655 F.3d 849 (8th Cir. 2011), 10-2487, United States v. Rubashkin

Docket Nº:10-2487, 10-3580.
Citation:655 F.3d 849
Opinion Judge:MURPHY, Circuit Judge.
Party Name:UNITED STATES of America, Appellee, v. Sholom RUBASHKIN, Appellant. American Civil Liberties Union of Iowa; National Association of Criminal Defense Lawyers; Washington Legal Foundation; Albert Alschuler; William Bassler; Douglas A. Berman; L. Barrett Boss; Robert J. Cleary; Nora V. Demleitner; Monroe H. Freedman; Bennett L. Gershman; Jeff Ifrah; H
Attorney:Nathan Lewin, argued, Washington, DC, Yaakov Roth, Washington, DC, Alyza D. Lewin, Washington, DC, Mark E. Weinhardt, Des Moines, IA, Guy R. Cook, Des Moines, IA, Adam D. Zenor, Des Moines, IA, Shay Dvoretzky, Washington, DC, F. Montgomery Brown, West Des Moines, IA, on the brief, for appellant. ...
Judge Panel:Before RILEY, Chief Judge, MURPHY and SMITH, Circuit Judges.
Case Date:September 16, 2011
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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655 F.3d 849 (8th Cir. 2011)

UNITED STATES of America, Appellee,

v.

Sholom RUBASHKIN, Appellant.

American Civil Liberties Union of Iowa; National Association of Criminal Defense Lawyers; Washington Legal Foundation; Albert Alschuler; William Bassler; Douglas A. Berman; L. Barrett Boss; Robert J. Cleary; Nora V. Demleitner; Monroe H. Freedman; Bennett L. Gershman; Jeff Ifrah; Harold J. Krent; Marc Miller; Michael O'Hear; Stephen Orlofsky; Mark Osler; James Reynolds; Stephen F. Smith; Sandra Guerra Thompson; Ronald Wright, Amici on behalf of Appellant.

Nos. 10-2487, 10-3580.

United States Court of Appeals, Eighth Circuit

September 16, 2011

Submitted: June 15, 2011.

Rehearing and Rehearing En Banc Denied Nov. 3, 2011.[*]

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Nathan Lewin, argued, Washington, DC, Yaakov Roth, Washington, DC, Alyza D. Lewin, Washington, DC, Mark E. Weinhardt, Des Moines, IA, Guy R. Cook, Des Moines, IA, Adam D. Zenor, Des Moines, IA, Shay Dvoretzky, Washington, DC, F. Montgomery Brown, West Des Moines, IA, on the brief, for appellant.

Peter E. Deegan, Jr., AUSA, argued, Cedar Rapids, IA, for appellee.

Deborah Kay Ellis, St. Paul, MN, Grant J. Shostak, St. Louis, MO, Ronald Daniel Rotunda, Orange, CA, on the amicus brief of the National Association of Criminal Defense Lawyers.

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Thomas P. Frerichs, Waterloo, IA, on the amicus brief of the American Civil Liberties Union of Iowa.

Daniel J. Popeo, Washington, DC, Douglas Berman, Columbus, OH, Richard Abbott Samp, Washington, DC, Richard Abbott Samp, Cory L. Andrews, Washington, DC, on the amicus brief of the Washington Legal Foundation, et al.

Before RILEY, Chief Judge, MURPHY and SMITH, Circuit Judges.

MURPHY, Circuit Judge.

A jury convicted Sholom Rubashkin of 86 counts of bank, wire, and mail fraud; making false statements to a bank; money laundering; and violations of an order of the Secretary of Agriculture. The district court 1 sentenced Rubashkin to 324 months, the low end of the guideline range. Rubashkin appeals from the denial of his motion for a new trial based on the judge's failure to recuse and from the adverse judgment, arguing that the district court abused its discretion in its scheduling order, evidentiary rulings, and jury instructions; that there was insufficient evidence of money laundering; and that his sentence was flawed and unreasonable. We affirm.

I.

Sholom Rubashkin managed Agriprocessors, Inc., a kosher meatpacking company in Postville, Iowa that employed over a thousand people at one point. Rubashkin also owned other small businesses and institutions in Postville, including a grocery store and a school. In 1999 Agriprocessors opened a revolving loan with First Bank Business Capital (the Bank), a subsidiary of St. Louis based First Bank. The loan was secured by Agriprocessors' collateral, primarily inventory and accounts receivable. By 2008 the daily loan balance usually exceeded $30 million.

Customer service employees testified at Rubashkin's multiweek trial about two ways in which Agriprocessors inflated its accounts receivable to increase its borrowing ability. First, under Rubashkin's direction, Agriprocessors employees created false invoices and bills of lading, increasing the value of the accounts receivable. Some of the false invoices involved customers who had in fact prepaid their orders. Others named as customers businesses that were not involved with Agriprocessors itself, such as a clothing store. When false invoices were accidentally sent to real customers, Rubashkin instructed his employees to tell them the mailing was a mistake. It was later estimated that false invoices allowed Agriprocessors to inflate its borrowing ability by roughly $10 million.

