Ex-NY bank director gets prison in $60M stock scam

AP News
Posted: Apr 09, 2012 7:53 PM
Ex-NY bank director gets prison in $60M stock scam

A former bank director who pleaded guilty to grand larceny in a $60 million stock fraud scheme and became a critical witness against a former colleague was sentenced Monday to up to 4 1/2 years in prison.

John Mazzuto, wearing a rumpled beige sweater, apologized for his crimes while he was CEO of Industrial Enterprises of America Inc.

"I committed a crime," he said. "... It affected everybody around me. Family, friends, colleagues, all that's been destroyed, and that's hard."

Mazzuto, 62, was accused of illegally giving stocks to friends and relatives, lying to investors and pumping up the company's stock prices. He pleaded guilty last year to grand larceny and scheming to defraud and was sentenced to serve between 1 1/2 years and 4 1/2 years in prison.

He would have faced more time had he been convicted at a trial, but instead he cooperated with authorities and testified against former colleague James Margulies, a Cleveland attorney who was the company's finance chief.

Mazzuto testified for nearly a week during Margulies' trial, a fact that did not go unnoticed by prosecutors Monday.

"Mr. Mazzuto was an exemplary cooperator and witness," Manhattan Assistant District Attorney Garrett Lynch said.

He said Mazzuto met with the office more than 100 times to review documents and testified for about a week.

Margulies was convicted and sentenced to seven to 21 years in prison. He called his involvement with the company the worst choice of his life and portrayed himself as the inexperienced dupe of Mazzuto, a sophisticated businessman.

The judge said Mazzuto's crimes didn't negate Margulies' role in a scheme that netted him $7 million to bankroll private jet travel, expensive homes and other plums.

Mazzuto garnered from the stock scheme more than $15 million, money that bought him a $3 million Southampton house he's since sold and his $2.5 million Palm Beach Gardens, Fla., home, prosecutors said.

He also endowed a baseball coaching post and underwrote a practice field for Yale University, his alma mater, which praised his "incredible generosity" in a 2009 item on the team's website. Prosecutors said he gave the university $1.5 million in Industrial Enterprises stock.

A contrite Mazzuto said at sentencing, "I have to live with this for the rest of my life."

He had been out on bail since his guilty plea, and during that time he was arrested twice for drunken driving in Florida. Those cases are open, and he faces additional jail time there after he serves his time in New York.

Prosecutors and defense attorney Richard Asche said Mazzuto completed a treatment program and is attending Alcoholics Anonymous meetings daily.

Mazzuto said he intends to spend the rest of his life helping others.

He filed for personal bankruptcy in 2002 and didn't emerge for seven years, prosecutors said.

The company, which through subsidiaries sells automotive chemical products, filed for bankruptcy in 2009 and remains in business. The new management has filed court papers seeking to get money back from more than 100 people and entities it says got stock or otherwise were involved in the scheme.