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and Esther Sternberg (Nochum’s wife) (collectively, the
promoters). Under the scheme, the promoters sold invoices to
corporations in the garment industry, falsely reflecting that one
of the promoters’ companies had sold yarn to the invoice-
purchasing company. Principals of the invoice-purchasing
companies provided the promoters with company checks in the
amounts of the false invoices, and the promoters returned cash to
the principals in the amount of the checks less a processing fee.
No actual yarn was involved. The invoice-purchasing companies
included the purported cost of the nonexistent yarn in their
calculations of cost-of-goods-sold for tax purposes, fraudulently
misstating their taxable income. The principals converted some
of the cash to their personal use without declaring those funds
as income on their tax returns. Ultimately, the promoters were
convicted for their parts in the scheme, and their convictions
were affirmed on appeal. See United States v. Gurary, 860 F.2d
521 (2d Cir. 1988).
Randy Hall began participating in the scheme before Mr.
Feinsmith was a Randy Hall shareholder. Mr. Mandel originally
purchased the false invoices on behalf of Randy Hall, and he did
so with the knowledge of the other two shareholders (i.e.,
Messrs. Perry and Rosenthal). Randy Hall continued to purchase
the false invoices after Mr. Mandel’s retirement. At all times,
Randy Hall paid for the false invoices by checks, and the
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