As Agriprocessors cracks up, lawmakers speak out

As Agriprocessors, the bankrupt kosher meatpacking firm in Postville, approaches its demise, the ripple effects of the company’s financial woes are being felt throughout the region, and some of the state’s top lawmakers are starting to speak out publicly about what the government can do to cushion the blow.

Once the nation’s largest supplier of kosher meat and an economic boon to northeastern Iowa, Agriprocessors’ failure is now threatening to saddle the town of Postville with obligations to repay a federal loan. Documents filed this week in a New York bankruptcy court reveal that if the company doesn’t resume payments on a 20-year U.S. Department of Agriculture (USDA) loan the city took on its behalf to build a sewage-treatment plant, the city could likely owe the more than $4 million in debt that remains. Agriprocessors had been paying nearly $25,000 per month on the loan, but is now more than $100,000 behind on payments.

The treatment plant, constructed several years ago as part of a settlement of environmental complaints against Agriprocessors, was paid for with a $3.3 million federal grant and the USDA loan.  Although the company has returned to limited poultry production under the supervision of bankruptcy trustee Joseph Sarachek, and possible buyers are under consideration, Agriprocessors remains unable to meet even its current monthly obligations.

Sen. Charles Grassley hopes the Department of Agriculture won't try to collect a loan payment from the town of Postville next month.

Republican U.S. Sen. Chuck Grassley said in his weekly conference call that he hopes the Agriculture Department will not demand payment immediately.

Noting that “you can’t get blood out of a turnip,” Grassley indicated he would be willing to go to bat for Postville, but not at the risk of having taxpayers pick up the tab for the potential buyers — individuals Grassley believes would reap direct benefits from the facility.

Grassley said Postville should not be unduly worried about the upcoming payment that is due in January.

“I don’t think they have to be worried about it because I think the USDA is — without making any decisions — just doesn’t have to push anything in January against Postville,” he said. “Now, whether the people at the USDA feel the same way that I’ve told you about this, I can’t say at this point.”

Sen. Tom Harkin has intervened on behalf of producers and auction barns that have not been paid for livestock sold to Agriprocessors.

In a letter released Dec. 1, Democratic U.S. Sen. Tom Harkin began correspondence with Ed Schafer, the U.S. secretary of agriculture, on behalf of producers and auction barns that have not been paid for livestock sold to Agriprocessors.

According to the letter, Harkin, as chairman of the Senate Agriculture Committee, received “numerous calls” from interested parties.

“These producers and auction barns are already in most instances operating at a loss due to low market prices, and if they go unpaid for their livestock or poultry, their own prospects for remaining in business are greatly reduced,” Harkin wrote.

Harkin urged the USDA to enforce the 1921 Packers and Stockyards Act, which provides payment protection to these entities.

“It has become apparent that the USDA has allowed this company to operate insolvent, causing further financial injury to producers and auction barns [and] jeopardizing their own operations,” Harkin said in a prepared statement. “USDA should step up its actions immediately and make clear that unpaid sellers of livestock and poultry receive what they are owed, as the law requires, and not be tangled up for perhaps a long time in bankruptcy court proceedings.”

The letter closed with a request for the USDA to hold public hearings in Iowa so that the producers and auction houses could know their rights and learn how to become involved in the bankruptcy proceedings, if necessary.

While there were some Iowa auction houses who were still allowing Agriprocesssors to purchase livestock as usual, others moved the company to a “cash-only” basis within weeks of the massive May 12 immigration raid. In his letter to the USDA, Harkin admitted that he does not know how many producers or auction houses have been affected by non-payment.

Marvin Waterhouse, manager of Manchester Livestock Auction, told Iowa Independent this summer that he had decided to move Agriprocessors, which had typically been a slow-paying client before the raid, to cash-only status.

“I informed them that they would need to pay up front,” Waterhouse said. “It was nothing against them personally, it’s just that I need to protect my business. If something else were to happen, I simply couldn’t afford to be left holding an unpaid bill.”

Waterhouse explained that businesses come to the auction and make purchases. Although some companies arrive with checkbook in hand, most are invoiced the same day as the sale and pay within 24 to 48 hours. It was not unusual, he said, for Agriprocessors to purchase $100,000 of livestock during an auction.

Agriprocessors, facing a $35 million lawsuit from First Bank Capital Investments, filed Chapter 11 bankruptcy in early November. The plant’s former chief executive, Sholom Rubashkin, remains in federal custody pending a trial on a host of bank fraud and immigration-related charges. In total, seven members of plant management are facing federal charges.

Iowa Lt. Gov. Patty Judge traveled to Postville last week and faced uncomfortable scrutiny from local residents for not visiting the community in the wake of a May immigration raid that saw roughly half of the plant’s employees detained, criminally convicted and deported. The purpose of Judge’s visit was to announce a $700,000 state aid package for former workers and the assignment of three AmeriCorps volunteers to the community.