
and presented false and misleading testimony during the
sentencing hearing. Defense counsel relied on incomplete
information when asserting that the government’s interference
had an effect on the bankruptcy process. And, the government
neither corrected testimony that it knew was false nor
corrected the court when it relied on the false testimony.
Paula Roby falsely stated that: she was unaware of any
prohibition on the involvement of Rubashkins in
Agriprocessors after any sale; the rumors regarding a
prohibition on the future involvement of Rubashkins in
Agriprocessors were very unreliable; the bankruptcy trustee
“worked very, very hard to dispel rumors that were in the
community”; the government’s use of forfeiture had no impact
on the bankruptcy sale process; a key meeting with a potential
bidder occurred in January of 2009 or prior to meeting with
the government; and she did not know whether a potential
bidder could include Aaron Rubashkin as a minority investor
because that question was never posed. Paula Roby offered
misleading testimony about the purpose of related party
disclosures in bankruptcy proceedings, claimed not to know
the government’s position regarding whether Rubashkins could
be involved in Agriprocessors, suggested that potential bidders
who were concerned about a “no Rubashkin rule” were acting
unreasonably or fabricating their stories and gave the false
impression that the government did not improperly interfere in
the bankruptcy process. Paula Roby’s testimony undermined
the argument that the related party disclosure requirement
played a part in the government’s enforcement of its “no
Rubashkin rule.” Paula Roby had an undisclosed bias.
It would have been futile to challenge the court’s
credibility finding regarding Paula Roby. The government’s
failure to disclose evidence and presentation of false testimony
12

violated the Constitution. The court relied on false evidence
and/or incomplete information when it rejected the argument
about the government’s wrongful use of criminal forfeiture to
punish Aaron Rubashkin and increase the loss amount. It is
self-evident that Paula Roby’s testimony was material because
the court relied on it when finding that the sale of
Agriprocessors did not include a condition that no purchaser
of Agriprocessors could have any involvement with the
Rubashkins. The government had actual and constructive
knowledge of the “no Rubashkin rule” because prosecutors
came up with such rule.
In support of his assertions, the movant refers to: the December 4, 2008 meeting
that government counsel referred to in the government’s December 8, 2008 letter to Lloyd
Palans; the December 5, 2008 meeting that included the bankruptcy trustee, the bankruptcy
trustee’s criminal counsel, the bankruptcy trustee’s other counsel, including Paula Roby,
and government counsel, see Movant App’x (civil docket no. 44-1) at 88-98, 170-77; the
December 9, 2008 letter that Lloyd Palans sent government counsel in response to the
government’s December 8, 2009 letter, see id. at 86-87; the affidavit of the bankruptcy
trustee, see id. at 43-45; the affidavit of Eli Soglowek, see id. at 99-100; the affidavits of
individuals on behalf of prospective bidders, see id. at 46-54, 103-112, 123-24; the March
24, 2009 default letter that FBBC’s counsel sent the bankruptcy trustee, see id. at 113-15;
the July 16, 2009 seventh superseding indictment, see Seventh Superseding Indictment
(criminal docket no. 544); the July 14, 2009 letter to Anita Shodeen, see Movant App’x
(civil docket no. 44-1) at 118-19; the July 15, 2009 correspondence between the Deputy
Attorney General of Iowa and the government, see id. at 116-17; the July 30, 2009 letter
from Jay Eaton, on behalf of SHF Industries, LLC, see id. at 120-22; the testimony of
Paula Roby, see id. at 30-42; and the June 10, 2011 valuation report of Triax Capital
Advisors, LLC, see id. at 55-83.

13

2.

Ground three

The movant alleges that the government withheld exculpatory information regarding
the purpose of financial transactions that the government characterized as money
laundering. The movant states that the relevant time period included hundreds of financial
transactions that undermined the government’s assertion that he laundered money and
admissions from a key cooperating witness would have established that the financial
transactions that support his money laundering convictions facilitated something other than
money laundering. The movant claims that the government failed to disclose information
that addressed his intent when transferring money among accounts. The movant cites to
Mitchel Meltzer’s January 29, 2014 statement, in which he states that he recalled
mentioning to prosecutors and agents that the movant moved money between accounts to
play the float and that he did not believe that the movant intended to defraud FBBC when
doing so. See id. at 164-65.
B. The Government’s Responsive Brief
1.

Ground one

The government denies that it failed to disclose information that demonstrates it
influenced the bankruptcy trustee and prospective buyers or elicited perjury when Paula
Roby testified about the existence of an agreement not to hire Rubashkins, bidding
procedures and other matters related to the sale of Agriprocessors’ assets during
bankruptcy proceedings.

The government argues that the movant conflates key

terminology, shamelessly omits dispositive facts and furtively relies upon documentary
evidence that the government disclosed prior to the sentencing hearing to support his
assertion that a constitutional violation occurred. The government asserts that it never
claimed that it did not intend to pursue forfeiture if the Rubashkins regained control of
Agriprocessors, publicly announced its intention in pursuing forfeiture within days of
including a forfeiture allegation in the December 11, 2008 third superseding indictment
and disclosed to the movant documents that reiterated the forfeiture position that it had
14

publicly disclosed. The government points out that the movant fails to mention the
documents that the government disclosed prior to the sentencing hearing and relies on a
disingenuous and inaccurate reading of the sentencing record when asserting that the
government committed misconduct by knowingly presenting false testimony.

The

government emphasizes that the movant’s latest attempt to rewrite the history of his case
and cast his convictions and sentences as unjust is not a proper basis to grant relief.
In response to the movant’s arguments, the government makes a plethora of
arguments relating to: (1) the disclosure of the government’s forfeiture position and the
movant’s reliance on newly discovered evidence; (2) the legality of the government’s
forfeiture position; (3) the testimony of Paula Roby; (4) the impact of the government’s
forfeiture position on the loss amount; and (5) the inability to establish cause and prejudice
to overcome procedurally defaulted assertions. The court summarizes them below.
a.

Disclosure of forfeiture position and reliance on newly discovered
evidence

Despite being under no duty to disclose information that
cannot be characterized as exculpatory, the government
endeavored to provided the movant with complete information.
The government’s willingness to produce such information
contradicts his assertion that the government engaged in
misconduct.
The government consistently asserted that it would seek
to use forfeiture to prevent Aaron Rubashkin from regaining
equity in or control over Agriprocessors through the
bankruptcy process or otherwise. The government’s discovery
production prior to the movant’s sentencing hearing confirmed
that it had publicly and consistently proclaimed shortly after
Agriprocessors filed for bankruptcy that it would be notifying
prospective buyers that it would vigorously assert its forfeiture
rights, if necessary, to ensure that those involved in previous
criminal wrongdoing would not be allowed to continue to
financially benefit from assets subject to forfeiture. For
example, in the December 8, 2008 letter to Lloyd Palans, the
government expressed that it had no intention of pursing
15

forfeiture if a purchaser had no connection to the current
owner of Agriprocessors or connection with the managers that
were in place at the times of the offenses.
Aside from being fully informed of the government’s
forfeiture position prior to the sentencing hearing as a result of
documents that the government disclosed, the movant could
have conducted an investigation, sought additional information
from the government and/or gathered more information
through other channels. For example, the government’s
forfeiture position was discussed on the record in bankruptcy
proceedings and acknowledged by the bankruptcy trustee in
bankruptcy filings. After the government disclosed documents
that set forth its forfeiture position, the movant made them part
of the sentencing record and referred to them when asserting
that the government insisted that Rubashkins could not be
involved. Nothing prevented the movant from presenting
additional evidence during the sentencing hearing, and the
movant is precluded from relitigating the same issue that he
previously raised.
The movant suggests that he had incomplete information
regarding the extent of the government’s interference in the
bankruptcy process and the effect of it on the bankruptcy
process, but the movant fails to establish that he is entitled to
be resentenced based on newly discovered evidence. The
movant did not exercise due diligence even though the
government disclosed its forfeiture position, and the additional
information does not substantially differ from the information
that the movant already had.
The additional information disclosed by the movant in
the instant proceeding indicates that the government expressed
or described its forfeiture position in slightly different terms at
different times, but the government always maintained that it
would pursue forfeiture if any assets were ultimately controlled
by or used for the benefit of the Rubashkins. Heshy
Rubashkin’s continued employment at Agri Star is more
probative of the nature of the government’s forfeiture position

16

than the terms used by the government.8 The movant had
evidence of the bankruptcy trustee’s concerns and FBBC’s
concerns, and he presented such evidence during the
sentencing hearing. The movant’s additional information
makes clear that the bankruptcy trustee and prospective buyers
did not want the Rubashkins to be involved. It also indicates
that the government’s forfeiture position did not cause the
bankruptcy trustee to believe that he would be unable to obtain
in excess of $40,000,000 for Agriprocessors’ assets. The
movant’s additional information regarding meetings that
occurred with prospective buyers is consistent with what the
government disclosed in the December 8, 2008 letter to Lloyd
Palans, including that it would be willing to meet with
prospective buyers. The movant’s additional information fails
to indicate that prospective bidders communicated to the
government a clear desire to have Rubashkins involved or the
significance of having them involved. Additional problems,
such as potential buyers failing to disclose to the government
why they did not bid, are associated with the additional
information offered by the movant. The government disclosed
the substance of its interactions with SHF Industries, LLC, and
the content of the additional correspondence is consistent with
the forfeiture position that the government always maintained.
Filings in the bankruptcy case confirm the existence of
a requirement that bidders disclose their connections to related
parties.
While the bankruptcy court-approved bidding
procedures included a requirement that bidders needed to
disclose their connection to related parties to qualify as a
bidder, no “agreement” prevented the Rubashkins, related
parties or anyone else from purchasing assets through the
bankruptcy process. The bidding procedures did not prohibit
a prospective purchaser from associating with a particular
person or include a no-Rubashkin edict.
In the July 14, 2009 letter to Anita Shodeen, the
government expressed that it appreciated that SHF Industries,
LLC, did not intend to be associated with any person involved
8

Heshy Rubashkin, the movant’s brother, is also known as Tzvi Rubashkin and
Heshi Rubashkin.
17

in the previous “criminal wrongdoing” at Agriprocessors and
made clear that its right to forfeit the assets being purchased by
SHF Industries, LLC, would not be affected by the bankruptcy
process. The government never imposed a no-Rubashkin edict
on SHF Industries, LLC. The terms requested by the
government only required SHF Industries, LLC to disclose any
payment or other compensation to a related party as defined in
the bid procedures and notified SHF Industries, LLC that the
government reserved the right to seek forfeiture against the
interests of a related party that had been involved in criminal
wrongdoing.
b.

Legality of forfeiture position

The government had a lawful prerogative to pursue
forfeiture of all, some or none of Agriprocessors’ assets. Any
information regarding the government’s decision not to
exercise that prerogative under certain circumstances is not
exculpatory and, therefore, cannot be characterized as Brady
material; the movant’s insistence that the government needed
to disclose the circumstances pursuant to which it would not
pursue the lawful forfeiture of assets is not material to the
issue of punishment. The government may confiscate assets
used in or gained from criminal activity to deter future crimes
by depriving a criminal defendant of the fruits of illegal
conduct. Rather than protect defendants, criminal forfeiture is
meant to punish wrongdoing, prevent further illicit use of
property and lessen the economic power of criminal
enterprises.
The government lawfully pursued the forfeiture of
assets owned by Aaron Rubashkin. Although the government
did not charge Aaron Rubashkin, he could not successfully
assert an innocent owner claim; Agriprocessors, which was
wholly owned by Aaron Rubashkin, faced criminal charges
and allegations; Agriprocessors’ facilitating property could be
forfeited because of its nexus to illicit activity; forfeited
property is not always owned by a defendant. Nothing
prevented the government from pursuing criminal forfeiture
and/or civil forfeiture against the movant’s assets or
Agriprocessors’ assets, and the government could have
18

pursued substitute assets in the event that property subject to
forfeiture could not be located.
The government acted in accordance with 21 U.S.C. §
853 and only to make potential purchasers aware of the fact
that Agriprocessors’ assets were subject to forfeiture. Nothing
that the government did can be characterized as a veiled
attempt to diminish the value of Agriprocessors’ assets prior
to their sale in bankruptcy proceedings. By publicly asserting
its right to forfeiture, the government put potential buyers on
notice that assets acquired in the bankruptcy process were
subject to its potential claims. The government acted in a
manner that ensured prospective buyers could make an
informed decision as to acquisition of Agriprocessors’
distressed assets. Prior to the bankruptcy sale, the government
appropriately informed prospective buyers that any asset
acquired with or for a defendant and any money paid to a
defendant could be subject to forfeiture.
c.

Testimony of Paula Roby

Defense counsel’s imprecise questioning, including but
not limited to the existence of an agreement, rumors in the
community and potential offers that included ownership by
Aaron Rubashkin, resulted in broad answers, and Paula Roby
cannot be faulted for defense counsel’s imprecision in
formulating questions and his choice of words. No evidence
of any agreement exists. The movant impermissibly conflates
the term “agreement” with the government’s forfeiture
position; the movant cannot sustain a claim that Paula Roby
committed perjury by lifting her statements out of context and
giving them meanings that are wholly different than that which
their context clearly shows.
Paula Roby offered truthful and accurate testimony.
Paula Roby did not purport to know the exact date that she and
others met with Eli Soglowek and, given the questions that
were being asked, it is not surprising that she could not
pinpoint an exact date. It is possible that she was confused
about when a meeting occurred, and her misreference to a time
that preceded the date that Eli Soglowek entered into a term
sheet can only be described as innocent.
19

Paula Roby never misled the court when she testified
regarding related party disclosure requirements in bankruptcy
sales. Rather than testify about the purpose of the disclosure
requirements, Paula Roby testified that disclosure requirements
existed in prior bankruptcies and the question of related parties
is a concern of bankruptcy courts, which want to ensure that
there is no collusion between a creditor and a debtor that might
depress the sale price and harm other creditors.
Paula Roby provided accurate testimony and recognized
an important distinction between Aaron Rubashkin serving as
an advisor for a new company and Aaron Rubashkin obtaining
an ownership interest in a new company. The prospect of
Aaron Rubashkin attempting to regain control of
Agriprocessors through another purchaser was a primary
factor that led the government to allege forfeiture in its
indictments. The government’s forfeiture interest never led to
an agreement during the bankruptcy process or at any other
time, and Paula Roby correctly testified that the government’s
forfeiture interest never resulted in an agreement during the
bankruptcy process or at any other time. The questions that
the government asked Paula Roby were designed only to
establish that no agreement about hiring Rubashkins existed.
A fair characterization of Paula Roby’s testimony indicates that
she thought the government was concerned about Aaron
Rubashkin becoming an owner but it would not pursue
forfeiture against the assets of the company if Aaron
Rubashkin served in an advisory role. Paula Roby’s testimony
is consistent with the December 5, 2008 notes that indicate
Rubashkins could not have any involvement from a control or
benefit standpoint, and it is consistent with government
counsel’s representation in early December of 2008 that no
Rubashkins could be involved and representation in early
February of 2009 that Aaron Rubashkin could serve as an
advisor.
Even if the movant could establish that Paula Roby
provided false testimony, nothing indicates that the government
should have corrected testimony that it did not know was false.
If ambiguity in Paula Roby’s testimony existed, the movant
could have asked additional questions to clarify her testimony
20

and used exhibits, such as the December 8, 2008 letter that the
government sent to Lloyd Palans, to clarify her beliefs
regarding the government’s forfeiture position. In addition, he
could have called additional witnesses, such as the bankruptcy
trustee.
d.

Impact of forfeiture on loss amount

No constitutional violation occurred, and ordinary
questions of Guideline interpretation may not be asserted in a
§ 2255 proceeding. The movant knew of the government’s
intention to pursue forfeiture if the Rubashkins reclaimed
control of Agriprocessors through the bankruptcy process and
no prosecutorial misconduct, including but not limited to
offering or failing to correct false testimony, caused his
advisory sentencing range to be erroneously enhanced. Prior
to sentencing, the movant articulated the precise argument that
he claims he could not make due to the government’s
misconduct.
Despite being fully apprised of the government’s
forfeiture position, the movant elected not to call any
prospective bidders to testify that the government’s position
caused them not to bid or reduce their bid amounts. The
February 11, 2009 letter that Soglowek Nahariya, Ltd. sent the
bankruptcy trustee contradicts the movant’s claim that the
government’s threat of forfeiture at the February 6, 2009
meeting caused Soglowek Nahariya, Ltd. to withdraw its
$40,000,000 bid to buy Agriprocessors. Such letter does not
support the movant’s position because it explicitly refers to the
valuation of accounts receivable and inventory as the reason
for withdrawing its bid and indicates that Soglowek Nahariya,
Ltd. remained interested in buying Agriprocessors under
different terms.
Eli Soglowek’s September 29, 2013
declaration does not claim that he ever intended to “re-install”
Aaron Rubashkin or claim that he decided not to complete the
purchase of Agriprocessors due to the government’s forfeiture
position.
The government sought the forfeiture of
Agriprocessors’ assets only because the movant and
Agriprocessors committed crimes. It is unsurprising that
21

Agriprocessors’ criminal conduct, which the movant
facilitated, substantially compromised FBBC’s collateral, and
the loss attributable to the unlawful actions of Agriprocessors
and the movant can only be described as direct and
foreseeable. This case is no different than other fraud cases
where the very act of bringing criminal charges may inhibit the
ability to reduce the amount of loss.
The movant is not entitled to second-guess the decisions
of others that may have impacted the loss calculation under the
sentencing Guidelines. Because the movant engaged in a
massive fraud scheme, the court properly calculated the loss
amount by not taking into account any increase in the loss
amount based on the government’s insistence that Aaron
Rubashkin not be permitted to regain control of
Agriprocessors, other positions that the government took when
asserting its forfeiture rights and/or other actions by the
government or others.
e.

Cause and prejudice to overcome procedural default

Being fully informed of the government’s forfeiture
position, the movant made arguments that the court rejected.
Like he did with respect to other issues, the movant could have
either asked the court to reconsider its findings if he believed
the court made an error or pursued all of his arguments on
direct appeal. He is unable to raise related loss claims in this
proceeding because nothing prevented him from raising them
on direct appeal and he does not offer cause for failing to do
so. The movant is unable to assert that the law regarding
findings of credibility made it unlikely that he would be
successful on direct appeal as a basis to excuse his procedural
default. With respect to prejudice, the movant is unable to
show that there is a reasonable probability that his sentence
would have been different. The movant’s reliance on a flawed
valuation of Agriprocessors and speculation that a prospective
buyer would have actually paid more for Agriprocessors’
assets under different circumstances does not establish a
constitutional violation.
The post-sentencing evaluation conducted by Triax
Capital Advisors, LLC, had the limited purpose of determining
22

whether Agriprocessors was solvent between June 30, 2006
and June 27, 2008, stated that the estimate of values, including
the $68,662,617 number, should not be used for any other
purpose, reached the conclusion that Agriprocessors was
insolvent even though it accepted the claimed value of assets
at the maximum declared value, did not provide a fair market
value, qualified the numbers that it reached, bore little or no
relation to the actual value of the assets, accepted
Agriprocessors’ financial statements and other related
information without any verification and stated Agriprocessors’
inventory and accounts receivable collectively accounted for
$32,670,326 of the $68,662,617.
The court correctly calculated the loss amount
regardless of the government’s actions. Despite making
arguments regarding the impact that the government’s
forfeiture position had on the loss amount, the movant
acknowledged that an 18-level upward adjustment applied in
light of loss that exceeded $4,500,000 and then conceded on
direct appeal that a 20-level upward adjustment applied in light
of a loss that exceeded $7,000,000. The court would have
imposed the same sentence even if an error in calculating the
sentencing Guidelines occurred and strongly indicated that no
variance was warranted in light of the circumstances.
2.

Ground three

The government denies that it violated Brady by withholding information that
Mitchel Meltzer disclosed prior to trial. The government points out that it disclosed
Mitchel Meltzer as an individual who cooperated with law enforcement and it provided the
movant with the September 9, 2009 FBI report of the interview of Mitchel Meltzer, which
indicated that: Mitchel Meltzer was aware of the larger fraud scheme within
Agriprocessors; Mitchel Meltzer was surprised when he learned that Agriprocessors’
checks were being deposited into the depository account to cover prior diversions; the
author of the report stepped out of the interview when certain topics were discussed, and
the author was given a summary of what was discussed during his absence; the movant lost
the two-day float when banking laws changed; the two-day float was critical to the movant;
23

and Mitchel Meltzer understood how the movant was creating float when he saw checks
written for Torah Education and Kosher Community Grocery. See Gov’t App’x (civil
docket no. 52-1) at 164-75. The government contends that no Brady violation occurred
given what occurred prior to and during trial and what Mitchel Meltzer included in his
January 20, 2014 statement.
In support of its position that no Brady violation occurred, the government makes
a number of arguments. First, the government argues that Mitchel Meltzer’s statement is
inculpatory, rather that exculpatory, in that it made clear that the movant was check-kiting.
The government emphasizes that Mitchel Meltzer’s opinion regarding the movant’s checkkiting is just another way of defrauding a financial institution. The government maintains
that the movant’s desire to check-kite and his desire to launder money were not mutually
exclusive and that playing the float some of the time does not prove that he failed to
launder money at other times.
Second, the government argues that Mitchel Meltzer’s opinion that the movant did
not intend to defraud FBBC when transferring money among accounts lacks foundation
because Mitchel Meltzer testified at trial that he was first made aware of the transfers
between accounts at Agriprocessors, Torah Education and Kosher Community Grocery
only when the FBI asked him questions about them. It states that Mitchel Meltzer’s
speculative opinion about the movant’s intent when making transfers between accounts
would have been inadmissible at trial and of little assistance to the jury because Mitchel
Meltzer only formed such opinion after the FBI questioned him. Given the nature of
Mitchel Meltzer’s opinion, the government maintains that it falls short of being material
to the issue of guilt.
Third, the government argues that Mitchel Meltzer’s statement is cumulative of
information that the government disclosed prior to trial and cumulative of evidence that the
jury considered. The government points to a report of the July 31, 2009 interview with
Yomtov Bensasson, Agriprocessors’ chief financial officer, and his testimony during trial.
24

The government contends that the facts supporting the use of the float for business
purposes was well-known to the movant and he cannot credibly claim that his own intent
in moving money between accounts was hidden from him by the government. Regarding
the former contention, the government emphasizes that: (1) Yomtov Bensasson testified
that Agriprocessors played the float and by doing so automatically left Agriprocessors’
receivables higher and (2) the movant maintained during closing argument that no money
was diverted when taking advantage of the float. Regarding the latter contention, the
government emphasizes that the movant testified that he did not see the whole purpose for
the whole thing, that is, the “rounding up” of checks and transferring money between
accounts, and it could have been Mitchel Meltzer or Yomtov Bensasson who had a reason
for doing so.
Fourth, the government argues that the movant knew of the float and who had
information about it and, if he thought Mitchel Meltzer possessed information favorable
to him, he should have sought testimony from Mitchel Meltzer or presented other
evidence. The government emphasizes that the movant’s assertion that Mitchel Meltzer’s
statements are favorable to his defense is dubious in light of the fact that the movant
disclaimed any understanding of the purpose behind rounding up deposits and attempted
to blame the transactions on Mitchel Meltzer or Yomtov Bensasson.
Lastly, the government argues that Mitchel Meltzer’s statement fails to account for
the evidence that showed the movant intended to conceal his fraud by manipulating the
amounts of the transfers between accounts to make customer cash diversions look like
round-number transfers and to make replacement transfers look like customer payments.
The government maintains that: (1) the movant fails to offer any explanation as to why he
thought it was necessary to manipulate financial transactions at all and (2) the inclusion of
a rounded-up check with other deposits to hide the fact that the deposits contained diverted
customer payments clearly constitutes money laundering. The government emphasizes that
the movant has offered no defense to the more than $25,000,000 that he laundered by
25

concealing the fact that he rounded checks up before depositing them into Agriprocessors’
operating account.
In sum, the government maintains that Mitchel Meltzer’s opinion is neither
exculpatory nor material and it is cumulative of information that the government disclosed
and evidence that the movant presented. Additionally, the government maintains that,
regardless of Mitchel Meltzer’s opinion, the movant is unable to establish that he suffered
any prejudice because the jury would have returned the same verdicts.
C. The Movant’s Reply Brief
In his reply brief, the movant reiterates assertions that he made in his merits brief
and makes numerous arguments. The court summarizes those arguments below.
1.

Ground one
On and after December 5, 2008, the government
maintained that it would pursue forfeiture if any of
Agriprocessors’ assets were ultimately controlled by or used
for the benefit of the Rubashkins. The government admits that
it did not disclose evidence, such as the discussion that
occurred at the December 5, 2008 meeting, the December 9,
2008 letter from Lloyd Palans and the March of 2009
discussions with potential bidders and FBBC, and makes
significant admissions that entitle the movant to relief.
The government misstates the law, including the law
that relates to Napue9 and Brady, misunderstands the movant’s
arguments and distracts the court from the relevant issues.
The government twists words and splits hairs when asserting
that the court’s loss calculation and Paula Roby’s testimony are
correct, and the movant cannot be denied due process based on
semantics. The government permitted Paula Roby to provide
false and/or misleading testimony about agreements,
prohibitions, edicts, restrictions, dates and rumors and did not
correct it.

9

Napue v. Illinois, 360 U.S. 264 (1959).
26

The government’s disclosure of some evidence but not
all of the evidence is either an act of deception or a remarkably
convenient oversight. Brady disclosures do not vitiate a Napue
violation, which occurs when the government presents false or
misleading information on a material issue. The materiality
standard under Brady and Napue is not the same. Under
Napue, perjured testimony is considered material unless the
failure to disclose it would be harmless beyond a reasonable
doubt.
Although the knowing use of perjury is sufficient to
establish a due process violation, the movant only needs to
establish that Paula Roby’s testimony was substantially
misleading. The government cannot lead a factfinder to an
incorrect factual conclusion on the basis of testimony that is
substantially misleading but not literally false.
A Napue violation occurred when the government failed
to correct the false impression that it created after Paula Roby
provided testimony about the government’s forfeiture position.
The government’s fixation on the word “agreement” in Paula
Roby’s testimony is, at best, a response to an argument that
the movant never made and, at worst, a carefully-planned
attempt to mislead the court. The manner in which the
government asked Paula Roby about an agreement
demonstrates its intent to create a false impression. Any
reasonable observer would have understood that the
government’s reference to “some agreement not to hire
Rubashkins” meant some restriction or prohibition on Aaron
Rubashkin having an ownership or management role in the
new entity. Paula Roby’s denial of an “agreement” repudiated
Meyer Eichler’s accurate description of the government’s
forfeiture position. The court erroneously discredited Meyer
Eichler’s affidavit and mistakenly concluded that the
government did not take the position that no purchaser of
Agriprocessors could have any involvement with the movant
or the movant’s family.
When asked whether the government had a condition
that no buyer could have any involvement with the movant or
any other members of his family, FBI Special Agent Randy
Van Gent stated that the government had a “concern” that a
27

future buyer “may be bidding on behalf of the [movant] and/or
his family” and falsely declared that he would not describe one
of the conditions of disposition of the plant as a no-Rubashkin
edict. The government cannot sit idly when a witness
unintentionally creates a misleading impression.
The movant never limited his arguments concerning the
Rubashkins’ involvement to a claim that the government
imposed a formal restriction in bankruptcy proceedings. The
movant argued without limitation as to time, form and place
that the government’s forfeiture position and conduct with
respect to Aaron Rubashkin depressed the sale price for
Agriprocessors’ assets. The movant’s position did not hinge
on whether the government’s conditions were formal or
informal. The court accurately recognized the movant’s
position when it stated in its sentencing memorandum that the
movant was arguing that the government attached a condition
to the sale of Agriprocessors’ assets that no purchaser of
Agriprocessors could have any involvement with the movant
or the movant’s family. The point of the movant’s argument
was that the government injected itself into the bankruptcy
process and used its forfeiture allegations to impose conditions
on the future ownership and operation of Agriprocessors. The
government’s actions scared bidders, did not allow the
bankruptcy process to operate in a normal way and reduced the
sale price of Agriprocessors.
The court relied on Paula Roby’s testimony to conclude
that Meyer Eichler and Steve Cohen lied or were confused
with respect to the government’s forfeiture position. But,
Meyer Eichler and Steve Cohen provided accurate descriptions
of the government’s forfeiture position.
The government impermissibly asked Paula Roby
whether she held an opinion about whether the government’s
forfeiture allegation affected potential bidders. Paula Roby
attempted to bolster her opinion that the government’s
forfeiture position did not have an impact on potential bidders
by volunteering that a meeting with Eli Soglowek occurred
prior to the date he submitted his $40,000,000 bid. She
implied that the February 6, 2009 meeting did not discourage
Soglowek Nahariya, Ltd. from making a bid.
28

