Big Kosher Suppliers Hit With Antitrust Subpoenas

The world’s largest kosher slaughterhouse and several other major kosher meat suppliers have been served with federal subpoenas in connection with a criminal antitrust investigation, The Jewish Week has learned.

AgriProcessors of Postville, Iowa, received its subpoena from a federal grand jury several weeks ago. At least two other kosher meat suppliers have also received subpoenas in connection with the probe, according to Washington, D.C., attorney Nathan Lewin, who represents the Iowa slaughterhouse.

“AgriProcessors is in the process of cooperating with the investigation,” said Lewin in a written statement he issued after inquiries from The Jewish Week. “It has been told that neither the corporation nor any corporate officer or employee is presently a target of the investigation.”

It could not be confirmed by press time which other firms had received the federal subpoenas, which were for documents and not for testimony. Two firms considered to be AgriProcessors’ major rivals as beef suppliers — Alle, also known as Meal Mart, and International Glatt Kosher, also known as Globex — failed to return repeated calls to their offices seeking information.Globex executive Sholom Chaimowitz also failed to return a call to his home after his wife said she would relay to him a reporter’s question about whether the company had been subpoenaed. Like AgriProcessors, the two firms produce both beef and poultry.

Empire Kosher Poultry, the country’s largest kosher poultry producer, declined to state whether it had received a subpoena. But in a statement, company spokesman Barry Rosenbaum said, “Empire Kosher’s current ownership and management have never engaged in any sort of price fixing with competitors and is not aware of any such actions on the part of previous ownership.”

A Justice Department spokeswoman declined to identify any of the companies subpoenaed or to comment on the probe.

In a follow-up interview, Lewin declined to say whether AgriProcessors was currently a “subject” of the investigation — a lesser form of scrutiny than being a “target.”

A target of a grand jury investigation, as prosecutors use the term, is someone against whom a prosecutor believes he has probable cause to bring criminal charges. A subject is someone who “falls within the scope of an investigation,” according to Michael Feldberg, an expert in antitrust law.

A law enforcement official who specializes in antitrust cases termed the fact that a federal grand jury had issued the subpoenas “very significant.” The official would speak only on the basis of anonymity because he thought his office could end up involved in the case.

“That means it’s a criminal investigation,” he explained. “Price fixing, bid rigging and market allocation are the kinds of practices that are traditionally pursued criminally. … It sounds like they are investigating collusion within the industry.”

The Justice Department’s Antitrust Division Web site defines price fixing as “an agreement among competitors to raise, fix or otherwise maintain the price at which their goods are sold.” Market allocation, another practice that may be relevant to this grand jury probe, consists of “agreements in which competitors divide markets among themselves. In such schemes, competing firms allocate specific customers or types of customers, products or territories among themselves.”

One industry insider, who would speak only on condition of anonymity, said the unique certification process involved in producing kosher meats made the industry particularly vulnerable to potentially illegal market allocation.

“There is an unwritten agreement not to traipse on each other’s hekshers,” he explained, referring to the rabbinic kosher certifiers who give their stamp of approval to the ritual processes by which meat must be slaughtered under religious law.

The power of custom and sectarian loyalty to particular kosher certifiers among various Jewish religious groups means “if you have a certain heksher, you have a lock on a certain part of the market geographically and religiously,” this insider said. Lubavitch and Satmar chasidim, for example, have separate certifiers to which they are each exclusively loyal. The meat companies, understanding this, effectively divide up the market by agreeing not to use each other’s certifiers, the source explained.

In one case, said the industry insider, a company that recruited a different kosher certifier to come in and oversee its production process was excoriated by the rest of the industry. “They said, ‘You slept with my wife,’” this source said the company was told by others using that certifier.

In some ways, the Justice Department’s Antitrust Division Web site describes similar kinds of generic conditions in which illegal collusion is prone to take place.

“Collusion is more likely to occur if there are few sellers,” it states. “The fewer the number of sellers, the easier it is for them to get together and agree on prices, bids, customers or territories.”

It adds: “The probability of collusion increases if other products cannot easily be substituted for the product in question, or if there are restrictive specifications for the product being produced. … Collusion is more likely if the competitors know each other well through social connections, trade associations, legitimate business contacts or shifting employment from one company to another.”

The Web site also emphasizes that such cases of collusion are often very difficult to prove. Multiple sources within the industry told The Jewish Week that the Justice Department’s probe appeared to begin seven to nine months ago, when several companies were contacted and questioned on a non-subpoena basis. “They wanted to know about communications we might have had with other companies,” said an official from one of the firms contacted. “Who we talked to and what we talked about.”

AgriProcessors, Alle, Globex and Empire Poultry are among the firms said to have been contacted then. For AgriProcessors, owned by the Rubashkin family, a prominent family within the Lubavitch chasidic community, the subpoena and probe are but the latest in a train of challenges.

In 2004, the Justice Department and the Environmental Protection Agency joined a civil suit against the firm, alleging it had violated the Clean Water Act by dumping water with high salt concentrations into public reservoirs. AgriProcessors settled the suit this year, agreeing to facilitate a 30 percent reduction in the salt emissions.

Also in 2004, secret videotapes taken on the company’s kill floor by the group People for the Ethical Treatment of Animals documented shocking slaughter practices. Among other things, the tapes showed workers ripping out cows’ tracheas while they were apparently still alive, leaving the cows to thrash in pain, sometimes for minutes and often in their own blood, after the sharp, clean cut that is supposed to lead to instantaneous death under kosher law. A follow-up investigation by the U.S. Department of Agriculture last year found AgriProcessor employees had engaged in “acts of inhumane slaughter.” It determined that Agriculture Department inspectors had observed but done nothing to stop prohibited practices and had accepted gifts of meat from the company.

AgriProcessors has subsequently pledged to reform its slaughter practices.

Last month, a report in The Forward charged that AgriProcessors mistreated its line employees. The article asserted that AgriProcessor’s heavily Latino work force was paid far below the industry average and given inadequate safety training. In just one month last summer two young workers required amputations, as have others since, the paper reported. The firm’s six safety violations this year, cited by the federal Occupational Safety and Health Administration, constitute more than half the total number committed by all meatpacking plants in the state, the paper found.

The company has vigorously denied the charges. Rabbi Asher Zellingold, who is paid by AgriProcessors to certify its meat, provided an alternative view after interviewing numerous employees who expressed firm satisfaction with their wages and denied they received inadequate safety training.

Conservative and Orthodox rabbinic organizations are currently examining the allegations, according to The Forward.