KENIA ENDS TESTIMONY IN POLISHAN TRIAL

Byline: Jennifer Weitzman

SCRANTON, Pa. — Donald Kenia wrapped up his testimony for the prosecution Thursday in the fraud case against Leslie Fay’s former chief financial officer Paul Polishan, recalling numerous incidents in which he alleged that his boss told him to cook the books.
Detailing his final days as Leslie Fay’s corporate controller, a job he held for over 20 years, he told U.S. Attorney Bruce Brandler in federal court here about events leading up to the January 1993 public disclosure of the accounting irregularities occurring in the Hanover, Pa., facility in the early Nineties that led to the company’s bankruptcy.
Kenia said Jan. 28, 1993, he had to make last-minute adjustments to the corporate and Sassco Fashions units because he never made details of his inflations and was having difficulty accounting for a remaining $22 million. Kenia said Polishan told him the following morning regarding the unsupported entries that they were Kenia’s problem.
Kenia said from Feb. 1, 1993, when the accounting problems were made public, until November 1992, he worked on a contractual basis for Leslie Fay with investigators to determine the full amount of the adjustments. He testified the consolidated number for the years 1990 to 1992 was $76,245,077.
He also testified about additional cases in which Polishan directed him to find ways to revise the company’s financial records so that its actual earnings would match (Polishan’s) higher earnings estimates.
For example, Kenia said Polishan told him that due to “radical changes” in the dress division’s budget, referring to earnings being “way off,” the cfo asked Kenia to prepare a new budget that would be more in line with projections.
Kenia said Polishan suggested looking at adjustments made in the previous quarter to write off some of the shortfalls to meet the discrepancies.
Kenia also testified that Polishan suggested changing the calendar year to add an extra shipping week to the quarter as a way to meet Polishan’s projected earnings per share of 82 cents in the third quarter of 1992.
Kenia also spoke about events on Nov. 11, 1992, during the following quarter, in which the divisional controllers turned in a total loss in earnings of $5.1 million as a result of the continuing downturn in the apparel business.
“Polishan said no way was this going to be the budget,” Kenia said, adding that he and Polishan then worked together making changes to certain divisions at the Hanover facility.
Brandler then showed Kenia a Nov. 16, 1992, financial worksheet containing the revised budget. Kenia indicated that there was a $6 million swing in projections and said there was no justification for the increase in the estimated earnings other than “Polishan wanted the change.”
The defense team is expected to start its cross-examination of Kenia on Wednesday.