One day behind bars. No days. A year and a day. Until Wednesday, that was as tough as federal Judge Janet Arterton got with the men who stole money when New Haven Savings Bank became NewAlliance Bank.
At the end of an emotional three-and-a-half hour hearing in U.S. District Court on Church Street, Arterton sentenced Chaim Citronenbaum to three years in prison.
His incarceration, Arterton said, would send an important message to other perpetrators of bank and tax fraud.
But she did agree to give a more merciful sentence than the request of U.S. Attorney assistant prosecutor Michael McGarry, who pressed her to follow sentencing guidelines calling for a 46 – 57 month term.
Arterton said Citronenbaum’s “good works,” which Arterton called “the real soul of what charity is,” led her to disregard that recommendation.
Citronenbaum’s three-year sentence will begin in July. As part of his guilty plea, he agreed not to appeal a sentence if it were lower than 57 months. His sentence also includes two years of supervised release and a $10,000, on top of his agreement to forfeit the $1.68 million he pocketed as a result of the scheme.
Citronenbaum, 52, of Monsey, NY, pleaded guilty last May to one count of conspiracy to commit mail fraud and to defraud the Internal Revenue Service, and one count of mail fraud. He broke down in tears several times during the nearly four-hour long proceedings. His wife, Zeva, and several other supporters from Monsey who were in the audience were just as emotional.
“What I did was wrong. Plain wrong,” he told Arterton, looking down at a crumpled, single piece of white paper. “I understand that I face incarceration, and that I deserve it.” He begged her to consider what might happen to his wife and five children if he were to be imprisoned.
The defense and prosecution presented strikingly different views of the same person to Arterton: on the one hand, a man with a remarkable capacity for charity, plagued by psychological problems and personal tragedy; on the other, a man who knowingly perpetuated fraud for many years, and not just at banks.
At first, said Citronenbaum’s attorney, Ronald Kleinberg, Citronenbaum’s money-making endeavor was completely legal. Respected financial advisers had suggested that he open up accounts in mutual banks that were soon to become stockholder-owned, public corporations. This way, Citronenbaum would be allowed to buy stock at the bank’s Initial Public Offering (IPO), then make a tidy profit when the stock zoomed up in price following the conversion.
But those profits weren’t enough for him. He began opening accounts using fraudulent names and addresses. He did that during one of New Haven’s gold rushes: the massive get-rich-quick schemes that accompanied the 2004 conversion of depositor-owned New Haven Savings Bank to publicly-traded NewAlliance Bank. In that instance, I Citronenbaum bought stock using the names of multiple depositors who never gave him their permission. One had repeatedly asked that Citronenbaum not use his name or social security number, to no avail; another was not from Connecticut and said he had no idea he even had a bank account in the state.
Ultimately Citronenbaum was able to sell close to 90,000 shares of NewAlliance stock for a profit of $331,000. He did so under the guise of “The Citronenbaum Foundation” to avoid taxes on his profits
Citronenbaum was the latest in a string of out-of-town scammers Arterton has sentenced in connection with the NewAlliance fraud. (Click here, here, and here to read about other cases.) Such frauds occur commonly when banks go public. But rarely do the scammers get caught. The feds made a point of investigating this case aggressively.
“He certainly took to his fraud with gusto,” said McGarry – and not for the first time. Citronenbaum lost his medical license in 2002 after falsely representing himself as, among other things, board-certified in physical medicine, an attending physician at various hospitals, and an “assistant professor” at a medical center.
And so the NewAlliance scam was not, as previous defendants in this scam had successfully claimed, a one-time breach of the law, McGarry argued. It was an indication of systematic behavior. “[Citronenbaum] turned to bank fraud just because health-care fraud wasn’t profitable enough.”
Supporters who traveled to the New Haven courtroom from Monsey offered a strikingly different view of the man.
Rachel Weisz called Citronenbaum “an angel in disguise.” When her husband was diagnosed with Lou Gehrig’s disease, she told Arterton, Citronenbaum appeared almost out of nowhere. He had never met her or her family, but had heard about her situation from friends and wanted to do anything he could to help. For the past two years, he has visited her and her five children every day, becoming a permanent fixture in their lives.
“They need Chaim,” she said of her family.
“Who would be there for these children if not [Citronenbaum?]” asked Nathan Rothschild, another Monsey resident who told Arterton about Citronenbaum’s commitment to helping troubled young people. “That’s a void that could never be filled if he were not there to do that.”
In total, four Monsey residents who had sat quietly together in the audience took to the podium and fiercely defended him as an ardent supporter of his tight-knit community, which they claimed could not survive without him.
Arterton seemed to be the most visibly moved by the argument of Citronenbaum’s lawyer, Ronald Kleinberg. As he described one particular instance of his client’s charity, he began by saying “[Citronenbaum] wanted to help. So what did he do?” The judge answered his question for him, nodding: “The wedding.” She was referring to an instance in which Citronenbaum had arranged a wedding at a hospital bedside so a terminally ill patient could see his son get married. She had read about it among the many letters submitted to her. And she had remembered.
Despite pleas by friends and family for probation, or even home confinement, rather than prison time, Arterton said her final message must include incarceration. “Mr. Citronenbaum is a highly-educated individual,” she pointed out; he was fully aware of his wrongdoing.
The family and community might suffer, Arterton said but she was confident they could “step up to the plate.”