Add me to mailing list    |           |      Search


NewsDay Gets “Inside” on Why FBI Raided R.W. Professional Leasing
---“...just a salesman,” claims defense attorney for Barry Drayer.

(See coda at end of news story)

Feds: Escrow scheme busted

Bank of New York branch in Island Park helped business customer fraudulently obtain loans using sham agreements, government says



November 10, 2005

Escrow accounts are supposed to be guarantees that debtors will pay what they owe. But at a Bank of New York branch in Island Park, they were anything but, according to federal prosecutors.

As part of a nonprosecution agreement with the government, Bank of New York has laid bare the details of a more than decade-long scheme by some managers and employees of its Island Park branch to help a business customer fraudulently obtain loans by setting up what the government called "sham escrow agreements."

In bank escrow agreements, a borrower deposits money at the bank to be used, if necessary, to ensure repayment of a loan or other contract.

Court papers filed by Bank of New York in connection with an agreement announced Tuesday show that at least 62 banks were taken in by the Island Park scheme. In all, the banks lent at least $92 million to the customer, R.W. Professional Leasing Services Corp., also based in Island Park, of which at least $18 million was never repaid, according to court exhibits.

The banks made the loans believing they were backed by escrow agreements. The borrowed money supposedly was to be used to help R.W. Professional Leasing buy medical equipment and lease it to customers.

In the court filings, Bank of New York said that its policies didn't allow escrow accounts to be set up at a branch, and that no escrow accounts had actually been established.

In addition to the Island Park criminal investigation, Bank of New York settled an investigation Tuesday by Southern District federal prosecutors into fraud and money laundering involving more than $7billion from Russia.

As part of the overall settlement of both cases, Bank of New York will forfeit $26 million to the government, including $12 million to the Eastern District, and pay another $12 million to the banks victimized in the Island Park scheme. It said in court papers that it also will pay about $5.9million to settle bank lawsuits resulting from the scheme.

The bank said Tuesday that it was cooperating with the government and issued a statement by its chairman, Thomas Renyi, saying that it was "taking the right steps ... to ensure sound business practices." It declined to comment further yesterday. Stuart Abrams, an attorney for R. W. Professional Leasing, didn't immediately return a call asking for comment.

According to a court statement filed Tuesday by Bank of New York, $24 million was transferred by wire from the leasing company's Bank of New York account to Medpro, a Huntington Beach, Calif., "shell company that rendered no services" to R.W. Professional Leasing.

After a number of banks complained about not being repaid, federal agents raided the leasing company's Island Park office in June 2002 and arrested a number of its executives. In March 2004, five company executives were indicted in the Eastern District, along with a former Bank of New York branch manager in Island Park and the owner of a California firm, Carefree Financial Services, that allegedly recruited medical providers to obtain financing for equipment through R.W. According to the indictment, R.W. Professional Leasing had diverted at least $28 million in proceeds from the bank loans to the firm's owners.

The former branch manager, Myrna Katz of Long Beach, pleaded guilty to making false statements and will be sentenced in January. Four R.W. principals - Rochelle Besser, her brothers Adam and Roger Drayer, all also of Long Beach, and Susan Cottrell, of Mansfield, Mass. - also have pleaded guilty. Another principal, Barry Drayer of Wellesley, Mass., is scheduled to be tried in January before U.S. District Judge Arthur Spatt, along with Stephen Barker of Lake Forest, Calif., the owner of Carefree.

Katz's attorney, John Wallenstein, didn't immediately respond to a request for comment. Steve Zissou, one of Barry Drayer's attorneys, said his client is "innocent, and we're going to show that at the trial ... Barry was a salesman."

Terrence Buckley, Stephen Barker's attorney, said his client is "completely innocent of any wrongdoing and we expect to prove that when we have our day in court."



(Editor: There also is a $20 million suit filed by American Express from its portfolio it purchased from Thomas J. Depping's Sierra Cities/First Sierra and $10 million plus from Crawford and Sons which handles pension plans for teachers and is publicly traded, plus a group of community banks.

The person allegedly behind the operation, Barry Drayer, has reportedly filed personal and business bankruptcy. An inside source says that everyone but Barry Drayer and Steve Barker had taken a plea bargain deal. Supposedly even Barry Drayer's sister, Rochelle Besser, the "dummy" president of the company, has agreed to testify against him. Insiders keep saying that the delay is his old trick of stalling, waiting for witnesses to change, prosecutors to move on, and everyone to just get too tired to pursue. The defense that Barry was just a “salesman,” has Al Crawford, Charlie Lester, and perhaps even Tom Depping laughing, perhaps even a belly laugh. Of course, it is true he reportedly “sold a bill of goods” to Old Kent Bank, CIT, Sierra Cities, Crawford and Sons, among many regional and local banks. But just a “salesman???”

Note: It was Greg McIntosh, now as part of American Express Business Finance, with new authority and change in responsibility, who caught payments being made on leases that he found out that had been “paid out” to R.W. Professional, and other discrepancies. He brought it to the “new management” attention. The industry controversy centers on whether Tom Depping traded a release of escrow funds and a personal guarantee from Barry Drayer for a $1 million policy while under the management at Sierra Cities. Perhaps in retrospect, it may have been a solid business decision, but it also brings up the question about how much did Depping know about Drayer, who employees reported would visit and have long lunches and dinners with Depping. We asked questions at the time, but never were able to obtain a comment from either party. Leasing News wrote a series on this:

For current stories , please go to:)