KENIA BLAMES POLISHAN FOR FINANCIAL MISDEEDS

Byline: Jennifer Weitzman

SCRANTON, Pa. — Donald F. Kenia, Leslie Fay’s former corporate controller and a star witness in the federal fraud case against the dress company’s former chief financial officer, Paul Polishan, finally pointed the finger at his old boss Tuesday.
Kenia testified that the cfo was part of an accounting fraud conspiracy that led to the company’s downfall and bankruptcy filing in 1993.
Beginning his testimony, which is expected to resume today, Kenia told U.S District Attorney Bruce Brandler that Polishan helped “cook the books” to sweeten the firm’s appeal to investors in the early Nineties.
Kenia said that Polishan discussed with him his financial policy to increase Leslie Fay’s profits, thereby increasing its earnings per share, a factor that is considered attractive to securities analysts.
According to Kenia, Polishan told him in one meeting that for every $50,000 to $60,000 in profits recorded, the company’s earnings per share would jump a half penny, which analysts would then round up.
Kenia, who started to work at Leslie Fay on its accounting staff in June 1976, began reporting to Polishan in 1978, because, he testified, Polishan told him then, “I was a person to trust.” After the fraud became public in 1993, Kenia was released from the company and, in 1994, he entered a guilty plea to filing false information with the Securities and Exchange Commission in exchange for the prosecutor’s recommendation of a more lenient sentence.
His current employment is as a sandwich maker at a nearby Subway franchise.
Kenia told Brandler on Tuesday that Polishan directed irregular accounting practices such as lowering the company’s reserves, eliminating its shrink and participating in a pre-billing scheme, all leading to the company’s increased profit reports.
He also testified in a methodical fashion about the company’s budget process. Part of the process, Kenia said, was that Polishan often made divisional controllers adjust their fiscal budgets to be more in line with the company’s expectations of being more profitable.
At that point in the early Nineties, those expectations, Kenia felt, were hard to reach because of the difficulty in the economic scene of the apparel industry.
Earlier in the day, Guy Comparetta, Leslie Fay’s divisional controller for its sportswear division, an employee since 1973, testified that he suspected a pre-billing scheme was taking place in the second quarter of 1992. During that time, Compa-retta said, it was Kenia who directed him to make false financial entries, except for one occasion in 1990, when he said he was directed by Polishan to make a $100,000 adjustment to the company’s liability fund.
Under cross-examination, Comparetta said Polishan never discussed with him how or when the goods related to that adjustment were broken down with the vendors.