The timing of the February 11, 2009 letter that
Soglowek Nahariya, Ltd. sent the bankruptcy trustee strongly
supports Eli Soglowek and Nathan Tzivin’s statements that the
government’s conduct during the February 6, 2009 meeting
was the primary reason for withdrawing the $40,000,000 bid.
Given the government’s threats and demands concerning who
Soglowek Nahariya, Ltd. could and could not do business, it
is not surprising that the letter would only identify the results
of due diligence as the basis for withdrawing the bid.
Paula Roby’s testimony regarding rumors and the
grapevine could have caused the court to conclude that a
restriction regarding Rubashkins did not exist. Rather than
work hard to dispel rumors as Paula Roby testified, the
bankruptcy trustee conveyed the government’s forfeiture
position to prospective buyers. Based on what occurred during
the December 5, 2008 meeting, Paula Roby knew that Aaron
Rubashkin could not have an ownership role in
Agriprocessors, but she testified that she did not know whether
it would be permissible to “re-install” Aaron Rubashkin if a
purchaser wanted him.
Paula Roby’s testimony concerning whether the
government restricted the ability of the Rubashkins to have an
equity interest or management role is not consistent with the
position that the government advanced during the December 5,
2008 meeting. Paula Roby’s testimony suggested that the
bankruptcy trustee’s initial concern was dispelled. His
concerns, however, remained throughout the bankruptcy
process.
The government acted in an unreasonable and
unforeseeable manner. The government improperly asserted
forfeiture, interfered in the bankruptcy process by unilaterally
imposing its own definition of “good faith purchaser” and
failed to disclose that FBBC and the bankruptcy trustee
conveyed their concerns about its forfeiture position. It is
likely that the government elected not to call a witness from
FBBC so as to avoid the issue of loss causation.
The government’s disclosure does not cure the falsity of
Paula Roby’s testimony. The government may not use false
29

testimony so long as it makes disclosures. The government
has a duty to correct false testimony that it reinforced. The
government falsely implied that the related party disclosure
requirement was a routine part of bankruptcy proceedings and
not connected to the government’s forfeiture restriction. It
covered up its inappropriate conduct by asking questions about
what is required in bankruptcy proceedings.
The government suppressed evidence that addressed
whether a restriction of the Rubashkins’ involvement existed
and what effect the government’s forfeiture position had on
loss amount. The movant could not make a full and complete
argument regarding the extent to which the government’s
forfeiture position drove up the loss amount. The government
probably caused the entire loss that FBBC suffered. The
information that the government did disclose prior to the
sentencing hearing misled the movant, and the government’s
reference to the bankruptcy record further demonstrates an
intentional effort by the government to mislead the court
regarding the impact that the government’s restrictions had on
the bankruptcy estate.
Prospective bidders felt so strongly about Aaron
Rubashkin’s involvement that they made arrangements to have
Aaron Rubashkin serve as a minority owner. FBBC called its
post-petition loan into default in light of its March 24, 2009
discussion with the government about its forfeiture position.
The government’s use of forfeiture was unlawful and
unforeseeable. The government could not establish a nexus
between the criminal conduct and the assets subject to
forfeiture. The government did not have a right to pursue
forfeiture of Agriprocessors’ assets, and the impact of the
government’s actions on the bankruptcy sale price cannot be
attributed to the movant. Losses caused by legitimate conduct
of the government or a third-party in response to fraud cannot
be held against a criminal defendant if the conduct was
unforeseeable. It was unforeseeable that the government
would pursue forfeiture in the manner that it did and seek
forfeiture over the objections of the victim and the bankruptcy
trustee. The government must accept loss as it finds it. The
government cannot suppress a sale price by interfering in a
30

bankruptcy process, imposing conditions on who can own and
operate a private company, preventing a bankruptcy judge
from applying bankruptcy law and/or taking other steps over
the objections of interested parties.
The movant suffered prejudice. Agriprocessors had
value, as indicated by the valuation report of Triax Capital
Advisors, LLC showing $68,662,617 in assets, Eli Soglowek’s
offer of $40,000,000, the offer of almost $16,000,000 during
the March auction, the offer of $17,000,000 plus rent of
$3,000,000 per year, the bankrutpcy trustee’s assertion that
one could expect to earn $25,000,000 per year and the interest
of another party that valued Agriprocessors’ assets at
$45,000,000. Such values indicate that the government likely
caused a loss in excess of the outstanding debt to FBBC. So,
a reasonable probability that the result of the sentencing
hearing “could have” or “would have” been different exists.
At a minimum, the government’s forfeiture position caused a
loss of at least $7,500,000, which is the difference between the
bid of almost $16,000,000 during the March auction and the
$8,500,000 paid by SHF Industries, LLC, and total loss would
have been $19,500,000, which would have reduced the
movant’s sentencing Guidelines range by two levels.
The government ignores that its aggressive forfeiture
position interrupted the market and caused bidders not to
participate. The government misstates the law when arguing
that the movant is not entitled to second-guess the decisions of
others that may have impacted his loss calculation under the
sentencing Guidelines.
The court should take into
consideration that the movant believed $68,662,617 served as
collateral for, and would revert to, FBBC. If unforeseen
action by a third-party causes collateral to yield less than full
value, only the portion of the loss that is reasonably
foreseeable can be attributed to him. No reasonable person
would foresee the impairment of collateral in the manner that
the government caused.
It would have been absurd to seek reconsideration in
light of the record. The movant’s claim is not procedurally
defaulted because the government’s conduct impeded defense

31

counsel’s access to the factual basis for making the claim on
direct appeal.
The government cannot assert that the court would have
imposed the same sentence because the government denied the
movant due process. The court’s statement regarding
imposition of the same sentence even if it erred in calculating
the sentencing Guidelines cannot account for the government’s
misconduct. The court relied on the accuracy of testimony that
a no-Rubashkin restriction did not exist and altogether declined
to consider the impact of that restriction on loss amount.
Given the falsity of the testimony on which the court relied and
the suppressed information regarding the impact of the
government’s forfeiture position on the sale of Agriprocessors’
assets, there is no basis to conclude that the court would have
imposed the same sentence. The court failed to provide
sufficient justification for an alternative sentence, including
one based on the harboring of illegal aliens.
2.

Ground three

With respect to his contention that the government withheld information that
indicated Mitchel Meltzer thought the movant moved money between accounts to play the
float and believed he did not intend to defraud FBBC when doing so, the movant asserts
that the government does not deny that Mitchel Meltzer made statements concerning the
float and his intent and these statements are material for purposes of Brady. The movant
asserts that the government overlooks the fact that the non-disclosure of Mitchel Meltzer’s
statements had an effect on calculating his Guidelines sentencing range and calls into doubt
the validity of the movant’s money laundering convictions.
In support of his assertions regarding punishment, the movant argues that: (1) the
government previously stated that the third-party accounts, that is, the Torah Education
and Kosher Community Grocery accounts, were only being used for the specific purpose
of allowing repayments to be made to FBBC from some source other than Agriprocessors
itself; (2) the government had to characterize the transactions from the Torah Education
and Kosher Community Grocery accounts in this way to prove “sophisticated laundering”
32

under USSG §2S1.1(b)(3); (3) Mitchel Meltzer’s undisclosed statements undermine the
basis for a two-level enhancement because they establish that the use of the Torah
Education and Kosher Community Grocery accounts had nothing to do with concealment
and only were designed to “play the float”; and (4) there is a reasonable probability that,
had the evidence been disclosed to the defense, the result of the sentencing proceeding
would have been different.
Concerning the validity of his money laundering convictions, the movant maintains
that additional evidence of relatively minor importance might have been sufficient to create
reasonable doubt because the government presented a “flimsy” money laundering case
based on checks being written in odd amounts. He states that some transactions are
inconsistent with the government’s theory that he used the Torah Education and Kosher
Community Grocery accounts to conceal the fact that Agriprocessors was the source of
funds and there is at least a reasonable probability that testimony from a longtime
employee of Agriprocessors would have caused the jury to return not guilty verdicts on the
money laundering charges. The movant asserts that Yomtov Bensasson’s statement to the
FBI and testimony during trial does not render Mitchel Meltzer’s statements immaterial or
cumulative because Mitchel Meltzer’s statements are different in that they do not provide
an unlawful purpose for transferring funds.

He emphasizes that Mitchel Meltzer’s

statements provide that extending the time of the float and helping with short-term cash
flow management were the only reasons for moving funds to the Torah Education and
Kosher Community Grocery accounts.
Additionally, with respect to Mitchel Meltzer’s opinion about the lack of intent to
defraud when transferring funds, the movant contends that: (1) courts have admitted such
testimony; (2) the government’s narrow focus on admissibility ignores how Mitchel
Meltzer’s opinion would have allowed defense counsel to understand what to expect when
cross-examining him, especially considering that cross-examination of a witness who is
sympathetic is very different that cross-examination of a witness who is hostile; and (3) the
33

government cannot reasonably maintain that the movant should have asked blind questions
without knowing what Mitchel Meltzer disclosed, especially considering that Mitchel
Meltzer was an admitted liar and had an incentive to offer testimony that favored the
government.
Lastly, the movant takes issue with the government’s assertion that the inclusion of
an inculpatory opinion nullifies the duty to disclose information. He emphasizes that
Mitchel Meltzer’s opinion about the movant’s lack of any intent to defraud FBBC relates
to all of the charges, not just the money laundering charges, and reiterates that there is a
substantial difference between being punished for convictions based solely on fraud charges
and being punished for convictions based on fraud charges and money laundering charges.
The movant states that the government clearly recognizes such differences because it went
to great lengths to defend the validity of the money laundering convictions on direct
appeal. He maintains that the government should not be permitted to take inconsistent
positions—that is, argue that the money laundering charges did not rely on the same
financial transactions as the bank fraud transactions on direct appeal and argue that the
money laundering charges and bank fraud charges are equivalent in this proceeding.
IV. MOTION FOR LEAVE TO TAKE DISCOVERY
“A judge may, for good cause, authorize a party to conduct discovery under the
Federal Rules of Criminal Procedure or Civil Procedure, or in accordance with the
practices and principles of law.” Rule 6(a), Rules Governing Section 2255 Proceedings
for the United States District Courts. In order to establish “good cause,” the movant must
demonstrate that the record, supplemented by the discovery requested, may entitle the
movant to relief. See Dyer v. United States, 23 F.3d 1421, 1424 (8th Cir. 1994) (“We
find no abuse of discretion in the district court’s denial of [the movant’s] motions for
discovery because [the movant] did not show how the evidence he sought would establish
his innocence.”); see also United States v. Fields, 761 F.3d 443, 478 (5th Cir. 2014) (“A
petitioner demonstrates ‘good cause’ under Rule 6(a) ‘where specific allegations before the
34

court show reason to believe that the petitioner may, if the facts are fully developed, be
able to demonstrate that he is . . . entitled to relief.’” (quoting Bracy v. Gramley, 520 U.S.
899, 904 (1997))).
The court finds that the movant has not demonstrated the requisite “good cause” to
conduct discovery. The current record adequately allows the court to evaluate the
movant’s remaining grounds for relief, and the discovery requested, if produced, would
not entitle the movant to relief. Accordingly, the court shall deny the motion for leave to
take discovery.
V. MOTION FOR AN EVIDENTIARY HEARING
A district court is given discretion in determining whether to hold an evidentiary
hearing on a motion under 28 U.S.C. § 2255. See United States v. Oldham, 787 F.2d 454,
457 (8th Cir. 1986). In exercising that discretion, the district court must determine
whether the alleged facts, if true, entitle the movant to relief. See Payne v. United States,
78 F.3d 343, 347 (8th Cir. 1996). Accordingly, a district court may summarily dismiss
a motion brought under 28 U.S.C. § 2255 without an evidentiary hearing “if (1) the . . .
allegations, accepted as true, would not entitle the [movant] to relief, or (2) the allegations
cannot be accepted as true because they are contradicted by the record, inherently
incredible, or conclusions rather than statements of fact.” Engelen v. United States, 68
F.3d 238, 240-41 (8th Cir. 1995) (citations omitted); see also Delgado v. United States,
162 F.3d 981, 983 (8th Cir. 1998) (stating that an evidentiary hearing is unnecessary
where allegations, even if true, do not warrant relief or allegations cannot be accepted as
true because they are contradicted by the record or lack factual evidence and rely on
conclusive statements); United States v. Hester, 489 F.2d 48, 50 (8th Cir. 1973) (stating
that no evidentiary hearing is necessary where the files and records of the case demonstrate
that relief is unavailable or where the motion is based on a question of law). Stated
differently, the court can dismiss a 28 U.S.C. § 2255 motion without a hearing where “the
files and records of the case conclusively show that the prisoner is entitled to no relief.”
35

28 U.S.C. § 2255(b); accord Standing Bear v. United States, 68 F.3d 271, 272 (8th Cir.
1995) (per curiam).
The court concludes that it is able to resolve ground one and ground three from the
record. See Rogers v. United States, 1 F.3d 697, 699 (8th Cir. 1993) (holding that “[a]ll
of the information that the court needed to make its decision with regard to [the movant’s]
claims was included in the record” and, therefore, the court “was not required to hold an
evidentiary hearing” (citing Rule Governing Section 2255 Proceedings 8(a) and United
States v. Raddatz, 447 U.S. 667, 674 (1980))). The evidence of record conclusively
demonstrates that the movant is not entitled to the relief sought. Specifically, it indicates
that the movant’s assertions are meritless, frivolous and/or malicious. As such, the court
finds that there is no need for an evidentiary hearing. The court shall deny the movant’s
motion for an evidentiary hearing.
VI. ANALYSIS
A. Proceedings Under 28 U.S.C. § 2255
A prisoner in custody under sentence of a federal court is able to move the
sentencing court to vacate, set aside or correct a sentence. See 28 U.S.C. § 2255(a). To
obtain relief pursuant to 28 U.S.C. § 2255, a federal prisoner must establish: (1) “that the
sentence was imposed in violation of the Constitution or laws of the United States”;
(2) “that the court was without jurisdiction to impose such sentence”; (3) “that the sentence
was in excess of the maximum authorized by law”; or (4) “[that the judgment or sentence]
is otherwise subject to collateral attack.” Id.; see also Hill v. United States, 368 U.S. 424,
426-27 (1962) (listing four grounds upon which relief under 28 U.S.C. § 2255 may be
claimed); Watson v. United States, 493 F.3d 960, 963 (8th Cir. 2007) (same); Lee v.
United States, 501 F.2d 494, 499-500 (8th Cir. 1974) (clarifying that subject matter
jurisdiction exists over enumerated grounds within the statute); Rule 1, Rules Governing
Section 2255 Proceedings (specifying scope of 28 U.S.C. § 2255). If any one of the four
grounds is established, the court is required “to vacate and set the judgment aside and [it
36

is required to] discharge the prisoner or resentence him or grant a new trial or correct the
sentence as may appear appropriate.” 28 U.S.C. § 2255(b).
When enacting 28 U.S.C. § 2255, Congress “intended to afford federal prisoners
a remedy identical in scope to federal habeas corpus.” Sun Bear v. United States, 644
F.3d 700, 704 (8th Cir. 2011) (en banc) (quoting Davis v. United States, 417 U.S. 333,
343 (1974)). Although it appears to be broad, 28 U.S.C. § 2255 does not provide a
remedy for “all claimed errors in conviction and sentencing.” Id. (quoting United States
v. Addonizio, 442 U.S. 178, 185 (1979)). Rather, 28 U.S.C. § 2255 is intended to redress
constitutional and jurisdictional errors and, apart from those errors, only “fundamental
defect[s] which inherently result[] in a complete miscarriage of justice” and “omission[s]
inconsistent with the rudimentary demands of fair procedure.” Hill, 368 U.S. at 428; see
also Sun Bear, 644 F.3d at 704 (clarifying that the scope of 28 U.S.C. § 2255 is “severely
limited” and quoting Hill, 368 U.S. at 428); United States v. Apfel, 97 F.3d 1074, 1076
(8th Cir. 1996) (“Relief under 28 U.S.C. § 2255 is reserved for transgressions of
constitutional rights and for a narrow range of injuries that could not have been raised on
direct appeal and, if uncorrected, would result in a complete miscarriage of justice.”
(citing Poor Thunder v. United States, 810 F.2d 817, 821 (8th Cir. 1987))). A collateral
challenge under 28 U.S.C. § 2255 is not interchangeable or substitutable for a direct
appeal. See United States v. Frady, 456 U.S. 152, 165 (1982) (making clear that a motion
pursuant to 28 U.S.C. § 2255 will not be allowed to do service for an appeal).
Consequently, “an error that may justify reversal on direct appeal will not necessarily
support a collateral attack on a final judgment.” Id. (quoting Addonizio, 442 U.S. at 184).
The law of the case doctrine has two branches. See Ellis v. United States, 313 F.3d
636, 646 (1st Cir. 2002). The first branch involves the “mandate rule (which, with only
a few exceptions, forbids, among other things, a lower court from relitigating issues that
were decided by a higher court, whether explicitly or by reasonable implication, at an
earlier stage of the same case).” Id. The second branch, which is somewhat more
37

flexible, provides that “a court ordinarily ought to respect and follow its own rulings”
throughout subsequent stages of the same litigation. Id.; see also United States v. Bloate,
655 F.3d 750, 755 (8th Cir. 2011) (“The [law of the case] doctrine applies only to actual
decisions—not dicta—in prior stages of the case.”); Roth v. Sawyer-Cleator Lumber Co.,
61 F.3d 599, 602 (8th Cir. 1995) (“Law of the case applies only to issues actually decided,
either implicitly or explicitly, in the prior stages of a case.”). “[R]ulings are the law of
the case and will not be disturbed absent an intervening change in controlling authority.”
Baranski v. United States, 515 F.3d 857, 861 (8th Cir. 2008); see also Davis, 417 U.S.
at 342 (observing that law of the case did not preclude relief under 28 U.S.C. § 2255
because of intervening change in the law).
Hence, in collateral proceedings based on 28 U.S.C. § 2255, “[i]ssues raised and
decided on direct appeal cannot ordinarily be relitigated.” United States v. Wiley, 245
F.3d 750, 752 (8th Cir. 2001) (citing United States v. McGee, 201 F.3d 1022, 1023 (8th
Cir. 2000)); see also Lefkowitz v. United States, 446 F.3d 788, 790-91 (8th Cir. 2006)
(concluding that the same issues that have been raised in a new trial motion and decided
by the district court cannot be reconsidered in a subsequent collateral attack); Bear Stops
v. United States, 339 F.3d 777, 780 (8th Cir. 2003) (“It is well settled that claims which
were raised and decided on direct appeal cannot be relitigated on a motion to vacate
pursuant to 28 U.S.C. § 2255.” (quoting United States v. Shabazz, 657 F.2d 189, 190 (8th
Cir. 1981))); Dall v. United States, 957 F.2d 571, 572-73 (8th Cir. 1992) (per curiam)
(concluding that claims already addressed on direct appeal could not be raised); United
States v. Kraemer, 810 F.2d 173, 177 (8th Cir. 1987) (concluding that a movant could not
“raise the same issues . . . that have been decided on direct appeal or in a new trial
motion”); Butler v. United States, 340 F.2d 63, 64 (8th Cir. 1965) (concluding that a
movant was not entitled to another review of his question). With respect to a claim that
has already been conclusively resolved on direct appeal, the court may only consider the

38

same claim in a collateral action if “convincing new evidence of actual innocence” exists.
Wiley, 245 F.3d at 752 (citing cases and emphasizing the narrowness of the exception).
Further, movants ordinarily are precluded from asserting claims that they failed to
raise on direct appeal. See McNeal v. United States, 249 F.3d 747, 749 (8th Cir. 2001);
see also Ramey v. United States, 8 F.3d 1313, 1314 (8th Cir. 1993) (per curiam) (citing
Frady, 456 U.S. at 167-68, and noting that a movant is not able to rely on 28 U.S.C. §
2255 to correct errors that could have been raised at trial or on direct appeal); United
States v. Samuelson, 722 F.2d 425, 427 (8th Cir. 1983) (concluding that a collateral
proceeding is not a substitute for a direct appeal and refusing to consider matters that could
have been raised on direct appeal). “A [movant] who has procedurally defaulted a claim
by failing to raise it on direct review may raise that claim in a [28 U.S.C. §] 2255
proceeding only by demonstrating cause for the default and prejudice or actual innocence.”
McNeal, 249 F.3d at 749 (citing Bousley v. United States, 523 U.S. 614, 622 (1998)); see
also Massaro v. United States, 538 U.S. 500, 504 (2003) (“[T]he general rule [is] that
claims not raised on direct appeal may not be raised on collateral review unless the
[movant] shows cause and prejudice.”). “‘[C]ause’ under the cause and prejudice test
must be something external to the [movant], something that cannot fairly be attributed to
him . . . .” Coleman v. Thompson, 501 U.S. 722, 753 (1991). “Prejudice” that is
necessary to excuse procedural default means that the alleged error worked to the movant’s
actual and substantial disadvantage. See Frady, 456 U.S. at 170; Johnson v. United States,
278 F.3d 839, 844 (8th Cir. 2002); Swedzinski v. United States, 160 F.3d 498, 501 (8th
Cir. 1998). If a movant fails to show cause, a court need not consider whether actual
prejudice exists. See McCleskey v. Zant, 499 U.S. 467, 502 (1991). Actual innocence
under the actual innocence test “means factual innocence, not mere legal insufficiency.”
Bousley, 523 U.S. at 623; see also Sawyer v. Whitley, 505 U.S. 333, 339-40 (1992)
(equating fundamental miscarriage of justice with factual innocence); McNeal, 249 F.3d
at 749 (“[A movant] must show factual innocence, not simply legal insufficiency of
39

evidence to support a conviction.”). To establish actual innocence, a movant “must
demonstrate that, in light of all the evidence, it is more likely than not that no reasonable
juror would have convicted him.” Bousley, 523 U.S. at 623 (quoting Schlup v. Delo, 513
U.S. 298, 327-28 (1995)) (internal quotation marks omitted); see also Sawyer, 505 U.S.
at 339 (clarifying that a fundamental miscarriage of justice can be demonstrated by
“establish[ing] that under the probative evidence [the movant] has a colorable claim of
factual innocence” (quoting Kuhlmann v. Wilson, 477 U.S. 436, 454 (1986))).10
Lastly, “not all constitutional violations amount to reversible error.” Satterwhite
v. Texas, 486 U.S. 249, 256 (1988). Reversal is required where a “structural defect
affect[s] the framework within which the trial proceeds, rather than simply an error in the
trial process itself.” Arizona v. Fulminante, 499 U.S. 279, 310 (1991). Thus far, an error
has been found to be structural only in cases where there is a complete denial of counsel,
a biased trial judge, an unlawful exclusion of grand jurors based on race, a denial of selfrepresentation at trial, a denial of a public trial or a defective reasonable doubt jury
instruction. See Johnson v. United States, 520 U.S. 461, 468-69 (1997) (collecting cases);
see also United States v. Marcus, 560 U.S. 258, 263 (2010) (reaffirming that structural
error has been found only in a very limited class of cases); Washington v. Recuenco, 548
U.S. 212, 218-19 (2006) (same). On the other hand, if no structural constitutional error
occurred and “the defendant had counsel and was tried by an impartial adjudicator, there
is a strong presumption that any other [constitutional] errors that may have occurred are
subject to harmless-error analysis.” Rose v. Clark, 478 U.S. 570, 579 (1986); accord
Fulminante, 499 U.S. at 306-07 (reiterating that constitutional errors that are not structural
defects are subject to a harmless error review). In that situation, the test is whether the

10

The procedural default rule applies to a conviction obtained through trial or
through the entry of a guilty plea. See, e.g., Matthews v. United States, 114 F.3d 112,
113 (8th Cir. 1997); Thomas v. United States, 112 F.3d 365, 366 (8th Cir. 1997); Reid v.
United States, 976 F.2d 446, 448 (8th Cir. 1992).
40

error “had substantial and injurious effect or influence in determining the jury’s verdict.”
Brecht v. Abrahamson, 507 U.S. 619, 623 (1993) (quoting Kotteakos v. United States, 328
U.S. 750, 776 (1946)); accord United States v. Clay, 720 F.3d 1021, 1027 (8th Cir.
2013).11

11

On direct appeal, courts consider whether it appears “beyond a reasonable doubt
that the error complained of did not contribute to the verdict obtained.” Chapman v.
California, 386 U.S. 18, 24 (1967); see also Delaware v. Van Arsdall, 475 U.S. 673, 681
(1986) (stating that errors determined to be “‘harmless’ in terms of their effect on the
factfinding process at trial” are excused under Chapman); United States v. Barnhart, 979
F.2d 647, 652 (8th Cir. 1992) (observing that a conviction will not be overturned if an
error is deemed to be harmless beyond a reasonable doubt). It, however, is unclear what
harmless error review standard applies in collateral proceedings under 28 U.S.C. § 2255.
The court must either be able to declare a belief that the error was harmless beyond a
reasonable doubt, see Chapman, 386 U.S. at 24, or be able to decide that the error “had
substantial and injurious effect or influence in determining the jury’s verdict,” Brecht, 507
U.S. at 623 (quoting Kotteakos, 328 U.S. at 776). In the 28 U.S.C. § 2254 context, it
is clear that the less onerous standard applies. See Fry v. Pliler, 551 U.S. 112, 121-22
(2007) (holding that the “substantial and injurious effect” standard set forth in Brecht
applies in proceedings under 28 U.S.C. § 2254). But, the Supreme Court has not directly
decided whether that same standard applies in proceedings under 28 U.S.C. § 2255. Cf.
id.; Frady, 456 U.S. at 164-66 (holding that the “plain error” standard is out of place
when a prisoner collaterally attacks a criminal conviction under 28 U.S.C. § 2255). Most
circuit courts of appeals, however, have held that the Brecht harmless error standard
applies when a conviction is collaterally attacked under 28 U.S.C. § 2255. See United
States v. Smith, 723 F.3d 510, 517 (4th Cir. 2013) (listing cases, including United States
v. Dago, 441 F.3d 1238, 1245-46 (10th Cir. 2006), United States v. Montalvo, 331 F.3d
1052, 1057-58 (9th Cir. 2003), Ross v. United States, 289 F.3d 677, 682 (11th Cir. 2002),
and Murr v. United States, 200 F.3d 895, 906 (6th Cir. 2000)); Clay, 720 F.3d at 1027
n.5 (citing Dago, 441 F.3d at 1246); see also Peck v. United States, 106 F.3d 450, 454
(2d Cir. 1997) (observing that a court must determine whether the constitutional error
substantially influenced the jury’s decision). Other circuit courts of appeals assume that
the more demanding standard applies. See, e.g., Herrin v. United States, 349 F.3d 544,
547-49 (8th Cir. 2003) (Riley, J., concurring) (concluding that a prosecutor’s improper
remarks were harmless beyond a reasonable doubt); Monsanto v. United States, 348 F.3d
345, 349 (2d Cir. 2003) (finding no reversible error in the district court’s application of
Chapman); Santana-Madera v. United States, 260 F.3d 133, 140 (2d Cir. 2001) (finding
(continued...)
41

B. The Movant’s Grounds
1.

Sentencing Error

The movant contends that a sentencing error occurred.

But, the movant

fundamentally misstates or misunderstands the nature of proceedings after a jury renders
its verdicts, the extent of due process protection in the context of different phases of a
criminal case and the scope of proceedings under 28 U.S.C. § 2255. He also repeatedly
mischaracterizes the record and misunderstands the law.
a.

