WITNESS SAYS POLISHAN DIRECTED RECORDS ALTERING

Byline: Eric Wilson

SCRANTON, Pa. — John Versari, a general ledger coordinator at Leslie Fay in the early Nineties, when financial irregularities took place at the company, testified on Monday that he had directly witnessed Paul Polishan tell an employee to alter records to improve the company’s performance.
The testimony came during the former chief financial officer’s ongoing fraud trial in federal court here. He is charged on 21 charges related to an alleged scheme that inflated Leslie Fay’s earnings by $81 million from 1990 to 1992, a scandal that plunged the company into bankruptcy.
Polishan’s character has played a major part in the trial, as prosecutors led by U.S. Attorney Bruce Brandler have sought to portray him as a tyrannical boss, ruling the Hanover, Pa., facility with an iron fist and coercing employees to go along with his scheme for fear of losing their jobs. After a month-long recess in the case, Assistant U.S. Attorney Lorna Graham continued that tactic, eliciting testimony from Versari that Polishan was “a real task master.”
Polishan’s defense team took aim at Versari’s credibility by playing up the witness’s admitted “dislike” for Polishan, citing examples of how Versari asked around for documents that might incriminate his former boss in the weeks after an external investigation into the accounting practices had begun.
Versari, who testified under immunity, worked for Leslie Fay from January 1965 until shortly after the accounting scandal broke in 1993, lastly as general ledger coordinator for the firm’s intimate apparel and sweater divisions.
On how annual budget plans were made, Versari testified that he formulated a bottom line each year based on meetings with divisional heads in New York, then submitted a report to Polishan.
“They were often not aggressive enough. You sort of had to [commit fraud] to get the bottom line he wanted,” Versari said.
Numbers were adjusted either by increasing inventory or reducing expenses so that profitability for the division was increased. Versari said he sometimes prepaid payroll taxes or printed fake inventory tickets to cover the adjustments, all at instructions from controller Donald Kenia’s office. Kenia has pled guilty in 1994 to filing false information with the Securities and Exchange Commission.
Under cross-examination, Versari said it was always Kenia who directed him to make changes on reports, such as monthly flash reports that indicated current sales and remaining inventory, and that Polishan did not personally direct him to make changes. However, on one occasion, he, Polishan and Kenia had met to discuss a trial balance sheet for Leslie Fay’s sportswear divisions, and Polishan told Kenia to change various records, Versari said. Specifically, he said, two entries marked as credits owed by Leslie Fay to retail accounts were altered — one from $415,595 to $270,874, the other from $715,595 to $411,544.
During the course of his testimony, Versari acknowledged making false entries on various flash reports from 1988 to 1993 and said he was confronted on at least one occasion by intimate apparel divisional head Alan Lask in New York on what appeared to be inappropriate expenses, noting they were unrealistically low considering the cost of designer and stylist salaries. Versari said he told Lask that those expenses were being absorbed on a corporate level, but he never approached Polishan about inquiries from the New York staff.
Defense attorney Timothy Polishan, the defendant’s son, pointed out that Versari had increased his annual salary by over $4,000 by exercising stock options at the same time he was aware the company was creating false statements in its filings.

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