By Larry Gordon
As you may be aware from previous articles on the subject, Aaron Fischman of Woodmere was indicted by the New York State attorney general and charged with stealing over $22 million from unassuming investors. The “investments” were supposed to go into a company he called Cardis. A majority of the investors were from the Five Towns, Far Rockaway, and West Hempstead, and included a local yeshiva.
In the interest of full disclosure, I—together with other members of my family and many of my friends—am a victim of what I will refer to as the Cardis scam.
Pursuant to a money judgment against Mr. Fischman, the banking records of his attorney Lawrence Katz were successfully procured by subpoenas.
Now, as a result of the subpoena process, it has been learned through a forensic analysis that over $31 million intended as direct investment into Cardis was diverted. It is believed that Mr. Fischman raised over $60,000,000, including money from offshore investors.
There were dozens of people, including prominent members of the Five Towns community, who lost many millions of dollars in the Cardis scheme. It is believed that Fischman, as well as a web of presumably unwitting associates, was aggressive and unrelenting in his pursuit of money.
The investors believed their funds were being used to further the Cardis technology and build an innovative startup company. Instead, Fischman’s self-serving conduct started the startup of much needed funds in order to support his lifestyle.
The forensic report shows that tens of millions of dollars were moved from the attorney escrow account to various people’s personal accounts with no apparent Cardis purpose. I spoke with a young man who entrusted significant sums of cash to Mr. Fischman, to another who entrusted his hard-earned life savings, and to yet another who “invested” his wedding money.
Sources tell me Mr. Katz is currently the subject of multiple complaints before the New York State Bar with respect to his handling of millions of dollars of escrow account funds. Since the issuance in the past year of a forensic accounting report discovering Mr. Katz’s redirecting of investor money from his escrow accounts, many of the investors have filed complaints with the Nassau County district attorney’s office and the attorney general’s office. The forensic accountant’s report documents that over $9 million alone entrusted to Mr. Katz for investment in Cardis was instead sent by Mr. Katz into the account of Mr. Fischman’s personal LLC—Choshen Israel—and an additional $5 million was sent directly to his wife Nina’s account. Interestingly, there is no evidence that Nina Fischman ever worked for Cardis during this period.
Apparently, investigating and prosecuting offenses in New York State can fall under the rubric of at least one of three agencies. The choices are generally between the federal government, represented by the U.S. attorney, the State of New York by the New York State attorney general, and locally by the Nassau County district attorney’s office.
As stated above, the Fischman-Katz-Cardis civil fraud case, filed in December 2018, is being dealt with by NYS Attorney General Letitia James. In that case, a civil action was filed against Mr. Fischman, Mr. Katz, and others, ostensibly to recover investor money. Subsequently, the 22-count criminal indictment was filed only against Aaron Fischman in September 2020, over a year ago. The indictment in part stated: “Aaron Fischman was able to fleece investors out of tens of millions of dollars for his own personal benefit. These victims believed they were investing in technology to help businesses mitigate against costly charges from electronic transactions, but instead they fell victim to Fischman’s massive scam.”
As stated in the September 3, 2020 press release issued by NY Attorney General Letitia James: “We will always hold white collar criminals accountable for their greed and deception that seek to illegally profit off others.” Upon filing the criminal case, the AG agreed to hold off on the civil case, presumably until the criminal case is resolved. Mr. Katz has not been and may never be criminally charged by the authorities despite his facilitating Mr. Fischman’s activities. One investor told me that his dad used to call it “legal larceny” when lawyers get away with bad conduct.
Unfortunately, over the past year, possibly due to COVID or the confidential manner of such proceedings, there has been little if any reported movement from the AG’s office on the criminal case, although I understand that the case has finally been set to resume on February 28 in Mineola, over the objections of Fischman’s new counsel, Claiborne R. Hane. There have been meetings here in the Five Towns with investors who believe they were defrauded about how to proceed, especially in view of the lack of perceived forward movement by the AG’s office to criminally indict any of the parties named in the civil action.
