Subversion By Organized Crime And Other Unscrupulous Elements of the Check Cashing Industry
State of New Jersey Commission of Investigation 1988 Report
PUBLIC HEARING-FIRST DAY (April 26, 1988) – A Bust-Out Victim of the Check Cashing Process

The Looted "Partnership"

A bust-out is a scheme customarily employed by organized crime to deplete the assets of a legit­imate business, thus forcing it into bankruptcy. A victim of such a corporate looting, John T. Decina of Brick Town, recalled his experience at the Com­mission's hearing. Married and father of two chil­dren, Decina told how an organized crime-linked "partner" during 1985-86 utilized two check cashers to funnel money out of his partnership, ultimately leaving him with a failed company and $250,000 in debt.

Decina's troubles began after he met a John Frka (actually John Zagorianakos, who was subsequently sought for questioning in a mob murder), who persuaded him to invest in a com­pany, Horizon Container, which Frka created to pick up and deliver container cargo from North Jersey docks. The possibility of a joint venture was being discussed in May, 1985, when Decina accompanied Frka to Linden to inspect a ware­housing facility at 2200 Urbanowitz Avenue for another Frka company, Horizon Distribution Center.

Frka soon after signed a lease for a warehouse belonging to Herbert Siegel, who operated the North Avenue East Check Cashing business in Elizabeth and who subsequently was convicted of currency violations as a check casher.

In July, 1985, Frka informed Decina that he was being made a half-owner of Horizon Distribution, although the latter never saw the legal papers. About this time, Decina quit his job with a Hackensack shipping concern so he could work full time for Horizon. By this time, also, Decina had invested $10,000 in Horizon, half of which he ob­tained from his parents. By September he and his wife and Frka and a woman Frka "represented to be his wife" had co-signed a five-year bank loan.

The Bust-Out Scheme Unfolds

In December, Frka told Decina he was now a 50 percent owner in both of the Horizon com­panies, and that an accountant Frka enlisted would draw up the incorporation papers. Frka's alleged wife acted as the bookkeeper while Frka stayed at the office and Decina spent 80 percent of his time on the road soliciting business.

Although both Decina and Frka were authorized to sign checks for a bank account maintained for Horizon Distribution, only Frka could sign checks for an account at a different bank that was opened for Horizon Container.

Despite having checking accounts in two banks, Frka handled most of the companies' checking transactions at the North Avenue East check cashing service owned by his warehouse landlord, Herb Siegel. This was the peculiar financial ar­rangement that became Frka's mechanism for de­stroying Decina.

The Payroll Frauds

One of the first moves initiated by Frka to promote his scheme was to cash payroll checks at his landlord's check cashing company for amounts in excess of what was actually being paid to Horizon's employees. This caper became simple for Frka to implement because he gradually took over the burden of signing payroll checks, including both the office checks (which Decina had been signing) and the checks for the warehousemen and truck drivers. These checks would be sorted and cashed by Siegel, who would put the money in individual envelopes that were returned to Horizon for distribution to the em­ployees.

SCI Counsel Ileana N. Saros questioned Decina about the pay check situation:

Q. You just described the procedure whereby employees would have their checks taken to North Avenue East for cashing and their money would be brought back in envelopes. Was John Frka part of implementing that procedure?
A. Oh, yes. I'm sure he was. He told the guys to sign their checks and have somebody bring back the cash later on in the day.

Q. Did you have any part in that procedure?
A. I knew it was going on but, you know, I don't think I ever accompanied anybody to a check casher, but I would see the envelopes come back and then being handed out to the guys.

Q. Were checks for petty cash also cashed at North Avenue East Check Cashing?
A. I would assume occasionally petty cash was cashed there, yeah.

Q. Do you know what amounts those checks were for?
A. They should have been no more than ... $400 at a time, the normal amount, you know, for gas and tolls and other operating expenses during the course of the day.

Q. And to whom were those checks made out?
A. Probably cash.

Q. Were they also made out to North Avenue East Checking?
A. Yes, yes. There were certain times that they were made out to North Avenue East.

