KENIA FOCUS AT POLISHAN TRIAL

Byline: Jennifer Weitzman

SCRANTON, Pa. — Federal prosecutors presented two more witnesses against Paul Polishan in the former Leslie Fay chief financial officer’s fraud trial this week, but their testimony tended to point the finger more at former controller Donald Kenia, who has already admitted his guilt in the 1993 accounting scandal.
David M. Nishtik, who worked at Leslie Fay from February 1989 until February 1994, discussed a meeting in December 1989 with Polishan and shipping department executives when a “slow truck” shipping method was overheard, whereby a sale made in a current quarter would be shipped during the next, thereby increasing the profits for the current quarter.
Asked by Assistant U.S. District Attorney Lorna Graham if Polishan was involved in those discussions, Nishtik said Polishan covered his ears and left the room. Nishtik’s testimony mostly told of how he inferred the meaning of instructions without clarifying them with his direct supervisors, Kenia and Polishan.
Under cross-examination by defense attorney Timothy Polishan, Nishtik said he was never directed by Paul Polishan to make an unsupported entry, but rather it was Kenia who told him not to tell anyone about any adjustments made to inventory.
Nishtik also said that, as far as he knew, the origin of Leslie Fay’s financial troubles stemmed from a “shrink description” of about $4 million coming during the third quarter of 1990 in its dress group. He added that he met with Pat Doyle, another divisional controller, and Kenia to try to determine the cause of the shrink problem.
However, he testified they were too busy to find the source of the problem, so Kenia decided to inflate inventory to hide it. The situation only got worse because the initial entry was never reversed and snowballed until the time when Kenia disclosed the irregularities to Polishan in January 1993.
Stanley Ruditz, a divisional controller for Leslie Fay in the early Nineties, testified on Wednesday that in 1993 Leslie Fay’s accounting department informed him that only sales figures, and not the expense of acquisition for dresses for its outlet stores from another manufacturer, Robby Lyn, totaling $202,464.71, were recorded in his December 1992 flash reports.
He implied that the basic accounting principal of recording cost and sales for the same time period was not carried out at that time, thus improperly increasing the profits for the outlet division.
Under cross-examination, Ruditz agreed that the defendant never knew about how the checks were recorded since it was Kenia who took the flash report. Also, Ruditz said the cfo never told him not to enter the checks or not to talk with BDO Seidman, the company’s outside auditors.
In addition, Ruditz agreed with defense counsel Polishan that the Robby Lyn charge had no effect on Leslie Fay’s consolidated financial statement and that the divisional financial statements were never released to the public.