POLISHAN TRIAL BEGINS

Byline: Terrie Morgan-Besecker

SCRANTON, Pa. — Prosecutors said Wednesday that former Leslie Fay chief financial officer Paul Polishan was a master manipulator who bullied subordinates into concealing a $159 million fraud that plunged the company into bankruptcy.
Polishan was involved with the fraud, his attorney agreed, but his role was as a victim, not a perpetrator.
The conflicting portraits emerged in day one of Polishan’s trial in federal court on 21 charges related to an elaborate scheme that inflated the apparel maker’s earnings by $81 million from 1990 to 1992. U.S. District Court Chief Judge Thomas I. Vanaskie will decide the case in a non-jury trial that is expected to last almost three weeks.
Polishan is charged with 10 counts of wire fraud, seven counts of false statements, and one count each of bank fraud, forfeiture, conspiracy and securities fraud. He faces more than 30 years in prison if convicted on all counts.
In his opening statement, U.S. Attorney Bruce Brandler said Polishan and former Leslie Fay controller Donald Kenia “cooked the books” to sweeten the firm’s appeal to investors. The scheme netted Polishan $334,000 in additional salary over three years based on performance bonuses, Brandler contended.
The revelation of the fraudulent numbers had a “cataclysmic” impact on Leslie Fay, Brandler said, forcing it to seek bankruptcy protection in 1993. The firm emerged from Chapter 11 in 1997, and continues to operate under new ownership, with longtime chairman and chief executive officer John. J. Pomerantz still at the helm.
Kenia is awaiting sentencing for his 1994 guilty plea to filing false information with the Securities and Exchange Commission. Prosecutors have promised not to seek the maximum penalty of 10 years in prison in exchange for his cooperation against Polishan. It is that promise that motivated Kenia to implicate Polishan, the former cfo’s attorney, Michael Berger, said in his opening statement.
Berger said Polishan and other company executives were duped by Kenia, whom he described as a “sophisticated and accomplished criminal.”
“All he did, if anything, was rely on trusted subordinates,” Berger said of Polishan. “No one observed the real fraud because it was cleverly concealed. It’s unfortunate it happened, but that is no crime.”
Brandler scoffed at the notion that Polishan was unaware of Kenia’s staggering numbers’ manipulation. An auditor hired by Leslie Fay determined Kenia had made false or misleading entries totaling more than $159 million. The alleged scheme allowed Polishan and Kenia to cover up $119 million in losses the company experienced in a three-year period, prosecutors charge.
Brandler insisted the case is not a “credibility contest” between Polishan and Kenia, noting he has “substantial other witnesses” who will testify that Polishan directed them to engage in fraudulent activity.
“He boasted he could destroy anyone at the company,” Brandler said. “The oppressive environment prevented them from telling anyone about it.”

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