NEW YORK COUNTY, 17 February 2004 - Manhattan District Attorney Robert M. Morgenthau announced today that MICHAEL J. SHERMAN and his associate, OLEG OSTROFSKY, and his company MJS ASSOCIATES, have pleaded guilty for their roles in the theft of $27.7 million from distressed businesses that were either being liquidated in bankruptcy or otherwise restructured. SHERMAN and OSTROFSKY will be sentenced to state prison terms and pay millions in penalties.

MICHAEL J. SHERMAN has pleaded guilty to one count of Criminal Possession of Stolen Property in the First Degree and three counts of Falsifying Business Records. MJS ASSOCIATES has pleaded guilty to one count of Criminal Possession of Stolen Property in the First Degree. OLEG OSTROFSKY has pleaded guilty to one count of Attempted Criminal Possession of Stolen Property in the First Degree.
Under the terms of his plea agreement, SHERMAN will be sentenced on June 30, 2004 to 2 ½ - 7 ½ years, and his company will pay $6 million to New York City and the costs of prosecution. Under the terms of his plea agreement, OSTROFSKY will be sentenced on June 30, 2004 to 1 - 3 years in prison.

The pleas are the result of a three-and-one-half year investigation by the Special Prosecutions Bureau of the District Attorney Office and the District Attorney's Office (NYPD) Detective Squad. In October 2002, nine people and four companies were indicted for massive fraud and thefts from distressed companies facing financial hardship, restructuring and bankruptcy. The indictment charged that the defendants systematically looted these companies by taking assets that should have gone to the businesses or to their creditors.

In court Friday, SHERMAN admitted that from on or about July 15, 1996 through March 26, 1999, he was the owner and President of MJS ASSOCIATES, and OLEG OSTROFSKY was the Vice-President. During that period, SHERMAN further stated he and MJS Associates, along with a company called Prince Marketing & Management Group, Ltd., which was owned and operated by co-defendant Frank Carone, Sr. a/k/a Frank Bari, were hired by the Bank of New York to manage and sell off the assets of a group of restaurants, formerly owned and operated by JBA Associates. In return for his participation in the venture, MJS Associates and SHERMAN were to receive one-half of the fees Prince earned. SHERMAN admitted that the remainder of the assets recovered were to be turned over to the Bank of New York. Between July 1996 and December 1998, Prince fraudulently withheld more than one million dollars from the Bank of New York with SHERMAN's assistance. SHERMAN also knew that revenue and expense statements submitted to the Bank of New York on March 3, 1998, September 4, 1998 and November 12, 1998 were intended to defraud the bank.

OLEG OSTROFSKY said in court Friday that he worked with SHERMAN between July 1996 and December 1998 and during that time he helped SHERMAN and CARONE disguise the amount of the assets they recovered from bankrupt companies from the Bank of New York and helped them plot to keep the money.

In November 2003, FRANK CARONE pleaded guilty to Grand Larceny in the First Degree, Grand Larceny in the Second Degree and Grand Larceny in the Third Degree. He will be sentenced on March 15, 2004 to 2-6 years in state prison. He and his companies PRINCE MARKETING & MANAGEMENT GROUP and CONSOLIDATED AUCTIONEERS & LIQUIDATORS, INC will pay $2 million to New York State, $2 million to New York City and the cost of prosecution. The other defendants RICHARD CIAPPINA, ANTON MAYER, JEFFREY KUNKLE, FRANK CARONE JR. and MICHAEL YANCOFSKI have also pleaded guilty.

The case was prosecuted by Assistant District Attorneys Rahul Kale and Louis O'Neill under the supervision of Special Prosecutions Bureau Chief Leroy Frazer and Thomas Wornom, Deputy Bureau Chief. David Ostrager and Michael Vecchio assisted in the case under the supervision of Financial Crimes Bureau Chief Frank Puma.

The District Attorney thanked NYPD Commissioner Raymond Kelly and Capt. Sean Crowley of the District Attorney's Office (NYPD) Detective Squad, as well as the members of the Squad who assisted in the investigation.