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Former Agriprocessors CEO Arrested

Sholom Rubashkin, former CEO of an Iowa slaughterhouse raided by immigration authorities earlier this year, was arrested Friday on new charges accusing him of bank fraud.

CEDAR RAPIDS, Iowa (AP) -- A former manager of a northeast Iowa kosher slaughterhouse was arrested Friday morning on a bank fraud charge and ordered jailed until at least next week.

Sholom Rubashkin was arrested about 8 a.m. at his home in Postville and driven to Cedar Rapids for his appearance in U.S. District Court.

Rubashkin, former chief executive officer at Agriprocessors and son of company owner Abraham Aaron Rubashkin, shuffled into court Friday morning for his initial appearance. He was shackled at the ankles, waist and wrists.

A judge ordered him held until a hearing Wednesday.

This is the second time in less than a month that Sholom Rubashkin has been arrested on federal charges related to his operation of the plant in Postville.

Agriprocessors was the site of a May 12 immigration raid in which 389 people were arrested. In the months following the raid, the company has faced state and federal allegations that it violated child labor laws and state wage regulations and broke safety rules.

The arrest Friday was related to the depositing of checks from customers and the alleged diversion of money.

Court records said that under a loan agreement with St. Louis-based First Bank, Rubashkin was supposed to deposit customer payments into an account at Decorah Bank & Trust as collateral on a loan. Records show that instead, Rubashkin allegedly diverted millions of dollars in customer payments into a different Agriprocessors account at a different bank. The payments would then not be posted on the customers' Agriprocessors accounts until a later date.

That resulted in the inflation of the value of accounts receivable in Agriprocessors' books, allowing the company to borrow additional funds from the bank without proper collateral.

Rubashkin also is accused of telling an Agriprocessors employee to erase evidence of the alleged scheme from the company's computers. The instructions allegedly began the day after Rubashkin was released after an Oct. 30 hearing in federal court, where he is facing charges of harboring illegal immigrants, document fraud and identity theft.

After the Oct. 30 hearing, Rubashkin was released on his own recognizance on the condition that he put up a $500,000 bond and wear a GPS tracking device on his ankle.

Last week, Agriprocessors filed for bankruptcy protection, a move that came as the company was facing allegations that it had made inaccurate and misleading statements to First Bank. The slaughterhouse owes First Bank at least $33 million.

The company also operated a plant near Gordon, Neb. It has been closed because of the company problems.

On Friday, federal Magistrate Jon Scoles ordered Rubashkin to be held until a Wednesday detention hearing. At that hearing, the judge will decide whether Rubashkin should be jailed until a trial.

Rubashkin told Scoles he was took a prescription anxiety medication Thursday night and Friday morning, but was still able to understand the proceedings.

Assistant U.S. Attorney Peter E. Deegan had requested that Rubashkin remain in jail until next week's hearing because he said Rubashkin was a flight risk. He noted the allegation of financial crimes and destruction of evidence as well as the company's bankruptcy filing.

"All of this means that the defendant's family business doesn't have ties to the community anymore," Deegan said, adding that Rubashkin could face "well in excess of 15 years" on the bank fraud charge alone.

Scoles said probation officers also asked that Rubashkin be kept in custody because of the allegations that he destroyed evidence after the Oct. 30 hearing.

Associated Press writer Michael J. Crumb in Des Moines, Iowa, contributed to this story.

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