Background
(1)

Judicial proceedings

During sentencing proceedings, a probation officer prepared a presentence report
which calculated an advisory sentencing Guidelines range of life imprisonment for the
Financial Counts, that is, the fraud counts, the false statement counts and the money
laundering counts, and the movant raised multiple objections regarding the probation
officer’s application of the Guidelines. Ultimately, the movant contended that his total
offense level should be either 28 (7 (base offense level) + 18 (loss between $2,500,000
and $7,000,000) + 3 (role)) for the fraud counts and false statement counts or 30 (25 (base
offense level) + 2 (18 U.S.C. § 1956) + 3 (role)) for the money laundering counts. And,
he asked the court to vary and/or depart downward and impose a term of imprisonment
that did not exceed seventy-two months. In April of 2010, the court held a sentencing
hearing and the parties presented evidence and argument in support of their positions.
Approximately two months after it heard from the parties, the court detailed its
findings and conclusions in a sentencing memorandum. The court determined that the
movant fell within criminal history category I. And, it calculated separate total adjusted
offense levels for the fraud and false statement counts, that is, bank fraud counts, and the
money laundering counts.
11

(...continued)
error to be harmless under either standard).
42

With respect to the fraud counts and false statement counts, the court: (1) relied on
USSG §2B1.1(a)(1) to determine that a base offense level of 7 applied; (2) applied USSG
§2B1.1(b)(1)(L) to increase the offense level by 22 levels because the loss exceeded
$20,000,000; (3) applied USSG §2B1.1(b)(9)(C) to increase the offense level by 2 levels
because the bank fraud offenses involved the use of sophisticated means; (4) applied USSG
§3B1.1(a) to increase the offense level by 4 levels because the movant was an organizer
or leader in the bank fraud offenses; and (5) applied USSG §3C1.1 to increase the offense
level by 2 levels because the bank fraud offenses involved the obstruction of justice. A
criminal history category of I and a total adjusted offense level of 37 for the bank fraud
counts resulted in an advisory sentencing range of 210 to 262 months imprisonment.
For the money laundering counts, the court: (1) relied on USSG §2S1.1(a)(2) to
determine that a base offense level of 31 applied; (2) applied USSG §2S1.1(b)(2)(B) to
increase the offense level by two levels because the movant was convicted under 18 U.S.C.
§ 1956; (3) applied USSG §2S1.1(b)(3) to increase the offense level by two levels because
the money laundering offenses involved the use of sophisticated means; (4) applied USSG
§3B1.1(a) to increase the offense level by 4 levels because the movant was an organizer
or leader in the money laundering offenses; and (5) applied USSG §3C1.1 to increase the
offense level by 2 levels because the money laundering offenses involved the obstruction
of justice. A criminal history category of I and a total adjusted offense level of 41 for the
money laundering counts resulted in an advisory sentencing range of 324 to 405 months
imprisonment.
Before it arrived at a total adjusted offense level for the bank fraud offenses and the
money laundering offenses, the court considered whether the facts and the law justified
upward adjustments under Chapter 2 and Chapter 3 of the Guidelines. When considering
the specific characteristics of the bank fraud offenses, the court did not adjust the offense
level under USSG §2B1.1(b)(2)(A)(i) for the number of victims in the case. And, the

43

court did not adjust the offense level for either the bank fraud offenses or the money
laundering offenses under USSG §3B1.3 for abusing a position of trust.
In addition, the court explicitly considered and rejected the government’s arguments
for an upward departure under USSG §5K2.0(a)(3) for extraordinary obstruction of justice
and USSG §5K2.21 for failure of the Guidelines to account for criminal conduct. Before
rejecting the government’s bases for departing upward, the court observed that an upward
departure would be permitted in light of the fact that the movant’s obstructive conduct was
more excessive than the conduct that is involved in a typical criminal case and the
Guidelines failed to account for a large amount of the movant’s criminal conduct.
Nonetheless, it noted that a sentence within the sentencing range established by the
Guidelines was sufficient to satisfy the goals of sentencing and that it would consider the
facts underlying the potential upward departures in conjunction with its analysis of the
factors enumerated in § 3553(a).
Similarly, the court explicitly considered and rejected the movant’s arguments for
a downward departure under USSG §5K2.0. The court also considered and rejected the
movant’s arguments for a downward variance from the advisory sentencing range in
accordance with the sentencing factors under § 3553(a). Before declining to vary, the
court made clear that the circumstances surrounding the movant’s case, such as the
reasonableness of a sentence for the movant under the Guidelines, the movant’s motive for
committing the offenses, the movant’s extraordinary charitable and civic contributions, the
movant’s relationship with his developmentally-disabled minor son and/or the movant’s
mental health history, did not warrant a downward variance and unaccounted for conduct
justified an upward variance. It also emphasized that, even if it inadvertently erred in
computing the Guidelines, it would still impose a sentence of 324 months imprisonment
after considering the factors under § 3553(a). And, when formally imposing the movant’s
sentence, the court clarified that it considered every argument and subargument that the
parties’ made.
44

On direct appeal, the movant, among other things, argued that the court erroneously
calculated his total adjusted offense level. More specifically, he asserted that the court
should not have calculated a sentencing range for the money laundering counts and the
court should not have included in its actual loss figure approximately $15,000,000 of loss
that he asserted he did not cause. Concerning the latter assertion, the movant maintained
that the actual loss to FBBC that was attributable to his fraudulent acts or omissions was
only about $12,000,000 because that is the amount of money that FBBC loaned to
Agriprocessors after he falsely inflated the value of collateral and fraudulently diverted
customer payments. He asserted that his crime was that he inflated the value of collateral
to enable Agriprocessors to obtain more money than it was entitled to obtain under the
terms of its loan agreement and that FBBC’s inability to collect additional amounts was
independent of his fraudulent acts or omissions.
The movant pointed out that any number of independent factors, such as
deteriorating market conditions, bad business planning or poor management by the
bankruptcy trustee, could have caused Agriprocessors to become unable to repay
$15,000,000 of its loan. With respect to the bankruptcy trustee, the movant asserted that
the record established that the shortfall on the balance of the loan was caused in no small
part by the bankruptcy trustee’s insistence that no member of the Rubashkin family be
involved in the new management of the company, refusal to seriously consider an offer to
purchase the company for $22,000,00012 and mishandling and destruction of frozen
inventory. The movant claimed that the loss figure could not include $15,000,000 because
12

In his appellate brief, the movant faulted the bankruptcy trustee for refusing to
seriously consider an offer to purchase Agriprocessors for $22,000,000. In his sentencing
memorandum, the movant argued that a substantial portion of the total loss amount could
be attributed to FBBC’s malfeasance with respect to Mordechai Korf’s $22,000,000 offer.
It appears that the movant mistakenly referred to the bankruptcy trustee’s involvement in
rejecting the $22,000,000 offer. It, however, is possible that the movant meant to fault
the bankruptcy trustee for refusing to seriously consider Soglowek Nahariya, Ltd.’s April
19, 2009 offer of $23,000,000 ($6,000,000 in rent + $17,000,000).
45

FBBC relied on legitimate collateral to loan such amount to Agriprocessors and FBBC’s
inability to collect such amount upon liquidation of collateral during bankruptcy
proceedings should not have been a factor that impacted the actual loss figure. According
to the movant, the actual loss amount could only include the difference between the amount
of credit FBBC extended based on his false representations and the amount of credit FBBC
would have extended had it known Agriprocessors’ true financial condition.
In response, the government asserted that the court did not err when it increased the
movant’s offense level by 22 levels, rather than 20 levels. Relying on USSG §2B1.1 cmt.
n.3(E)(ii), the government claimed that the court correctly calculated the actual loss
amount by taking the outstanding principal on the loan and reducing it by the amount
recovered from the sale of collateral and the fair market value of any unsold collateral.
It asserted that, after accounting for the sale of collateral, Agriprocessors still owed
approximately $30,000,000, and, after accounting for the fair market value of unsold
collateral and other credits, Agriprocessors still owed approximately $27,000,000. The
government emphasized that the court’s actual loss amount appropriately accounted for
FBBC’s inability to recover the full outstanding balance on the loan after the movant
perpetrated a massive fraud and caused Agriprocessors to file for bankruptcy.
The Eighth Circuit Court of Appeals affirmed the court’s calculations under the
Guidelines. See Rubashkin, 655 F.3d at 869. Before doing so, it addressed the movant’s
arguments concerning the court’s calculation of loss. Id. at 867-68.
The . . . court calculated the loss amount as the unpaid balance
on the Agriprocessors loan minus [FBBC’s] recovery in
bankruptcy proceedings. That amounted to about $27 million.
[The movant] contends that the correct figure would be $12
million—the difference between what [FBBC] would have lent
Agriprocessors without inflated collateral and what it actually
lent. His calculation fails to account for an additional $15
million [FBBC] lost due to Agriprocessors’ insolvency and
related bankruptcy.

46

The formula [the movant] proposes applies to calculations of
intended loss under the sentencing [G]uidelines. [United States
v. Miller, 588 F.3d 560, 566 (8th Cir. 2009)]. We have never
extended that formula to determine actual loss. See [USSG
§2B1.1] cmt. n.3(A)(i)-(ii) (defining actual and intended loss).
The government suggests that the more relevant [G]uideline is
[USSG §2B1.1] cmt. n.3(E)(ii). The commentary to that
[G]uideline provides that in cases involving pledged collateral
(such as in a bank fraud), loss shall be reduced by “the amount
the victim has recovered at the time of sentencing from
disposition of the collateral, or if the collateral has not been
disposed of by that time, the fair market value of the collateral
at the time of sentencing.”
The relevant [G]uideline commentary and the weight of
authority interpreting it are contrary to [the movant’s]
argument. The purpose of collateral is to protect a lender in
the event of a borrower’s default. See Black’s Law Dictionary
278 (8th ed. 1999). The relevant [G]uideline commentary
provides that our first consideration should be how much
protection the collateral actually provided. [USSG §2B1.1]
cmt. n.3(E)(ii). If a district court were to find that the
outstanding debt less the collateral would overstate the loss that
foreseeably resulted from fraud, it could depart downward.
Other circuit courts considering this issue have concluded that
loss is simply the unpaid balance on a fraudulently obtained
loan, less the realized or fair market value of any pledged
collateral. See, e.g., United States v. Turk, 626 F.3d 743, 750
(2d Cir. 2010) (“[A] defendant may not reasonably count on
the expected sale value of collateral to save himself from the
foreseeable consequences of his fraudulent conduct”); United
States v. Serfling, 504 F.3d 672, 679 (7th Cir. 2007).
[The movant] argues that changed market conditions,
unreasonable negotiating by [FBBC], and mismanagement by
the bankruptcy trustee combined to cause the default on
otherwise secured loans. The . . . court considered this
argument before making the specific factual finding that all
$27 million of the default foreseeably resulted from [the
movant’s] actions. It rejected [the movant’s] argument as
“fail[ing] to consider the impact of a massive fraudulent
47

scheme on the value of a company.” We agree. Any
reasonable person could have foreseen that large scale fraud
could lead to collapse and insolvency if discovered. We see no
error in the . . . court’s loss calculation.
Id. (fifteenth and twenty-first alterations in original).
(2)

Record in relation to bankruptcy matters13

The movant exercised day-to-day control over Agriprocessors prior to and after the
May 12, 2008 ICE enforcement action. See Presentence Report (criminal docket no. 887)
at ¶ 112.

Aaron Rubashkin had the only ownership or shareholder interest in

Agriprocessors. See Chapter 11 Affidavit (bankr. docket no. 3-2). Except for daily
operations, every major decision regarding Agriprocessors was discussed and approved
by Aaron Rubashkin. See Dec. 1, 2008 Hearing Transcript (bankr. docket no. 129) at
119-21, 161-62. Aaron Rubashkin had the ultimate decision-making authority and had
familiarity with the operations, business and financial affairs of Agriprocessors. See
Chapter 11 Affidavit (bankr. docket no. 3-2).
Agriprocessors experienced financial difficulties as a result of difficult
circumstances brought about by the ICE enforcement action.

Id.

After the ICE

enforcement action, Yomtov Bensasson recommended to the movant that Agriprocessors
file for bankruptcy. See Presentence Report (criminal docket no. 887) at ¶ 294. At that
time, Agriprocessors owed FBBC approximately $28,000,000 to $29,000,000. Id. Even
though production at Agriprocessors greatly decreased after the ICE enforcement action,
the amount of receivables that Agriprocessors reported to FBBC increased. Id. As of
November of 2008, Agriprocessors employed between 250 and 300 people at its plant in
Postville, Iowa, but, prior to its legal troubles, Agriprocessors had approximately 1000
employees. See Chapter 11 Affidavit (bankr. docket no. 3-2).

13

References to “bankr. docket” are associated with In re Agriprocessors, Inc.,
Case No. 08-02751 (Bankr. N.D. Iowa 201_).
48

To restructure its overall business, Agriprocessors actively sought new sources of
financing, and, as a result of labor issues, Agriprocessors engaged new supervisory
personnel to oversee plant operations. Id. Mordechai Korf’s company was interested in
purchasing Agriprocessors because it had “an extremely strong position in the kosher meat
market.” See Defense Sentencing Exhibit 11131 (criminal docket no. 912-268); see also
Sentencing Transcript (criminal docket no. 936) at 139-54.14 Mordechai Korf began
investigating the possibility of purchasing Agriprocessors from the Rubashkin family in the
summer of 2008. See Defense Sentencing Exhibit 11131 (criminal docket no. 912-268).
At that time, Mordechai Korf prepared a proposal and brought a team, including outside
counsel, an operations executive and a marketing executive, to tour Agriprocessors’ plant,
and the Rubashkin family told Mordechai Korf that the price for Agriprocessors was
around $40,000,000, which Mordechai Korf was not prepared to pay. Id.
In September of 2008, Aaron Rubashkin appointed Bernard Feldman as the chief
executive officer. See Chapter 11 Affidavit (bankr. docket no. 3-2). Despite such
appointment, the movant continued to exercise day-to-day control over Agriprocessors’
plant and finances until Agriprocessors filed for bankruptcy. See Presentence Report
(criminal docket no. 887) at ¶ 112.
In the Fall of 2008, Mordechai Korf learned that it might be possible to purchase
Agriprocessors directly from FBBC. See Defense Sentencing Exhibit 11131 (criminal
docket no. 912-268).
On October 30, 2008, FBBC sued Agriprocessors, Aaron Rubashkin, certain related
companies and the movant. In its lawsuit, FBBC alleged, among other things, that the
defendants diverted FBBC’s collateral, that is, its accounts receivable into an operating
account rather than a deposit account, and sought the repayment of its loan balance, which

14

The sentencing transcript (criminal docket nos. 936 & 937) has been filed with
its own pagination scheme. For the purposes of this order, the court shall cite to such
separate pagination.
49

exceeded $32,000,000, and the appointment of a receiver with expanded powers. See
Chapter 11 Affidavit (bankr. docket no. 3-2); see also Trustee Motion (bankr. docket no.
676).
On November 4, 2008, Agriprocessors filed for bankruptcy in the United States
Bankruptcy Court for the Eastern District of New York. See Bankruptcy Petition (bankr.
docket no. 3). As president of Agriprocessors, Aaron Rubashkin signed the voluntary
petition for relief under the Bankruptcy Code. Id. Agriprocessors sought bankruptcy
protection on an emergency basis due to pending litigation against it. See Chapter 11
Affidavit (bankr. docket no. 3-2). On November 5, 2008, Agriprocessors closed a
slaughterhouse located in Gordon, Nebraska because of financial problems.

See

Presentence Report (criminal docket no. 887) at ¶ 107.
In November of 2008, Mordechai Korf offered to buy FBBC’s interest in
Agriprocessors for an amount between $21,500,000 to $22,000,000.

See Defense

Sentencing Exhibit 11131 (criminal docket no. 912-268); see also Sentencing Transcript
(criminal docket no. 936) at 144-45. Mordechai Korf told FBBC that the value of
Agriprocessors would drop dramatically if a bankruptcy trustee assumed control and
altered the business in any way. See Defense Sentencing Exhibit 11131 (criminal docket
no. 912-268).

Mordechai Korf made it clear to FBBC that he wanted to buy

Agriprocessors while it was still operating. Id. After informing Mordechai Korf that it
had exposure in the amount of $27,000,000 to $29,000,000 and that it was not prepared
to discount its note at all, FBBC rejected Mordechai Korf’s offer. Id.; Sentencing
Memorandum (criminal docket no. 927) at 18.
On November 20, 2008, the United States Bankruptcy Court for the Eastern District
of New York appointed Joseph E. Sarachek as the bankruptcy trustee. See Amended
Order Appointing Trustee (bankr. docket no. 57). On November 26, 2008, the bankruptcy
trustee filed a notice that indicated he had held meetings with several parties, including
with Assistant United States Attorneys for the Northern District of Iowa. See Statement
50

in Support of Venue Change (bankr. docket no. 104). On December 1, 2008, the
bankruptcy trustee filed a declaration that indicated: (1) upon being appointed, he
immediately confronted “an estate in financial extremis” due in part to Agriprocessors
being shut down, certain principals of Agriprocessors facing federal criminal charges and
Agriprocessors facing federal criminal charges; (2) he needed to use cash collateral and
obtain emergency post-petition financing; (3) he determined that the prospect of locating
any third party that would be willing to extend credit to Agriprocessors would be “wholly
unrealistic” because of the government’s indictment; and (4) he had held meetings with
several parties, including with Assistant United States Attorneys for the Northern District
of Iowa. See Declaration of Trustee (bankr. docket no. 108).
At a hearing to determine whether it was appropriate to transfer the bankruptcy
action to the Northern District of Iowa, several individuals testified. The attorney for
Agriprocessors informed the United States Bankruptcy Court for the Eastern District of
New York that Agriprocessors would need at least $50,000,000 in new financing to satisfy
its obligation to FBBC and to fund operations. See Dec. 1, 2008 Hearing Transcript
(bankr. docket no. 129) at 36, 40, 43. He also asserted that FBBC’s actions hindered
Agriprocessors and acknowledged that, if Agriprocessors’ obligations to FBBC could not
be satisfied in a short period of time, then liquidation was the only option. Id. at 40.
Bernard Feldman, as Agriprocessors’ chief executive officer, testified that: (1)
Agriprocessors faced a multitude of problems, including the inability to replace the
employees that had been arrested by ICE, the lack of cash flow and the expenses that had
to be paid; (2) somebody would have to be prepared to come into Agriprocessors and
spend approximately $75,000,000 to give it the “maximum opportunity to survive”; (3)
it was imperative that Agriprocessors start operating at full capacity in the cattle category
and the cooked or prepared products category, not just the chickens category, in the very
immediate future, otherwise the value of Agriprocessors, which is structured as an
oversized plant, would be devastated and it would lose its niche; (4) Agriprocessors needed
51

to secure additional financing through a new investor so that it could satisfy its obligation
to FBBC and jump-start operations; and (5) Agriprocessors needed to reach an agreement
with state and federal authorities because they were seeking to seize the plant and impose
a multi-million dollar fine. See Dec. 1, 2008 Hearing Transcript (bankr. docket no. 129)
at 159-60, 167, 171-74, 191-92. He also testified that: (1) the biggest issue facing
Agriprocessors was its ability to satisfy FBBC and, if it could not do so within two to three
weeks, the only alternative would be to go into liquidation; (2) the government would be
willing to mitigate Agriprocessors’ liability, including a fine of $9,600,000 and the
possible seizure of assets; and (3) a lot of the concerns of the government would be
satisfied if he could establish a new controlling interest, a new face or a new control of
Agriprocessors. Id. at 172, 174, 188-94. Additionally, he: (1) observed that transferring
the bankruptcy action to the Northern District of Iowa would be devastating because it
would result in the loss of many, if not all, of the numerous potential investors that he had
contacted and it would also negatively impact the reorganization or restart of
Agriprocessors; (2) acknowledged that anyone financing Agriprocessors, merging with
Agriprocessors or making an equity investment in Agriprocessors would (i) need to
conduct due diligence, (ii) take into account the fact that Agriprocessors had been charged
with immigration offenses and bank fraud offenses and (iii) ensure that a viable operation
existed despite the accounting discrepancies; (3) stated that, although the bankruptcy
trustee undertook efforts to obtain financing, his efforts and Aaron Rubashkin’s efforts
would probably be the only avenue towards financing because no institutional investor
would be likely to help finance Agriprocessors in light of what happened; and (4)
expressed that, even though Agriprocessors filed for bankruptcy, investors that he had met
in August and September of 2008 expressed overall interest in Agriprocessors and told him
to contact them at the appropriate time. Id. at 174-75, 178-79, 185-95. Lastly, Bernard
Feldman expressed that potential investors preferred to be in New York because of certain
things that happened in Iowa and that a concern with the administration of justice existed
52

in light of, among other things, the computation of the multi-million dollar fine and the
potential seizure and displacement of Agriprocessors by the federal government. Id. at
187-88.
In addition to hearing the testimony of Bernard Feldman, the United States
Bankruptcy Court for the Eastern District of New York received the testimony of Aaron
Rubashkin, who emphasized that he had no part in the daily operations of Agriprocessors
and stated that the movant, Heshy Rubashkin and Yossie Gourarie addressed the daily
operations of Agriprocessors and all of them were equal to each other in terms of their
corporate responsibility. Id. at 120-22.
On December 8, 2008, government counsel sent a letter to Lloyd Palans, thencounsel for FBBC, regarding the government’s forfeiture allegation against
Agriprocessors, and it provided courtesy copies of such letter to the bankruptcy trustee and
his counsel. Such letter provided:
This is a follow-up on our meeting of December 4, 2008.
As we discussed, this office is considering bringing forfeiture
claims which could impact certain property which is included
in the bankruptcy estate of Agriprocessors, Inc. The assertion
of such claims may well occur in the very near future. You
have previously asked for this office’s thoughts on the pursuit
of such claims in view of their potential impact on a proposed
sale under 11 U.S.C. § 363, and the impact on the rights of
the creditors.
While I wish to share some general thoughts in this regard,
nothing stated in this letter should be taken as an agreement of
any kind. As discussed below, any agreement would be
reached at a later time with the appropriate parties.
In general, this office does not wish to do anything that would
impede a sale of Agriprocessors, Inc.’s assets to an appropriate
purchaser. This is especially so if such a purchaser would
intend to operate the Postville plant, in compliance with the
law, into the future. In addition, this office does not wish to
impede the distribution of the proceeds of such a sale to the
53

innocent creditors of the bankruptcy estate. Accordingly, any
assertion of forfeiture rights should only be seen as an effort
by this office to protect the ultimate interests of the United
States and provide some level of certainty and predictability
going forward. It is our belief that the public assertion of the
government’s forfeiture rights, along with clear
communication with any potential purchasers or other
interested parties as to the ultimate resolution of those rights,
would provide the greatest level of certainty.
Against that backdrop, please be aware that this office has no
present intention of executing forfeiture rights against assets
which can be sold in a section 363 sale to an [arm’s] length,
good faith, purchaser who has no connection to the current
owner of Agriprocessors, Inc., and no connection with the
managers that were in place at the times of the offenses. If
such a purchaser can be identified, this office would be willing
to agree with that purchaser in writing to a conditional waiver
of the government’s forfeiture rights with regard to the assets
at issue. In general, the conditions of such waiver would seek
to prevent the future use of the Agriprocessors, Inc. company
name and trademarks by anyone, and the future use of its
assets by or for the benefit of the current owner or the
managers in place at the times of the offenses. With regard to
the company name and trademarks, to the extent a qualified
buyer demonstrates a need to continue their use for a specified
time, this office would be willing to negotiate the terms of
such use.
This office has no present intention of executing forfeiture
rights against any legitimate, good faith creditor seeking to
assert a claim to the proceeds of a section 363 sale.
On a final note, during our December 4, 2008, meeting, you
indicated that a certain potential buyer was interested in
operating the Postville plant as part of [a going] concern. We
have since been told that the same potential buyer would intend
to close the Postville plant. As indicated above, to the extent
feasible, our office remains interested in working towards a
resolution that would permit the Postville plant to remain
operational for years to come. Please keep us as informed as

54

possible regarding the identity and interests of any potential
purchasers.
Gov’t App’x (civil docket no. 52-1) at 37-38, 90-91; Movant App’x (civil docket no. 44-1)
at 84-85.
On December 10, 2008, the bankruptcy trustee filed an additional declaration that
indicated: (1) he and his proposed counsel had met with the Assistant United States
Attorney prosecuting the criminal case against Agriprocessors and certain of its former
management; (2) he had a duty to maximize the value of the estate to afford its creditors
the greatest possible recovery; (3) he believed maximum value could only be achieved
through an open and transparent bankruptcy sale process that addressed the government’s
possible pursuit of forfeiture claims against Agriprocessors; (4) through proposed counsel,
he “had been in direct and frequent communication with federal authorities . . . to discuss
the parameters of a sale process that would obviate the need for the assertion of forfeiture
claims”; and (5) the pending federal criminal charges and the Packers and Stockyards Act
or trust fund claims by the providers of cattle and poultry to Agriprocessors would
necessarily involve some compromise by the parties in interest. See Trustee Declaration
in Support of Venue Change (bankr. docket no. 135) at 3.
On December 12, 2008, the United States Bankruptcy Court for the Eastern District
of New York transferred the bankruptcy action to the United States Bankruptcy Court for
the Northern District of Iowa. See Order Granting Transfer (bankr. docket no. 1). On
December 17, 2008, the bankruptcy trustee filed a status report that disclosed: (1) he and
his proposed counsel met with the United States Attorney for the Northern District of
Iowa; (2) the government filed criminal charges against Agriprocessors and its December
11, 2008 superseding indictment added a forfeiture allegation which potentially put at risk
Agriprocessors’ assets if it was convicted of one or more offenses; (3) he and his proposed
criminal counsel monitored initial federal criminal proceedings to protect the estate’s
interest concerning any fines or penalties that could be imposed; (4) he and his proposed

55

criminal counsel met with the United States Attorney for the Northern District of Iowa on
several occasions to discuss the effect that the government’s prosecution would have on
the bankruptcy proceeding, including but not limited to a sale under 363 of the Bankruptcy
Code; (5) he had been approached by no fewer than twelve parties that expressed an
interest in undertaking due diligence in connection with acquiring Agriprocessors’ assets;
and (6) the interested parties expressed that they were concerned about the government’s
potential forfeiture remedy and the 363 sale process. See Dec. 17, 2008 Trustee Status
Report (bankr. docket no. 148) at 3, 5-6.
On December 22, 2008, the government made clear that it intended to use criminal
forfeiture as a means to ensure that Agriprocessors’ assets did not end up being controlled
by or used for the benefit of those who allowed Agriprocessors’ assets to be used for
criminal purposes in the past. See Dec. 17, 2008 Hearing Notice (bankr. docket no. 107);
Gov’t App’x (civil docket no. 52-1) at 119-122. Specifically, when addressing the United
States Bankruptcy Court for the Northern District of Iowa, government counsel stated:
There’s been some talk about the government’s forfeiture
allegations and I just wanted to make clear that the government
brought its forfeiture allegations because we thought it was a
necessary step to, first of all, protect the government’s
interests going forward and provide some means so that the
assets which might be subject to this 363 sale don’t end up
being controlled by or being used for the benefit of those who
allowed these assets to be used for criminal purpose in the
past.
In addition, by sort of getting the issue out there we thought
that this was a first step in getting the issue resolved. We’ve
had good discussions with the [bankruptcy trustee] and [Lloyd]
Palans for [FBBC] about what we see as far as a 363 sale
going forward and we’re confident that we’re going to be able
to come to terms with any potential buyer—appropriate
buyer—in a way that would allow them sufficient comfort that
the assets at issue aren’t going to be subject to forfeiture in the
future. We’ve also given substantial assurances to [FBBC]

56

with regard to proceeds of any 363 sale—non-liquidation 363
sale.
I do think that in general we’re all on the same page and the
United States doesn’t want to do anything that’s going to
impede an appropriate sale to the appropriate purchaser under
363.
Dec. 17, 2008 Hearing Notice (bankr. docket no. 107); Gov’t App’x (civil docket no. 521) at 119-120.
On December 23, 2008, the bankruptcy trustee sought to retain Triax Capital
Advisors, LLC, for the purpose of accounting for the estate’s inventory, evaluating
strategic alternatives and formulating a business plan for selling and/or hypothecating the
estate’s assets. See Application to Retain Triax (bankr. docket no. 184) at 5. On January
9, 2009, Agriprocessors, through Aaron Rubashkin, filed schedules, including one that
claimed the book value of its assets was $40,013,246.00 excluding depreciation. See
Schedules and Statements (bankr. docket no. 243); Defense Sentencing Exhibit 11012
(criminal docket no. 912-313).
On January 25, 2009, the bankruptcy trustee sought an order that approved the sale
of substantially all of Agriprocessors’ assets, free and clear of all liens, claims and
encumbrances. See Motion for Sale of Property (bankr. docket no. 329); see also Defense
Sentencing Exhibit 11013 (criminal docket no. 912-314). When doing so, the bankruptcy
trustee noted that he had been inundated with requests by third parties to undertake due
diligence in connection with a potential transaction with the estate, entered into no less than
twelve non-disclosure agreements with interested parties and endorsed Soglowek Nahariya,
Ltd., which indicated it was prepared to acquire substantially all of Agriprocessors’ assets
for $40,000,000. See Motion for Sale of Property (bankr. docket no. 329). He also
attached the term sheet of Soglowek Nahariya, Ltd., which was dated January 21, 2009.
See Soglowek Term Sheet (bankr. docket no. 329-2). As a condition of purchase,
Soglowek Nahariya, Ltd. stated that it would acquire Agriprocessors’ assets free and clear

57

of all liens, claims, encumbrances, liabilities and interests, including the forfeiture
allegations contained in the government’s indictment dated December 11, 2008. Id. With
respect to disclosures, Soglowek Nahariya, Ltd. stated:
[Soglowek Nahariya, Ltd.] shall complete a disclosure
statement, which shall be sworn to under the penalty of perjury
. . . pursuant to 28 U.S.C. § 1746 setting forth any and all
connections or affiliations of [Soglowek Nahariya, Ltd.],
whether direct or indirect, express, implied, contingent or
unmatured, with any creditors or other parties-in-interest in the
case, including, without limitation, connections or affiliations
with [Agriprocessors’] principals or members of current or
former management (collectively, the “Related Parties”),
including intention to employ or enter into consulting
agreements with such parties post sale. The disclosure
statement shall also (i) disclose whether and to what extent any
Related Party will have an interest, directly or indirectly, in
[Agriprocessors’ assets] and/or the acquirer of
[Agriprocessors’ assets] following the consummation of any
proposed sale transaction with [the bankruptcy trustee]; (ii)
disclose [Soglowek Nahariya, Ltd.’s] post-sale intention with
respect to operation of the Postville, Iowa plant and
continuation of [Agriprocessors’] intellectual property,
including, but not limited to, trade names and all trademarks;
(iii) disclose any immigration compliance program that
[Soglowek Nahariya, Ltd.] has in place or that it intends to
implement post sale; and (iv) include a statement affirming that
[Soglowek Nahariya, Ltd.] has not engaged in any improper
conduct with actual or potential bidders for [Agriprocessors’
assets].
Id. at 5 (footnote omitted) (formatting omitted). Soglowek Nahariya, Ltd. indicated that
related parties included immediate members of the Rubashkin family and the spouses of
immediate members of the Rubashkin family. See id.
On February 11, 2009, Soglowek Nahariya, Ltd. sent the bankruptcy trustee a
letter. See Gov’t App’x (civil docket no. 52-1) at 80; Gov’t Sentencing Exhibit 5520
(criminal docket no. 912-289). In the letter, Soglowek Nahariya, Ltd. stated:

58

Reference is made to the Term Sheet dated as of January 21,
2009 (the “Term Sheet”) between you, in your capacity as
Chapter 11 Trustee of Agriprocessors, Inc. (the “Debtor”),
and Soglowek [Nahariya, Ltd.] setting forth the terms of the
proposed sale of the Debtor’s assets pursuant to sections 363
and 365 of the Bankruptcy Code. The Due Diligence Period
as to accounts receivable and inventory expires on February
11, 2009. Based upon the results of the due diligence
concerning the valuation of the accounts receivable and the
inventory, Soglowek [Nahariya, Ltd.] has concluded that it
cannot proceed with the transaction as constituted in the Term
Sheet. Notwithstanding this termination of the Term Sheet,
Soglowek [Nahariya, Ltd.] remains firmly committed to
further discussions and meetings with you to try to reach a
mutually acceptable term sheet on terms that work for all
parties in interest. We look forward to continuing our
discussions with you on this important matter.
Gov’t App’x (civil docket no. 52-1) at 80; Gov’t Sentencing Exhibit 5520 (criminal docket
no. 912-289).
On the same date, MLIC Asset Holdings, LLC,15 a primary secured creditor,
objected to the proposed sale price of $40,000,000 on the basis that it would not benefit
all creditors who have seen their collateral seriously diminished or extinguished all
together by Agriprocessors. See MLIC Objection (bankr. docket no. 425). On February
17, 2009, the U.S. Trustee also commented on the sale price of $40,000,000 and related
fees. See U.S. Trustee Comment (bankr. docket no. 455).
On February 27, 2009, the United States Bankruptcy Court for the Northern District
of Iowa entered an order approving the sale of Agriprocessors’ assets at an auction. See
Feb. 27, 2009 Order (bankr. docket no. 494). It included bid procedures, which set forth
a disclosure requirement that mirrored the one that Soglowek Nahariya, Ltd. included in
15

In addition to FBBC, MLIC Asset Holdings, LLC held a senior security interest
that encumbered Agriprocessors’ assets. Such interest amounted to approximately
$10,000,000. MLIC Asset Holdings, LLC is also known as Metropolitan Life Insurance
Company and MetLife.
59

its term sheet. Id. at 4. On March 4, 2009, the bankruptcy trustee submitted an asset
purchase agreement form, which included a disclosure requirement as outlined in the
February 27, 2009 order. See Asset Purchase Agreement (bankr. docket no. 507-1).
On March 17, 2009, MLIC Asset Holdings, LLC and the bankruptcy trustee entered
into a stipulation concerning the right to enter a credit bid at the auction of Agriprocessors’
assets. See Mar. 17, 2009 Stipulation (bankr. docket no. 567). Additionally, MLIC Asset
Holdings, LLC renewed its objection to the sale of Agriprocessors’ assets on the basis that
it could not reasonably make a credit bid at auction because no mechanism operated to
allow it to accurately determine how net proceeds of the sale would be allocated. See
MLIC Conditional Objection (bankr. docket no. 568).
Several parties submitted bids in connection with an auction that occurred on March
23 and March 24, 2009, but FBBC and MLIC Assets Holdings, LLC made credit bids for
their collateral in the amount of $20,000,000 and $6,500,000, respectively. See Sale
Motion (bankr. docket no. 678); Supplemental Sale Motion (bankr. docket no. 802). The
auction concluded upon the primary secured creditors making credit bids, which reflected
their unwillingness to accept the consideration being offered by the bidders at the auction.
Consequently, the bankruptcy trustee did not accept any of the bids submitted and did not
request a final order approving the sale.
On April 19, 2009, Soglowek Nahariya, Ltd. and others, including Nathan Tzivin,
came back to the table and made an offer to purchase Agriprocessors for $17,000,000,
payable on June 1, 2011, and rent of $3,000,000 per year or $250,000 per month until
June 1, 2011. See Sentencing Transcript (criminal docket no. 936) at 92-93; Defense
Sentencing Exhibits 11127, 11128 & 11129 (criminal docket nos. 912-264, 912-265 &
912-266). Either the bankruptcy trustee or FBBC rejected it. See Sentencing Transcript
(criminal docket no. 936) at 92-93; Defense Sentencing Exhibit 11128 (criminal docket no.
912-265).

