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Many Lawyers Caught Up In Gifting Tables Case
The Connecticut Law Tribune
Shelley P. Marcus, a nominee for a Superior Court judgeship, endured tough questioning last week over her role as an attorney for 21 "gifting table" clients who paid her and the Marcus Law Firm more than $50,000 for civil representation.
But she is hardly the only member of the legal community who turned up in the federal probe of the allegedly criminal scheme.
While reports initially focused on well-to-do suburban homemakers, it's now clear that a Hamden lawyer, the office manager of a New Haven law firm, the wife of a former inhouse counsel, a former Tyler, Alcorn & Cooper attorney, and other lawyers either were participants or along the way offered encouraging legal advice to participants.
Last week, the prosecution of gifting table participants Jill Platt and Donna Bello, both of Guilford, continued in U.S. District Court in Hartford before U.S. District Judge Alvin Thompson. Platt is represented by Johathan Einhorn, of New Haven, and Bello by Norman Pattis, of Bethany. The women are charged with five counts of wire fraud and tax evasion as the alleged leaders of the enterprise, which prosecutors say took in some $5 million beginning in 2008.
The gifting tables works roughly like this: New members pay $5,000 to get in on the bottom row of the table, known as the "appetizer" level. As new members join, their name moves up the table. When they get to the top, or the "dessert" level, they receive a $40,000 payout.
In 2009, when then-Attorney General Richard Blumenthal began investigating the tables, Platt and Bello were told that potential liability came from a statute known as the contingent transactions act, which is typically enforced by the Department of Consumer Protection. The statute says it's "unlawful" to offer a rebate or special price based on the customer bringing in other customers or sales.
In this case, the potential legal penalties rose over time, for a small few at the top.
The government's first witness last week was Joy Bershtein, a gifting table participant and a lawyer at Hamden's Bershtein Law Center. She said the group met about 20 times a year, on Monday evenings, with each woman bringing a dish or wine.
Under cross-examination, Bershtein said she didn't advertise the fact that she was a lawyer. "I was myself. If people asked, I told them," Berstein testified.
Einhorn asked about another gifting tables participant, Cheryl Maturo, the office manager at New Haven's Garrison, Levin-Epstein, Chimes and Richardson. "People knew that Cheryl worked for a law firm," Bershtein acknowledged.
Next to the stand came Shelley Marcus and her father, Ed Marcus, a former state Democratic Party chairman and also an attorney. Shelley Marcus said she was hired by participants to give advice about a pending investigation by then-Attorney General Richard Blumenthal.
Assistant U.S. Attorney Douglas Morabito introduced the 34-page manual for the gifting tables as an exhibit, and questioned Shelley Marcus about it. The photocopied 2008 manual proclaims the program is safe and legal, and relied on an Internal Revenue Service income tax exemption for gifts.
Shelley Marcus testified that she had doubts about the legality from the beginning. "It looked like a pyramid scheme," she told the court. How did her clients respond? "No, no, no, no, we've been told by many lawyers and accountants that it's perfectly legal."
Ed Marcus recalled that when Platt came to the firm for advice in 2009, she had been participating in the gifting tables programs for three years. "She wasn't just a little bit pregnant. She'd had triplets," Marcus said. (David Doyle, a lawyer in the Marcus firm, said that everything Platt and Bello are being charged with had already transpired when they came seeking advice in late 2009).
Both Shelley Marcus and her father said they were unable to get names of the lawyers who advised Platt and Bello that the gifting tables program was legal.
At Bello's suggestion, Shelley Marcus said she spoke with Elena Cahill, a former Tyler, Cooper & Alcorn lawyer, yoga teacher and business school instructor at the University of Bridgeport. Cahill suggested a low-level solution inviting Blumenthal to have a meeting to see if the investigation could be negotiated to a successful conclusion.
Both Shelley Marcus and later her father said they considered this a bad approach. "I thought it was inappropriate," testified Edward Marcus. He suggested instead that his clients "let it play out in its normal course."
The Marcus firm lawyers were preparing to fight the matter on a slightly higher level as a civil enforcement issue.
Between November and December of 2009, Shelley Marcus did some legal research into the contingent transactions statute, sometimes called the pyramid statute. She said she found only one case that dealt with the statute, and was researching the matter as a civil offense. She also thought about a possible defense. The contingent transactions act, she said, focused on sales of merchandise, services, rights or privileges.
Arguably, the gifting table activity was not covered by this definition, Marcus said.
But after signing on as a client of the Marcus Law Firm for a $5,000 retainer, Bello later wrote to request a refund. She said it could be a conflict of interest for the firm to represent 20-plus gifting table defendants, because some could have competing interests as the case moved forward. The firm returned $2,700.
Platt, too, instructed the Marcuses that their firm no longer represented her, and asked for the return of her files. By this point, Einhorn was representing Platt.
Then, last fall, other gifting tables clients of the Marcus Law Firm entered into a settlement with the Attorney General's Office. Last October, George Jepsen and Consumer Protection Commissioner William M. Rubenstein announced that five gifting table participants will forfeit a total of $202,500 through civil voluntary compliance agreements.
By this point, the matter had reached a third level federal criminal prosecution.
A federal grand jury issued indictments for wire fraud and tax evasion last May against Bello, Platt and a third woman, Bettejane Hopkins of Essex, who entered a guilty plea to a criminal tax charge in December. She faces sentencing on March 22 before Thompson, who could impose up to five years potential jail time.
Connecticut's criminal defense lawyers are representing a large number of witnesses and people on the periphery of the investigation. One attorney, who would comment only on a not-for-attribution basis, said he considered the case small potatoes. "There's no blood, no sex, nobody injured and this is the same [U.S. Attorney's Office] that was going to go after major financial crimes and hedge fund abuses. Instead they go after some tea party in Madison."
Lawyers at all levels in the case are trying to decide what to make of this. One is the husband of Charlotte Meyer, of Old Lyme, a woman who took the stand Feb. 8 as a witness for the government. Meyer acknowledged that she had received $40,000 from one table and $30,000 from a second one. She spent the money on things like "my granddaughter's orthodontia" and household repairs. Under questioning, she said her husband is a lawyer and an accountant.
In the back of the room, Albert J. Meyer shook his head, as if in disagreement.
In a subsequent conversation, Meyer told the Law Tribune that he's a former inhouse counsel for a supermarket chain, but isn't a Connecticut lawyer. He currently works as an auditor of legal billings for Chubb Insurance in Simsbury. "I had no idea my wife was involved in this. I didn't know until after Blumenthal made his initial investigation into this, and the whole thing stopped," he said.
Albert Meyer found the prosecution surprising. "It amazes me that the government is spending this much time and money on this thing," he said.
Meyer said he had only recently seen the manual explaining gifting tables, "about how you train people and how everybody loves everybody. [It says] these were gifts and that's it."
He said he didn't know how he would have advised his wife, if he'd known about this from the beginning. "I'm not a tax lawyer. I send the taxes out an accountant which I am not."