He didn’t exactly rob a bank or hit anybody. He did participate in a bank scam — so a federal judge decided not to “put him back where he was” with no consequences. So she sent another scammer caught up in a New Haven bank fraud to jail for a year and a day.
That was the latest in a continuing series of repercussions Tuesday to the massive get-rich-quick scheme that accompanied the 2004 conversion of depositor-owned New Haven Savings Bank to publicly-traded NewAlliance Bank.
Steven E. Schleifer, 53, of Monsey, N.Y., became the latest participant in that scheme to take the fall when Judge Janet Bond Arterton Tuesday afternoon sentenced him to one year and a day in jail in U.S. District Court on Church Street.
“You are taken out of circulation,” Judge Arterton told him at the climax of an emotional two-hour court session.
In the scheme, out-of-town moneymen found an illegal way to angle in on a lucrative initial public offering when the bank went public. Only New Haven Savings Bank depositors were supposed to be able to purchase shares in the offering. The out-of-towners, who weren’t depositors, found local depositors to serve as fronts. They gave the depositors money to buy the shares in their own names. Then the depositors would immediately resell the shares and split the profits with the moneymen when the bank went public and the shares zoomed up in price.
Schleifer, one of a host of such out-of-town moneymen, pocketed $137,911.73 in the scheme.
Those scams often take place when banks go public. Rarely are people caught. The feds did an extensive investigation in New Haven and busted a series of scammers in a groundbreaking investigation. Read about some of those related cases here, here, here, and here.
And earlier this month the Secruties and Exchange Commission won a court order under which previously tried scammers will pay more than $3 million to legitimate depositors who were crowded out of the sale. (Click here to read a release on that.)
Steven Schleifer pleaded guilty in September to one count of corruptly obstructing and impeding the due administration of Internal Revenue Service laws. Besides the jail term, Arterton sentenced him Tuesday to a year’s conditional release, fined him $10,000, and ordered him to pay back taxes of about $50,000. She also ordered him to pay more than $73,600 of his ill-gotten gain into a so-called “Fair Fund” set up to give victims of the scheme someof their money back. The taxes already have been paid. The $73,600 was handed over Tuesday.
According to his guilty plea, Schleifer and an associate in 2004 conspired to purchase more NAB shares than they were legally allowed to own.
All parties to the case agreed that the defendant who stood in front of Arterton Tuesday in her first-floor courtroom was not the usual criminal in the dock.
Schleifer, 53, is a slim, straight-standing man with full salt and pepper beard and black metal-framed glasses. He wore a full velvet yarmulke on his head and dressed in a black suit to court. His wife accompanied him. She alternately took notes onto a white legal pad, dabbed her eyes and read from a book of psalms as Assistant U.S. Attorney Michael McGarry and New York-based defense lawyer Ira Lee Sorkin argued intricacies of federal sentencing guidelines and what weight previous good deeds should be given in balancing the crime he had admitted to committing.
The case was all about contradictions, according to the two lawyers and the judge.
McGarry said Schleifer, a certified public accountant, was a millionaire who has money in the bank, and a nice house. He has worked a comptroller of a company for more than 25 years.
Sorkin, the defense lawyer, said Schleifer is the sole support for his wife, six children and three grandchildren.
The eldest four children range from 18 to 28 years old; the youngest are 13 and 15. Sorkin said all are in school and depend on Schleifer financially.
Schleifer had quickly begun negotiations with the government years ago and never tried to hide his role in the scheme after learning that the government was looking into his actions, McGarry said.
But, McGarry noted, “that is not the same as aiding the government,” something other defendants in the scheme had done and as a consequence received probation and community service rather than being sent to prison.
Others have not been so fortunate. But one participant in the schemes was set free by the judge.
Judge Arterton said Schleifer perplexed her.
Sorkin told her that he was convinced this defendant would not again commit any crime.
“In looking at him, I would think it unlikely he would do it in the first place,” she said. “That’s what perplexes me.”
“I have been living in fear for four years,” Schleifer told the judge when he rose to speak before hearing his sentence. He told of “countless nightmares,” This was his first contact with the law and certainly would be his last, he said. He told of his “tremendous pain” and his sorrow “for the shame I caused my wife and children.”
“I don’t intend to be in court again,” he said, slooking at the judge as his wife sat, wiping her eyes, yet composed.
Sorkin said the shame his client must bear in his family and community would be punishment enough. The judge disagreed.
“He’s sorry he got caught,” she said. “Why is that a sentence? It just puts him back to where he was” before he did his crime.
McGarry carried on that theme when his turn came to address the court.
“Where is the bite?” he told the judge. There has to be more than, “‘OK, have a nice day.’ There needs to be significant punishment,” he argued. Otherwise, he said, others may think, “It’s worth a try because there is easy money.”
As he spoke, the defendant sat, looking down at the table in front of him, once whispering to his lawyer, never looking at the prosecutor.
Then, as Schleifer stood alone at the rostrum, facing the judge Arterton called him “a paradox to the court.”
“Your character and community involvement belie that you would be involved in criminal activity,” she said. “You have so much to lose.”
She said deterrence of others is a necessary part of sentencing, which she called “the most serious of a court’s responsibilities.” She said she doubts Schleifer would have committed his crime if he had been aware of someone harshly punished for doing a similar crime.
“You are a good man. You are a kind man. You are true to your family and faith. You are a comptroller,” she told the man awaiting his fate.
She then pronounced the year and a day sentence, telling Schleifer that he could be out in 10 months with good behavior. Schleifer, the strain showing on his face, turned to look at his wife sitting in the first row of the gallery.
He then folded his arms and grabbed his waist with both hands, hugging himself and stepping from foot to foot. After another quick look back to his wife, he put his head into the crook of his arm on the lectern twice. She sat, dabbing her eyes. The two-hour ordeal was almost over.
Sorkin pleaded with the judge to allow Schleifer to serve his sentence in a community facility where he would be able to work during the day but sleep at the jail. McGarry objected, and the judge said no.
“Imprisonment is more than a slight inconvenience,” Arterton declared. “You are taken out of circulation.”
McGarry urged the judge to confine Schleifer in a facility where he would be able to practice his Jewish faith.
As part of the plea deal, Schleifer waived his right to all but constitutional appeals. He was ordered to report to prison by Feb. 9. Neither the lawyers nor the defendant and his wife would comment.
To read the pleadings and sentencing memos, click: here, here, here, and here.