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Manhattan District Attorney Robert M. Morgenthau announced today that
MICHAEL J. SHERMAN and his associate, OLEG OSTROFSKY, and his company
MJS ASSOCIATES, 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. SHERMAN and OSTROFSKY will be sentenced
to state prison terms and pay millions in penalties.
MICHAEL J. SHERMAN has pleaded guilty to one count of Criminal Possession
of Stolen Property in the First Degree and three counts of Falsifying
Business Records. MJS ASSOCIATES has pleaded guilty to one count of Criminal
Possession of Stolen Property in the First Degree. OLEG OSTROFSKY has
pleaded guilty to one count of Attempted Criminal Possession of Stolen
Property in the First Degree.
Under the terms of his plea agreement, SHERMAN will be sentenced on June
30, 2004 to 2 ½ - 7 ½ years, and his company will pay $6
million to New York City and the costs of prosecution. Under the terms
of his plea agreement, OSTROFSKY will be sentenced on June 30, 2004 to
1 - 3 years in prison.
The 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.
In court Friday, SHERMAN admitted that from on or about July 15, 1996
through March 26, 1999, he was the owner and President of MJS ASSOCIATES,
and OLEG OSTROFSKY was the Vice-President. During that period, SHERMAN
further stated he and MJS Associates, along with a company called Prince
Marketing & Management Group, Ltd., which was owned and operated by
co-defendant Frank Carone, Sr. a/k/a Frank Bari, were hired by the Bank
of New York to manage and sell off the assets of a group of restaurants,
formerly owned and operated by JBA Associates. In return for his participation
in the venture, MJS Associates and SHERMAN were to receive one-half of
the fees Prince earned. SHERMAN admitted that the remainder of the assets
recovered were to be turned over to the Bank of New York. Between July
1996 and December 1998, Prince fraudulently withheld more than one million
dollars from the Bank of New York with SHERMAN's assistance. SHERMAN also
knew that revenue and expense statements submitted to the Bank of New
York on March 3, 1998, September 4, 1998 and November 12, 1998 were intended
to defraud the bank.
OLEG OSTROFSKY said in court Friday that he worked with SHERMAN between
July 1996 and December 1998 and during that time he helped SHERMAN and
CARONE disguise the amount of the assets they recovered from bankrupt
companies from the Bank of New York and helped them plot to keep the money.
In November 2003, FRANK CARONE pleaded guilty to Grand Larceny in the
First Degree, Grand Larceny in the Second Degree and Grand Larceny in
the Third Degree. He will be sentenced on March 15, 2004 to 2-6 years
in state prison. He and his companies PRINCE MARKETING & MANAGEMENT
GROUP and CONSOLIDATED AUCTIONEERS & LIQUIDATORS, INC will pay $2
million to New York State, $2 million to New York City and the cost of
prosecution. The other defendants RICHARD CIAPPINA, ANTON MAYER, JEFFREY
KUNKLE, FRANK CARONE JR. and MICHAEL YANCOFSKI have also pleaded guilty.
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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Defendant Information:
MICHAEL J SHERMAN - (3/30/47)
333 E 68TH STREET, APT. 13A
NEW YORK, NY 10023
OLEG OSTROFSKY - (9/30/66)
303 EAST 57TH STREET, APT. 43B
NEW YORK, NY 10022
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