Assistant District Attorney Janet Alpert responded to my letter to the DA and she spent a half-hour on the phone with me reviewing the details and the nuances of the case. She was familiar with many details of the case because, as stated above, her office has received a fair number of complaints about Fischman’s and Katz’s activities, with requests that the DA get involved in the case, particularly with the newly revealed evidence of misdirection of attorney trust account funds.
ADA Alpert explained to me that at this point the case is being handled by the AG’s office and that the DA does not get involved in another agency’s cases so that efforts are not duplicated and they do not fall over one another. However, as stated above, there is no criminal action pending anywhere against Mr. Katz, despite the millions of dollars he is alleged to have misdirected from their intended purpose.
Still, those who have written to the DA have maintained that there have been enough alleged crimes committed by these folks to keep law enforcement busy and cooperating in both enforcement agencies. The catch-22 is that despite the obvious injustice to the investors, the county DA will not step on another agency’s toes even though it is a separate matter to hold an attorney responsible for facilitating a crime.
This is what the attorney general complaint says in part: “The OAG alleges that investors in Cardis were instructed by employees of the company to wire money or write checks to multiple Interest on Lawyer Account (IOLA) accounts. Between January 2013 and December 2016, over $22 million of investor money flowed into four IOLA accounts and one business checking account in the name of Cardis USA. Of this $22 million, prosecutors allege that more than $3 million was diverted for the benefit of Fischman and his family. Some examples of these personal diversions include more than $1.4 million diverted to bank accounts in the name of Fischman and his wife, more than $285,000 diverted to bank accounts in the names of Fischman’s relatives, more than $900,000 was diverted to select charities of Fischman’s choosing, and more than $400,000 paid to American Express in connection with personal charges on American Express cards in the names of Fischman and his wife.”
As stated above, newly developed and discovered evidence has been revealed in a forensic accounting report that traces over $14,000,000 diverted directly to Fischman’s wholly owned LLC and to his wife, Nina.
Also as stated above and to reiterate, Mr. Fischman’s actions starved Cardis of much-needed capital for the startup to bring its groundbreaking concept to fruition. To raise funds, Mr. Fischman preyed upon investors’ hopes and dreams, then through an attorney escrow account and with the attorney’s cooperation diverted the funds intended for Cardis for his personal use. When Cardis failed, he blamed others and the “startup environment” as an excuse to cover his misdeeds.
Most of the more than dozens of investors I had the opportunity to speak with over the last two years are resigned to the fact that their money will never be recovered in full. Sadly, that is how the system works. Most of the people with whom I have spoken about this take umbrage that the misappropriation of money by these folks may still be ongoing. And the primary target today—just as it was previously—is Orthodox Jews or those connected through affiliations with the Orthodox universe. A prominent criminal attorney described the phenomenon as “affinity investing.” It occurs in the ethnic communities and is based on trusting your fellow community member in lieu of thorough due diligence. Mr. Fischman was a master of playing the relationship angle. A mere check into Mr. Fischman’s background would have revealed a FINRA violation barring Mr. Fischman from the securities industry. (BrokerCheck Report, CRD # 1391938)
This difficult reality was reiterated to me just last week as I was contacted by a former Long Island resident who gave Fischman $25,000 for Cardis and like everyone else received nothing but the opportunity to take a tax loss. When he was informed and advised to file a claim with the Nassau County DA and write to the NYS attorney general, he said he was not sure he could do that because it might be lashon ha’ra!
When I heard that I thanked him for clarifying for me why people like Aaron Fischman specifically target frum Jews. It is exactly this calculation that enables these scams in our community, since G-d-fearing people like this young man will be reluctant to cooperate with the authorities investigating brazen illegal activities by co-religionists. I reminded him that it is his well-intentioned yet misplaced thinking that encourages scam artists to target our people.
Right now, as I understand it, Mr. Katz’s alleged misuse of his escrow accounts is being investigated. If an abuse of ethics is determined, the Nassau County DA or the AG will kindly, or shall I say hopefully, take action to protect our community. That is the procedure as I understand it and as explained to me by the Nassau County Assistant DA. I believe well over $60 million is gone as a result of these shenanigans. Hopefully, it is not too late to put an end to such chillul Hashem. It’s a sad state of affairs that can and should be stopped.