DISTRICT ATTORNEY - NEW YORK COUNTY

News Release
November 12, 2003

Contact: Barbara Thompson
212.335.9400

Manhattan District Attorney Robert M. Morgenthau announced today that FRANK CARONE and two of his companies have pleaded guilty for their roles in the theft of $27.7 million from distressed businesses that were either being liquidated in bankruptcy or otherwise restructured. CARONE will be sentenced to a state prison term and pay millions in penalties to New York City and New York State.

FRANK CARONE a/k/a FRANK BARI has pleaded guilty to Grand Larceny in the First Degree, Grand Larceny in the Second Degree and Grand Larceny in the Third Degree. CONSOLIDATED AUCTIONEERS & LIQUIDATORS, INC. (CALI) has pleaded guilty to Attempted Grand Larceny in the First Degree. PRINCE MARKETING & MANAGEMENT GROUP, LTD. pleaded guilty to Insurance Fraud in the Second Degree. CARONE owns both companies.

Under the terms of the plea agreement, CARONE will be sentenced on March 1, 2004 to 2 - 6 years, and he and his companies will pay $2 million to New York State, $2 million to New York City and the costs of prosecution.

Today's pleas are the result of a three-and-one-half year investigation by the Special Prosecutions Bureau of the District Attorney Office and the District Attorney's Office (NYPD) Detective Squad. In October 2002, nine people and four companies were indicted for massive fraud and thefts from distressed companies facing financial hardship, restructuring and bankruptcy. The indictment charged that the defendants systematically looted these companies by taking assets that should have gone to the businesses or to their creditors. The cases against the other defendants - MICHAEL J. SHERMAN, OLEG OSTROFSKY, RICHARD CIAPPINA, ANTON MAYER, JEFFREY KUNKLE, NICHOLAS CARONE, FRANK CARONE JR. and MICHAEL YANCOFSKI -- are still pending.

In court today, CARONE admitted that from on or about January 1, 1994 through November 28, 2001, he was the owner and President of Consolidated Auctioneers & Liquidators, Inc., and that from July 1996 until June 2001, he also owned Prince Marketing & Management Group, Ltd. (Prince). CALI appraised, liquidated and auctioned off the assets of businesses that were voluntarily dissolving or doing so under the protection of bankruptcy laws. Prince managed a group of restaurants, formerly owned and operated by JBA Associates, for the Bank of New York.

CARONE admitted that around October 1, 1995, MICHAEL J. SHERMAN and OLEG OSTROFSKY helped CALI obtain the Jamesway Corporation's liquidation and auction rights. During the liquidations and auctions that CALI held from October 1, 1995 to June 1996, CARONE admitted stealing more than $1 million of the auction proceeds. He admitted that he ordered others not to accurately report the sales proceeds from liquidations and auctions of Jamesway's goods and, in fact, never accurately reported the figures to the Bankruptcy Court during the Jamesway bankruptcy proceeding. The defendant admitted that he gave some of the stolen proceeds from the auction to a company called BCI, Inc., a company which was under SHERMAN's and OSTROFSKY's control.

The defendant also admitted that in November 2000, CALI secured the rights to auction off the assets of Branding Iron Associates, L.L.C. d/b/a Magnolia's Restaurant. Magnolia's assets were auctioned between November 16, 2000 and December 8, 2000. The funds received from the auction sales were deposited in CALI's account and the auction sales were underreported. The defendant admitted that a false report of the auction sales was submitted to Magnolia's, and a lower amount of money was turned over to Magnolia's and that he stole the difference between the money that was actually received and the money which was turned over to Magnolia's.

In March 2001, CALI was hired to liquidate the assets of Balducci.com, a Manhattan-based Internet distribution site for a vendor of specialty foods. From March 21, 2001 to August 28, 2001, CALI conducted the liquidations and CARONE admitted CALI stole more than fifty thousand dollars from Balducci.com. Again, the defendant ordered employees not to turn over the full proceeds of the liquidations and to underreport the results of the liquidations and auctions to Balducci.com.

CALI was hired in May 2001 to liquidate assets of GoRefer.com, a Manhattan Internet referral company. In auctions conducted between May 16, 2001 and May 30, 2001, CARONE admitted stealing more than three thousand dollars from the company by withholding auction proceeds and by ordering employees to underreport the results of the auctions to GoRefer.com.

Finally, in August 2001, CALI was retained to liquidate some of the assets of World Gym, a gym in Manhattan, for the benefit of West 64th Street, L.L.C. From August 29, 2001 to September 13, 2001, CARONE admitted stealing more than three thousand dollars belonging to West 64th Street, L.L.C. by withholding auction proceeds and ordering employees to underreport the results of the auctions to West 64th Street, L.L.C.

The case was prosecuted by Assistant District Attorneys Rahul Kale and Louis O'Neill under the supervision of Special Prosecutions Bureau Chief Leroy Frazer and Thomas Wornom, Deputy Bureau Chief. David Ostrager and Michael Vecchio assisted in the case under the supervision of Financial Crimes Bureau Chief Frank Puma.

The District Attorney thanked NYPD Commissioner Raymond Kelly and Capt. Sean Crowley of the District Attorney's Office (NYPD) Detective Squad, as well as the members of the Squad who assisted in the investigation.

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