The loan foreclosure against the company, Agriprocessors Inc., was the latest in a cascade of troubles that have come after nearly 400 illegal immigrant workers were arrested in a raid in May at its plant in Postville, Iowa. On Thursday, Sholom Rubashkin, the former chief executive, was arrested in Iowa on federal charges of conspiring to harbor illegal immigrants.
In a lawsuit filed Thursday in federal court in Cedar Rapids, First Bank Business Capital of St. Louis claimed that Agriprocessors had failed to maintain enough cash in designated bank accounts to stay current on the revolving loan it took out in 1999. The lawsuit was first reported Friday on the Web site of The Forward, a Jewish newspaper.
The suit also claims that Agriprocessors violated the loan terms by diverting nearly $1.4 million from First Bank accounts to another bank to issue payroll checks on Oct. 24. First Bank learned that those checks were returned for insufficient funds, the lawsuit says.
The suit says Agriprocessors had begun to fall behind on the revolving loan during the quarter that ended March 31, suggesting that its financial woes predated the raid, which decimated its workforce.
The bank asked the judge to appoint a receiver immediately, saying that a bank representative had been expelled from the Postville plant after a meeting on Thursday. The judge, Linda R. Reade of Federal District Court, appointed the temporary receiver late Friday and set a hearing for next Wednesday.
The bank reported that Agriprocessors owed $188,000 to an electrical company and warned that electricity to the plant could be shut off, causing “millions of dollars of fresh and frozen products” to spoil. The suit says millions of chickens “are in danger of starving to death if not fed.”
Aaron Rubashkin, the company’s owner and the father of Sholom, put up $2.2 million in collateral, in addition to some of the property at the huge Postville plant, and Sholom Rubashkin put up $1 million, the suit says.
Last week, Iowa authorities levied $10 million in fines against Agriprocessors for wage violations, and Aaron and Sholom Rubashkin are facing criminal charges for child labor violations.
Lawyers for the company could not be reached for comment.