When Decina in early 1986 became suspicious of Frka and began checking on the company's bank records, he confirmed that the payroll was being skimmed:

Q. When you requested and received copies of payroll checks from the bank did you discover that numerous checks, payroll checks, were written in excess of the employees' salary?
A. Yes.

Q. And do you know who received over what the employees rightfully were to have received?
A. Well ... It's kind of hard to prove, but if some­body's making $400 a week and he's getting a check for a thousand dollars a week and Jack is signing the check and the money's coming back to be put in the envelope, I would assume that's where the money was going.

Q. And John Frka is the one who arranged the procedure to have employees' payroll checks taken to the check casher and brought back?
A. Yes.

Check Casher Promotes Bank Loan

For various reasons, a new warehouse location for Horizon was obtained, in Elizabeth. The site was proposed by a real estate agent selected by Frka, who also signed the lease. At the suggestion of check casher Siegel, the former Horizon land­lord, Decina arranged a loan at a bank with the help of a bank officer that Siegel recommended. Siegel, Decina said, told him he'd "never get any­where without a good bank," a tip that indicated check cashers found friendly bank officials handy to know. Siegel obviously had an "in" at the bank since his banking friend "was expecting" to be contacted by Decina and immediately promised that "everything would be taken care of." The speed with which Decina obtained a six-figure loan astounded him, as he recalled it:

Q. From the point that you spoke with that bank official, how long did it take to get your loan approved?
A. I'd like to say overnight it happened so fast but I'm sure it took maybe five days, five working days.

Q. And how much was the loan for?
A. Half of it was given as working capital equal to $50,000 and the other half was given in a evolving credit line of $50,000 which could be used and drawn on, you know, as necessary.

Q. So the total was $100,000?
A. Right.

Q. What was your reaction to that amount?
A. I said, "This must be a great business we went into because the bank recognizes, you know, that amount of money totally unsecured."

Q. The loan was unsecured?
A. Yes, and nobody's signature was necessary except myself and Jack Frka's. In fact, they didn't even have to meet Jack Frka. They just said, "Bring the papers down to Jack and he'll sign them and bring them back to the bank."

Q. Did you use $50,000 of that loan as a security deposit for the [new] location?
A. Yes.

Q. And that was on November 7, 1985?
A. Right.

Q. Ultimately how much of the $100,000 in the loan was used?
A. $85,000.

Signs of Looting Develop

As 1985 closed, Decina said, Horizon's busi­ness appeared to prosper, to the extent that he and Frka began drawing salaries, for the first time, of $300 a week. Then came the first of a series of personal and corporate setbacks. For one thing, Frka's behavior changed; "he became very rational, argumentative, basically violent" toward everyone, Decina said. Later developments in­dicated that Frka may have been smitten by bust­out fever since the looting of Horizon was by then well underway. Decina's suspicions that some­ thing was amiss were confirmed during early 1986, when he learned that he had not been made a partner of the trucking company, Horizon Con­tainer, as Frka had promised. Counsel Saros dis­cussed this lapse with the witness:

Q. When the accountant for the businesses in­formed you that he received the incorporation papers back from Trenton and that the truck­ing company papers did not contain your name as a partner, did you confront Jack Frka with that fact?
A. Yes, I did.

Q. What did he tell you?
A. The trucks were his and they would always be his and I had no right to the trucks.

Q. Even though he had told you that you would be a 50 percent partner?
A. That's true. At about the same time, Decina learned that the Horizon bank account was overdrawn and its pay­roll checks were not being honored:

Q. And did you later learn that the account was overdrawn by approximately $14,000?
A. The day that happened, I was in the office and Jack called the vice president of the bank and said, "You have to honor my payroll checks." At that point the bank gave him, you know-basically carte blanche. It would honor all the checks until the discrepancy was re­solved ... then it was about a week later that no discrepancy existed and the account was overdrawn $14,000, $15,000.

Q. The bank confirmed that it was overdrawn in that amount?
A. Yes.

Q. What was Jack Frka's response to that fact?
A. "Don't worry about it. It's no problem."

Q. After the accountant learned that the account was overdrawn by $14,000, $15,000, what did he do?
A. I never heard from him or saw him again.