60

On June 23, 2009, the bankruptcy trustee again sought to sell substantially all of
Agriprocessors’ assets to another party, that is, SHF Industries, LLC. See Supplemental
Sale Motion (bankr. docket no. 802). When doing so, the bankruptcy trustee stated that
SHF Industries, LLC, would be required to provide a disclosure statement, which again
substantially followed the disclosure statement that Soglowek Nahariya, Ltd. included in
its term sheet. Id. at 5. The bankruptcy trustee also observed that several parties
negotiated with the primary secured parties and obtained their consent to the proposed sale
to SHF Industries, LLC. Id.
On July 1, 2009, government counsel responded to a June 24, 2009 inquiry about
a proposed sale of equipment. See Gov’t App’x (civil docket no. 52-1) at 27. Government
counsel clarified that, although the government would not enter into the proposed
certification, it did not intend to assert any forfeiture rights against the sale of the identified
equipment and any proposed purchaser of the equipment should feel free to call if
questions arose. Id.
Prior to the sale of Agriprocessors’ assets, the government and SHF Industries,
LLC, discussed a disclosure statement that would be included as part of the final sale order
of the United States Bankruptcy Court for the Northern District of Iowa. On July 13,
2009, government counsel emailed Anita Shodeen, then-counsel for SHF Industries, LLC,
in an effort to determine the status of the disclosure statement because the contents of such
statement would allow the government to address its significant and varied interests and
determine the position it would take at a hearing scheduled for July 15, 2009. Id. at 8-9.
In response, Anita Shodeen sent the government the disclosure statement and indicated that
her client would sign it prior to the July 15, 2009 hearing. Id. at 8. In relevant part, the
disclosure statement provided:
[SHF Industries, LLC,] does not have any connections or
affiliations, whether direct or indirect, express, implied,
contingent or unmatured, with any creditors or other partiesin-interest in the captioned Bankruptcy Case, including
61

connections or affiliations with Related Parties (as defined in
the Bid Procedures) as set forth in the Order.
...
[SHF Industries, LLC, or an assignee of SHF [Industries,
LLC,] may, following the closing of the transaction
contemplated by the Order entered by this Court related to the
Sale of Assets pursuant to 11 U.S.C. §[ ]363 as submitted by
the [bankruptcy trustee] in the captioned Bankruptcy Case,
employ, or enter into consulting agreements with, certain
parties-in-interest in the captioned Bankruptcy Case that are
currently employed by [Agriprocessors].
None of the Related Parties will have an ownership interest,
directly or indirectly, in the Assets and/or [SHF Industries,
LLC, or an assignee of SHF Industries, LLC,] following the
consummation of the transaction contemplated by the Order.
...
[SHF Industries, LLC,] intends to continue to operate the plant
located in Postville, Iowa following the consummation of the
transaction approved by the Court pursuant to 11 U.S.C. §
363.
Pursuant to its Offer[, SHF Industries, LLC, or an assignee of
SHF Industries, LLC,] will acquire all of the intellectual
property of [Agriprocessors], including all trademarks and
tradenames owned by [Agriprocessors]. [SHF Industries,
LLC, or an assignee of SHF Industries, LLC,] may continue
to use such intellectual property following the consummation
of the transaction set forth in the Court Order.
[SHF Industries, LLC, or an assignee of SHF Industries,
LLC,] intends to adopt, promptly following the consummation
of the transaction contemplated by its Offer and the Court
Order a comprehensive screening and compliance program for
the retention of employees and to ensure compliance with all
immigration laws and regulations.
Id. at 10-12.

62

On July 14, 2009, government counsel sent Anita Shodeen a letter, which, in
pertinent part, stated:
This is to confirm our office’s telephone conversation of May
21, 2009, with you and representatives of SHF Industries,
LLC, including Mr. Hershey Friedman, and the July 7, 2009,
telephone conversation involving me, [another government
counsel], and you.
We understand the bankruptcy trustee for Agriprocessors,
Inc., has recently accepted your client’s bid to purchase certain
assets from the bankruptcy estate and that a hearing to approve
the sale of those assets is scheduled for this week.
As we have discussed, our office is interested in seeing the
Agriprocessors, Inc. business sold to an individual or entity
that intends to continue to operate the meat slaughtering and
processing plant in Postville, while abiding by all applicable
laws and regulations. It is our hope that such a business will
serve as a source of economic strength for the region and will
help secure Postville as a vibrant community for future
generations.
We have been pleased to hear that your client shares our
interest in strengthening the community of Postville by
continuing to operate and improve the Postville plant as a
going concern. We are also assured by the representations that
neither your client nor the purchasing entity are currently, nor
will become, associated in the purchase or operation of the
plant, including through any financial or management interest
or arrangement, with any of the previous owners or plant
managers, including those charged with criminal offenses. As
you know, this relates to our concern that any person involved
in previous criminal wrongdoing not be permitted to
circumvent the forfeiture laws through bankruptcy, or
otherwise benefit or enrich themselves through the use,
acquisition, or disposition of any financial or management
interest in assets subject to forfeiture.
Finally, as we have discussed, and as you have previously
acknowledged in conversations, it remains our position that
any forfeiture interest of the United States will remain
63

unaffected by the bankruptcy process. However, we are
certainly willing to continue to discuss any matters related to
forfeiture and, in particular, the orderly disposition of
trademarks and trade names. With regard to those matters, we
are confident that we can reach agreement with your client
along the lines of our previous discussions.
Id. at 5-6, 14-15, 64-66; Movant App’x (civil docket no. 44-1) at 118-19.
On July 15, 2009, Thomas Miller, a Deputy Attorney General of Iowa, emailed the
government. In his email, he stated:
Your office has been involved in the Agriprocessors
bankruptcy proceedings, and has held talks with [the
bankruptcy trustee] and the major creditors. Based upon my
conversations with both of you over the past several months,
it is my understanding that it has been the U.S. Attorney’s
position that the federal forfeiture action, which threatens to
seize all of the assets of Agriprocessors, will act as a safeguard
against the possibility of a sale to anyone who might have
inappropriate connections with [the movant] or any of those
who have been engaged with [the movant] in the matters which
are the subject of your indictments.
I telephoned [government counsel] last week regarding the
impending sale, and learned that while your office has not
done any independent investigation of the proposed purchaser,
nevertheless you have spoken with [the bankruptcy trustee] and
others and have found no reason to believe that he is connected
with the Rubashkin family. Moreover, it is my understanding
that you are satisfied that your pending forfeiture action,
coupled with the certification that the purchaser must file under
oath in order to complete the sale, should suffice to protect
against that possibility.
Late yesterday we received a telephone call from an individual
known to us to have a longstanding family background in the
kosher meat processing business. The caller informed us that
there is circulating within the kosher consumer community a
claim that the purchaser has plans to enter into consulting
contracts, or other business relationships, with one or more
members of the Rubashkin family immediately following the
64

sale. I checked yesterday afternoon with the U.S. Trustee and
learned that while the sale is scheduled to proceed at the
hearing in bankruptcy court this afternoon, that it remains
unknown to either [the bankruptcy trustee] or Mr. [Habbo]
Fokkena just who it is that the Friedman group intends to
employ to manage this plant.
Since the purchaser’s
background is apparently in plastics and real estate, and not in
meat processing, this last fact would seem to add weight to the
above-mentioned concern. I also gathered from Mr. [Habbo]
Fokkena that the expected certification would not necessarily
prevent the purchaser from entering into such a consulting
arrangement.
As you know, I am not a bankruptcy expert, and I do not even
know whether the information received yesterday is accurate.
If the information is accurate, it may conceivably even
describe a legitimate business relationship for all I know.
Nevertheless, any concealed relationship that the purchaser
might presently have with the Rubashkin family, whatever its
nature, would potentially raise serious concerns which I am
sure you would share. Accordingly, I wanted to get this
information to you as soon as possible.
Gov’t App’x (civil docket no. 52-1) at 25-26; Movant App’x (civil docket no. 44-1) at 11617. In response, government counsel provided a copy of the disclosure statement that the
buyer, SHF Industries, LLC, prepared and expressed that it made SHF Industries, LLC,
aware of the government’s position that bankruptcy proceedings would not adversely
impact the government’s forfeiture rights. See Gov’t App’x (civil docket no. 52-1) at 25.
In addition, government counsel made clear that there were limits as to what the
government could do to affect the sale and it had a strong interest in seeing that a buyer
acquire and lawfully operate the plant for the benefit of the community. Id.
On July 16, 2009, Anita Shodeen asked government counsel whether the
government thought additional language should be included in the findings of the
bankruptcy order or whether attaching the disclosure statement to the bankruptcy order
would be sufficient. Id. at 16. On July 17, 2009, government counsel emailed Anita

65

Shodeen to resolve concerns that it expressed in the July 14, 2009 letter. Id. Specifically,
government counsel asked Anita Shodeen to include the following language in the proposed
bankruptcy order:
[SHF Industries, LLC,] agrees that [SHF Industries, LLC], its
agents, assignees, and any subsequent recipient or transferee
of assets acquired by [SHF Industries, LLC,] pursuant to this
order, shall be obligated for a period of five years from the
date of this order to disclose the amount, date, and method of
any payment or other consideration given, or any agreement
to make a future payment or to provide other consideration, to
any related party (as defined in the Bid Procedures). Such
disclosure must be made to the United States Attorney’s Office
for the Northern District of Iowa not later than the date of the
payment or other consideration is given or the date an
agreement is reached to do so in the future.
Further, [SHF Industries, LLC,] acknowledges that the
forfeiture interest of the United States will remain unaffected
by the sale of assets pursuant to this order and the provisions
of 11 U.S.C. § 363(f).
Id.
On July 20, 2009, the United States Bankruptcy Court for the Northern District of
Iowa entered an order approving the sale of substantially all of the assets, free and clear
of all liens, interests, claims and encumbrances, to SHF Industries, LLC. See July 20,
2009 Order (bankr. docket no. 873); Gov’t App’x (civil docket no. 52-1) at 42; Sentencing
Transcript (criminal docket no. 936) at 34; Defense Sentencing Exhibit 11019 (criminal
docket no. 912-225). Before entering its sale order, the United States Bankruptcy Court
for the Northern District of Iowa, among other things, observed that the consideration
provided by SHF Industries, LLC, that is, $8,500,000, constituted reasonably equivalent
value and fair consideration under the law, referenced pertinent parts of the disclosure
statement and stated that SHF Industries, LLC, in its sole discretion, could employ any of
Agriprocessors’ employees. See July 20, 2009 Order (bankr. docket no. 873) at 4, 9-11,

66

16.16 The United States Bankruptcy Court for the Northern District of Iowa attached the
disclosure statement, which Daniel Hirsch signed on July 15, 2009, to its sale order but
did not include in such order the provision that remained in place for five years and
required SHF Industries, LLC, to disclose to the government any compensation or other
payment provided by SHF Industries, LLC, to parties related to the bankruptcy action.
On the same date, government counsel emailed Anita Shodeen to express the
government’s dissatisfaction with the lack of input it had with respect to the sale order.
See Gov’t App’x (civil docket no. 52-1) at 18. In response, Anita Shodeen stated that the
record sufficiently represented the cooperation between the parties. Id. On July 21, 2009,
Anita Shodeen emailed government counsel about several concerns, and government
counsel again expressed dissatisfaction about the requested language being omitted from
the sale order. Id. at 21-24.
Consistent with the sale order, SHF Industries, LLC, purchased substantially all of
Agriprocessors’ assets, free and clear of all liens, interests, claims and encumbrances.
SHF Industries, LLC, however, did not purchase Agriprocessors’ pre-petition inventory
or accounts receivable. See May 12, 2009 Order (bankr. docket no. 723); July 30, 2009
Order (bankr. docket no. 897); Defense Sentencing Exhibit 11017 (criminal docket no.
912-223). Daniel Hirsch’s son-in-law, Hershey Friedman, became the chief executive
officer of Agriprocessors.
The government never obtained any property associated with Agriprocessors’
bankruptcy estate as a result of pursuing the forfeiture allegations that it included in the
indictments in the underlying criminal case. Although it chose not to pursue forfeiture
under criminal statutes, the government relied on civil forfeiture provisions when it
asserted that life insurance proceeds, in which Aaron Rubashkin was a potential trust

16

Regarding the credit bid of $8,500,000, the United States Bankruptcy Court for
the Northern District of Iowa directed $6,500,000 to be paid to MLIC Assets Holdings,
LLC and $2,000,000 to be paid to FBBC.
67

beneficiary, constituted property that was either involved in money laundering or derived
from the unlawful harboring of illegal aliens. See Movant App’x (civil docket no. 44-1)
at 49; Sentencing Transcript (criminal docket no. 936) at 68-69; Gov’t App’x (civil docket
no. 52-1) at 92-114. The parties reached a settlement pursuant to which the Aaron
Rubashkin Trust agreed to forfeit $661,592.64 in cash value to the United States for money
laundering in violation of 18 U.S.C. § 1957 and the government agreed to forgo forfeiture
of $100,000 in additional cash value. See Gov’t App’x (civil docket no. 52-1) at 115-18.
On April 21, 2010, the movant amended his sentencing memorandum, asserting
that:
[P]art of FBBC’s actual loss stems from governmental
interference amounting to misconduct. The government has
not accused Aaron Rubashkin of any federal crime relating to
Agriprocessors. Yet, during and prior to the bankruptcy, the
[United States] Attorney’s Office for the Northern District of
Iowa insisted that none of the Rubashkin family retain an
ownership interest in the company. Agriprocessors’ sole
owner was Aaron Rubashkin, whose name had immense value
and good will in the Orthodox Jewish community. The
government’s position had the effect—foreseeable to the
government but not the [movant]—of reducing the sale or
liquidation value of Agriprocessors.
Amended Sentencing Memorandum (criminal docket no. 895) at 39.
On the same date, defense counsel emailed the government. See Gov’t App’x (civil
docket no. 52-1) at 3-4. Such email, in relevant part, stated:
Pursuant to the local rules, I hereby make request for
voluntary production of the [following] exculpatory sentencing
information pertaining to the above case prior to sentencing,
which is currently set for April 28, 2010:
The Terms/Agreement the Buyers of Agriprocessors had to
Sign Per Federal Requirement.
The foregoing are requested in light of the principles of
constitutional law. See, e.g., [Brady, 373 U.S. at 83]
(“suppression by the prosecution of evidence favorable to the
68

accused upon request” is violative of the Due Process Clause
of the Fourteenth Amendment where such evidence is material
to guilt or punishment).
Id. at 3 (formatting omitted). On April 22, 2010, government counsel spoke with defense
counsel and sent the following email:
[A]s we discussed—I am not aware of any agreement of the
sort you describe. Here is the letter I mentioned in our phone
call just now.
Id. The July 14, 2009 letter to Anita Shodeen was attached to the government’s email.
See id. at 5-6. On April 23, 2010, government counsel again emailed defense counsel.
The email, in relevant part, stated:
[Y]ou recently requested “The Terms/Agreement the Buyers
of Agriprocessors had to Sign Per Federal Requirement.” As
we discussed yesterday by telephone, I am unaware of any
such agreement—however I did send you a letter that
[government counsel] sent to [Anita Shodeen] on the subject.
As I have already explained to you by telephone, we do not
agree that we are under any obligation to provide such
information. Nonetheless, I am providing some additional
communications that may relate to the general topic of your
inquiry (see attached).
Id. at 7. The government’s attachments included: (1) the July 1, 2009 correspondence
between the government and counsel who represented the seller of equipment; (2) the July
13, 2009 correspondence between the government and Anita Shodeen; (3) the disclosure
statement of SHF Industries, LLC; (4) the July 14, 2009 letter to Anita Shodeen; (5) the
July 15, 2009 correspondence between the Deputy Attorney General of Iowa and the
government; (6) the July 16, 2009 and July 17, 2009 correspondence between Anita
Shodeen and the government; and (7) the July 20, 2009 and July 21, 2009 correspondence
between the government and Anita Shodeen. See id. at 8-28, 59-79; Defense Sentencing
Exhibit 11023 (criminal docket no. 912-232).

69

On April 27, 2010, the government notified defense counsel that additional
information would be added to the discovery file. See Gov’t App’x ( civil docket no. 52-1)
at 36. Specifically, it referred to the December 8, 2008 letter to Lloyd Palans and attached
such letter to its email. Id. at 36-38.
During the sentencing hearing that the court held between April 28, 2010 and April
30, 2010, the parties, among other things, presented evidence regarding the government’s
forfeiture position and its impact on the sale of Agriprocessors. Specifically, defense
counsel elicited the following testimony from FBI Special Agent Randy Van Gent:
Q.

In fact, one of the conditions of disposition of the plant,
from as early as perhaps November of 2008, from the
US Attorney’s Office was no buyer could have any
involvement with [the movant] or any other members of
his family, true?

A.

I know the US Attorney’s Office was concerned that
any future buyer—the concern was that—that a future
buyer may be bidding on behalf of the [movant] and/or
his family, and so that’s a concern that the US
Attorney’s Office had, yes.

Q.

And so there was a no-Rubashkin edict that was public
knowledge among—in the bankruptcy and prospective
bidders, correct?

A.

I wouldn’t describe it as a no-Rubashkin edict. I would
describe it as I have, that there was a concern about that
issue.

Id. at 48; Sentencing Transcript (criminal docket no. 936) at 56. Defense counsel
introduced as exhibits the July 1, 2009 correspondence between the government and
counsel who represented the seller of equipment, the July 13, 2009 correspondence
between the government and Anita Shodeen, the disclosure statement of SHF Industries,
LLC, the July 14, 2009 letter to Anita Shodeen, the July 15, 2009 correspondence between
the Deputy Attorney General of Iowa and the government, the July 16, 2009 and July 17,
2009 correspondence between Anita Shodeen and the government and the July 20, 2009
70

and July 21, 2009 correspondence between the government and Anita Shodeen (collectively
“bankruptcy documents”), and asked FBI Special Agent Randy Van Gent questions
concerning the bankruptcy documents. See Sentencing Transcript (criminal docket no.
936) at 60-63; Defense Sentencing Exhibit 11023 (criminal docket no. 912-232). Aside
from asking questions concerning the involvement that a buyer of Agriprocessors could
have with the movant or his family, defense counsel sought to explore why a potential
buyer might have withdrawn a bid during bankruptcy proceedings.

Upon being

questioned, FBI Special Agent Randy Van Gent testified that Soglowek Nahariya, Ltd.
withdrew a $40,000,000 bid for Agriprocessors because it “was concerned about the
accuracy of Agriprocessors’ financial numbers.” Gov’t App’x (civil docket no. 52-1) at
50; Sentencing Transcript (criminal docket no. 936) at 65. On redirect, the government
emphasized FBI Special Agent Randy Van Gent’s testimony concerning the reason
Soglowek Nahariya, Ltd. withdrew its bid by admitting the February 11, 2009 letter from
Soglowek Nahariya, Ltd. to the bankruptcy trustee. See Gov’t App’x (civil docket no. 521) at 55, 80; Sentencing Transcript (criminal docket no. 936) at 85.
Aside from questioning FBI Special Agent Randy Van Gent, the government
questioned Paula Roby, who served as counsel for the bankruptcy trustee. See Gov’t
App’x (civil docket no. 52-1) at 81-89; Sentencing Transcript (criminal docket no. 937)
at 485-519. When testifying, Paula Roby generally indicated the following:
The bankruptcy trustee and his counsel confronted an
extremely complex bankruptcy process involving
Agriprocessors.
Immigration issues were a matter of great concern because the
bankruptcy action sought to maintain Agriprocessors as an
operating business.
She originally focused on the collection of accounts receivable,
the necessary investigation, the auction procedures and the
prospective buyers.

71

Her focus ultimately shifted to pursuing preferences,
fraudulent transfers, transfers to insiders and recoupment of
money for creditors.
The bankruptcy trustee’s overreaching goal was to maximize
the value of the bankruptcy estate and the return to creditors.
The bankruptcy trustee pursued other goals such as running
day-to-day operations at Agriprocessors, continuing to obtain
DIP financing and ensuring that Agriprocessors’ employees
continued to have jobs.
The bankruptcy estate would be forced to liquidate if
Agriprocessors ceased to operate as a going concern and
creditors would only receive pennies on the dollar if
Agriprocessors shut down.
Several things that came to light, including the fraudulent
accounts receivable, the fraudulent inventory numbers and the
overall criminal scheme, greatly reduced the value of
Agriprocessors.
The situation that the bankruptcy trustee confronted involved
an absence of individuals who could or would provide
information.
Fairly early after the bankruptcy trustee took over it became
clear that Agriprocessors would not be able to collect its
accounts receivable and the full extent of the problem
associated with the accounts receivable would be difficult to
determine.
She spent a considerable amount of time with prospective
bidders, including Eli Soglowek.
The bankruptcy trustee and his counsel initially “freaked out”
and worried when they learned about the government’s
criminal forfeiture allegation because they believed that it
could have a chilling effect on prospective buyers.
The bankruptcy trustee immediately contacted the United
States Attorney’s Office, and all parties agreed that it would be
best if prospective bidders would communicate directly with
the government.

72

She held the opinion that the government’s forfeiture position
did not have an affect on prospective bidders.
She attended a meeting that included Eli Soglowek, his
attorney, Bill Fish, one of Bill Fish’s associates and several
members of the government’s team; either Eli Soglowek or
someone associated with him asked many questions about the
government’s forfeiture allegations; the government’s team
asked either Eli Soglowek or someone associated with him
questions; Eli Soglowek and those associated with him seemed
very satisfied with the responses that they had received from
the government’s team.
The bankruptcy trustee and his counsel sent many prospective
bidders to the United States Attorney’s Office and many of
them, including Eli Soglowek, indicated that they intended to
keep Rubashkin family members as advisors or senior
management.
Eli Soglowek indicated during the meeting with the
government’s team that he felt Heshy Rubashkin was a
“crucial part of the organization” and Aaron Rubashkin was an
“absolutely indispensable advisor,” and, in response, the
government told him that having them involved was not a deal
breaker.
She met with Hershey Friedman because he had many
concerns about the value of Agriprocessors, including but not
limited to considerable concerns about the inventory, the
accounts receivable and the wastewater treatment plant, and he
only spoke about the government’s right to forfeiture in a
passing manner.
She was not aware of any agreement that prevented a buyer
from hiring the Rubashkins.
The bidding procedures included a provision that required
bidders to disclose their connections with several parties,
including related parties and anyone involved in
Agriprocessors, to qualify as a bidder.
Such disclosure ensured that the bankruptcy trustee could
provide the United States Bankruptcy Court for the Northern

73

District of Iowa with a good faith assurance that he had
qualified bidders.
The question of related parties is a concern that needs to be
addressed in bankruptcy proceedings.
Neither the bankruptcy trustee nor FBBC destroyed a
substantial amount of inventory.
The bankruptcy trustee and his counsel did what they
determined to be in the best interests of the bankruptcy estate
and did not do anything because the government gave a
directive.
Eli Soglowek withdrew his $40,000,000 offer because he
and/or others associated with him discovered inflated inventory
numbers and inflated accounts receivable when conducting due
diligence and determined that $40,000,000 was not a
reasonable amount to offer for Agriprocessors.
Eli Soglowek and/or others associated with him sent a followup letter indicating that some level of interest in
Agriprocessors still existed, but nothing else ever occurred
after the letter was sent and no dollar amount was associated
with his letter of interest.17
Heshy Rubashkin continued to work at Agriprocessors until at
least the last day that the bankruptcy trustee was onsite.
See Gov’t App’x (civil docket no. 52-1) at 81-84; Sentencing Transcript (criminal docket
no. 937) at 485-99.
After the government finished asking Paula Roby questions as part of its rebuttal
case, a lengthy colloquy between the movant’s counsel and Paula Roby ensued. It
generally revealed the following:
In January of 2009, the bankruptcy trustee received the
$40,000,000 stalking-horse bid from Soglowek Nahariya, Ltd.

17

The court notes that, to the extent Paula Roby is referring to April 19, 2009 offer,
it did include specific terms.
74

The government enumerated specific instances of inflated
accounts receivable in multiple counts included within the
fourth superseding indictment.18
The government sought forfeiture in the fourth superseding
indictment.19
The issue of forfeiture had been discussed prior to the date that
the bankruptcy trustee received the stalking-horse bid from
Soglowek Nahariya, Ltd.
The physical plant, the inventory, the accounts receivable, the
trademarks and the name recognition all added to
Agriprocessors’ value.
To Paula Roby’s knowledge, no edict prevented any purchaser
from being involved with Aaron Rubashkin.
Some discussions occurred because the government was
concerned about someone buying on behalf of Aaron
Rubashkin.
At the meeting that included Eli Soglowek, his attorney, Bill
Fish, one of Bill Fish’s associates and several members of the
government’s team, Eli Soglowek and the bankruptcy trustee
made it clear that they saw Aaron Rubashkin as an
indispensable advisor, and the government told them that his
involvement was not a deal breaker.

18

The court notes that defense counsel’s question implied that the government filed
a fourth superseding indictment in which it outlined numerous instances of inflated
accounts receivable shortly after Soglowek Nahariya, Ltd. and the bankruptcy trustee
entered into a term sheet on January 21, 2009. But, the grand jury returned the fourth
superseding indictment on January 15, 2009. Further, the government first alleged in its
November 20, 2008 second superseding indictment that the movant committed bank fraud
when he unlawfully diverted customer payments on accounts receivable and caused
Agriprocessors’ books to reflect an inflated amount for accounts receivable.
19

The court notes that defense counsel’s question implied that the government
sought forfeiture shortly after Soglowek Nahariya, Ltd. and the bankruptcy trustee entered
into a term sheet on January 21, 2009. But, the government first alleged forfeiture in its
December 11, 2008 third superseding indictment.
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Although Paula Roby could not recall the date that the meeting
with Eli Soglowek took place, Paula Roby believed it occurred
after January but before Eli Soglowek came back in April of
2009 to again try to buy Agriprocessors, before a party offered
to pay $3,000,000 per year in rent and $17,000,000 on June
1, 2011, before the initial auction that occurred on March 23,
2009 and March 24, 2009 and before Soglowek Nahariya, Ltd.
entered its $40,000,000 bid.20
The bankruptcy trustee received numerous offers that never
materialized.
The movant had nothing to do with the offers that failed to
materialize.
Paula Roby did not know whether the exposure of inflated
accounts receivable in the fourth superseding indictment
caused FBBC to act out of a concern for contributions that
allowed Agriprocessors to keep operating.
Paula Roby was aware that the rumor of forfeiture was in
existence before the grand jury returned the January 15, 2009
fourth superseding indictment.
Such rumor created some uncertainty among potential buyers,
and, as a result, the bankruptcy trustee wanted to start a
dialogue with the United States Attorney’s Office to figure out
if there was a way to make prospective buyers comfortable.
The government never told Paula Roby that it would not seek
forfeiture before January 15, 2009.
There was a rumor in the business community that there was
going to be a forfeiture allegation and ultimately there was a
forfeiture allegation.