Agriprocessors also inflated its accounts receivable by diverting some of its customer payments away from the bank account in which the loan agreement specified they should have been deposited. Employees instead deposited the payments into an Agriprocessors account at another bank. The checks were sent to that bank in rounded amounts so they would appear to be something other than customer payments. Rubashkin requested that employees delay the entry of the customer payments into the Agriprocessors accounting system, thereby inflating the company's accounts receivable.

Because Agriprocessors' revolving loan with the Bank capped the amount of money that could be borrowed, the company needed to pay down the loan to borrow additional funds. At Rubashkin's instruction employees deposited funds from Agriprocessors'

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operating account (which included loan proceeds obtained from the Bank under the revolving loan agreement) into the accounts of a kosher grocery store and a private school called Torah Education, both controlled by Rubashkin. The school and grocery store then wrote checks payable to Agriprocessors which were deposited into the account designated in Agriprocessors' loan agreement. These checks were drawn in odd amounts so that they would appear to be genuine customer payments. This diversion of funds allowed Agriprocessors to pay down its revolving loan without revealing hidden customer payments, thereby inflating its accounts receivable by an additional $3 million. These payments from the school and grocery store gave rise to Rubashkin's money laundering charges.

The credit agreement between Agriprocessors and the Bank contained covenants requiring the company to comply with the Packers & Stockyards Act of 1921, 7 U.S.C. §§ 181-229c (Packers Act). It also included a covenant that required Agriprocessors to represent to the Bank that the company was not in violation of any law that would adversely affect the collateral or its business or operations.

The majority of Agriprocessors workers were undocumented immigrants. In May 2008, Immigration and Customs Enforcement (ICE) conducted the nation's largest worksite immigration action at the Agriprocessors plant. ICE arrested almost four hundred of its employees for immigration violations and criminally charged most of them. Around that time, Rubashkin received letters from the United States Attorney's office (USAO) in the Northern District of Iowa indicating that he was the target of a federal investigation for financial and immigration crimes.

Rubashkin was arrested in November 2008 and ultimately indicted in 163 counts. He was charged with fourteen counts each of bank and wire fraud, 18 U.S.C. §§ 1343, 1344; nine counts of mail fraud, id. § 1341; ten counts of money laundering and aiding and abetting the same, id. §§ 2, 1956(a)(1)(A)(i), (B)(i); twenty four counts of false statements to a bank, id. § 1014; and twenty counts of willful violations of orders of the Secretary of Agriculture under the Packers Act and aiding and abetting the same, 7 U.S.C. § 195, 18 U.S.C. § 2 (collectively the financial counts). He was also charged with sixty nine counts of harboring undocumented aliens for profit, 8 U.S.C. § 1324(a)(1)(A)(iii), (A)(iv), (A)(v)(II), (B)(i); one count of conspiracy to do the same, id. § 1324(a)(1)(A)(v)(I), (B)(i); one count of conspiracy to commit document fraud, 18 U.S.C. § 371; and one count of aiding and abetting document fraud, id. §§ 2, 1546(a) (collectively the immigration counts).

Agriprocessors filed for bankruptcy while Rubashkin's trial was pending, and a trustee was appointed.

II.

The district court severed the immigration counts from the other charges in the indictment and scheduled the financial charges to be tried first over Rubashkin's objection. After reviewing jury questionnaires from a potential jury pool which reflected the wide publicity the immigration action had received in the area, the district court moved the trial from its Iowa district to Sioux Falls, South Dakota.

After Rubashkin was indicted, but prior to his final superseding indictment and trial, an Agriprocessors employee moved for the district court's recusal in a related immigration fraud case. United States v. Martin De La Rosa-Loera, No. 08-1313 (N.D.Iowa Aug. 13, 2008). The movant raised a claim of bias or prejudice that focused on the district court's involvement in arranging for necessary interpreters,

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lawyers, and facilities prior to the immigration arrests at Agriprocessors. Id.; see 28 U.S.C. § 455(a). The district court denied the motion to recuse in an order explaining the need to prepare for processing hundreds of anticipated immigration arrestees, which included arranging for visiting judges to travel to Waterloo, Iowa to handle arraignments. The district court described its involvement as " limited ... to [its] role as Chief Judge" and acknowledged " an obligation to litigants and [the court's] colleagues not to remove [itself] needlessly."

Rubashkin's counsel was aware of this order and its contents but did not move for the district court's recusal at his trial or for any related discovery. Nor did he object to the deadline the district court had set for recusal motions. After that deadline had passed, Rubashkin made a Freedom of Information Act request to ICE for records regarding its meetings with the USAO and the district court.

Rubashkin's trial on the financial charges 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 indictment alleged that Agriprocessors had fraudulently told the 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...

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