05.17.05 -
Millionaires' Row
MINEOLA - Millionaires are beginning to accumulate at the Nassau County
Correctional Facility.
One deep-pocketed inmate hails from tony Kings Point, another from lush,
secluded Upper Brookville, and a third once lived in the Bahamas.
The trio - whose only association is that they now share the same East Meadow
address - are wards of the U.S. Marshals Service.
Facing prosecution for crimes ranging from arson and insurance fraud to stock
swindles and extortion, each is the subject of a complaint filed by the Long
Island division of the U.S. Attorney's Office for the Eastern District of New
York.
Some say Murderers' Row is gradually being replaced by what could be called
Millionaires' Row.
Gary R. Brown, senior counsel for the Computer Associates who spent 15 years in
the U.S. Attorney's Office before joining the Islandia-based company in March,
explained that prosecuting corporate fraud has became a priority of the U.S.
Justice Department priority in the wake of the Enron scandal.
Only anti-terrorism efforts outrank it, said Mr. Brown, the former chief of
criminal prosecutions on Long Island under U.S. Attorney Roslynn R. Mauskopf.
She declined requests to be interviewed for this article.
Mr. Brown noted that Ms. Mauskopf serves on President Bush's Corporate Fraud
Task Force. She is one of seven U.S. attorneys on that panel.
Still, Mr. Brown contends that Murderers' Row has not been entirely supplanted.
"The government still has obligations to enforce criminal prosecution
across the board," he said.
Joseph Conway, who spent 15 years as an Eastern District prosecutor and is now
a partner in LaRusso & Conway in Garden City, has two clients on
Millionaires' Row.
Within the district, Mr. Conway said, there are many successful businesses
including hedge funds and large corporations, some of which have run afoul of
federal law. With public attention increasingly being paid to such crimes,
"these cases are now high-profile cases," he said.
Michael Pescatore of Upper Brookville, a well-heeled client of Mr. Conway, is
one of the men being held without bail on Millionaires' Row.
As president of Astra Motor Cars, a Brooklyn used-car dealership, Mr. Pescatore
and 10 others were arrested last fall as part of an investigation dubbed
"Operation Vin City."
Under federal law, vehicle identification numbers (VINs) are punched into a
plate affixed to the dashboard of every car sold in the United States.
Increasingly, auto makers are stamping the numbers on individual parts, making
it easier to tell when a car has been assembled from the cannibalized pieces of
other vehicles.
According to the Justice Department's 51-page indictment in U.S. v. Astra Motor
Cars Inc., No. 04-cr-00774, Mr. Pescatore and the others were engaged in
several unlawful practices, including auto title laundering.
Astra's agents allegedly stole and stripped cars in what prosecutors called the
biggest "chop shop" on the East Coast.
After being declared a total loss by the owner's insurer, the hulks would be
reacquired at auction by Astra from the police. Having obtained clean titles,
Astra would reattach the previously stolen parts and sell the cars as used.
The defendants are also accused of bribing motor vehicle department officials
in Florida, Ohio and Georgia.
The schemes netted more than $20 million in proceeds over a five- year period,
according to Ms. Mauskopf's office.
Mr. Pescatore has pleaded not guilty.
Because of a conflict caused by his prior employment, Mr. Conway could not
represent Mr. Pescatore in the Vin City affair, although he is defending him
against other federal charges.
Martin B. Adelman of Manhattan, a past president of the New York State
Association of Criminal Lawyers who represents Mr. Pescatore in the Vin City
case, summed up his client's defense thusly: if there was criminal activity at
Astra, it did not involve Mr. Pescatore.
Because there are no motion or trial dates set for the Astra matter, it may be
leapfrogged by U.S. v. Pescatore, 05-cr-00128, a later-filed case charging Mr.
Pescatore with extortion.
Mr. Conway, the attorney in the extortion matter, said his client pleaded not
guilty. There were, he said of the four allegedly unlawful acts, "no
threats of force whatsoever. They were strictly business deals."
A status conference in the latter case is set for June 10 before U.S. District
Judge Thomas C. Platt, who is hearing both matters.
Housed near Mr. Pescatore in the East Meadow jail is Mr. Conway's other client,
Derek G. Turner, who is also being held without bail.
According to the complaint filed last month in U.S. v. Turner, No. 05-mj-00504,
Mr. Turner allegedly bilked two Long Island investors out of about $1.3
million.
Mr. Turner - a New Zealander who calls the Bahamas home - has not yet been
indicted by a grand jury, Mr. Conway said.
The complaint avers that Mr. Turner ran Turningpoint International Limited, a
hedge fund he represented as having between $300 million and $500 million in
assets.
Over a two-year period, he allegedly persuaded a father and son - identified
only as John Doe 1 and 2 - to invest in the fund with a promise of a 40 percent
annual return.
For reasons unstated in the complaint, in March the plaintiffs asked for their
money back. When Mr. Turner was slow in complying, they turned to authorities.
According to the complaint, bank records for Mr. Turner's business account
showed that it never held more than $300,000.
Mr. Conway described the dispute as "more of a misunderstanding than false
representations and stealing somebody's money." Assets are available
"to make the investors whole, if that's what they seek," he said.
The fate of Mehti Gabayzadeh is somewhat more certain that that of his
neighbors on Millionaires' Row.
Last month, after a 10-week trial, a jury convicted the Kings Point resident of
conspiring to commit a $300 million bank and securities fraud. He is awaiting
sentencing.
Mr. Gabayzadeh committed the crimes as president of the Hauppauge-based
American Tissue Co.
His attorney, Raymond G. Perini, called the verdict "devastating." He
noted that the jury had deliberated for seven days, giving rise to hopes that
it might acquit his client.
The conviction will be appealed, he said.
A partner in Hauppauge's Perini & Hoerger, Mr. Perini is a former Suffolk
assistant district attorney. He too said he has seen an increase in the
prosecution of corporate crime in the Eastern District.
It started, he said, about two years ago with a series of stock-broker
prosecutions. Now, he said, the U.S. Attorneys Office is aggressively pursuing
more white-collar cases.
"They've come out guns a-blazing," he said.
The East Meadow millionaires may soon be joined by Nat Schlesinger of
Williamsburg, Brooklyn.
He faces charges in two separate conspiracies that the prosecution has braided
together for one trial. One strand accuses him of arson and insurance fraud;
the other avers he defrauded corporate creditors.
About the only facts upon which both sides agree are that Mr. Schlesinger was
the principal of a series of high-end clothing companies operating under
various names; that the companies' knitting mill was beset by four separate
fires; and that that when the companies ran into financial trouble, they
re-emerged as different businesses employing some of the same personnel.
Defense attorneys Douglas T. Burns and Randy Scott Zelin have asked U.S.
District Judge Arthur D. Spatt to sever the creditor fraud case from the arson
case. The motion was denied. The trial, which started on April 12, went to the
jury last week.
Mr. Zelin is a Westbury solo practitioner. His co-counsel, Mr. Burns, is a
partner in Garden City's Shaw Licitra Gulotta Esernio & Schwartz and a
former federal prosecutor.
"While there may be evidence as to what kind of fire it was . . .
accidental or not accidental . . . that's a far different story than saying who
did it," Mr. Zelin said in an interview.
Turning to the creditor fraud charges, Mr. Zelin said there is "a fine
line between what can be viewed as a legitimate business transaction and the
criminalization of a business transaction, particularly when it comes to what
can or cannot happen" between debtors and their creditors.
At press time,the jury was still pondering Mr. Schlesinger's fate, and his
future address.
- Andrew Harris: New York Law
Journal
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