POLISHAN TRIAL GETS ON FAST TRACK
Byline: Jennifer Weitzman
SCRANTON, Pa. — Attorneys involved in the ongoing fraud trial of former Leslie Fay chief financial officer Paul Polishan agreed Tuesday to cut a number of planned witnesses from the trial, including company shareholders, analysts and bank and insurance officers, to save about two weeks of trial time.
Testimony in the trial resumed on Monday after a month-long recess and is expected to continue through the end of May. The prosecution opened its case on March 1, and it was originally estimated to last three weeks.
Defense attorney Michael Berger said Tuesday he would accept that the witnesses would have testified that they had lost money as a result of the financial scandal and ensuing bankruptcy that rocked Leslie Fay in early 1993 after accounting irregularities were first exposed.
This week, prosecutors turned their attention to two Leslie Fay financial employees working at its Hanover, Pa., facility from 1990 to 1992 — Robert Belcher, a cost and inventory manager, and Patrick Doyle, who was a divisional controller.
Doyle, who started working for Leslie Fay in April 1979, testified on Tuesday he had witnessed inflation of Leslie Fay’s earnings figures from 1990 to 1993 and felt pressure from Polishan to meet his financial budget goals “to be part of the management staff.”
During direct examination, Assistant U.S. Attorney Lorna Graham asked Doyle to review sales estimates for June 1992 related to Leslie Fay’s Sassco division, handwritten by Polishan. Graham then showed Doyle his final report for the same period, indicating the numbers were the same or similar to Polishan’s written estimates.
Doyle’s testimony mirrored that of William Perkoski, who said on March 16 that changes made to weekly snapshot and monthly flash reports “in most instances” inflated the firm’s bottom line.
However, under cross-examination, Doyle responded to defense attorney Timothy Polishan, the defendant’s son, that he never received direction from Polishan as to what numbers to put into the snapshot reports and said it was possible he did not see Polishan’s handwritten numbers until 1993, after public disclosure.
“Doyle never had a clear understanding of the how and why the cfo produced those numbers,” Polishan stated.
Doyle also testified to other questionable maneuvers by Polishan. He told of a 1993 budget that was not acceptable to Polishan because it didn’t meet his financial goals. Another example was in December 1992, when Polishan instructed Doyle to capitalize a $65,000 payment related to getting out of a lease in Kingston, Pa., rather than expense it, he said.
Defense counsel asked Doyle if he had ever discussed with Polishan whether the transaction was being treated improperly. Doyle responded that he had not.
On Monday, Belcher, a cost and inventory manager at Leslie Fay, testified that he found inventory figures had been increased on two occasions and that Polishan was aware of the changes.
Belcher said he questioned how inventory figures were accounted for in 1991 and 1992 and that he found it strange when Donald Kenia, the former corporate controller who pleaded guilty in 1994 to filing false information with the Securities and Exchange Commission, told him that under no circumstances were the reports to be seen by others, including the company’s home office in New York, as well as internal and external auditors, without his or Polishan’s permission.
Belcher said Polishan, on a Saturday morning in January 1992, wanted to make “minor adjustments” on the yearend inventory for 1991. By the end of the day, Belcher said he was “concerned” because those adjustments totaled $7.6 million, including a $6 million jump in its import business and another jump of $1.6 million in the sportswear division.
In another account, Belcher turned in a $122 million inventory report for second quarter 1992. Polishan told Belcher that number was not enough in inventory, saying the figure should be closer to $135 million, Belcher said.
Kenia told Polishan: “It will be when we get done,” Belcher testified, adding that Kenia told him the following Monday that the inventory was $135.8 million.
“I was blown away,” Belcher testified. “If I were the cfo, it [the additional money] would have blown my mind.”
Belcher said he had daily contact with Polishan, describing his former boss as a “tough guy to deal with, very arrogant, condescending and rude.”
Asked to describe the relationship between Polishan and Kenia, Belcher said that Kenia did everything that was asked, but felt that something strange was going on, as if “Paul had a dirty picture of Kenia.”
Timothy Polishan questioned Belcher on earlier testimony that Kenia had told Belcher not to talk to Polishan, implying that Kenia was hiding something. In addition, he said Belcher never heard how Kenia would make up the additional inventory money or who Kenia was specifically referring to when he said, “It will be when we get done.”
In the trial, Paul Polishan is charged with 21 counts relating to alleged actions that inflated Leslie Fay’s earnings by $81 million from 1990 to 1992 and resulted in the company’s bankruptcy.