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U.S. v. SCHLESINGER

June 8, 2005.

UNITED STATES OF AMERICA,
v.
NAT SCHLESINGER, also known as "Naftule Schlesinger" and "Zvi Pollack," HERMAN NIEDERMAN, and GOODMARK INDUSTRIES, INC., Defendants.



The opinion of the court was delivered by: ARTHUR SPATT, District Judge

MEMORANDUM OF DECISION AND ORDER

This criminal prosecution initially arose out of a series of fires that occurred from 1987 to 1999 at a clothing factory in the Williamsburg section of Brooklyn, New York. The factory was once a place where women's clothing was manufactured for sale to high end retailers such as Neiman-Marcus, Saks Fifth Avenue, and Bloomingdales. On New Year's Eve 1998, the factory was the scene of a suspicious fire in which a firefighter temporarily became lost deep inside the factory while battling the blaze. The investigation that followed resulted in a thirty-four count indictment against one of the owners of the business that occupied the factory on charges of arson, conspiracy, insurance fraud, creditor fraud, and money laundering.

On May 19, 2005, after a four week jury trial, the defendant Nat Schlesinger ("Schlesinger" or the "Defendant") was convicted of one count of arson and one count of use of fire to commit a felony in connection with the December 31, 1998 fire (the "1998 New Year's Eve Fire"). In addition, Schlesinger was convicted of one count of conspiracy to commit mail and wire fraud with regard to insurance claims, thirteen counts of mail fraud, and two counts of wire fraud on the insurance claims, and one count of conspiracy to engage in monetary transactions with insurance fraud proceeds in connection with the scheme to fraudulently inflate insurance claims on the losses suffered as a result of the 1998 New Year's Eve fire and four other fires that occurred at the factory. This fraudulent scheme was carried out by the Defendant through the use of bribes and false documents involving fires spanning a period from 1991 to 1999.

  Schlesinger was also convicted of one count of conspiracy, four counts of mail fraud, and three counts of engaging in monetary transactions with fraudulent proceeds resulting from a second scheme to defraud the creditors of the clothing manufacturing businesses that he controlled. This scheme involved the use of nominees and shell corporations to carry out what was, in effect, two self organized bankruptcies. The Defendant, who with his brother Jack Schlesinger, owned and controlled both companies involved, was able to transfer the assets and operations of a financially unstable company to an ostensibly new company. As a result, on two occasions the creditors of the businesses were deprived of their machinery and equipment collateral and left with judgment proof debtors.

  At the conclusion of the trial the Defendant moved for a judgment of acquittal pursuant to Rule 29 of the Federal Rules of Criminal Procedure on the counts of arson and use of fire to commit a felony. The Defendant contended that there was insufficient evidence at trial to support a conviction of arson and that the jury was improperly influenced by the evidence presented concerning the other counts. The Defendant also argued that an out of court statement allegedly related to the fire should have been excluded by the Court as inadmissible hearsay. At the conclusion of the Government's case, at the end of the entire case, and after the verdict the Court reserved decision on these Rule 29 motions. For the reasons set forth below, the motion is denied.

  I. Background

  Along with his brother Jack, the Defendant Nat Schlesinger owned and operated a place of business in the Williamsburg section of Brooklyn in a building that occupied an entire city block bordered by Wallabout Street, Kent Avenue, and Classon Avenue. The place of business was identified at various times as: (1) 48-76 Wallabout Street, Brooklyn, New York; (2) 50 Wallabout Street, Brooklyn, New York; (3) 750 Kent Avenue, Brooklyn, New York; and (4) 1 Classon Avenue, Brooklyn, New York ("the Premises"). The two brothers operated a clothing manufacturing company at this location beginning in the 1980's under the names Pous Apparel, Inc., Private Brands of Delaware, Inc., and Goodmark Industries, Inc. At the time of the 1998 New Year's Eve Fire, the business was operating under the name Goodmark Industries, Inc.

  The Premises was designed and equipped as a knit clothing factory. The three story building contained all the processes necessary to design and manufacture women's clothing. The first floor contained storage for the yarn as well as knitting, slicing, and framing machines. The second floor housed sewing and dying machines to wash, dye, and cut the fabric. The second floor also contained a design room and an office. That office was primarily occupied by Nat and Jack Schlesinger. The third floor was the shipping area where the clothes were stored, boxed, and eventually shipped out to the customers. The clothes were stored on the third floor by hanging them in aisles of racks or by storing them in boxes.

  On Thursday, December 31, 1998, at about 10:30 p.m., a fire broke out in the third floor shipping area. On that day the factory had closed at 5:00 pm for the New Year's Eve holiday. Normally the factory operated twenty four hours a day, six days a week, and was only closed on Friday nights and Saturdays for religious reasons. At the trial, the following witnesses testified concerning the events leading up to the fire: (1) Jack Schlesinger's son-in-law Israel Schwimmer, (2) the manager of the third floor shipping department Abraham Weiser, and (3) Jack Schlesinger's son Victor Schlesinger.

  Israel Schwimmer worked at Goodmark for several years. Schwimmer testified that on the day of or a day prior to the 1998 New Year's Eve fire he observed the Defendant and his son David removing about four or five bags of papers from the Defendant's file cabinets. Schwimmer testified that before he left on the day of the fire he stopped in to see Jack Schlesinger in the main office. While in the office he overheard a conversation between Abraham Weiser and the Defendant. Weiser told the defendant that he was going to lock up the third floor for the day. The Defendant told Weiser that he would take care of locking up the third floor that day. Israel Schwimmer left the building at about 5:00 pm that day and Jack and Nat Schlesinger remained at the factory in the second floor office.

