U.S. v. Schlesinger, Cr. No. 02-485(ADS)(ALL).
| Decision Date | 18 March 2005 |
| Docket Number | Cr. No. 02-485(ADS)(ALL). |
| Citation | 360 F.Supp.2d 512 |
| Parties | UNITED STATES of America, v. Nat SCHLESINGER, also known as "Naftule Schlesinger" and "Zvi Pollack," Herman Niederman, and Goodmark Industries, Inc., Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Roslynn R. Mauskopf, United States Attorney by Lawrence Philip Ferazani, Assistant U.S. Attorney, Central Islip, NY, for Plaintiff.
Shaw Licitra Gulotta Esernio & Schwartz, P.C. by Douglas T. Burns, Esq., Garden City, NY, Randy Scott Zelin, P.C. by Randy Scott Zelin, Esq., Westbury, NY, for defendants Nat Schlesinger and Goodmark Industries, Inc.
Law Offices of Daniel Ollen by Daniel J. Ollen, Esq., New York City, for defendant Herman Niederman.
This case involves charges of conspiracy to commit insurance fraud and creditor fraud, and arson. On October 1, 2003, a grand jury entered a 34 count Superseding Indictment ("Indictment") against defendants Nat Schlesinger ("Schlesinger"), Herman Niederman ("Niederman"), and Goodmark Industries, Inc. ("Goodmark") (collectively the "Defendants"), arising out of, among other things, a series of fires dating back to 1987 that occurred at a factory in the Williamsburg section of Brooklyn. Presently before the Court are the following motions by the Defendants: (1) a motion to dismiss Count One, Twenty, and Twenty-Two through Thirty-Four of the Indictment; (2) a motion to sever Counts Twenty-Three to Thirty-Four from the remaining Counts; (3) a motion to sever defendant Niederman; (4) a motion to grant a bill of particulars; (5) a motion to suppress evidence; and (6) a motion to transfer the location of the trial.
I. Summary of Alleged Facts
The following facts are taken from the Indictment and the Government's response to the Defendants' motions. Schlesinger owned and maintained a place of business with his brother, Jack Schlesinger, in a building that was identified at various times as: (1) 48-76 Wallabout Street, Brooklyn, New York; (2) 50 Wallabout Street, Brooklyn, New York; (3) 750 Kent Avenue, Brooklyn, New York; and (4) 1 Classon Avenue, Brooklyn, New York ("the Premises"). Apparently, the various addresses for the same building are due to the fact that the Premises occupied an entire city block and had multiple entrances.
The Premises was designed and equipped as a clothing manufacturing factory. Schlesinger and his brother operated numerous clothing manufacturing companies in this location from the time they purchased the building in the early 1980's. These companies included Pous Apparel, Inc. ("Pous Apparel"), Private Brands of Delaware, Inc. ("Private Brands") and the defendant Goodmark. The indictment alleges that the brothers jointly exercised total control over each company but masked their ownership of the various companies to conceal their fraudulent schemes. One scheme involved defrauding insurance companies by submitting fraudulent claims for losses resulting from a series of fires that occurred at the Premises from 1987 to 1999. The second scheme involved using Private Brands and Goodmark as a vehicle to defraud various creditors. The Court will discuss each scheme separately.
On August 7, 1987 a fire occurred at the Premises, which at the time was doing business under the name Pous Apparel. At the time of the fire Schlesinger was listed as the vice-president of the company. The indictment alleges that Schlesinger, along with his brother, controlled the company. Schlesinger hired Jack DuBoff and Associates ("DuBoff"), a public adjusting firm located in Valley Stream, New York, to negotiate Pous Apparel's claim for loss resulting from the fire. The indictment alleges that Schlesinger agreed to pay Duboff a cash bribe in exchange for an inflated and false claim to Pous Apparel's insurance company. Upon receipt of the fraudulent proof of loss, the insurance company paid the claim in the amount of $1,065,000. The money was deposited in the account of Pous Apparel. Schlesinger paid Duboff the cash bribe, and Duboff distributed the cash to the other co-conspirators.
In June of 1990 and September 1991, a second and third fire occurred at the Premises, which at the time was doing business as Private Brands. At various times, Schlesinger listed himself as director, executive vice-president, vice-president, and owner of Private Brands. The indictment further alleges that Schlesinger owned and controlled the day-to-day operations of the company. As with the first fire, Schlesinger hired DuBoff to negotiate the claims resulting from the losses. Similarly, it is alleged that Schlesinger agreed to pay Duboff a cash bribe in exchange for an inflated and false claim to Private Brands' insurance companies. Upon receipt of the fraudulent proofs of loss, the insurance company paid the claims in the amount of $2,510,980. The money was deposited in the account of Private Brands. Schlesinger paid Duboff the cash bribes, and Duboff distributed the cash to the other co-conspirators.
