U.S. District Court Judge Thomas I. Vanaskie sentenced Polishan after a 35-day bench trial in Scranton, Pa., where he was convicted of 18 felony counts of overstating and manipulating Leslie Fay’s earnings between 1989 and Feb. 1 1993, when the fraud was disclosed to the public by senior management. At the time, Leslie Fay was one of the nation’s largest apparel firms based in New York, with administrative and manufacturing headquartered in Wilkes Barre, Pa.
Following jail time, Polishan is to serve three years of supervised release and was ordered to pay a statutory assessment of $900. He is to begin serving his time on Feb. 11. The case was prosecuted by Assistant U.S. Attorneys Bruce Brandler and Lorna N. Graham.
Donald F. Kenia, the former corporate controller of Leslie Fay, was sentenced Oct. 9 to a term of two years in prison. Kenia, who helped carry out Polishan’s orders to inflate the financial statements, cooperated with the government’s investigation since the time of his guilty plea in 1994 and testified against his former boss.
Kenia is serving his sentence in Allenwood Federal Prison in Montgomery, Pa. It is still to be determined where Polishan will serve his time, but it will likely not be at Allenwood.
Martin C. Carlson, U.S. Attorney for the Middle District of Pennsylvania, said the offenses committed by Polishan were some of the most serious white-collar crimes ever prosecuted in the history of the district and the nine-year sentence properly reflected the seriousness of the offenses.
“Cases such as this one, which involve high-ranking corporate executives who fraudulently manipulate corporate earnings for their own benefit, have a staggering impact on thousands of innocent individuals and the economy in general,” he said. “Shareholders lose their savings, employees lose their jobs and retirement savings and confidence in the integrity of the markets is eroded.”
In the aftermath of Leslie Fay’s bankruptcy, the firm’s stock plummeted and class-action lawsuits were filed by shareholders, who eventually received $22 million of $133 million in recognized loses in a May 1997 settlement.
The firm survived its Chapter 11 proceedings and has since been taken private by investment firm Three Cities Funds. Chairman and chief executive officer John Pomerantz, son of the 55-year-old firm’s founder, was never implicated in the scandal and remains at the helm.