  Abraham Weiser had worked for the Defendant for approximately twelve years until the clothing business closed in 2000. At the time of the fire, Abraham Weiser was the supervisor of the shipping department located on the third floor. He was responsible for packing the manufactured garments in boxes to send by UPS or in bags via their own truck. Weiser testified that no other employees worked with him in the shipping area in December 1998. One of his responsibilities was to secure the two entrances to the third-floor shipping area and turn off the lights by closing the circuit breaker each night before he left. In fact, Abrahm Weiser testified that it was his practice to secure both doors and turn off the circuit breaker at the end of the day and that the only other people with keys to that floor were Jack and Nat Schlesinger. However, Abraham Weiser did not have keys to the exterior entrances of the factory.

  Weiser testified that on December 31, 1998, he was the only person on the third floor during the day. He testified that he did not smoke; that smoking was not permitted in the building; and he did not observe anyone smoking on the third floor on the day of the fire. Weiser stated that he "wouldn't let them smoke" because he "can't take the smoke." Tr. at 616. Weiser further testified that there were no flammable liquids, thinners, dyes, linseed oils or the smell of smoke or any other unusual odor before he left on December 31, 1998. Weiser stated that occasionally a small cleaning gun was used on the third floor to remove stains from the finished garments. Weiser testified that on December 31, 1998, at about 4:00 p.m., he locked up the third floor and turned off the circuit breaker providing electricity to the third floor, locked both doors, and left the building.

  Victor Schlesinger testified that he had maintained an office in the Premises on the second floor. Victor stated that he would typically visit the factory and his father Jack daily at the end of the day. He stated that he did not have keys to the factory but that the security guard would let him in. On the day of the fire, Victor went to his father's office and found his father with Nat. While in the office, Victor told his father that he wanted to come back to the building later that evening to get some work done. The Defendant overheard this request and told Victor, "No, you are not coming back here." Tr. 1490. In response, Jack told Victor that he should listen to Nat and not return to the building. While this conversation was occurring, Victor observed Abraham Weiser enter the office and tell the Defendant and Jack that he was closing up the third floor. Victor testified that the Defendant told Weiser, "No, don't close up the third floor, I'm going to close it." Tr. 1491.

  At about 10:30 pm on December 31, 1998, the New York City Fire Department received reports of a fire at the Premises. Several fire companies were dispatched and confirmed that there was visible fire coming from the third floor of the factory. All of the entrances to the Premises were locked and secure when the fire department arrived. The fire department forced entry into the factory and ascended the stairs to the third floor. At the top of the stairs they found that the entrance to the third floor was also locked and had to break down that door. Inside the third floor there was a smokey fire that was difficult to find. One of the firefighters became lost while searching for the fire and sent out a "mayday." The firefighter was quickly rescued and was unharmed by the incident.

  The fire was eventually found to be located underneath a mezzanine that was constructed above the third floor. Under the mezzanine, clothes were hung from rows of racks. Above the mezzanine boxed goods were stored. Firefighters testified that in order to extinguish the fire they had to proceed through each of the rows of clothes under the mezzanine. Part of the mezzanine eventually collapsed due to the fire. The investigation that followed revealed that the main body of fire was located under the mezzanine and that the boxes stored above the mezzanine were not charred as much as the goods stored below.

  The New York City Fire Marshal was requested to go to the scene the night of the fire, but was unable to respond until the following Monday due to the New Year's holiday. On Monday, January 4, 1999, the Fire Marshal conducted a quick investigation and determined the cause of the fire to be "not ascertained." The Fire Marshal explained that due to lack of resources the investigator was unable to search under the partially collapsed mezzanine, and thus labeled the location of the fire as the third floor, origin unknown. After the Fire Marshal left the owners were allowed back inside the factory.

  Israel Schwimmer and Victor Schlesinger both testified with regard to the events that took place the Monday following the fire, which was the first day the owners were allowed back into the factory. Israel Schwimmer testified that he went to the main office where he saw the defendant with Jack Schlesinger, Milton Jacobi, Abraham Weiser, and the Defendant's son, Sam Schlesinger. There Schwimmer overheard a conversation between Nat Schlesinger and his son Sam Schlesinger, who was an insurance claims adjuster. The Defendant told him to "put together a nice claim" and to "put everything, new fabric, old fabric, whatever he could put in the claim." Tr. at 508-09. Schwimmer also recalled a conversation between the Defendant and his son David. This testimony was admitted without objection:
Q And what was that conversation?
A A week after the fire they were discussing the fire, the fire was good. A job well done.
Q Who said a job well done?
A David.
Q Who did he say that to?
A His father, Nat. Q What did the defendant, Nat Schlesinger, say in response?
A We will wait for the claim that is going to go through.
Q Where were you when they were having this conversation?
A I was in the hallway out of the office.
Q Where was the defendant and his son, David Schlesinger?
A In the office.
Tr. at 510.

  Victor Schlesinger testified that he observed substantial damage in the building and described it as a "whole mess." Tr. 507, 1493. When Victor went to see his father Jack in the second floor office that day, he found him with the Defendant. The Defendant was telling Jack Schlesinger to go slow in starting up the business because adjusters needed to come down and assess the damage. While they were in the office, the Defendant's son David Schlesinger entered the room and stated "job well done." Tr. 1500. Victor testified that the statement was made with bravado as a "happy thing," despite the fact that he was standing in the midst of ...


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