On December 31, 1998 a fourth fire (the "1998 Fire") occurred at the Premises, now doing business as Goodmark. Schlesinger hired Horizon International Group, Ltd. ("Horizon"), a public adjusting company located in New York, New York, to represent Goodmark in connection with the insurance claims relating to that fire. On January 19, 1999, Schlesinger prepared a cost estimate from a fictitious company called "G.I.I. Engineering Co." to repair knitting machines. Schlesinger also solicited the help of defendant Herman Niederman who at the time was the President of House of Kids, Inc., a corporation located in Brooklyn, New York, which was engaged in the business of manufacturing clothing. In February 1999, Niederman, with the help of an employee of Dryesburg Corporation, provided Schlesinger with inflated quotes for fabric. Schlesinger provided Horizon with the G.I.I. Estimate and the Dryersburg Letter in support of a preliminary claim for damages totaling $4,092,319.84. Horizon prepared and submitted claims to Atlantic Mutual Insurance Company ("Atlantic Mutual").
Atlantic Mutual retained the services of Thomas J. Russo Consultants, Ltd. ("TJR Consultants"), a cause and origin expert located in Williston Park, New York, in order to examine the fire scene and determine the cause and origin of the 1998 Fire. Atlantic also retained the services of Stoner and Company, Inc. ("Stoner"), a salvor located in Bohemia, New York, to determine the amount of loss and damage to the inventory at the Premises as a result of the 1998 Fire. A salvor's responsibilities include verifying an insured's inventory counts and values submitted in support of the claim for damaged goods, and selling the damaged goods for the insurance company. TJR consultants determined that the 1998 Fire originated on the third floor shipping area of the Premises and was intentionally set. In addition, the New York City Fire Department fire marshal concluded that this fire was intentionally set and labeled the fire an arson. Further, upon arrival of the New York City Fire Department, the building was found locked with no indication of forced entry.
The indictment charges that Schlesinger, along with John Doe # 7 whose identity is known to the grand jury, deliberately caused the 1998 Fire to be set for the purpose of submitting the false and inflated insurance claim to Atlantic Mutual totaling approximately $4,590,000 in insurance benefits. Atlantic Mutual declined to pay the claim because it concluded that the fire was intentionally set. On March 16, 2001, Schlesinger filed a lawsuit against Atlantic Mutual seeking to recover damages caused by the 1998 Fire.
On August 3, 1999, a fifth fire occurred at the Premises. Schlesinger and his brother still owned the company under the name Goodmark. Schlesinger retained the services of Horizon to negotiate Goodmark's claim with the insurance company Crum and Forster Indemnity Company. Schlesinger again allegedly submitted fraudulent documentation from co-defendant Niederman regarding the value of damaged fabrics, as well as other fraudulent documents in order to defraud the insurance company. After receiving the proof of loss, the insurance company paid the claim in the amount of $934,319. The funds were deposited into the Goodmark bank account.
In September of 1996, Private Brands had substantial financial obligations to various lien and judgment holders and creditors (collectively "creditors"). These obligations included: New York State and New York City tax judgments in excess of $630,000; an Internal Revenue Service lien in excess of $570,000; a bankruptcy court judgment in excess of $1,200,000; a civil suit with a potential judgment in excess of $250,000; and a debt to Brooklyn Union Gas Co., for approximately $75,000.
In 1987, the French American Bank ("FAB") issued a revolving line of credit to Private Brands in the amount of $2,000,000, which was collateralized by certain assets, including machinery, equipment, and inventory. In July 1996, Schlesinger and others, arranged for and caused C.C. Calabria, Inc. ("Calabria"), a real estate holding company, to purchase the loan Private Brands owed to FAB. Schlesinger allegedly hired an attorney, Edwin Schwimmer, to create a paper trail to make it appear as though Calabria did in fact purchase the FAB loan. However, Schlesinger provided the funding for Calabria to assume the loan, making it falsely appear as if Calabria was an independent purchaser of the FAB loan. A substantial portion of the funding came from a company known as Selective Properties, Inc.
After Calabria obtained the loan from FAB, Schlesinger and others arranged for Calabria to foreclose on the FAB loan and obtain title to all assets of Private Brands through...
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