Estate of Harvey Feinsmith, Deceased, Betty Feinsmith, Executrix - Page 4




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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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