20

When trying to approximate the date of the meeting with Eli Soglowek, Paula
Roby provided inconsistent testimony. The meeting actually took place on February 6,
2009, which is consistent with Paula Roby’s testimony that it did not occur in January
because her son was in the hospital at that time. The meeting, however, occurred after
Soglowek Nahariya, Ltd., entered into a term sheet on January 21, 2009. Additionally,
there appeared to be some confusion about whether Eli Soglowek or another party offered
to pay $3,000,000 per year in rent and $17,000,000 on June 1, 2011.
76

Paula Roby did not know whether there was a rumor in the
business community that Aaron Rubashkin was prohibited
from being involved in Agriprocessors.
The bankruptcy trustee and those individuals who he hired to
help him “worked very, very hard to dispel any rumors” that
were in the community and to market the sale of
Agriprocessors as vigorously as possible.
During discussions that the bankruptcy trustee and his counsel
had with the government prior to the return of the January 15,
2009 fourth superseding indictment, the government was very
clear that the bankruptcy trustee could be facing forfeiture
allegations.
The trademarks that the Rubashkins spent almost eighteen
years building had value and were transferred to SHF
Industries, LLC.
The government repeatedly assured potential buyers, who were
qualified, that it would not seek to forfeit the trademarks.
Paula Roby did not know why the government expressed in its
July 14, 2009 letter to Anita Shodeen that it appreciated that
SHF Industries, LLC, did not intend to be associated with any
person involved in the previous criminal wrongdoing at
Agriprocessors.
Agriprocessors’ upper management, including Heshy
Rubashkin, Chaim Abrahams and Gary Norris, remained
largely undisturbed.
Paula Roby could only speak about what she witnessed during
the bidding and the bankruptcy case.
The government never asserted a prohibition that prevented
charged management from being involved with a new
purchaser, and the government gave “the thumbs up” every
time the bankruptcy trustee sent a prospective bidder to the
United States Attorney’s Office.
It was not true that every potential bidder that the bankruptcy
trustee sent over to the United States Attorney’s Office already
qualified because all of them had already agreed not to use any
of the charged defendants or Aaron Rubashkin.
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It was true that Eli Soglowek made it clear that he saw Heshy
Rubashkin and Aaron Rubashkin as indispensable and Eli
Soglowek was told that their involvement was fine.
Paula Roby did not have an understanding as to whether the
government would allow Eli Soglowek to purchase
Agriprocessors and re-install Aaron Rubashkin because nobody
posed that question.
Paula Roby did hear questions regarding individual
involvement, and, in response to the questions posed, the
government gave assurances.
Paula Roby did not recall if anyone disclosed at the stalkinghorse deal in January of 2009 that Eli Soglowek or others
associated with him wanted some related party other than
Heshy Rubashkin to be involved.
No prospective bidder or qualified bidder sought to involve
themselves with Aaron Rubashkin.
Prospective bidders expressed concern about losing Rubashkinrelated trademarks in forfeiture proceedings, and the
bankruptcy trustee and his counsel set up meetings with the
government so that they could have their concerns addressed
by the government.
Paula Roby did not recall whether government counsel told
Meyer Eichler and another member of the board of directors
for LibertyPointe Bank in March of 2009 that they would be
subject to prosecution if any member of the Rubashkin family
had an ownership interest or management role.
Paula Roby did recall that government counsel told Meyer
Eichler and the other board member that it would be
permissible to hire Heshy Rubashkin.
Paula Roby thought that there was some discussion of the
concern held by the bankruptcy trustee and the government
that someone could make an offer on behalf of the family and
that the subject of equity could have come up at the meeting in
March of 2009.
Paula Roby did not recall a particular discussion about
management roles because almost every potential purchaser,
78

if not every potential purchaser, indicated a desire to have
Rubashkins in management.
Paula Roby had a hard time testifying about a “rumor[] in the
wind” that there was a particular prohibition against Aaron
Rubashkin, that is, a no-Aaron Rubashkin edict, and observed
that the “grapevine can be a very unreliable thing.”
The bankruptcy trustee followed the bid procedures, which
required prospective buyers to disclose any relationship to a
related party.
The July 15, 2009 letter from the Deputy Attorney General of
Iowa indicated that government counsel had a discussion about
the seizure of assets in conjunction with any inappropriate
connections to the movant.
See Gov’t App’x (civil docket no. 52-1) at 84-89; Sentencing Transcript (criminal docket
no. 937) at 499-519.
Lastly, Paula Roby testified that the bankruptcy trustee did everything he could do
to maximize the value of the bankruptcy estate and FBBC did everything it could do to
maximize the value of its collateral. See Gov’t App’x (civil docket no. 52-1) at 89;
Sentencing Transcript (criminal docket no. 937) at 518-19. She stated that FBBC’s efforts
included but were not limited to providing DIP financing so that Agriprocessors could be
sold as a going concern. See Gov’t App’x (civil docket no. 52-1) at 89; Sentencing
Transcript (criminal docket no. 937) at 518-19.
Steve Cohen also testified during the sentencing hearing. See Sentencing Transcript
(criminal docket no. 937) at 530-36. He maintained that, in December of 2008 or January
of 2009, he spoke with the bankruptcy trustee and learned that Rubashkins could not be
involved in any acquisition. Id. at 531. He also stated that he considered the Rubashkins
to be an important component in keeping Agriprocessors viable and such consideration and
several other reasons caused him not to make an offer. Id. at 534. He thought that the
prohibition against having Aaron Rubashkin involved in a successor corporation reduced

79

the value of Agriprocessors by millions of dollars because Aaron Rubashkin would be
unable to tell him how to go forward. Id. at 535-36.
Based on the evidence admitted during the sentencing hearing, the movant argued
that the government threatened forfeiture of Agriprocessors’ assets and the loss amount
reflected the government’s misconduct. See Sentencing Transcript (criminal docket no.
936) at 33-95; Sentencing Transcript (criminal docket no. 937) at 485-519; Defense
Sentencing Exhibits 11000-11030, 11127-11131 (criminal docket nos. 912-301-912-315,
912-221-912-239 & 912-264-912-268). Specifically, at the conclusion of the sentencing
hearing, defense counsel asserted:
The events that took place well after [the movant] left the
business, the conduct of the bankruptcy trustee, the conduct of
others, including the United States Attorney for the Northern
District of Iowa—demanding that there be no Rubashkins
involved in the sale of the business, as clearly set forth in [the
bankruptcy documents], quite directly stating, contrary to the
last witness’s testimony, [Paula] Roby, the government insisted
there be no Rubashkins involved, and as we’ve discussed in
our papers, further caused a loss that [the movant] could not
have foreseen.
Sentencing Transcript (criminal docket no. 937) at 568.
After the sentencing hearing, the movant filed a summary of his sentencing exhibits.
See Summary of Sentencing Exhibits (criminal docket no. 905). He described the import
of the bankruptcy documents in the following manner:
The [g]overnment’s prohibition against future involvement by
a purchaser with Aaron Rubashkin and the looming forfeiture
proceedings substantially devalued the company and caused
FBBC loss of recovery. It was not reasonably foreseeable to
[the movant] that the [g]overnment would act in the manner
that would naturally and proximately cause the company to
lose value and reduce FBBC’s recovery in any sale of the
company.

80

Id. at 10. Additionally, the movant offered the affidavit of Meyer Eichler as an exhibit,
and described it in the following manner:
Meyer Eichler expressed interest in finding a group of
investors to purchase Agriprocessors[.] His affidavit details
the [government’s] threat of prosecution and Rubashkin family
prohibition which occurred even though Aaron Rubashkin was
never charged with any federal crime relating to
Agriprocessors. The decisions to file forfeiture charges
against Agriprocessors and forbid involvement by Aaron
Rubashkin in the purchase of the company from the
[bankruptcy trustee] diminished the value of Agriprocessors’
sale value, trademark value and good name in the market.
These decisions were unforeseeable to [the movant], and
caused diminution of value of Agriprocessors which directly
affected FBBC’s ability to recover as one of the two lead
secured creditors.
Id. at 9. The court admitted all of the movant’s exhibits without objection. See Gov’t
App’x (civil docket no. 52-1) at 57; Sentencing Transcript (criminal docket no. 936) at 92.
In his affidavit dated April 9, 2010, Meyer Eichler declared:
In March 2009, I traveled to Cedar Rapids, Iowa, together
with a member of LibertyPointe Bank’s Board of Directors and
LibertyPointe Bank’s outside counsel.
We met with
[government counsel]. We told [him] that a group of investors
was interested in purchasing Agriprocessors.
[Government counsel] forewarned us in no uncertain terms that
if he (or members of his office) were to discover that any
member of the Rubashkin family had either an equity interest
or a management role in the company after we purchased it,
the US Attorney’s Office would not allow this. [Government
counsel] made it clear that this exclusion applied to all
members of the Rubashkin family, not just to [the movant].
We understood from [government counsel’s] statement that if
any member of the Rubashkin family were to have an
ownership interest or a management role in the company after
we purchased Agriprocessors, the Department of Justice would
pursue this and we would be subject to prosecution.

81

I asked [government counsel] whether the prohibition extended
to regular employees. Could we, for example, hire Mr. Heshy
Rubashkin as an employee? [Government counsel] told us it
would be permissible to hire Mr. Heshy Rubashkin as an
ordinary employee, but not as a manager.
In the months following my meeting with [government
counsel], I had several conversations with . . . the bankruptcy
trustee. During that time, we were in discussions with parties
who were interested in purchasing Agriprocessors.
Ultimately, however, the exclusion of Rubashkin family
members pronounced by the US Attorney’s Office prevented
the group of investors from making a formal offer for the
company. While the parties that we were in discussions with
had the financial wherewithal to consummate a deal that we
believed would be acceptable to [FBBC] and the [bankruptcy]
trustee, due to the admonition from the US Attorney’s office
the investors were unable to put together a management team
that they felt had sufficient experience in the kosher meatprocessing industry.
Agriprocessors was the largest kosher meat-processing plant
in the country. The Rubashkin family’s extensive experience
and knowledge of the industry were extremely difficult to
replicate. By forbidding all members of the Rubashkin family
from having any type of management role in the company, the
US Attorney’s Office made it virtually impossible for us to put
together a management team with the experience and
knowledge necessary (a) to satisfy our investors and (b) to
successfully operate such a business.
Gov’t App’x (civil docket no. 52-1) at 137-39 (formatting omitted); Movant App’x (civil
docket no. 44-1) at 46-48 (formatting omitted).
In its June 21, 2010 sentencing memorandum, the court stated:
Defendant argued that, in the Bankruptcy, the government took
the position . . . that no purchaser of Agriprocessors could
have any involvement with Defendant or Defendant’s family,
resulting in a depressed sale price of Agriprocessors.
However, the attorney for the [bankruptcy trustee] in the
Bankruptcy Auction, Paula Roby, testified that there was no
82

such condition attached to the sale of Agriprocessors. The
court credits [Paula] Roby’s testimony and discredits testimony
from Defendant’s witnesses. Accordingly, the court declines
to consider this theory in arriving at an actual loss calculation.
Sentencing Memorandum (criminal docket no. 927) at 22-23. In addition, the court
generally observed that the movant failed to present sufficient evidence to support the
theories that he offered in an effort to reduce the loss amount and failed to recognize that
his theories disregarded the impact that a massive fraudulent scheme has on the value of
a company and the effect that a bankruptcy has on the value of assets of the estate. See id.
at 23. It concluded that intervening causes did not make the loss amount unforeseeable to
the movant. Id. at 23-25.
(3)

Additional information

On December 5, 2008, a meeting that included the bankruptcy trustee, the
bankruptcy trustee’s criminal counsel, the bankruptcy trustee’s other counsel, including
Paula Roby, and government counsel took place. See Movant App’x (civil docket no. 441) at 88-96, 170-77. Notes regarding that meeting indicate that participants made various
assertions when discussing Agriprocessors’ bankruptcy.

The edited and truncated

discussion generally reveals the following:
Paula Roby—14,000 chickens processed yesterday; 4,000 the
day before yesterday.
Bankruptcy trustee—There is rancor in the county. We have
to deal with chickens some of which are dying. We have to
keep the plant running so we can sell it.
Bankruptcy trustee’s criminal counsel—The bankruptcy trustee
does not want to keep the Rubashkins around if he does not
have to, but they have institutional knowledge. But, the
bankruptcy trustee has a fiduciary duty to maximize the value
of Agriprocessors. We are trying to deal with potential
buyers.
Bankruptcy trustee—A buyer will not let Rubashkins be
involved in Agriprocessors going forward because they ran it
83

so poorly. The Rubashkins are unprofessional on so many
levels. When dealing with Agriprocessors’ volume, there is a
need to run the business with precision and good management.
The Rubashkins do not have either precision or good
management. I am considering whether to bring in a crisis
manager to run Agriprocessors for a few weeks. Bernard
Feldman is gone. He is not on the payroll. I told him last
week that he is out. This is a real plant. It has to be run by
professionals. This plant cannot compete in a non-kosher
world so it has to be incredibly efficient. My gut feeling is
that Agriprocessors has been in distress for years. I met with
a financial buyer last week. There is no way that he would
allow the Rubashkins to be involved. We are talking about
$50,000,000.
Bankruptcy trustee’s criminal counsel—Rubashkins are a
pariah to a large part of the Jewish community.
Government counsel—The concern is that the Rubashkins
controlled the kosher beef market forever using very
aggressive tactics. There are reports that indicate they are
very territorial. So, the problem is that Agriprocessors might
end up in the Rubashkin’s control again because they have
considerable influence.
Bankruptcy trustee’s criminal counsel—But, Rubashkins could
be behind bars if you guys do your job.
Paula Roby—We cannot control what happens years from now.
Government counsel—Well, that is a concern.
Government counsel—I think you can. There are things that
you can do.
Bankruptcy trustee—My entreaty: let me run a process for best
value. It will be done. We’re working on bidding procedures.
We will run them by you. A sale under 363 in the Bankruptcy
Code must be in good faith.
Government counsel—What does “good faith” mean?
Whatever the judge says it means. It is very broad.

84

Paula Roby—But, the judge will want to save the town and fix
everything.
Bankruptcy trustee—Give me sixty days to run this process.
I will share with you every piece of information. You will be
involved in the process. People are scared of you guys.
Bankruptcy trustee’s criminal counsel—That is another issue.
You guys obviously want to keep conducting your
investigation as you see fit. In recent days, a couple of
customers have stopped paying because of grand jury
subpoenas. That is affecting the bankruptcy trustee’s ability to
collect money for the estate. But, we are not telling you to
stop with subpoenas because you have to do what you have to
do.
Paula Roby—That is why we have not totally cut out the
Rubashkins. They might tell their contacts not to pay.
Bankruptcy trustee—If Heshy Rubashkin is fired, customers
will hear and stop paying.
Government counsel—The problem may be the Rubashkins.
TCP or another customer got a call from Heshy Rubashkin
saying do not pay us, pay the feed supply company. So,
maybe you should not be relying on Heshy Rubashkin.
Bankruptcy trustee—No. We are relying on others. Look, the
Rubashkins violated a lot of corporate formalities. It is as
sloppy as I have ever seen it. From a bankruptcy standpoint,
we are going to conduct a forensic investigation and bring in
all of the related entities. For right now, I need to soak up any
piece of data that we can get. That is why they are still there.
But, it could be that, by the time of the sale, they will be gone.
They are poison. When the plant shut down in May, they
probably went to lenders. The lenders probably said 80-20.
The Rubashkins said no because they did not want to give up
their business. So, they waited and waited. These guys that
I am dealing with now will not let a bunch of jokers, that is,
the Rubashkins, be involved in the business.

85

Government counsel—No Rubashkins is very important to us.
It is non-negotiable. The problem is we do not have a seat at
the table.
Paula Roby—We are setting one up for you.
Government counsel—Yes, but there is no legal backstop.
Paula Roby—Are there other non-negotiables?
Government counsel—They are not finalized. We need to
meet with the United States Attorney. But, there should be no
involvement of the Rubashkins or family from any control,
equity or benefit standpoint. If we file a forfeiture action, then
we are in place. Then we can agree not to go forward with the
case if there is a good faith purchaser.
Bankruptcy trustee—That would kill off bidders.
Government counsel—We will give you written assurance.
There will be no move by the government if there is a goodfaith purchaser.
Bankruptcy trustee—But, if I was a lender, I would not lend if
the government could come in down the road.
Bankruptcy trustee’s criminal counsel—A forfeiture action
would enormously hurt the bankruptcy trustee’s ability to do
his job. If you plan to seek forfeiture, please tell me in
advance. Please do us this courtesy.
Government counsel—The forfeiture issue seems like form
over substance because anyone taking over Agriprocessors
already knows it is there. It is better to file now and get it out
in the open.
Bankruptcy trustee’s criminal counsel—I disagree. The
existence and enforcement of forfeiture are two different
worlds.
Government counsel—If there is no peep from the government
for two months and a 363 sale occurs and then the government
files a forfeiture action, good faith is lacking. It is possible
that a purchaser might come to the government and seek a
guarantee before closing. It can be an issue in the bid packet.
A point of negotiation.
86

Bankruptcy trustee’s criminal counsel—Everyone here wants
the bankruptcy case to be in Iowa. If it comes back to Iowa,
then we can all sit down and we can have more certainty.
Government counsel—I do not think so because we do not
have a legal leg to stand on. Until we take some action to put
our marker down, people are asking us to rely on the
bankruptcy process and a promise that “good faith” means the
same to you as the government needs it to mean. It is a matter
of legal procedure. But, I think we all want the same thing
here.
Bankruptcy trustee—I would like to reach out to Sam Giordano
and then come back to you guys. Agriprocessors is on the
operating table. I am just trying to keep it alive.
Government counsel—What about names and trademarks going
forward?
Bankruptcy trustee—I do not know.
Paula Roby—It may depend on the buyer.
Government counsel—This is a serious issue for us. “Aaron,”
“Rubashkin” etc. should go away. The IP should be taken
out. One way to do this is to forfeit it and then sell/retire it.
Bankruptcy trustee—What if a huge, clean buyer offered lots
of money but wanted “Aaron”?
Government counsel—They might not get it. A condition
might be that any potential buyer must sit down with the
government. Everyone has tight schedules. Regarding your
request for advance notice of forfeiture, there are no
guarantees. But, let us keep an open line of communication.
We have to do what we have to do.
Bankruptcy trustee—Regarding procedure, if the assets of
Agriprocessors are sold and everyone is not paid, then the
bankruptcy trustee goes on and commences lawsuits to get
transfers. If the bid is $100,000,000 and the total claims are
$70,000,000, then usually $30,000,000 would go back to the
Rubashkins. So, here maybe the government could get
$30,000,000.

87

Government counsel—That is what we are talking about with
forfeiture. Other consideration is that the government takes
the stock. Is that what you are talking about?
Bankruptcy trustee—Yes. Let us try to fashion something
together.
Government counsel—I think that we can. Let us be creative.
This is new uncharted territory. Empire would not be
interested in operating the plant. They would buy it and shut
it down. That is a concern too because that would destroy the
community. So, we want a buyer who will keep operating the
plant.
Bankruptcy trustee—Let us keep talking.
See id. at 88-96, 170-77 (reproducing discussion verbatim).
In response to the government’s December 8, 2008 letter, Lloyd Palans sent the
government a letter, which is dated December 9, 2008. Id. at 86-87. In such letter, Lloyd
Palans stated:
We are encouraged that your office is sensitive to the dynamics
of a potential sale of the assets of Agriprocessors by its
[bankruptcy] trustee. We agree with you that your office’s
willingness to waive forfeiture claims against assets available
for sale to a good-faith, arm’s-length purchaser, and to refrain
from pursuing forfeiture of the proceeds of the sale in the
hands of good-faith creditors, is likely to enhance the value of
Agriprocessors’ assets.
...
We remain concerned, however, by the suggestion in your
letter that your office may assert forfeiture claims in the very
near future involving property of Agriprocessors’ bankruptcy
estate. We understand, of course, that you have the right to
assert such claims and that you may be faced with
considerations beyond the desire to facilitate a sale.
Nevertheless, we believe that the public assertion of forfeiture
claims, even if accompanied by a statement that your office
will work with potential purchasers, is likely to have a
significantly negative impact on the prospects for the sale of
88

Agriprocessors’ assets as a going concern or a turnkey
operation and thereby “chill” the bidding process. In
particular, although we are encouraged that your office is
willing to communicate with potential purchasers about its
expectations for the sale process, there may be few, if any,
potential purchasers willing to navigate through a pending
forfeiture proceeding and pay fair value for Agriprocessors’
assets. We do not believe that such an outcome would be in
the interests of Agriprocessors’ creditors, its employees or the
Postville community.
Id.
FBBC’s counsel sent the bankruptcy trustee a letter of default on March 24, 2009.
Id. at 113-15. Such letter specified additional occurrences of default and indicated the
following:
[B]ased on discussions with certain government officials on or
about March 24, 2009, the Lender deems itself insecure with
respect to the actual or potential assertion by the United States
of a right to forfeiture of assets of the [e]state and the actions
of the United States in pursuit of such a right or claim [of]
right.
Id. at 113-14.
Jay Eaton, as counsel for SHF Industries, LLC, sent “gentlemen,” who presumably
were associated with the purchase of Agriprocessors’ assets, a letter, which is dated July
30, 2009. Id. at 120-22. Such letter, in relevant part, stated:
The bottom line is that . . . the [government] is eager to
resolve its differences with the new buyer and gain clarity of
the situation.
. . . [I]t seems to me that conceptually the [government’s]
forfeiture position/concern is a function of the [government’s]
comfort level about whether the new buyer (Hershey
[Friedman]), either now or in the future, might be standing in
for the Rubashkin family or its companies. I gathered the [the
government] obtained comfort about that in its first meeting
with Hershey [Friedman]. However, the subsequent published
article quoting (whether or not accurately) Hershey [Friedman]
89

about the Rubashkins and the Postville situation gave the
[government] some pause.
[Government counsel’s] forfeiture focus was on taking money
which the buyer might pay, or assets which in the future the
buyer might transfer, to the Rubashkin family or one of its
entities. I focused on the other side of the forfeiture coin, i.e.
whether the [the government] had in mind forfeiting and taking
from the buyer assets which it purchases to operate the
company.
[Government counsel] and I expressed our respective concerns.
. . . [Government counsel] said he was happy to begin this
dialog and he wanted to reach resolution of issues with the
buyer.
I told [government counsel] the buyer was keenly focused on
the [government’s] current position, because it is not too late
to cut its losses by deciding not to close. I said it is not
realistic to expect the buyer to incur the huge anticipated future
financial commitment necessary to close and begin operating
the company if an ever-present risk hangs over its head that the
[government] might come in to forfeit and take assets which
the buyer acquired from the Agriprocessors bankruptcy estate,
or from the Nevel Properties bankruptcy estate, or from the
FDIC or from the Best Value bankruptcy estate, or forfeit
assets because the best financial decision for the buyer to make
at this time would be to continue buying broilers from the
company’s current supplier (Cottonballs) which is a
Rubashkin-owned entity.
[Government counsel] acknowledged that would not be a
realistic starting point for the new buyer. [Government
counsel] ultimately said the [the government] is not concerned
about taking assets from the buyers unless they are the
Rubashkins in disguise.
Id. at 120-21. It also listed multiple future meeting topics, including whether a comfort
letter of some sort or, in Jay Eaton’s opinion, an unrealistic agreement in some form that
included the language which the government wanted in the bankruptcy sale order would
give the government appropriate comfort, and noted that the government wanted a list of
90

items that the buyer would need comfort on before deciding to proceed with the closing.
Id. at 121-22.
Triax Capital Advisors, LLC, completed a valuation report, which is dated June 10,
2011. See id. at 55-83. Portions of such report indicated:
[The] valuation was performed solely to estimate the fair value
of the sole stockholder’s equity shares, as of [June 27, 2008,
July 29, 2007, December 29, 2006 and June 30, 2006], to
assist in the matter of avoidance actions . . . . We were
restricted or limited in the scope of our work as we were not
provided projections by [Agriprocessors], nor was there access
[to] much of the senior management of [Agriprocessors], many
of whom are now serving sentences in the Federal Prison
System.
. . . Based upon [estimates of value between $26,700,000 and
$30,330,000], the value of the sole stockholder’s equity shares
was $0 as of June 27, 2008, July 29, 2007 and December 29,
2006, and between $996,000 and [$1,600,000] as of June 30,
2006. This conclusion is subject to [assumptions, limiting
conditions, exhibits and analyst representations].
The purpose of this report is to provide an opinion as to the
estimate of value of Agriprocessors . . ., and whether
Agriprocessors was solvent during the two years prior to the
Bankruptcy Filing Date, November 4, 2008. . . .
At all times [between June 30, 2006 and June 27, 2008],
Agriprocessors was experiencing both cash flow and balance
sheet insolvency. The analysis highlighted within this report
shows that [between June 30, 2006 and June 27, 2008]
Agriprocessors was unable to meet its debts as they came due,
and while additional credit was at times extended by its
primary secured lenders, [FBBC] and [MLIC Asset Holdings,
LLC], and its vendors and other third parties, the anticipated
cash flows of the business would never be sufficient to relieve
[Agriprocessors’] debt burden to these creditors. Thus, from
an operating perspective, [Agriprocessors] was cash flow
insolvent. Additionally, the fair value of the assets of
[Agriprocessors] were insufficient to cover [Agriprocessors’]
liabilities, thus, from a balance sheet perspective,
91

[Agriprocessors] was insolvent.
. . .
[A]lthough
[Agriprocessors] had substantial Enterprise Value, [the
Enterprise Value between June 30, 2006 and June 27, 2008]
was insufficient [to cover] Agriprocessors’ obligations to its
creditors. An informed and willing equity participant would
not pay enough for [Agriprocessors] to satisfy its obligations
and provide existing equity with any recovery on its
investment. Any reasonable investor would pay no more than
Enterprise Value for the assets to be delivered free and clear
of the debt security holder’s obligations. At all times [between
June 30, 2006 and June 27, 2008], Enterprise Value was lower
than [Agriprocessors’] outstanding debt security
obligations.[21]
...
In May 2008, the Postville facility was raided by . . . [ICE]
for its hiring practices and the employment of undocumented
workers. Over 350 workers were forcibly removed from the
facility; another 300 personnel either took refuge in their
homes, Postville’s churches or fled the community. The ICE
raid forced [Agriprocessors] to temporarily cease operations.
After several difficult weeks, Agriprocessors was again
producing, but only at 50% of its pre-raid levels. Moreover,
as a direct result of the ICE raid, [FBBC], Agriprocessors’
lender, was no longer willing to continue to extend credit, and
ultimately, Agriprocessors filed for Chapter 11 Bankruptcy
protection on November 4, 2008.
...
The Valuation Analyst utilized Agriprocessors’ internally
compiled financial statements . . . . Adjustments were made

21

As of June 27, 2008, Agriprocessors’ equity valuation based on the income
approach was $0 ($26,916,000 (Enterprise Value) - $68,452,000 (Debt) = $-41,536,000),
and Agriprocessors’ equity valuation based on the asset approach was $0 ($10,205,000
(Book Value) - $33,451,000 (Adjustments) = -$23,246,000 (Total Adjusted Net
Liabilities, at Fair Value)). For the same date, Agriprocessors had $68,662,617 in total
assets, which included $21,929,246 for its property, plant and equipment, and
$70,620,141 in total liabilities.
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to these financial statements to reflect the estimated fair values
of these assets . . . and to normalize costs and revenues . . . .
Agriprocessors’ management perpetrated a [$28,000,000]
fraud on [FBBC], [and] its other creditors.
When
[Agriprocessors] filed bankruptcy, over $80,000,000 of claims
were filed in the case. . . . [N]o adjustments were made to
reflect fraudulent activity prior to September 2007. . . . No
pro-forma adjustments were made to account for the additional
costs that would be necessary to employ legal aliens or
naturalized U.S. citizens.
...
. . . The use of a weighted average cost of equity and debt
would have resulted in a higher discount rate and a lower
enterprise value. . . .
. . . Utilizing any deductions from free cash flow for tax and
working capital requirements would have resulted in a lower
enterprise value.
[A lower enterprise value would have resulted if the adjusted
profit and loss statements were] negatively adjusted for
downward adjustments to gross profit margin that resulted
from [Agriprocessors’] failure to adjust inventories to net
realizable value on an on-going basis. . . .
...
[U]tilizing an Equity Cost of Capital component would have
resulted in a lower Enterprise Value. The lower Cost of Debt
Capital was utilized to demonstrate that under the most
favorable conditions, [Agriprocessors] was significantly overleveraged at all times [between June 30, 2006 and June 27,
2008]. . . .
. . . [T]axes were considered $0, which resulted in a higher
Enterprise Value.
...
[Agriprocessors] required a significant working capital
infusion, as is evidenced by its significant growth in cash
overdrafts and accounts payable [between June 30, 2006 and
June 27, 2008], as well as unrecorded advances provided to
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[Agriprocessors]. No adjustment was made for increased net
working capital requirements. If adjustments were made, they
would have resulted in a lower Enterprise Value.
. . . During the pendency of the Bankruptcy case, under the
[bankruptcy trustee’s] stewardship, over $75,000 per month
was spent on maintenance, which was approximately half of
what was required to maintain the equipment, limit production
stoppages and maintain safety and OSHA compliance. When
substantially all the operating assets were sold to [SHF
Industries, LLC], a significant investment was necessary to
modernize and maintain the plant.
...
While Agriprocessors had significant value, as an enterprise,
any reasonable investor would have required a significant
balance sheet restructuring in order to invest in this entity.
Such a restructuring would require the senior lenders to not
only modify the terms of their debt, but to cancel a significant
portion of it. While the analysis shows that there is between
$996,000 and [$1,600,000] of Equity Value at June 30, 2006,
this value was not sufficient to allow [Agriprocessors] to
operate as a going concern. Bankruptcy and a reorganization
of [Agriprocessors’] balance sheet was inevitable.[22]

22

The report includes a balance sheet, which lists the property, plant and equipment
as $40,013,246, which is the same number that Agriprocessors, through Aaron Rubashkin,
included in its January 9, 2009 bankruptcy schedule. In its list of assumptions, the report,
among other things, referred to the $21,929,246 that accounted for the net property, plant
and equipment and noted that:
The plant and equipment were not discounted, on the basis that
if the plant was valued at replacement value, it would not
exceed book value. During the bankruptcy process, the
property was purchased by [SHF Industries, LLC] for less than
[$12,000,000], as a going concern, inclusive of all assets free
and clear. It is likely that [a willing participant would pay for
up to book value for the plant and equipment] alone, as of
[the] bankruptcy date, however, no downward adjustments
have been made. The plant was in major disrepair as of the
(continued...)
94

