Sholam Weiss (also spelled Shalom Weiss; born April 1, 1954) is a former American businessman, currently incarcerated at FCI Otisville, NY.
On February 15, 2000, the Middle District Court of Florida (Orlando) sentenced Weiss, to a term of imprisonment of 845 years, for racketeering, wire fraud, and money laundering, and a restitution of $125,016,656 (amount of restitution is Joint and several with other co defendants and does not take into account any liquidated assets recovered by the receivers, especially money collected from the discounted mortgages bought by Weiss), and a fine of $123,399,910, in connection to the collapse of National Heritage Life Insurance Company.
On July 28, 2016, the government acknowledged by "notice to the court" that Weiss' $125 million restitution had been paid in full.
The National Heritage financial collapse was believed to be the largest "insurance failure" (not financial failure or crime ) in history at the time. The sentence imposed on Weiss is believed to be the longest known to have ever been imposed for a white-collar crime. It is also believed to be the longest disparity criminal sentence (other than life sentences) ever imposed at the federal level in American history. 15 business executives and lawyers from Arizona, Texas, Illinois and New York have either pleaded guilty or been convicted in the fraud case. Some were the originators of the crime that pleaded guilty or received immunity, they admitted to forging documents and lying. In exchange for their testimony against co-defendants they would receive lesser counts and a reduction of sentence. None of the co-defendants ended up receiving more than 13 years imprisonment and some got no prison time at all. In Mr. Weiss's case, he apparently received an additional 830 year for not cooperating with the government.
Weiss fled the country at the end of his trial and was a fugitive for one year, and was subsequently extradited from Austria.
Video Sholam Weiss
Early life and background
Weiss grew up in Borough Park, Brooklyn, where his father ran a fruit stand. Born and raised Jewish, he was educated in a yeshiva, where he spoke Yiddish, and received the equivalent of a high school education. He did not learn English until he was in his late teens. He began doing construction work as a young man, and established Windsor Plumbing Supply in 1974, eventually making $20 million a year.
After Windsor Plumbing declared bankruptcy in 1989, Weiss became a bankruptcy specialist. Through that business he met New York attorney Michael D. Blutrich, who was "outside counsel" to National Heritage Life Insurance Company, and his partner Lyle K. Pfeffer, also connected to National Heritage, through whom he became involved with National Heritage.
Weiss was indicted on mail fraud charges, for which he served eight months in prison.
Maps Sholam Weiss
National Heritage Life Insurance
In late 1989, National Heritage reported an operating loss and 27% reduction of capital from a decline of sales, and in 1990 insurance regulators threatened to shut down the company if it did not raise additional capital. A group of investors offered $4 million to satisfy regulators, in exchange for a controlling interest in National Heritage. The group provided a $4 million check, but once in control of National Heritage, transferred $3 million from National Heritage to help cover the check. This began a long series of schemes in which millions were stolen from National Heritage by the group of investors. Bad investments further depleted National Heritage capital.
In 1993, the group decided to cover up all the missing money by a "mortgage-backed bond scheme". Weiss (not part of the original investment group) was contracted to purchase discounted mortgages with National Heritage funds, which were put into a mortgage-backed bond. It was believed that the discounted mortgages could be rehabilitated, and thus make a profit. The bond was fraudulently placed on National Heritage books with inflated values.
In 1994, the Delaware Insurance Department did a full examination of the company and placed it in receivership. Three corporations and 13 individuals were convicted, including Weiss.
The FBI Section Chief for Financial Crimes stated in 2001 that National Heritage was the largest insurance company failure in U.S. history, resulting $450 million of losses. A 2000 New York Times article stated that Weiss was part of "an immense fraud scheme that siphoned $450 million" from the insurance company. However, Best's Review, the insurance industry monthly magazine, explains that it had $420 million in liabilities to its policyholders, which were covered by state guarantee funds, and were due to a mixture of theft and bad investments.
The $450 (or $420) million figure cited above in media reports and the FBI is the "gross" amount of National Heritage liabilities covered by state guarantee funds, before recovery of National Heritage assets. According to an order by the Delaware Court of Chancery granting liquidation, at the time National Heritage went into receivership in 1994, it had $214 million in liabilities above its assets. The Receiver noted in court submissions (exhibits A-C) that National Heritage recovered $235 million, and reimbursed state guarantee funds $229 million. The policyholders of National Heritage were fully reimbursed by 2000.
Conviction and sentence to 845 years
At Weiss's sentencing on the National Heritage charges in February 2000, Judge Patricia C. Fawsett sentenced him to 845 years in prison, fined him $123.4 million and ordered him to pay $125 million in restitution (which is Joint and severally with other co defendant, and has fully been paid). Under federal sentencing guidelines, none of the charges against Weiss carried a maximum of life in prison. Fawsett arrived at the extreme 845-year sentence by "stacking" the sentences of five and 20 years for each count, and running them together consecutively. She commented that because of the "magnitude and repeated fraudulent acts", as well as his "disrespect for the law," he should be permanently removed from society. A federal prosecutor claimed that Weiss induced people who would have otherwise never defrauded anyone into taking part in the scheme. Weiss' defense attorney argued that the crime was about money not murder, and the lengthy sentence did not fit the crime. Some legal experts considered the extreme sentence unconstitutional because it effectively imposed a life sentence.
Among the 12 other people convicted, defendants Michael Blutrich and Lyle Pfeffer, who cooperated with the government for a reduced sentences, received sentences of 200 months (16 years, 8 months) and then reduced again to 156 months (13 years) and served their terms in the Federal Witness Protection Program. All (living) co-defendants have been released.
Sentencing comparison to codefendants
*All Restitution are Joint and severally
Extradition and support from Austria
Weiss surrendered to Austrian authorities in the Fall of 2000, and was extradited in 2002. The extradition was challenged at the United Nations Human Rights Committee, and the European Court of Human Rights, both of which noted that the United States provided assurances that Weiss would receive a full appeal and a full re-sentencing. The extradition was also raised in the Parliamentary Assembly of the Council of Europe, also noting the U.S. assurances.
According to a letter from the Austrian Chancellor to President Trump, under Austrian law, Weiss would have received no more than a 10-year sentence, and Austria granted extradition on assurances from the United States that Weiss would receive a full appeal and full re-sentencing. Austria has requested Presidents Bush, Obama and Trump for a commutation of sentence to time served.
Incarceration and subsequent proceedings
Weiss challenged his incarceration in federal court, arguing that the United States violated its extradition treaty with Austria by not providing a full re-sentencing and a full appeal (denied under the fugitive disentitlement doctrine), which United States assured Austria to effectuate the extradition. In 2009, a judge restored his right of appeal to satisfy the treaty obligation, and took ten years off his sentence. Weiss argued that the United States was also required to provide a full re-sentencing, but was denied for procedural reasons, with the court commenting that it was up to the Executive branch (President) to satisfy the international obligation by a commutation of sentence.
Weiss is currently arguing that his satisfaction of restitution ($125 million) from recoveries of mortgages he purchased and transferred to National Heritage, shows that he was not personal responsible for losses to National Heritage, and that under current sentencing guidelines, he would only receive a 37-month sentence.
Weiss is currently serving his sentence at the medium security prison, FCI Otisville, in Otisville, New York. His projected release date is November 23, 2754.
References
External links
- Official website
- National Heritage Life Insurance Co website
- Freedom For Sholam Weiss Website
- Best's Review article
Source of article : Wikipedia
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