...
The analyses, opinions, and conclusions of value . . . are
subject to the specified assumptions and limiting conditions and
they are the personal analyses, opinions, and conclusions of
value of the Valuation Analyst. The conclusion of value
arrived at herein is valid only for the stated purpose as of the
date of the valuation.
Financial statements and other related information provided to
the Valuation Analyst, in the course of this engagement, have
been accepted without any verification as fully and correctly
reflecting [Agriprocessors’] business conditions and operating
results for the respective periods, except as specifically noted
herein. Triax Capital Advisors, LLC has not audited,
reviewed, or compiled this information. . . .
The valuation report is not intended to be and should not be
used by anyone other than that stated in the accompanying
report.
Id.
In his affidavit dated September 29, 2013, Eli Soglowek declared:
By the end of January, 2009, I was sufficiently satisfied with
my due diligence that I signed a term sheet on behalf of
[Soglowek Nahariya, Ltd.], offering to purchase the assets of
Agriprocessors, Inc. for the price of $40,000,000. . . .
I had questions concerning the fact that the United States
Attorney’s Office for the Northern District of Iowa was
asserting a right of forfeiture of Agriprocessors’ assets in

22

(...continued)
bankruptcy date, according to maintenance supervisors.
During the [bankruptcy trustee’s] tenure, [approximately
$75,000] was spent each month on maintenance to maintain
minimum safety standards and production, although at least
[$30,000] per week is required. These monies were not spent
during the two years prior to filing. An adjustment has been
made to cost of sales to project minimum maintenance
requirements.
95

connection with a criminal case . . . . Accordingly, on
February 6, 2009, I traveled to [meet] with representatives of
the United States Attorney’s Office to address my concerns.
At the February 6, 2009 meeting, representatives of the United
States Attorney’s Office told me that if [Soglowek Nahariya,
Ltd.] purchased the assets of Agriprocessors, no member of
the Rubashkin family or any related entity could have any
management, consulting or ownership role in the business
going forward. I was told by representatives of the United
States Attorney’s Office that if it was discovered that any
Rubashkin was involved in the business going forward, there
would be “very bad consequences” for me and [Soglowek
Nahariya, Ltd.]
It is also my understanding that [Paula] Roby testified that I
did not complete the acquisition of Agriprocessors because we
“began due diligence and discovered that there were inflated
inventory and receivables numbers and didn’t believe that
[$40,000,000] was a reasonable amount to offer for this
company”. This is also not true. My reasons for not
completing the acquisition were not related to any inflated
inventory and receivables numbers or that I didn’t believe that
the [$40,000,000] was a reasonable amount to offer for the
company at that time.
Id. at 99-100 (formatting omitted); see also id. at 123-24 (indicating that the threats and
demands of the United States Attorney’s Office were the principal reasons that caused
Soglowek Nahariya, Ltd. to withdrew the offer reflected in the $40,000,000 term sheet and
elect not to appear at the bankruptcy auction held on March 23, 2009 and March 24,
2009).
In his affidavit dated March 1, 2016, the bankruptcy trustee declared:
As [the bankruptcy trustee], my mission was to maximize the
value of the bankruptcy estate for the benefit of
Agriprocessors’ creditors. I felt the best way to accomplish
this goal was by selling [Agriprocessors] as a going concern,
and therefore from the outset focused my energies on
preparing [Agriprocessors] for sale as an operating entity. At

96

the outset of the case, [Agriprocessors] was shut down and me
and my staff had to restart operations. . . .
I received numerous . . . inquiries from potentially interested
buyers in the weeks following my appointment as [the
bankruptcy trustee].
Many of these buyers had the
sophistication and financial wherewithal necessary to
consummate a transaction. I viewed their interest as serious
and genuine.
In my view, the buyer who would pay the most money for the
business was either a member of the Rubashkin family or
someone associated in the Lubavitch community as they knew
the business better than anyone else and they would naturally
have to satisfy the existing creditors in order to continue
operating the business. On several occasions, I encouraged
buyers to consult with the Rubashkins.
Aaron Rubashkin, in particular, was vital to maximizing the
value of [Agriprocessors] on a going forward basis, as he had
the relationships with large customers and unmatched
experience and knowledge in the industry. Mr. [Aaron]
Rubashkin was the namesake for the “Aaron’s Best” and
“Rubashkin” trademarks, which had significant meaning and
value in the glatt kosher meat industry and were among
Agriprocessors’ most valuable assets. Aaron Rubashkin’s
ongoing involvement was crucial to maximizing
[Agriprocessors’] value in a bankruptcy sale and I met with
him numerous times during the sale process.
...
The [government’s] potential forfeiture claims were of
substantial concern to me. I worried they would have a
chilling effect on the bankruptcy sale and therefore hurt my
ability to do my job of maximizing the value of the estate.
[FBBC], the largest secured creditor, shared my concerns, as
did [the] United States Bankruptcy Trustee for the Northern
District of Iowa, Habbo Fokkena.
My attorneys and I met with prosecutors shortly after my
appointment as [the bankruptcy trustee] to express our
concerns regarding the potential forfeiture claims. The
97

prosecutors listened to our concerns, but ultimately made clear
that they believed the assertion of forfeiture was necessary and
appropriate regardless of the effect it would have on the
bankruptcy sale. The prosecutors wanted to be actively
involved in the bankruptcy sale process and felt the assertion
of forfeiture was necessary to ensure [Agriprocessors] would
not be sold without their approval. They were particularly
focused on making sure [Agriprocessors] was not sold to
Aaron Rubashkin or any other member of the Rubashkin
family, and that no member of the Rubashkin family would
have any involvement in managing the business on a going
forward basis. Prosecutors made this restriction very clear to
my attorneys and me during the meeting shortly after my
appointment as [the bankruptcy trustee].
Several potential buyers who appeared to be well-capitalized
and had the wherewithal to purchase the business, including,
among others, Meyer Eichler and Abraham Shaulson,
expressed interest in having an ongoing relationship with the
Rubashkins if they purchased [Agriprocessors]. However, at
the government’s direction, I disclosed to [Meyer] Eichler,
[Abraham] Shaulson, and others that members of the
Rubashkin family could not be involved in buying or managing
[Agriprocessors].
In January 2009, a potential buyer named Eli Soglowek
submitted a [$40,000,000] bid for Agriprocessors on behalf of
an entity with which he was affiliated. I chose not to accept
the [$40,000,000] bid outright, but rather to treat it as a
“stalking horse” bid to try to drive higher bids from other
interested parties. I believed an auction process would lead to
a bid even higher than [$40,000,000].
I informed [Eli] Soglowek, [Meyer] Eichler, and other
potentially-interested parties that they would need to meet
directly with prosecutors prior to consummating any purchase
of Agriprocessors to discuss the issue of forfeiture and the
conditions on which the government would waive its forfeiture
rights. Many such meetings occurred in the early months of
2009, including meetings during the bankruptcy auction in
Cedar Rapids, Iowa, in March 2009.

98

The offers submitted by various bidders at the bankruptcy
auction in March 2009 were insufficient to satisfy [FBBC] and
[MLIC Asset Holdings, LLC] and ultimately resulted in a
“failed auction.” Shortly after the auction, I received a letter
from [FBBC] declaring a default on certain loans [FBBC]
issued to Agriprocessors subsequent to [Agriprocessors] filing
for bankruptcy. [FBBC] declared the default on the basis of,
among other things, “discussions with certain government
officials on or about March 24, 2009 . . . with respect to the
actual or potential assertion by the United States of a right to
forfeiture of assets of the Estate and the actions of the United
States in pursuit of such claim or right.” . . .
Following the bankruptcy auction in March 2009, we
continued our efforts to sell Agriprocessors as a going
concern. Ultimately, however, the highest offer we received
was from [SHF Industries, LLC] in the amount of $8.5
million.
Although I felt Agriprocessors was worth
substantially more than $8.5 million, we had no choice but to
accept the offer. The sale to [SHF Industries, LLC] was
finalized in August 2009.
Among other things, the government’s assertion of forfeiture
claims and restriction on the involvement of members of the
Rubashkin family clearly had a chilling effect on the
Agriprocessors’ bankruptcy sale process and resulted in
[Agriprocessors] selling for a lower amount than it otherwise
would have.
Id. at 43-45 (formatting omitted) (thirty-third alteration in original).
In their affidavits, other individuals on behalf of prospective bidders generally
asserted variations of the following themes: (1) after meeting with government counsel,
the bankruptcy trustee or individuals associated with him, prospective bidders learned that
the government would exercise its right to forfeiture if Aaron Rubashkin or other members
of the Rubashkin family obtained an ownership interest or management role in
Agriprocessors, (2) the government viewed Agriprocessors as a criminal enterprise, (3)
the government’s forfeiture position had a chilling effect on prospective bidders’ interests
in purchasing Agriprocessors because operation of Agriprocessors required extensive skills
99

in the areas of purchasing livestock, kosher slaughtering and sales and distribution, (4)
Aaron Rubashkin was the only person with the ability to manage Agriprocessors, (5) any
transition would be much more difficult and risky if Rubashkins could not be in
management, (6) government counsel threatened, accused and intimidated potential bidders
by asserting, among other things, that it might use criminal forfeiture to seize
Agriprocessors’ assets after the bankruptcy sale, (7) the government’s restrictions caused
bidders to lower their bids, including the highest bid for nearly $16,000,000, at the March
auction, and the government’s interactions with bidders at the March auction further
reduced Agriprocessors’ valuation, (8) prospective bidders at the March auction
understood that Rubashkins could not be involved in the ownership or operation of
Agriprocessors following the sale, (9) annual earnings before taxes of $25,000,000 could
be earned in one’s sleep, but all of the money that the Rubashkin family had was diverted
to other companies or never realized due to very poor management of the enterprise; (10)
the inability to have any ties with the Rubashkins, any employment or consulting
relationship with any member of the Rubashkin family or any connection to any company
affiliated with the Rubashkins caused prospective bidders to chose not to contact the United
States Attorney’s Office; and (11) prospective bidders did not feel comfortable calling the
government because they were unwilling to have the government dictate who could be
hired and how business should be conducted. See id. at 49-54, 103-12, 123-24.
b.

Applicable legal principles
(1)

Framework relied upon after conviction

Pursuant to 28 U.S.C. § 994(a)(1), the United States Sentencing Commission
establishes Guidelines, which provide the essential framework for federal sentencing
proceedings.
The Guidelines enter the sentencing process long before the
district court imposes the sentence. The United States
Probation Office first prepares a presentence report which
includes a calculation of the advisory Guidelines range it
100

considers to be applicable.
Fed. Rules Crim. Proc.
32(d)(1)(A)-(C); see generally 18 U.S.C. §3552(a). The
applicable Guidelines range is based on the seriousness of a
defendant’s offense (indicated by his “offense level”) and his
criminal history (indicated by his “criminal history category”).
Rules 32(d)(1)(B)-(C). The presentence report explains the
basis for the Probation Office’s calculations and sets out the
sentencing options under the applicable statutes and
Guidelines.
Rule 32(d)(1).
It also contains detailed
information about the defendant’s criminal history and
personal characteristics, such as education and employment
history. Rule 32(d)(2).
Molina-Martinez v. United States, ___ U.S. ___, ___, 136 S. Ct. 1338, 1342 (2016).
After receiving the presentence report, the parties have an opportunity to raise
objections. See Fed. R. Crim. P. 32(f)(1) (“Within 14 days after receiving the presentence
report, the parties must state in writing any objections, including objections to material
information, sentencing guideline ranges, and policy statements contained in or omitted
from the report.”); Fed. R. Crim. P. 32(i) (making clear that a district court must provide
an opportunity at the sentencing hearing for the parties to address their objections). In
deciding disputed sentencing factors, the district court can consider a wide variety of
evidence not normally admissible at trial. See USSG §6A1.3(a) (“[T]he court may
consider relevant information without regard to its admissibility under the rules of evidence
applicable at trial, provided that the information has sufficient indicia of reliability to
support its probable accuracy.”); see also 18 U.S.C. § 3661 (“No limitation shall be
placed on the information concerning the background, character, and conduct of a person
convicted of an offense which a court of the United States may receive and consider for
the purpose of imposing an appropriate sentence.”); Fed. R. Evid. 1101(d)(3) (clarifying
that the Federal Rules of Evidence do not apply in sentencing proceedings); United States
v. Watts, 519 U.S. 148, 157 (1997) (explaining that information may be considered if it
has sufficient indicia of reliability to support its probable accuracy); Witte v. United States,
515 U.S. 389, 399-401 (1995) (noting that sentencing courts have traditionally considered
101

a wide range of information without the procedural protections of a criminal trial); United
States v. Tucker, 404 U.S. 443, 446 (1972) (“Before making [the sentencing]
determination, a judge may appropriately conduct an inquiry broad in scope, largely
unlimited either as to the kind of information he may consider, or the source from which
it may come.”); Williams v. New York, 337 U.S. 241, 246 (1949) (explaining that courts
have traditionally exercised “wide discretion in the sources and types of evidence used to
assist [them] in determining the kind and extent of punishment to be imposed within limits
fixed by law”). Additionally, “the nature of the dispute, its relevance to the sentencing
determination, and applicable case law” guides what procedure should be utilized by the
district court, USSG §6A1.3 cmt. background, and a preponderance of the evidence
standard of proof, rather than a beyond a reasonable doubt standard of proof, is relied
upon by the district court when making its findings of fact, see id. (“The Commission
believes that use of a preponderance of the evidence standard is appropriate to meet due
process requirements . . . .”); see also Watts, 519 U.S. at 156 (“[A]pplication of the
preponderance standard at sentencing generally satisfies due process.”); McMillan v.
Pennsylvania, 477 U.S. 79, 88-93 (1986) (endorsing a preponderance-of-the-evidence
standard at sentencing).
After receiving input from the parties, the district court formulates a sentence that
is sufficient, but not greater than necessary, to further the goals enumerated by Congress
in 18 U.S.C. § 3553(a). When formulating a sentence, the district court must consult a
properly calculated Guidelines range. See Molina-Martinez, ___ U.S. at ___, 136 S. Ct.
at 1342 (citing Peugh v. United States, 569 U.S. ___, ___, 133 S. Ct. 2072, 2080 (2013);
United States v. Booker, 543 U.S. 220, 264 (2005)); Gall v. United States, 552 U.S. 38,
49 (2007) (“[T]he Guidelines should be the starting point and the initial benchmark.”).
But, “the sentencing court does not enjoy the benefit of a legal presumption that the
Guidelines sentence should apply.” Rita v. United States, 551 U.S. 338, 351 (2007)
(citing Booker, 543 U.S. at 259-60). Rather, it must make an independent determination
102

that a Guidelines sentence comports with the sentencing factors set forth in 18 U.S.C. §
3553(a).

See Hawkins v. United States, 706 F.3d 820, 822-23 (7th Cir. 2013)

(emphasizing that district courts cannot impose a sentence that is within the applicable
Guidelines range if such a sentence is inconsistent with the considerations set forth in 18
U.S.C. § 3553(a)). A district court may choose an out-of-Guidelines sentence, but it must
ensure that the facts justify the degree of variance from the Guidelines. See Gall, 552
U.S. at 50; see also United States v. Cavera, 550 F.3d 180, 190 (2d Cir. 2008) (en banc)
(stating that district court commits procedural error, inter alia, where it miscalculates
Guidelines or does not consider 18 U.S.C. § 3553(a) factors).
Aside from challenging the application of the Guidelines during sentencing
proceedings, a defendant’s primary avenue for obtaining relief is to assert on direct appeal
that a sentence calculation error occurred. When reviewing a defendant’s sentence, an
appellate court must “ensure that the district court committed no significant procedural
error.” United States v. Feemster, 572 F.3d 455, 461 (8th Cir. 2009) (en banc) (quoting
Gall, 552 U.S. at 51). “A failure to properly calculate the advisory Guidelines range is
a significant procedural error . . . .” United States v. Waller, 689 F.3d 947, 957 (8th Cir.
2012) (quoting United States v. Woods, 670 F.3d 883, 886 (8th Cir. 2012)).
Appellate courts analyze preserved objections for harmless error and unpreserved
objections for plain error. See Molina-Martinez, ___ U.S. at ___, 136 S. Ct. at 1343;
Booker, 543 U.S. at 268. Pursuant to either harmless error review or plain error review,
appellate courts routinely remand cases to correct sentencing errors. However, there may
be occasions where it is appropriate to excuse application of an erroneous Guidelines
range. A preserved error is harmless if “the government can show the procedural error
did not substantially influence the outcome of the sentencing proceeding.” Waller, 689
F.3d at 958 (quoting Woods, 670 F.3d at 886). And, an unpreserved sentencing error does
not require an appellate court to remand for resentencing if the defendant is unable to
“‘show a reasonable probability that, but for the error,’ the outcome of the proceeding
103

would have been different.” Molina-Martinez, ___ U.S. at ___, 136 S. Ct. at 1343
(quoting United States v. Dominguez Benitez, 542 U.S. 74, 76 (2004)).
The sentencing process is particular to each defendant, of
course, and a reviewing court must consider the facts and
circumstances of the case before it. See United States v.
Davila, 569 U. S. ___, ___ , 133 S. Ct. 2139, 2149 (2013)
(“Our essential point is that particular facts and circumstances
matter”). The record in a case may show, for example, that
the district court thought the sentence it chose was appropriate
irrespective of the Guidelines range. Judges may find that
some cases merit a detailed explanation of the reasons the
selected sentence is appropriate. And that explanation could
make it clear that the judge based the sentence he or she
selected on factors independent of the Guidelines. The
Government remains free to “poin[t] to parts of the
record”—including relevant statements by the judge—“to
counter any ostensible showing of prejudice the defendant may
make.” United States v. Vonn, 535 U.S. 55, 68 (2002).
Id. at 1346-47 (citations omitted) (alteration in original); see also Williams v. United
States, 503 U.S. 193, 203 (1992) (explaining that remand is unnecessary if “the district
court would have imposed the same sentence absent the erroneous factor”).
Once the appeals process concludes and a defendant’s conviction becomes final, a
sentencing error may be asserted in a proceeding under 28 U.S.C. § 2255. But, not every
sentencing error can be corrected on collateral review. See Sun Bear, 644 F.3d at 704
(clarifying that the scope of 28 U.S.C. § 2255 is severely limited); see also United States
v. Springs, 988 F.2d 746, 747 (7th Cir. 1993) (emphasizing that the domain of 28 U.S.C.
§ 2255 is limited).

If the alleged sentencing error is neither constitutional nor

jurisdictional, there is no authority under § 2255 to review such error unless it amounts
to “a fundamental defect which inherently results in a complete miscarriage of justice.”
Sun Bear, 644 F.3d at 704 (quoting Addonizio, 442 U.S. at 185); see also Reed v. Farley,
512 U.S. 339, 354 (1994) (indicating that a non-constitutional error can be raised for the
first time on collateral review only where the alleged error constitutes a “fundamental
104

defect which inherently results in a complete miscarriage of justice” (quoting Hill, 368
U.S. at 428)); Jones v. United States, 178 F.3d 790, 796 (6th Cir. 1999) (“Moreover, an
error in the application of the Sentencing Guidelines does not warrant collateral relief
under § 2255 absent a complete miscarriage of justice.”); Burke v. United States, 152 F.3d
1329, 1332 (11th Cir. 1998) (“We thus hold that a claim that the sentence imposed is
contrary to a post-sentencing clarifying amendment is a non-constitutional issue that does
not provide a basis for collateral relief in the absence of a complete miscarriage of
justice.”); Graziano v. United States, 83 F.3d 587, 590 (2d Cir. 1996) (holding that,
absent a complete miscarriage of justice, claims regarding a sentencing court’s error in
failing to properly apply the Guidelines are not subject to collateral review). Review is
only appropriate if the district court is presented with “exceptional circumstances where
the need for the remedy afforded by the writ of habeas corpus is apparent.” Hill, 368 U.S.
at 428.
Given the permissible scope of review under § 2255,
“ordinary questions of [G]uideline interpretation falling short
of the ‘miscarriage of justice’ standard do not present a proper
section 2255 claim.” Auman v. United States, 67 F.3d 157,
161 (8th Cir. 1995); accord United States v. Pregent, 190
F.3d 279, 284 (4th Cir. 1999), and cases cited; United States
v. Williamson, 183 F.3d 458, 462 (5th Cir. 1999); [Graziano,
83 F.3d at 590]. Therefore, such questions “may not be
re-litigated under § 2255.” [McGee, 201 F.3d at 1023].
Sun Bear, 644 F.3d at 704; see also United States v. Foote, 784 F.3d 931, 943 (4th Cir.
2015) (concluding that an erroneous Guidelines classification is not cognizable under §
2255); Spencer v. United States, 773 F.3d 1132, 1135 (11th Cir. 2014) (en banc)
(explaining that a misapplication of the advisory Guidelines is not a basis to collaterally
attack a sentence); Donnell v. United States, 765 F.3d 817, 819 n.2 (8th Cir. 2014) (stating
that “[s]entencing errors are generally not cognizable in § 2255 proceedings”); United
States v. Coleman, 763 F.3d 706, 710 (7th Cir. 2014) (recognizing that even sentencing

105

errors that are not harmless are not cognizable in post-conviction proceedings); Hawkins,
706 F.3d at 824 (“An error in the interpretation of a merely advisory [G]uideline is less
serious [than a sentence that exceeds the statutory maximum]. Given the interest in
finality, it is not a proper basis for voiding a punishment lawful when imposed.”); Welch
v. United States, 604 F.3d 408, 412 (7th Cir. 2010) (“[D]eviations from the Sentencing
Guidelines generally are not cognizable on a § 2255 motion.”); United States v.
Mikalajunas, 186 F.3d 490, 495 (4th Cir. 1999) (“[M]isapplication of the sentencing
[G]uidelines does not amount to a miscarriage of justice.”).
It is clear that a post-conviction change in the law that renders conduct no longer
criminal can be corrected on collateral review. See Davis, 417 U.S. at 346-47 (explaining
that, if a prisoner’s punishment is for something that the law does not make criminal,
“there can be no room for doubt that such a circumstance ‘inherently results in a complete
miscarriage of justice’ and ‘present[s] exceptional circumstances’ that justify collateral
relief”). It is also clear “that, in sentencing, a miscarriage of justice cognizable under §
2255 occurs when the sentence is in excess of that authorized by law.” Sun Bear, 644
F.3d at 706 (citing Addonizio, 442 U.S. at 184); see also Foote, 784 F.3d at 938
(recognizing that sentencing errors in cases of actual innocence and sentences above the
statutory maximum are cognizable on collateral review); Meirovitz v. United States, 688
F.3d 369, 371-72 (8th Cir. 2012) (concluding that alleged error in calculating the
Guidelines range did not amount to a miscarriage of justice because the sentence was not
in excess of that authorized by law). But, in the context of sentencing, an error that does
not result in the imposition of a sentence that does not exceed the statutory maximum
rarely, if ever, qualifies as a “fundamental defect” that is cognizable on § 2255 review.
Surely, there are constitutional limitations on the scope of information that a court
may consider at sentencing. See United States v. Pratt, 553 F.3d 1165, 1170 (8th Cir.
2009). Indeed, although a sentencing court may consider relevant information without
regard to its admissibility under the Federal Rules of Evidence, provided the evidence has
106

“sufficient indicia of reliability to support its probable accuracy,” USSG §6A1.3(a), a
sentence cannot stand if it is based in part on “misinformation of constitutional
magnitude,” Tucker, 404 U.S. at 447. See also Roberts v. United States, 445 U.S. 552,
556 (1980) (“We have . . . sustained due process objections to sentences imposed on the
basis of ‘misinformation of constitutional magnitude.’” (quoting Tucker, 404 U.S. at 447));
Hill, 368 U.S. at 429 (emphasizing that there was no suggestion that the district court was
“misinformed or uninformed as to any relevant circumstance”).
Where a violation of a defendant’s due process right to be sentenced on the basis
of accurate and reliable information occurs, appellate courts vacate sentences and remand
for resentencing. See, e.g., United States v. Ortiz, 741 F.3d 288, 295 (1st Cir. 2014)
(vacating sentence because reliance on erroneous information that materially influences the
sentencing calculus undermines the integrity of the sentencing process); United States v.
McGowan, 668 F.3d 601, 606-09 (9th Cir. 2012) (vacating sentence because district court
relied on allegations that were insufficiently reliable when it imposed a sentence); United
States v. Corona-Gonzalez, 628 F.3d 336, 342-43 (7th Cir. 2010) (vacating sentence
because there was a distinct possibility that the district court relied on a nonexistent fact
when it made its sentencing assessment); United States v. Wilson, 614 F.3d 219, 225 (6th
Cir. 2010) (vacating sentence after recognizing “the general rule that a violation of due
process exists when a sentencing judge relies upon erroneous information” (quoting Arnett
v. Jackson, 393 F.3d 681, 686 (6th Cir. 2005))); United States v. Simmons, 964 F.2d 763,
776-78 (8th Cir. 1992) (vacating defendant’s sentence because drug quantity finding could
have been based on testimony of a drug addict with impaired memory); United States v.
Shacklett, 921 F.2d 580, 584 (5th Cir. 1991) (vacating sentence because district court
relied solely on probation officer’s conclusory statement as to drug quantity involved);
United States v. Cammisano, 917 F.2d 1057, 1062 (8th Cir. 1990) (vacating sentence
because uncorroborated testimony of FBI agents that defendant was member of organized
crime was not sufficiently reliable); United States v. Robison, 904 F.2d 365, 371 (6th Cir.
107

1990) (vacating sentence because drug quantity estimates provided by witness who was
heavy drug user lacked sufficient indicia of reliability); United States v. Williams, 668
F.2d 1064, 1072 (9th Cir. 1981) (vacating sentence because trial judge relied on materially
false or unreliable information). And, under certain circumstances, due process concerns
may give rise to relief in a collateral proceeding. See, e.g., Hicks v. Oklahoma, 447 U.S.
343, 346 (1980) (concluding that relief was warranted because appellate court’s refusal to
correct unconstitutional mandatory prison term deprived petitioner of a state-provided
liberty interest in a jury determination). “[A]s a practical matter, collateral relief does
exist to vindicate rights of constitutional import that may lurk beneath otherwise
garden-variety issues of statutory rights or [G]uideline calculations.” Grant v. United
States, 72 F.3d 503, 506 (6th Cir. 1996). But, only where “the error is committed in a
context that is so positively outrageous as to indicate a ‘complete miscarriage of justice’”
does due process require a district court to “correct” a sentence that is in every sense final.
Id.; see also Crank v. Duckworth, 905 F.2d 1090, 1090 (7th Cir. 1990) (observing that
“‘misinformation of constitutional magnitude’, [Tucker, 404 U.S. at 447]—that is, reliance
on an invalid prior conviction—authorizes relief from the current sentence”); cf. United
States v. Eakman, 378 F.3d 294, 301 (3d Cir. 2004) (explaining that “the appropriate test
inquires whether (1) the district court made an objectively ascertainable error (one that
does not require courts to probe the mind of the sentencing judge) and (2) the district court
materially relied on that error in determining the appropriate sentence”); Jones v. United
States, 783 F.2d 1477, 1480 (9th Cir. 1986) (“Where a § 2255 petition alleges reliance on
materially false sentencing information, the sentence will be vacated on appeal only if the
challenged information is (1) false or unreliable and (2) demonstrably made the basis for
the sentence.”).
(2)

Nature and extent of due process rights when a failure to
disclose occurs during trial

The level of materiality at which nondisclosure effects a
constitutional error depends upon whether the prosecution’s
108

failure to disclose additional exculpatory or impeaching
evidence is simply that, or, alternatively, results from the
prosecution’s knowing use of false testimony or evidence.
Mastracchio v. Vose, 274 F.3d 590, 601 (1st Cir. 2001). The materiality standard for a
claim for the knowing use of perjured testimony is less stringent than the materiality
standard for a general Brady violation. See Clay, 720 F.3d at 1025-26 (citing Rosencrantz
v. Lafler, 568 F.3d 577, 587 (6th Cir. 2009)); see also Perkins v. Russo, 586 F.3d 115,
119 (1st Cir. 2009) (“[A] prosecutor’s knowing inducement of perjury is treated more
harshly than a failure, which could be inadvertent, to disclose exculpatory evidence.”).
“A conviction obtained by the knowing use of perjured
testimony must be set aside ‘if the false testimony could . . .
in any reasonable likelihood have affected the judgment of the
jury . . . .’” [Rosencrantz, 568 F.3d at 583 (quoting Giglio v.
United States, 405 U.S. 150, 154 (1972)]). Instead of asking,
as under Brady, “whether ‘there is a reasonable probability
that, had the evidence been disclosed to the defense, the result
of the proceedings would have been different,’” a court
addressing a Giglio false-testimony claim “ask[s] only ‘if there
is any reasonable likelihood that the false testimony could have
affected the judgment of the jury.’” Id. at 584 (citations
omitted); see [Napue, 360 U.S. at 272].
Wogenstahl v. Mitchell, 668 F.3d 307, 323 (6th Cir. 2012) (first, second and fourth
alterations in original); accord Trepal v. Sec’y, Fla. Dep’t of Corr., 684 F.3d 1088, 110708 (11th Cir. 2012); Perkins, 586 F.3d at 119; Mastracchio, 274 F.3d at 601; Braun v.
Powell, 227 F.3d 908, 920 (7th Cir. 2000); Gilday v. Callahan, 59 F.3d 257, 267 (1st Cir.
1995).
The proper materiality standard, however, is only part of the
equation. . . . On habeas review, . . . constitutional
violations that are categorized as “trial error” generally are
“amenable to harmless-error analysis.” [Brecht, 507 U.S. at
629]. . . . Accordingly, [habeas relief is typically available]
only if the asserted trial error “had substantial and injurious
effect or influence in determining the jury’s verdict.” [Id. at
637 (quoting Kotteakos, 328 U.S. at 776)]. This standard
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requires a showing of “actual prejudice” for habeas relief. Id.
(quoting United States v. Lane, 474 U.S. 438, 449 (1986)).
The Supreme Court has avoided assigning a formal burden of
proof for this analysis, but it has stated that “[w]hen a federal
judge in a habeas proceeding is in grave doubt about whether
a trial error of federal law had ‘substantial and injurious effect
or influence in determining the jury’s verdict, that error is not
harmless. And, the petitioner must win.” O’Neal v.
McAninch, 513 U.S. 432, 436 (1995).
Clay, 720 F.3d at 1026-27 (citations omitted) (sixth alteration in original).
Hence, on direct appeal, the knowing use of perjured testimony requires a
conviction to be set aside if there is any reasonable likelihood that the false testimony could
have affected the judgment of the jury, but, on collateral review, the knowing use of
perjured testimony might not give rise to relief if the error is considered harmless under
Brecht. See id. Where a movant alleges in a collateral proceeding that the prosecution
knowingly presented false testimony during trial, the appropriate inquiry is whether “there
is a reasonable probability that, had the evidence been disclosed to the defense, the result
of the proceeding would have been different,” Kyles v. Whitley, 514 U.S. 419, 433 (1995)
(quoting United States v. Bagley, 473 U.S. 667, 682 (1985)), because such inquiry is the
same as the Brecht harmless-error inquiry. See Clay, 720 F.3d at 1026 n.4; see also
Wogenstahl, 668 F.3d at 323 (explaining that “a traditional Brady materiality analysis
obviates a later harmless-error review under [Brecht and] courts may excuse Brady/Giglio
violations involving known and materially false statements as harmless error” (quoting
Rosencrantz, 568 F.3d at 584)); Rosencrantz, 568 F.3d at 591 (emphasizing that, under
Brecht, the crucial inquiry for due process purposes concerns the effect that the
prosecutorial misconduct had on the jury’s verdict) (citing Smith v. Phillips, 455 U.S. 209,
219 n.10 (1982)); Mitchell v. Gibson, 262 F.3d 1036, 1062 n.13 (10th Cir. 2001)
(explaining that, in collateral proceedings, a court applies the “reasonable probability”
standard of Kyles, not the “reasonable likelihood” standard of Giglio, because an error that
may have occurred as a result of the presentation of false testimony is still subject to
110

harmless-error analysis under Brecht, which is essentially the same analysis that is required
by Kyles); Braun, 227 F.3d at 921 (reviewing government’s conduct under “substantial
and injurious effect” standard (citing Brecht, 507 U.S. at 637)); Gilday, 59 F.3d at 269
(stating that a court must consider whether the error more likely than not had no effect on
the verdict) (citing O’Neal, 513 U.S. at 436).

Even if a court concludes that the

presentation of false testimony did not have a substantial and injurious effect on the
factfinding process at trial, the grant of habeas relief might still be warranted if the
circumstances show that “a deliberate and especially egregious error of the trial type, or
[an error] that is combined with a pattern of prosecutorial misconduct, [infected] the
integrity of the proceeding.” Rosencrantz, 568 F.3d at 589 (quoting Brecht, 507 U.S. at
638 n.9).
c.

Application
(1)

Procedural obstacles

These proceedings are not a substitute for earlier proceedings, and, consequently,
the movant cannot reformulate arguments, reconstruct the record or relitigate issues that
have already been decided. The movant has not plausibly alleged cause that excuses his
failure to assert the sentencing error earlier and prejudice that resulted from such error.
Cf. Clay, 720 F.3d at 1025 n.2 (pointing out that, even though movant arguably
procedurally defaulted his claim that his conviction was based on the use of perjured
testimony in violation of his right to due process, the merits of such claim would be
addressed because the government chose not to argue that movant’s claim was procedurally
defaulted). The parties presented evidence and arguments in support of their positions
regarding the Guidelines and appropriate disposition. Witnesses testified and the court
received exhibits.

The movant argued that the loss amount was unreliable and

unforeseeable. The court previously considered all of the parties’ contentions regarding
loss under the Guidelines and under 18 U.S.C. § 3553(a). The court overruled the
movant’s objection regarding the application of USSG §2B1.1(b). After considering all
111

of the Guidelines and the § 3553(a) factors, the court provided reasons that justified the
sentence. The court’s discussion of the appropriate sentence clearly reflects consideration
of the factors under 18 U.S.C. § 3553(a). Assuming that the movant can establish cause
for failing to raise the Guidelines issue during sentencing or on direct appeal, the movant
cannot show prejudice because the court emphasized that the movant’s sentence was welljustified in light of the factors under § 3553(a).
It is clear that, even if the court accepted the movant’s argument that the
government impermissibly caused the loss amount to increase when it legally asserted its
right to forfeiture, the court would have departed or varied upward to arrive at the same
sentence because such sentence is the sentence that is sufficient, but not greater than
necessary, to achieve the overall goals of sentencing. The extent of the enhancement under
USSG §2B1.1(b) really was immaterial because the court made clear that the circumstances
justified a term of 324 months imprisonment or a greater term of imprisonment. The
movant does not assert that the court could not have departed or varied upward based on
its assessment of the factors under § 3553(a), and the court’s explanation of the sentence
makes clear that it intended to impose a term of 324 months imprisonment regardless of
the Guidelines range.

See Molina-Martinez, ___ U.S. at ___, 136 S. Ct. at 1346

(recognizing that, “despite application of an erroneous Guidelines range, a reasonable
probability of prejudice does not exist” when “[t]he record in the case . . . show[s] . . .
that the district court thought the sentence it chose was appropriate irrespective of the
Guidelines range”); United States v. Hentges, 817 F.3d 1067, 1068 (8th Cir. 2016)
(finding that district court’s variant sentence made it unnecessary to address whether
district court erred in applying the Guidelines); United States v. Hager, 609 F. App’x 355,
358 (8th Cir. 2015) (finding that there was no need to determine whether district court
procedurally erred because the record unequivocally indicated that the district court would
have imposed the same sentence based on the 18 U.S.C. § 3553(a) factors); United States
v. Pappas, 715 F.3d 225, 230 (8th Cir. 2013) (holding that any error in applying the
112

Guidelines was harmless because district court made sufficient findings that sentence would
be the same regardless of calculations under the Guidelines); United States v. SanchezMartinez, 633 F.3d 658, 660-61 (8th Cir. 2011) (concluding that miscalculation of the
advisory Guidelines range was harmless because the record clearly established that district
court intended to impose the same sentence under 18 U.S.C. § 3553(a) regardless of the
error); United States v. Henson, 550 F.3d 739, 741-42 (8th Cir. 2008) (emphasizing that
district court’s procedural error did not substantially influence the outcome of the
sentencing proceeding because judge expressly took into account the potential impact of
the claimed error and made clear that he intended to impose the same sentence); United
States v. Idriss, 436 F.3d 946, 951 (8th Cir. 2006) (emphasizing that non-constitutional
misapplication of the Guidelines does not require remand if the record establishes that
district court would have imposed the same sentence absent the error). A variant sentence
based on the factors under § 3553(a) defeats any claim that the movant suffered prejudice.
In light of the record, it is clear that the court’s application of the advisory sentencing
Guidelines, consideration of the parties’ sentencing arguments and application of the
sentencing factors under 18 U.S.C. § 3553(a) violated no constitutional right. Nothing
restricted the court’s discretion during the sentencing hearing, and the sentence that the
movant received is reasonable and appropriate.

Accordingly, the movant’s sentencing

error claim is procedurally defaulted, and relief on the basis of such error is unavailable
to the movant.
Further, an issue which has been decided by the Eighth Circuit Court of Appeals
may not be revisited absent exceptional circumstances. An example of such a circumstance
includes an intervening change in the law. No intervening change in the law or other
extraordinary circumstance exists such that it is appropriate to relitigate the issue of loss
under the Guidelines. See Baranski, 515 F.3d at 861 (affirming district court’s decision
denying collateral relief because prior rulings were law of the case and movant did not
establish an intervening change in controlling authority); see also United States v. Marks,
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768 F.3d 1215, 1218 (8th Cir. 2014) (explaining that the law of the case doctrine requires
an appellate court to adhere to decisions that were made in earlier proceedings unless a
party introduces substantially different evidence or the prior decision is clearly erroneous
and works a manifest injustice); United States v. Winters, 600 F.3d 963, 966 (8th Cir.
2010) (concluding that additional evidence offered in subsequent proceeding after remand
did not substantially differ from testimony offered at earlier hearing); United States v.
Bartsh, 69 F.3d 864, 866-67 (8th Cir. 1995) (determining that district court did not err in
determining that law of the case doctrine precluded further review of defendant’s sentence
even though district court arrived at a different loss amount on remand).
(2)

Cognizability

Even if the movant’s claim concerning the loss amount was not procedurally
defaulted, it is not cognizable. Any entitlement to collateral relief is severely limited; the
language of § 2255(a) demonstrates that collateral review is available for a narrow range
of defects. The facts asserted by the movant do not establish “exceptional circumstances
where the need for the remedy afforded by the writ of habeas corpus is apparent.” Hill,
368 U.S. at 428. No sentencing error amounted to a fundamental defect which inherently
resulted in a complete miscarriage of justice.

See Sun Bear, 644 F.3d at 704-05

(concluding that sentencing errors are generally not cognizable in § 2255 proceedings).
As the government correctly points out, claims involving errors in the application
of the sentencing Guidelines, which are non-constitutional errors, generally are not
cognizable under § 2255. See Addonizio, 442 U.S. at 187-88 (explaining that a district
court’s subjective intent in sentencing is not a subject cognizable on § 2255 review);
Henson, 550 F.3d at 741 (stating that district court’s improper treatment of the sentencing
range as presumptively reasonable was undoubtedly a non-constitutional error). Unless
the record reflects a fundamental defect in the proceedings which necessarily resulted in
a complete miscarriage of justice, a sentencing error, to wit a non-constitutional error,
cannot be raised in a § 2255 motion.
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The movant cannot use § 2255 to raise the alleged error in calculating the
Guidelines range. The error asserted by the movant is not a member of the “small” class
of errors which would call for § 2255 review. See United States v. Peterman, 249 F.3d
458, 462 (6th Cir. 2001) (“Courts have generally declined to collaterally review sentences
that fall within the statutory maximum.”); Pregent, 190 F.3d at 284 (“[W]hile § 2255
applies to violations of statutes establishing maximum sentences, it does not usually apply
to errors in the application of the Sentencing Guidelines.”); Auman, 67 F.3d at 161
(“While section 2255 does provide relief for cases in which ‘the sentence was in excess of
the maximum authorized by law,’ this provision applies to violations of statutes
establishing maximum sentences, rather than garden-variety Sentencing Guideline
application issues.”). The alleged error in the application of the advisory Guidelines is not
a fundamental defect that inherently results in a complete miscarriage of justice.
Notably, when the court sentenced the movant, it relied on advisory Guidelines and
the movant received a sentence that is below the maximum that is authorized by the law.
See United States v. Villareal-Amarillas, 562 F.3d 892, 898 (8th Cir. 2009) (observing that
a sentencing judge is only constrained by the statutory maximum and minimum for an
offense and the factors included in 18 U.S.C. § 3553(a)). The court sentenced the movant
within the statutory limits, and, although actual loss under USSG §2B1.1(b) was an issue
at the time of sentencing, the application of USSG §2B1.1(b) did not affect the lawfulness
of the movant’s sentence—then or now. In the context of collateral proceedings, a
sentence below the ceiling imposed by Congress—whether by statute or the
Guidelines—does not constitute a miscarriage of justice. Therefore, the court is not
presented with exceptional circumstances where the need for the remedy afforded by the
writ of habeas corpus is apparent.
(3)

Merits of sentencing error claim

The dimensions of the issues that are addressed during a criminal trial and during
a sentencing hearing are fundamentally different. See Nichols v. United States, 511 U.S.
115

738, 747 (1994) (noting that “the sentencing process . . . [is] less exacting than the process
of establishing guilt”). Indeed, a sentencing hearing is not undertaken to convict a
defendant for the alleged violation, and, therefore, it does not give rise to the full panoply
of rights that are due a defendant at trial. See Witte, 515 U.S. at 399-401 (noting that
sentencing courts have traditionally considered a wide range of information without the
procedural protections of a criminal trial). It is also clear that different standards apply
when trial errors and sentencing errors are reviewed on direct appeal and when they are
reviewed in a collateral proceeding. Compare Wogenstahl, 668 F.3d at 323 (emphasizing
that the knowing use of perjured testimony requires an appellate court to set aside a
conviction if there is any reasonable likelihood that the false testimony could have affected
the judgment of the jury), and United States v. Boyce, 564 F.3d 911, 918 (8th Cir. 2009)
(explaining that, where a defendant asserts that a violation of due process occurred at the
time of sentencing, appellate relief is available if the defendant establishes that “the
prosecution used perjured testimony, [that it] knew or should have known of the perjury,
and that there is a ‘reasonable likelihood that the perjured testimony could have affected
the [court’s] judgment’” (quoting United States v. Martin, 59 F.3d 767, 770 (8th Cir.
1995) (second alteration in original)), with Clay, 720 F.3d at 1026 n.4 (explaining that,
in a collateral proceeding where a movant asserts that the prosecution knowingly presented
false testimony during trial, the appropriate inquiry is whether there is “a reasonable
probability that, had the evidence been disclosed to the defense, the result of the
proceeding would have been different” (quoting Rosencrantz, 568 F.3d at 584 n.1)), and
Grant, 72 F.3d at 506 (emphasizing that only where “the error is committed in a context
that is so positively outrageous as to indicate a ‘complete miscarriage of justice’” does due
process require a district court to “correct” a sentence that is in every sense final).
Here, the movant does not argue that the government presented false testimony or
committed misconduct during trial. Rather, the movant argues that the total loss that the
victims suffered and the court calculated for sentencing purposes was based on false or
116

misleading testimony and incomplete information. But, the movant falls woefully short
of establishing that the alleged error was committed in a context that is so positively
outrageous as to indicate a complete miscarriage of justice. See Grant, 72 F.3d at 506.
(a)

Parties’ positions/arguments

It is apparent that the position advanced by the movant in this proceeding is
essentially the same position that he advanced in prior proceedings. In advance of the
sentencing hearing, throughout his sentencing proceeding and after judgment entered
against him, the movant argued some variation of the following:
The government unfairly injected itself into the bankruptcy
process; the government did not allow the bankruptcy process
to operate in a normal way; the government impermissibly
interfered with the sale of Agriprocessors’ assets. The
government used its forfeiture allegations to impose conditions
on the future ownership and operation of Agriprocessors; the
government insisted that none of the Rubashkin family retain
an ownership interest in the company; the government forbid
Aaron Rubashkin from being involved in the purchase of
Agriprocessors’ assets; the government demanded/insisted that
no Rubashkins could be involved in the sale of Agriprocessors.
The government’s actions scared bidders. The government’s
looming forfeiture proceedings reduced the sale price of
Agriprocessors; the government’s prohibition against future
involvement by a purchaser with Aaron Rubashkin
substantially devalued Agriprocessors. The government’s
forfeiture position had the unforeseeable effect of reducing the
liquidation value of Agriprocessors; it was not reasonably
foreseeable that the government would act in a manner that
would reduce FBBC’s recovery of the money it loaned.
Similarly, the evidence of record clearly revealed the government’s purpose for
asserting a forfeiture allegation and the manner in which the government advanced its
forfeiture rights. The government consistently asserted some variation of the following:
the government would not execute its forfeiture rights against
assets which could be sold in a section 363 sale to an arm’s
length, good faith, purchaser who has no connection to the
117

current owner of Agriprocessors, Inc., and no connection with
the managers that were in place at the times of the offenses; by
asserting forfeiture, the government sought to prevent assets
which might be subject to a 363 sale from being controlled by
or being used for the benefit of those who allowed
Agriprocessors’ assets to be used for criminal purposes in the
past; the government approved of any buyer that did not have
associations and would not become associated with the
previous owner or plant managers, including those charged
with criminal offenses; the government desired to prevent any
person involved in previous criminal wrongdoing from
circumventing the forfeiture laws through bankruptcy or from
otherwise enriching themselves through the use, acquisition,
or disposition of any financial or management interest in assets
subject to forfeiture.
At nearly the outset of criminal proceedings against the movant and Agriprocessors,
the government decided to put potential buyers on notice that any asset acquired with or
for a defendant and any money paid to a defendant could be subject to forfeiture. And,
shortly after making such decision, the government included a forfeiture allegation in the
December 11, 2008 third superseding indictment.23

It also publicly maintained its

forfeiture position throughout bankruptcy proceedings, which the movant expressed
familiarity with during the sentencing hearing. See United States v. Coplen, 565 F.3d
1094, 1097 (8th Cir. 2009) (citing United States v. Zuazo, 243 F.3d 428, 431 (8th Cir.
2001)); United States v. Albanese, 195 F.3d 389, 394 (8th Cir. 1999); United States v.
Jones, 160 F.3d 473, 479 (8th Cir. 1998).
Aside from the fact that readily available information indicated that the government
was trying to prevent Aaron Rubashkin from regaining control of Agriprocessors either

23

The court notes that, when the government first included a forfeiture allegation
in the December 11, 2008 third superseding indictment, neither the government nor the
bankruptcy trustee had a clear understanding of the value of Agriprocessors. Clearly, the
government did not want proceeds that exceeded the amount owed to creditors to revert
to the Rubashkins.
118

directly or through another purchaser and would pursue forfeiture if any of
Agriprocessors’ assets were ultimately owned by the Rubashkins, controlled by the
Rubashkins or used for the benefit of the Rubashkins, abundant information apprised the
movant that the bankruptcy trustee, FBBC and other interested parties had concerns about
the government’s forfeiture position. Actual documents disclosed those concerns, and it
would have been obvious to anyone involved in the bankruptcy process that the issue of
forfeiture would need to be addressed.
The arguments offered by the movant with respect to Paula Roby’s testimony do not
support a finding that Paula Roby committed perjury. If all of Paula Roby’s testimony is
considered, it cannot be said that she wilfully intended to provide either false or
substantially misleading testimony. See Tassin v. Cain, 517 F.3d 770, 778-79 (5th Cir.
2008). Rather, it is clear that any inaccuracy in her testimony occurred as a result of
confusion, mistake or faulty memory.
Paula Roby’s testimony can be fairly characterized as generally addressing the
following:
the bankruptcy trustee’s duties and goals; the issues that the
bankruptcy trustee confronted; the timing of forfeiture
discussions and the government’s bank fraud charges and
forfeiture allegations; the efforts undertaken to address the
government’s forfeiture position; the need to have prospective
buyers communicate directly with the government about its
forfeiture position; the time spent with prospective buyers and
others associated with the bankruptcy case; the limited ways in
which the government would allow Rubashkins to be involved
in a new entity; the nonexistence of an edict that prevented
potential buyers from having any involvement with Aaron
Rubashkin; the possibility of discussions regarding the
government’s concerns about a buyer acquiring Agriprocessors
on behalf of Aaron Rubashkin or the Rubashkins obtaining an
equity interest; the strong desire of prospective buyers to have
Rubashkins involved as advisors or senior management; the
view held by prospective buyers that Heshy Rubashkin and
Aaron Rubashkin were indispensable; the impact that the
119

government’s forfeiture position had on prospective buyers;
the concerns other than the government’s forfeiture position
that prospective buyers had; the bidding procedures; the
receipt of Eli Soglowek’s $40,000,000 stalking-horse bid and
the reason that Eli Soglowek withdrew such bid; the timing of
Eli Soglowek’s meeting with the government and others; the
continued employment of Rubashkin family members at
Agriprocessors; the aspects of Agriprocessors that added to its
value; the receipt of offers that did not materialize; the lack of
the movant’s involvement in bankruptcy proceedings; FBBC’s
response to the government’s actions; the existence of rumors;
the bankruptcy trustee’s efforts to dispel rumors; and the
knowledge of why the government took some actions.
See Sentencing Transcript (criminal docket no. 937) at 485-519. Paula Roby repeatedly
emphasized that potential bidders needed to work out forfeiture details with the
government. She never implied that the government was not pursuing forfeiture. In
February of 2009, she clearly thought that the government’s forfeiture position did not
prohibit all involvement by the Rubashkins, that is, they could have some type of limited
involvement. It is apparent that she believed Aaron Rubashkin could be involved as an
advisor and other Rubashkins could be employed in some capacity. By relying on terms
such as “advisor”, she fairly conveyed that the circumstances under which the government
would pursue forfeiture depended on the manner in which the Rubashkins would be
involved and the benefit they would receive.
The movant’s attempts to disparage the government and its witnesses are misguided.
There was no doubt that the government would be pursuing all of its significant interests.
But, it was also true that the government appropriately recognized that it could not act out
of vindictiveness and that the advancement of its rights to forfeiture had limits. It clearly
tried to balance the interests of the Postville community and other interests against its
assertion of its right to forfeiture. Indeed, it did not persist when SHF Industries, LLC
indicated that it was unwilling to go forward if the government continued to pursue its
forfeiture interests. And, consistent with testimony offered at the sentencing hearing, the
120

bankruptcy trustee did what he thought was in the best interests of creditors. Even though
the government expressed reservations about Heshy Rubashkin being involved in
Agriprocessors, the government did not interfere with the bankruptcy trustee’s
determinations as to what was best for Agriprocessors.
Regarding the movant’s attempts to disparage the government’s witnesses, a fair
description of the record reveals that the government’s witnesses actually provided
testimony that favored the movant, or, at least, can be described as relatively neutral. See
Boyce, 564 F.3d at 918 (concluding that defendant failed to establish a reasonable
likelihood that false statements affected his sentence). They both acknowledged that the
government’s forfeiture position caused people to react, to explore the limitations or
restrictions on the Rubashkins and/or to seek information about the parameters of the
government’s forfeiture position. The government’s witnesses provided testimony that
aligned with the work that they did: FBI Special Agent Randy Van Gent investigated the
movant, and Paula Roby, as counsel for the bankruptcy trustee, served the interests of the
creditors of the bankruptcy estate. They both expressed views based on their observations
and perspectives.
The movant mischaracterizes the new evidence. A fair description of the new
evidence indicates the following:
During the December 5, 2008 meeting, the participants
addressed many issues. It is clear that, from an early point,
serious concerns regarding the involvement of Rubashkins in
a new entity existed. For various reasons, all of the
participants in the December 5, 2008 meeting believed that it
would be unwise to involve the Rubashkins in a new entity.
The government emphasized that no involvement of the
Rubashkins from any control, equity or benefit standpoint was
very important and non-negotiable, that trademarks should be
eliminated and that a buyer should commit to operating the
plant because shutting it down would destroy the community.
Serious concerns regarding whether the government should or
should not formally assert its right to forfeiture also existed.
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The government did not believe that lingering concerns about
forfeiture would allow a good faith purchaser to be identified.
Despite the existence of serious concerns, all of the
participants agreed that an open line of communication should
be maintained and that something creative could be worked
out.
FBBC recognized that the value of Agriprocessors’ assets
would be enhanced if the government agreed to forgo
forfeiture of assets that are available for sale to a good-faith,
arm’s-length purchaser and expressed a belief that the public
assertion of the government’s right to forfeiture would not be
in the best interests of Agriprocessors’ creditors, its employees
or the Postville community. FBBC acted in response to
information that it learned during bankruptcy proceedings.
The government’s forfeiture interest only concerned money
that a buyer might pay or assets that a buyer might transfer to
the Rubashkins in the future and it would not forfeit assets
which a good-faith buyer acquired to operate Agriprocessors.
Triax Capital Advisors, LLC prepared a valuation report
regarding Agriprocessors. A determination regarding the
value for Agriprocessors prior to the date that it filed for
bankruptcy took into account many assumptions.
Many individuals reacted to the government’s assertion of
forfeiture, explored the limitations or restrictions on ownership
of or involvement in Agriprocessors and/or sought information
about the parameters of the government’s forfeiture position.
See Movant App’x (civil docket no. 44-1) at 88-98, 170-77. The movant’s new evidence
is consistent with the evidence that the movant previously relied on during sentencing
proceedings. It does not substantially differ from the evidence that the parties presented
during the sentencing hearing. Because the new evidence that the movant relies on is
essentially the same as the evidence that he previously introduced during the sentencing
hearing, a reasonable probability that the result of the sentencing proceeding would have
been different does not exist. Thus, it cannot be said that the government’s conduct caused

122

a complete miscarriage of justice, see Grant, 72 F.3d at 506, or had a substantial and
injurious effect or influence in determining the outcome, see Brecht, 507 U.S. at 637.
The movant had all the information that he needed to make a full and fair argument
concerning the loss amount. After obtaining relevant information, nothing prevented the
movant from following up or conducting further investigation. And, nothing prevented the
movant from doing more with the information that he had. The movant absolutely could
have provided a different accounting and/or made other arguments, including an argument
about the legality of the government’s forfeiture position.24 Given the information that the
movant had or could have easily obtained if he deemed more information to be necessary
to advance his argument, the movant’s reconstruction of the record and reformulation of
his arguments concerning loss is precluded.
(b)

Understanding of the court

Given the parties’ positions, the court understood that numerous variables or
factors, not just the government’s forfeiture position, could have impacted the value of
Agriprocessors. It also understood that reasonably accurate estimates for those variables
or factors could not be provided.
(i)

Variables or factors

The record is filled with statements that make it relatively easy to infer that the
circumstances surrounding the sale of Agriprocessors’ assets involved many

24

Neither the movant nor Agriprocessors previously asserted that the government
could not legally pursue forfeiture or that it had improper reasons for doing so. See, e.g.,
United States v. Robinson, 809 F.3d 991, 1000-01 (8th Cir. 2016) (determining that
sufficient evidence to raise a presumption of impermissible prosecutorial vindictiveness did
not exist); United States v. Williams, 720 F.3d 674, 701-02 (8th Cir. 2013) (discussing
purpose of forfeiture). The time for challenging the government’s assertion of its right to
forfeiture passed a long time ago, and the movant cannot do so now. Moreover, if the
government could not legally assert a right to forfeiture, then the government’s assertion
of such right should not have had any impact whatsoever on the bidding process.
123

considerations. For example, it is possible that the value of Agriprocessors could have
been influenced by the following:
the government’s role and statements; Aaron Rubashkin’s role
and statements; the chief executive officer’s role and
statements; the actions of and statements by other Rubashkins;
FBBC’s actions and/or greed; other creditors’ actions; the
bankruptcy trustee’s actions, including his estimation of what
price he could obtain in a sale of Agriprocessors’ assets; the
insistence that those associated with criminal activity be
involved with a new company; the intensity of the
government’s response to an assertion that Rubashkins must be
involved in a new entity; the need to maintain Agriprocessors
as a going concern; assertions made by potential buyers,
including those that might be made to drive the price lower;
accounting irregularities; rumors in the community;
deteriorating market conditions; overall business conditions;
bad business planning; poor management by the bankruptcy
trustee; the bankruptcy trustee’s refusal to consider offers;
pressure by the Rubashkins; the devotion to religious
obligations, including the duty to pay off debts; the lack of
responsible management at Agriprocessors; the dysfunctional
nature of Agriprocessors; the lack of centralized control over
Agriprocessors’ finances, including incurrence of debt,
expenditures and payment of accounts payable; operations
being conducted remotely or from the East coast; the lack of
cross-checking or accountability within Agriprocessors; Aaron
Rubashkin’s lack of oversight and controls; the way that Aaron
Rubashkin structured Agriprocessors, including that he, rather
than a board of directors, should make all major decisions; the
lengthy amount of time during which Agriprocessors faced a
serious financial crisis; the lack of a centralized system for
decision-making, bill paying and expense management;
Agriprocessors’ thin profit margin; Agriprocessors’ poor
business decisions, including adding new and unprofitable
products, expanding the plant and overproducing products;
Agriprocessors’ difficulty in turning a profit after 2004;
Agriprocessors’ increased managerial dysfunction; the loss of
goodwill that would occur as a result of Agriprocessors’
issues, including employing an illegal workforce and failing to
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pay individuals or creditors; the hope of Agriprocessors’
management that the executive branch would help with its
illegal worker situation; the loss of Agriprocessors’ largest
account shortly before the ICE enforcement action; the lack of
a decision making authority to stop illegal conduct from
occurring at Agriprocessors; the destruction of documents; the
concealment of information; the realization that Agriprocessors
had not paid its cattle and poultry suppliers; the inability of
Agriprocessors’ management and Aaron Rubashkin to secure
new sources of financing prior to and after the ICE
enforcement action; the failure of Agriprocessors to act fast
enough to get investors in place after November 4, 2008; the
existence of serious labor issues, including Agriprocessors’
inability or unwillingness to replace employees and restaff the
plant; the pending civil litigation brought by FBBC in October
of 2008; the pending criminal charges against Agriprocessors
and certain of its principals; the bankruptcy trustee’s control
over Agriprocessors and alteration of it; the length of time
Agriprocessors had been shut down; the inability to secure
financing from any third party as a result of the government’s
indictment; the acknowledgment that liquidation would be the
only option if $50,000,000 could not be obtained in a short
period of time; the acknowledgment that someone would have
to be willing to spend $75,000,000 to give Agriprocessors the
maximum opportunity to survive; Agriprocessors’ failure to
operate at full capacity for a long time; Agriprocessors being
structured as an oversized plant; Agriprocessors’ loss of its
niche; Agriprocessors’ need to reach an agreement with
authorities; Agriprocessors’ inability to satisfy FBBC; the loss
of potential investors and the inability to reorganize or restart
Agriprocessors as a result of the transfer of the bankruptcy
case to the Northern District of Iowa; the concern with the
administration of justice; the minimization of criminal conduct,
knowledge of it and role that individuals and Agriprocessors
played in it; feelings toward Agriprocessors and the
Rubashkins; feelings toward the government; Agriprocessors’
inability or unwillingness to comply with the law for a very
long period of time; the preference to have a buyer continue to
operate Agriprocessors rather than shut it down; the
uncertainty of whether adequate due diligence could be
125

conducted; the understandings of the government, the
bankruptcy trustee, FBBC, other creditors and potential
buyers; the availability of information; the information being
conveyed to potential buyers; the information being conveyed
to the government; the information that potential buyers
conveyed to the bankruptcy trustee; employees’
communications with potential buyers; the unwillingness of
potential buyers to communicate with the government; the
failure to accept a $40,000,000 bid outright; the objections of
creditors regarding the proposed sale price of $40,000,000; the
uncertainty of the primary secured creditors at the March
auction; the rejection of the highest March bid; the rejection of
the April 19, 2009 offer; the existence of inappropriate
connections to the movant or Agriprocessors; the complexity
of the bankruptcy process; the fraudulent accounts receivable,
fraudulent inventory numbers and overall criminal scheme; the
concern about the wastewater treatment plant; the failure to
remove individuals and put professionals in place prior to
filing for bankruptcy; the need for Agriprocessors to be run in
an incredibly efficient manner; the inability of Agriprocessors
to compete in a non-kosher world; the limited number of
interested parties given the nature of Agriprocessors’ business;
the use of aggressive tactics by the Rubashkins; the
considerable influence of the Rubashkins; the possibility that
a successor company might have to address the negative
influence of Rubashkins if such company did not involve them;
the ability to collect on accounts after the government
commenced criminal proceedings; the information that the
Rubashkins might be telling their contacts; the belief that
Aaron Rubashkin’s name had immense value and good will in
the Orthodox Jewish community; the “sloppiness” of
Agriprocessors; the failure of the Rubashkins to adhere to
corporate formalities; the refusal of the Rubashkins to give up
their business; the concern about destroying the Postville
community if a buyer shut the plant down; the lack of access
to management because they were unavailable; the inability of
Agriprocessors to meet its debts; the unwillingness of FBBC
to extend credit after the ICE enforcement action; the
additional cost to lawfully employ individuals; the size of
working capital requirements; the failure to expend capital to
126

maintain the plant and equipment; the accuracy of operating
results or Agriprocessors’ books; the need to satisfy existing
creditors in order to continue operating the business; the need
to develop relationships with large customers and gain
experience in and knowledge of the industry; the failure of the
bankruptcy trustee to have his concerns about the
government’s forfeiture position addressed after December of
2008; the lack of potential buyers that declined to pursue their
business interests by negotiating with the government or
pursuing other avenues through the bankruptcy process; the
number of product sales after the ICE enforcement action; the
passage of time, etc.
Not one of those variables considerably outweighs the other listed variables.

The

government’s role is no more important than the role that FBBC, the bankruptcy trustee,
the Rubashkins or potential buyers played prior to and/or during bankruptcy proceedings.
The movant repeatedly emphasizes that potential buyers would have paid more for
Agriprocessors if the Rubashkins could have been involved, but he fails to acknowledge
that some buyers wanted absolutely nothing to do with the Rubashkins and were willing
to spend around $50,000,000. He also fails to recognize that the buyers’ declarations that
they would have paid more if the Rubashkins could have had an ownership interest or
management role directly conflicts with their interest in paying as little as possible for
Agriprocessors’ assets. No potential buyer could credibly assert that Aaron Rubashkin’s
name and the involvement of the other remaining Rubashkins had value in the tens of
millions, and it is highly likely that buyers’ interests in obtaining a sale price as low as
possible far outweighed the value and good will associated with the use of Aaron
Rubashkin’s name and the involvement of the Rubashkins. Potential buyers clearly had
an incentive to profess their need for the Rubashkins to be involved and their desire that
the government not assert its forfeiture rights. Indeed, they cannot credibly deny that they
wanted to pay as little as possible for Agriprocessors’ assets.
It is telling that not one potential buyer deemed the government’s forfeiture position
and the involvement of the Rubashkins to be so important that they asked to meet with the
127

government to negotiate appropriate terms. The movant does not point to businesses or
individuals that identified the government’s forfeiture position as an overwhelming concern
and deemed it essential to negotiate an agreement not to pursue forfeiture before submitting
a bid or offer. Sophisticated businesses run by savvy individuals do not run from a
challenge. Rather, they seize opportunities, especially when an opportunity benefits the
bottom line. If it serves their interests, savvy investors who have concerns attempt to get
them addressed. If any potential buyer really thought that the remaining Rubashkins were
indispensable or the government’s forfeiture position caused unreasonable restrictions,
such buyer could have sought to negotiate favorable terms with the government. And, if
negotiations with the government failed to alleviate a potential buyer’s concerns, nothing
prevented such buyer from pursuing other options, such as asking the bankruptcy trustee
or the United States Bankruptcy Court for the Northern District of Iowa to get involved.
The suggestion that savvy individuals felt so threatened or frightened by the government
that they would not even entertain the thought of asking for a meeting is unbelievable; it
is incredibly difficult to conclude that all investors were so debilitated by fear that they
refused to act in any manner whatsoever.
(ii)

Estimate of loss

In order for the court to depart downward, reliable evidence regarding the impact
that particular factors had on the sale of Agriprocessors’ assets needed to be part of the
record. The movant did not present specific evidence to support his theory about a
depressed sale price, and, as a result, the court could not reasonably estimate the value
associated with particular factors. The court still cannot reasonably estimate the value
associated with specific factors and doubts that it ever could given the circumstances
surrounding this case.
During the sentencing hearing, the government exercised great restraint. Due to
the evidence already in the record, the government did not have to offer anything but a
temperate response, that is, it only needed to admit reliable evidence of the banks’ losses
128

during the sentencing hearing.25 It did so by, among other things, calling FBI Special
Agent Randy Van Gent. In response, the movant called Abe Roth, who testified about
how he arrived at a total loss amount around $4,500,000. Abe Roth did not deem it
appropriate to further reduce that number based on FBBC’s failure to unilaterally
investigate Agriprocessors’ fraud or to provide an alternative analysis based on factors that
might have caused the bankruptcy trustee to recover less.
Throughout sentencing proceedings, the movant never emphasized a specific value
that could be attributed to any particular factor, and nobody placed a value on any
particular factor that impacted the sale of Agriprocessors’ assets. When the government
called Paula Roby as a rebuttal witness, Paula Roby opined that she did not think the
government’s forfeiture position impacted the sale of Agriprocessors’ assets. And, the
movant’s sur-rebuttal witness failed to identify all of the considerations that caused him not
to make an offer for Agriprocessors’ assets or a specific number that he associated with
having the Rubashkins involved in a new entity. He only testified that he believed the
prohibition against having Aaron Rubashkin involved in a successor corporation reduced
the value of Agriprocessors by millions of dollars.
Contrary to the movant’s contention, the court did not discredit or credit any
specific testimony of any witness. It did not specify the forfeiture position that it believed
the government advanced during bankruptcy proceedings because a determination
regarding the loss amount did not hinge on the exact nature of the government’s forfeiture
position. It was clear that the government aggressively pursued its right to forfeiture. But,
it was also clear that not all involvement by Rubashkins was prohibited. Because it was

25

A report dated September 14, 2007 indicates that FBBC sold a $10,000,000
portion of its secured interest to MB Financial Bank, N.A. After FBBC made such sale,
FBBC held a $25,000,000 secured interest in Agriprocessors and MB Financial Bank,
N.A. held a $10,000,000 secured interest in Agriprocessors. The court determined that
FBBC suffered a $18,525,362.18 loss and MB Financial Bank, N.A. suffered a
$8,322,989.12 loss.
129

clear from Meyer Eichler’s affidavit and Paula Roby’s testimony that no absolute
prohibition regarding all of the Rubashkins existed, it was not difficult to reject the
movant’s argument that no purchaser could have any involvement whatsoever with the
movant or the movant’s family. Rather than focus on the extent of the government’s
restriction on the Rubashkins’ involvement, the court focused on whether any forfeiture
position could have impacted the sale price of Agriprocessors’ assets. The court credited
Paula Roby’s opinion about the impact that the government’s forfeiture position had on
potential bidders. And, the court discredited witnesses’ opinions that were offered in
support of the movant’s assertion that the government’s forfeiture position resulted in a
depressed sale price of Agriprocessors’ assets. Namely, the court did not find that the
value of Agriprocessors’ assets fell by millions of dollars because buyers could have
absolutely no association or involvement with Aaron Rubashkin, that is, could not even ask
Aaron Rubashkin for advice on how to move forward, or that buyers opted not to bid
because they could not put together a sufficiently experienced management team if a
Rubashkin could not be part of it.
At their core, the movant’s allegations regarding the government’s conduct amount
to no more than the use of accusations, especially unjust ones, to damage the reputation
of an opponent. The movant’s mudslinging is wholly inappropriate. Although zealous
advocacy is permitted, a litigant may not embellish, disparage and take words out of
context in an effort to prove a weak or non-existent argument. Clearly, the movant’s allconsuming endeavor to call into question the government’s actions and to impugn witness
testimony caused him to lose track of the central issue in this proceeding.
The government never disputed that it sought forfeiture of Agriprocessors’ assets
and that it took steps to enforce its right to forfeiture. But, without credible evidence that
established amounts that could be attributed to various factors, the government’s forfeiture
position and what it did during bankruptcy proceedings really had no bearing whatsoever
on the sentencing proceeding. When initially making points about the Guidelines, the
130

parties presented straight-forward calculations, and neither the government nor the movant
offered any specific evidence regarding any particular factor.

Given the movant’s

evidence, the government really had no reason to call a rebuttal witness. And, even after
the government offered the rebuttal testimony of Paula Roby and the movant offered the
sur-rebuttal testimony Steve Cohen, the evidence of record did not show with any
specificity whatsoever the impact that the government’s forfeiture position had on the value
of Agriprocessors’ assets.
It is apparent that the movant is reluctant to focus on the facts because the facts do
not give rise to relief. Speculation that one factor over all of the other factors caused an
increase in the loss amount is not a sufficient basis for a court to impose a sentence. It is
not possible to reasonably approximate values for particular factors. This is particularly
evident when some of the numbers that are part of the record are analyzed: (1) as of June
27, 2008, no reasonable investor would pay more than the enterprise value of $26,916,000
for Agriprocessors’ assets to be free and clear of the debt security holder’s obligations; (2)
as of June 27, 2008, Agriprocessors had a book value of $10,205,000 and $21,929,246
in net property, plant and equipment; (3) in the summer of 2008, the Rubashkin family was
asking Mordechai Korf to pay around $40,000,000 for Agriprocessors;26 (4) in November
of 2008, Mordechai Korf was already seeking to obtain an interest in Agriprocessors at a
discount between $5,500,000 and $7,000,000, that is, Mordechai Korf sought to obtain
FBBC’s interest for between $21,500,000 and $22,000,000 even though FBBC had
exposure between $27,000,000 and $29,000,000; (5) in December of 2008, a buyer was
apparently willing to pay $50,000,000 and would never allow the Rubashkins to be
involved; (6) Eli Soglowek offered $40,000,000 on January 21, 2009 and then he was back

26

It is uncertain whether the Rubashkin family discounted the price in light of
various factors. Apparently, Aaron Rubashkin knew what had happened toward the end
of Agriprocessors or by mid-October of 2008. See Presentence Report (criminal docket
no. 887) at ¶ 295.
131

at the table with a $23,000,000 offer ($6,000,000 in rent and $17,000,000 payable after
about two years) on April 19, 2009; and (7) Eli Soglowek’s April 19, 2009 offer exceeded
the offer of almost $16,000,000 during the March auction.
The $68,662,617 number that the movant provides as a starting point for the value
of Agriprocessors’ assets is disingenuous. Regarding the more realistic starting point that
is at some point below $40,000,000, potential buyers would absolutely be concerned about
how to value Agriprocessors in light of various factors, including accounting irregularities,
and to suggest that those factors did not decrease the $40,000,000 value that the
Rubashkins placed on Agriprocessors is absolutely belied by the actions of bidders.
The movant argues that the loss amount is no more than $19,500,000, which is
$27,000,000 (FBBC’s outstanding unpaid balance) - $7,500,000 (the difference between
the bid of almost $16,000,000 during the March auction and the $8,500,000 paid by SHF
Industries, LLC). But, he fails to acknowledge that Eli Soglowek offered between
$17,000,000 and $23,000,000 on April 19, 2009, which purportedly would have accounted
for the government’s forfeiture threats. So, something other than the government’s
forfeiture position must account for the $8,500,000 to $14,500,000 drop that occurred
between April 19, 2009 and July 20, 2009.27
In addition, the movant argues that the government interfered with the free
operation of market forces by asserting its legal right to forfeiture. But, he wholly fails
to address the fact that he improperly interfered with the free operation of market forces
well before and after Agriprocessors filed for bankruptcy. Aside from the fact that
harboring an illegal workforce and committing financial crimes artificially increased the

27

The court notes that the movant overlooks the specific nature of the secured
creditors’ interests. FBBC only received $2,000,000 of the $8,500,000 credit bid by SHF
Industries, LLC. MLIC Assets Holdings, LLC received the remaining $6,500,000.
Presumably, MLIC Assets Holdings, LLC received more because MLIC Assets Holdings,
LLC had a senior lien and/or FBBC primarily held a security interest in Agriprocessors’
pre-petition inventory and accounts receivable.
132

value of Agriprocessors for a lengthy amount of time, the movant and Agriprocessors
duped FBBC into providing another $5,000,000 in DIP financing, that is, before it realized
the extent of the fraud. FBBC unwittingly loaned such amount without realizing that the
movant falsely inflated Agriprocessors’ accounts receivable by $10,000,000 and that it
would be unable to recover approximately $5,000,000 as a result of the movant’s failure
to comply with the Packers and Stockyards Act. It is possible that the movant’s failure to
disclose his unlawful conduct and additional unlawful conduct, even after being indicted
by the government, bolstered the sale price of Agriprocessors’ assets because the
bankruptcy trustee was able to sell Agriprocessors as a going concern. At a minimum, it
is probable that FBBC would have made different choices if it had known the extent of the
fraudulent activity and the low amount that it would ultimately recover.
(c)

Application of the sentencing Guidelines

The movant asserts that the government’s misconduct deprived him of a fair
sentencing hearing. There is absolutely no support for the movant’s allegations of
misconduct. The government did not conceal any information that materially affected the
outcome of the sentencing hearing and it did not offer misleading testimony. The court
was neither misinformed nor uninformed as to any relevant circumstance, correctly applied
the Guidelines and imposed a sentence after exercising its informed discretion.
The Guidelines define “loss” for purposes of the enhancement
for fraud offenses as “the greater of actual loss or intended
loss.” [USSG §2B1.1], comment. n.3(A). Under this
[G]uideline as extensively amended in 2001, “actual loss” is
“the reasonably foreseeable pecuniary harm that resulted from
the offense.” Note 3(A)(i); see United States v. Hartstein, 500
F.3d 790, 798 n.3 (8th Cir. 2007), cert. denied, 552 U.S.
1102 (2008). As the Sentencing Commission explained, this
“net loss” approach “recognizes that the offender who
transfers something of value to the victim[] generally is
committing a less serious offense than an offender who does
not.” [USSG] App. C., Vol. II, Amend. 617, at 183; accord
[USSG §2B1.1] comment. (background).
133

United States v. Markert, 774 F.3d 922, 925 (8th Cir. 2014) (fourth alteration in original).
“Because the loss caused by fraud is often difficult to determine precisely, ‘a district court
is charged only with making a reasonable estimate of the loss.’” United States v. Waldner,
580 F.3d 699, 705 (8th Cir. 2009) (quoting United States v. Parish, 565 F.3d 528, 534
(8th Cir. 2009)); accord Markert, 774 F.3d at 925.
For purposes of the [USSG §2B1.1(b)(1)] enhancement, actual
loss is “reasonably foreseeable pecuniary harm,” that is,
“harm that is monetary or that otherwise is readily measurable
in money.” Note 3(A)(i) & (iii). For many, perhaps most
fraud offenses, actual loss is properly and readily measured by
the fair market value of property “taken” from the victim.
Note 3(C)(i).
Markert, 774 F.3d at 926. After considering all of the evidence and the arguments of the
parties in light of the evidence and the Guidelines, the court correctly calculated the loss
amount.
As the court observed during sentencing proceedings, the movant’s theory regarding
loss was fundamentally flawed in that it disregarded the general effect that a massive
fraudulent scheme and a subsequent bankruptcy have on the value of a corporation’s assets.
There is a common denominator among the various factors that affected the sale of
Agriprocessors’ assets: the movant and Agriprocessors. When assigning fault, nearly all,
if not all, of the loss amount is attributable to the conduct of the movant and
Agriprocessors. But for the criminal actions of the movant and Agriprocessors, the
government would not have asserted a forfeiture allegation. But for the actions of the
movant and Agriprocessors, no bankruptcy petition would have been filed. But for the
actions of the movant and Agriprocessors, prospective bidders would have been able to
evaluate the value of Agriprocessors with some certainty. The movant’s conduct, through
Agriprocessors, was the foreseeable cause of loss.
The court was well aware of the movant’s position at the time of sentencing. The
court understood that the movant blamed the government for failing to work with him and
134

his lawyers before the ICE enforcement action, the government for prosecuting him and
seeking forfeiture, FBBC, his illegal workforce, his father, managers of Agriprocessors,
other employees of Agriprocessors, the bankruptcy trustee, etc. It also understood that the
movant orchestrated a massive criminal scheme that impacted a very large community, that
is, defrauded financial institutions for approximately ten years, harbored an illegal
workforce and laundered millions of dollars in an effort to provide kosher products across
the nation. The court recognized that the movant repeatedly tried to obstruct justice when
his criminal scheme came to light, never acknowledged what the law requires and never
wholeheartedly accepted responsibility. The court knew that the movant’s criminal
conduct caused many individuals and entities to respond and that a business that is unable
or unwilling to comply with the law could prove to be worthless, or, at the very least,
significantly devalued.
The movant’s alleged sentencing error is based on nothing more than a conclusory
assertion that the loss estimate might have gone down if the movant could have established
that the government’s exercise of its lawful right to forfeiture caused a decrease in
Agriprocessors’ value. Clearly, in order to arrive a lower Guidelines range, the loss
would have had to be $20,000,000 or less. And, in order to arrive at a Guidelines range
that did not encompass 324 months imprisonment, the loss would have had to be
$7,000,000 or less. But, FBI Special Agent Randy Van Gent testified that inflated
collateral exceeded $12,000,000 and the movant conceded on appeal that such number
should have been used to calculate loss. More importantly, there is absolutely no need to
recalculate the loss that the victims suffered, and a number that is more reasonable than
the one that the court calculated could not be determined given all of the variables.
Supposition as to the value of a business that does not face forfeiture allegations is not a
proper basis to estimate loss. The movant does not suggest a way to reasonably quantify
such a variable and implicitly acknowledged that it could not be quantified when he failed

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to present reliable evidence at the sentencing hearing. It necessarily follows then that there
is absolutely no need to resentence the movant.
The court did not base the movant’s sentence upon misinformation of constitutional
magnitude; the court did not arrive at the movant’s sentence after relying on any incorrect
facts. Neither the government nor its witnesses misled the court about anything. See
Boyce, 564 F.3d at 918-19 (concluding that no due process violation occurred as a result
of any alleged misconduct by the government during defendant’s sentencing and
emphasizing that inconsistent testimony does not always create a due process concern).
Surely, the government would not have pursued forfeiture absent the movant’s criminal
conduct, and the loss that the court calculated appropriately accounts for the natural and
foreseeable consequences of such conduct. See United States v. Morris, 744 F.3d 1373,
1374 (9th Cir. 2014) (emphasizing that the sentencing Guidelines “ensure that defendants
who fraudulently induce financial institutions to assume the risk of lending to an
unqualified borrower [be held] responsible for the natural consequences of their fraudulent
conduct” (quoting United States v. Mallory, 709 F. Supp. 2d 455, 459 (E.D. Va. 2010)));
Rubashkin, 655 F.3d at 868 (citing Turk, 626 F.3d at 750); Parish, 565 F.3d at 535 (“The
appropriate test is not whether market factors impacted the amount of loss, but whether the
market factors and the resulting loss were reasonably foreseeable.”).
(4)

Summary

The movant is unable to overcome procedural obstacles and presents a ground for
relief that is not cognizable in § 2255 proceedings. Moreover, even if the movant’s
arguments regarding the sentencing error are considered, it is clear that they are meritless,
frivolous and/or malicious. Accordingly, the movant is not entitled to relief based on
ground one.
2.

Trial error

With respect to the alleged Brady violation that occurred during trial, the movant

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must establish (1) “the prosecution suppressed evidence,” (2)
“the evidence was favorable to him,” and (3) “the evidence
was material to either his guilt or his punishment.” United
States v. Carman, 314 F.3d 321, 323-24 (8th Cir. 2002). To
establish materiality in the context of Brady, “the accused must
show there is a reasonable probability that if the allegedly
suppressed evidence had been disclosed at trial the result of the
proceeding would have been different.” Drew v. United
States, 46 F.3d 823, 828 (8th Cir. 1995). “A ‘reasonable
probability’ is a probability sufficient to undermine the
reviewing court’s confidence in the outcome of the
proceeding.” Id.
Mandacina v. United States, 328 F.3d 995, 1001 (8th Cir. 2003).
The Brady standard is not met if a movant shows a mere possibility that the
suppressed evidence might have produced a different outcome. See United States v. Agurs,
427 U.S. 97, 109-10 (1976) (“The mere possibility that an item of undisclosed information
might have helped the defense . . . does not establish ‘materiality’ in the constitutional
sense.”); United States v. Sigillito, 759 F.3d 913, 929 (8th Cir. 2014) (quoting United
States v. Haskell, 468 F.3d 1064, 1075 (8th Cir. 2006)). Further, the
Brecht harmless-error analysis is unnecessary for a general
Brady withholding claim because “practically speaking, the
two analyses are the same.” Rosencrantz, 568 F.3d at 584
n.1. More specifically, “‘a reasonable probability that, had
the evidence been disclosed to the defense, the result of the
proceeding would have been different’ necessarily entails the
conclusion that the suppression must have had ‘a substantial
and injurious effect or influence in determining the jury’s
verdict.’” Id. (quoting Kyles, 514 U.S. at 435 (citations
omitted in original)).
Clay, 720 F.3d at 1026 n.4.
Brady applies even when the defendant does not specifically
request the covered information. United States v. Gonzales,
90 F.3d 1363, 1368 (8th Cir. 1996). One of the limits of
Brady is that it does not cover “information available from

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other sources or evidence already possessed by a defendant.”
[Jones, 160 F.3d at 479] (citation omitted).
Sigillito, 759 F.3d at 929; see also United States v. Roy, 781 F.3d 416, 421 (8th Cir.
2015) (emphasizing that no Brady violation occurs if a defendant has access to undisclosed
evidence through other channels); United States v. Ladoucer, 573 F.3d 628, 636-37 (8th
Cir. 2009) (citing Jones, 160 F.3d at 479); United States v. Willis, 997 F.2d 407, 412-13
(8th Cir. 1993) (“Due process does not require the prosecution to turn over its entire file
or to do the defense counsel’s work.” (citing United States v. Pou, 953 F.2d 363, 366 (8th
Cir. 1992)); United States v. McMahan, 744 F.2d 647, 651 (8th Cir. 1984) (“[Brady] does
not require the government to provide defendants with all information it has regarding each
of its witnesses.”).
Having reviewed the entire record, the court concludes that no Brady violation
occurred. See, e.g., Gov’t App’x (civil docket no. 52-1) at 142-212. The government
correctly points out that: the movant denied having any knowledge whatsoever of why it
was necessary to round checks up and transfer money between accounts, the movant
thought Mitchel Meltzer or Yomtov Bensasson were responsible for doing so and the
movant presented evidence and argument concerning the float during trial.

It also

correctly points out that the statements offered by Mitchel Meltzer: incriminate the
movant; are cumulative of Yomtov Bensasson’s testimony; are based on what he thought
the movant was doing when law enforcement officers told him what was occurring; are not
probative of the movant’s actual state of mind at the time he committed criminal acts; and
fail to account for why the movant directed checks to be rounded up and why the movant
concealed or manipulated financial transactions. Cf. United States v. Ellefsen, 655 F.3d
769, 777-78 (8th Cir. 2011) (observing that “self-serving exculpatory acts performed
substantially after a defendant’s wrongdoing is discovered are of minimal probative value
as to [a defendant’s] state of mind at the time of the alleged crime” (quoting United States
v. Radtke, 415 F.3d 826, 840-41 (8th Cir. 2005))).

138

Given the record, it cannot be said that any additional testimony by Mitchel Meltzer
would have had a substantial influence on the jury’s verdicts, especially considering that
the other evidence overwhelmingly weighed in favor of the jury’s verdicts. The jury
apparently did not believe anything that the movant testified about and Mitchel Meltzer’s
testimony about an intent that the movant denied having would have had absolutely no
effect or influence in determining the jury’s verdicts. See Brecht, 507 U.S. at 637. The
movant advances a position that is not consistent with the position that he advanced during
trial and he is unable to advance a new theory that is based on an opinion that has limited
or no bearing on the movant’s state of mind at the time he committed criminal acts,
especially considering that the movant offers no explanation whatsoever for directing the
use of particular numbers.
Nothing the government did was of such a magnitude that it actually casts doubt on
the integrity of the jury’s verdicts. See Robinson, 809 F.3d at 997 (concluding that there
was no reasonable probability defendant would have been acquitted given the additional
testimony of an eye witness). And, it necessarily follows that the court’s sentences are
proper. Accordingly, the movant is not entitled to relief based on ground three.
VII. CERTIFICATE OF APPEALABILITY
In a 28 U.S.C. § 2255 proceeding before a district judge, the final order is subject
to review, on appeal, by the court of appeals for the circuit in which the proceeding is
held. See 28 U.S.C. § 2253(a). Unless a circuit justice or judge issues a certificate of
appealability, an appeal may not be taken to the court of appeals. See 28 U.S.C. §
2253(c)(1)(A). A district court possesses the authority to issue certificates of appealability
under 28 U.S.C. § 2253(c) and Fed. R. App. P. 22(b). See Tiedeman v. Benson, 122 F.3d
518, 522 (8th Cir. 1997). Under 28 U.S.C. § 2253(c)(2), a certificate of appealability
may issue only if a movant has made a substantial showing of the denial of a constitutional
right. See Miller-El v. Cockrell, 537 U.S. 322, 335-36 (2003); Garrett v. United States,
211 F.3d 1075, 1076-77 (8th Cir. 2000); Carter v. Hopkins, 151 F.3d 872, 873-74 (8th
139

Cir. 1998); Cox v. Norris, 133 F.3d 565, 569 (8th Cir. 1997); Tiedeman, 122 F.3d at 523.
To make such a showing, the issues must be debatable among reasonable jurists, a court
could resolve the issues differently, or the issues deserve further proceedings. See Cox,
133 F.3d at 569 (citing Flieger v. Delo, 16 F.3d 878, 882-83 (8th Cir. 1994)); see also
Miller-El, 537 U.S. at 335-36 (reiterating standard).
Courts reject constitutional claims either on the merits or on procedural grounds.
“‘[W]here a district court has rejected the constitutional claims on the merits, the showing
required to satisfy [28 U.S.C.] § 2253(c) is straightforward: the [movant] must
demonstrate that reasonable jurists would find the district court’s assessment of the
constitutional claims debatable or wrong.’” Miller-El, 537 U.S. at 338 (quoting Slack v.
McDaniel, 529 U.S. 473, 484 (2000)). When a federal habeas petition is dismissed on
procedural grounds without reaching the underlying constitutional claim, “the [movant
must show], at least, that jurists of reason would find it debatable whether the petition
states a valid claim of the denial of a constitutional right and that jurists of reason would
find it debatable whether the district court was correct in its procedural ruling.” See Slack,
529 U.S. at 484.
Having thoroughly reviewed the record in this case, the court finds that the movant
failed to make the requisite “substantial showing” with respect to the grounds that he
raised in his motion to vacate, set aside or correct sentence pursuant to 28 U.S.C. § 2255.
See 28 U.S.C. § 2253(c)(2); Fed. R. App. P. 22(b). Because he does not present a
question of substance for appellate review, there is no reason to grant a certificate of
appealability. Accordingly, a certificate of appealability shall be denied. If he desires
further review of his 28 U.S.C. § 2255 motion, the movant may request issuance of the
certificate of appealability by a circuit judge of the Eighth Circuit Court of Appeals in
accordance with Tiedeman, 122 F.3d at 520-22.

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VIII. CONCLUSION
There is no need for discovery or an evidentiary hearing because the facts and legal
contentions are adequately presented in the parties’ briefs, and neither discovery nor an
evidentiary hearing would aid the decisional process. There is no need to prolong this case
any further because it is very clear that this is not a case where the government’s conduct
strikes a heavy blow to the public’s “trust in the prosecutor as ‘the representative . . . of
a sovereignty . . . whose interest . . . in a criminal prosecution is not that it shall win a
case, but that justice shall be done.’” Kyles, 514 U.S. 439 (alterations in original) (quoting
Berger v. United States, 295 U.S. 78, 88 (1935)).

The prosecutors in this case

appropriately prosecuted the movant with “earnestness and vigor.” Berger, 295 U.S. at
88. Their zealous advocacy never caused them to rely on “improper methods calculated
to produce . . . wrongful conviction[s]” or sentences. Id. Throughout all steps in this
case, the government remained committed to ensuring that the factfinding process would
be fair.
The accuracy of the outcome is not subject to second-guessing because the
government did not present false or misleading evidence, did not fail to correct false or
misleading evidence and did not fail to disclose material evidence. The jury fairly and
dispassionately considered all of the evidence when deciding what verdicts to return, and
the court fairly and dispassionately considered all of the evidence when deciding what
sentences to impose. The movant’s convictions and sentences remain valid. None of the
movant’s grounds for relief, including the ground that the court resolved on January 20,
2016, have any merit. Accordingly, the movant’s motion pursuant to 28 U.S.C. § 2255
shall be denied.
As for a certificate of appealability, the movant has not made the requisite showing.
See 28 U.S.C. § 2253(c)(2). Accordingly, a certificate of appealability under 28 U.S.C.
§ 2253 will not issue. If he deems it appropriate, the movant may seek a certificate of
appealability at the appellate level.
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IT IS THEREFORE ORDERED:
(1) The movant’s motion for leave to take discovery is DENIED.
(2) The movant’s motion for an evidentiary hearing is DENIED.
(3) The movant’s motion pursuant to 28 U.S.C. § 2255 is DENIED.
(4) A certificate of appealability is DENIED.
DATED this 26th day of January, 2017.

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