Cash Poor-Despite Boom

The Horizon cash flow was drying up at a time when its business was booming. More omens of trouble ahead came to Decina's attention, as he testified:

Q. What were you [warned] by one of your em­ployees who handled one of the major ware­house accounts concerning your relationship to Jack Frka and [about] whether or not you should keep a closer eye on the business?
A. One of the employees, the warehouse man­ager, was handling our largest account at the time, which was Honda Motorcycle, and told me that he had reason to believe that the money was not right, that with the accounts the size that were being solicited and being brought in, even with a normal receivable lag of 35, 45, 60 days, we should not be cash poor, which is when I got more involved with the checkbook.

Q. Were you also informed by one of your cus­tomers who's a Manhattan candy importer that one of his checks sent to the company was endorsed by Jack Frka and cashed at the North Avenue East Check Cashing?
A. Yes.

Q. Were you provided with a copy of that check?
A. Yes, I was. Frka also had drawn a company check to be used as a downpayment on a new home, Decina learned:

Q. Did you observe the [checkbook] recording of a $5,000 check made payable to a real estate agent as a down payment on a condominium that Jack Frka was buying in Woodbridge?
A. Yes.

Q. What did Jack Frka tell you when you con­fronted him with that fact?
A. Well, [he said] the check was never going to be cashed. It was only going to be held by the real estate agents.

Q. Following that checkbook incident what hap­pened to the checkbook?
A. It disappeared.

Also early in 1986, Decina learned that Frka apparently had filched a $50,000 third party in­vestment in Horizon. This revelation came from a former associate of Frka who had been a regular participant in secret meetings-from which Deci­na was barred-that were frequently called by Frka. Counsel Saros questioned the witness on this subject:

Q. [There was an] individual who was in attend­ance at some of the closed-door meetings with Jack Frka and others. In January or February, 1986, did he tell you that he gave Jack Frka $50,000 which he had borrowed as security deposit for the [Elizabeth] location with the understanding that he, in return, would receive 15 or 20 percent of the business?
A. Yes.

Q. And did he tell you that Jack Frka endorsed that check and cashed it at a check casher?
A. Yes.

Q. Did you ever see or did you know anything about that check?
A. I had not-I think I wound up seeing a copy and it was for $49,500 and again it, you know-supposedly went right to the security deposit on the building ... I knew it didn't because I saw the bank's money after the loan was granted go right to the landlord.

Big Bill Payment Diverted, Cashed

Frka also diverted a check payment to Horizon, that would have covered the overdraft, to his own use. Decina said he had told both the bank and Frka that a payment was to be made to Horizon that would restore the checking account bal­ance-but Frka intercepted the payment:

Q. Didn't you relay that information to Jack Frka who then sent someone to the customer and obtained the check himself?
A. Yes.

Q. So that you never did get that check to put into the bank account?
A. No.

Q. Were you able to obtain a copy of that check because the customer had the checking ac­count at the same bank where you had your checking account?
A. Yes.

Q. And whose signature appeared as the en­dorsement on that check?
A. Jack had signed the check.

Q. Where was the check cashed?
A. I believe it was City Check Cashing [of Jersey City].

Q. Do you know who owns City Check Cashing?
A. Not really ...

Q. Did you learn that Eddie Siegel was the owner?
A. I was under the impression that Eddie Siegel was the owner, that's true; no relation to Herb Siegel.

Although not related, the Siegels shared one characteristic-their separate check cashing busi­nesses profited enormously from questionable transactions. For example, when Decina com­plained to the bank about Frka cashing Horizon's receivables for his own personal use at Herbert Siegel's North Avenue East entity, Frka found Eddie Siegel's City Check Cashing service a wel­come substitute:

Q. Did you learn that Jack Frka also cashed checks from other business customers at North Avenue East Check Cashing?
A. Yes.

Q. Was that money ever put back into the busi­ness?
A. Not that I know of.

Q. Did you also learn that Jack Frka cashed a number of business checks at City Check Cashing?
A. Yes. City, I think, came after North Avenue. What happened was, after I got involved with the bank that North Avenue and Herb Siegel had sent us to, I was there the day the bank called Herb Siegel and told him not to cash any more receivable checks for Horizon or, you know, that Jack Frka gave him.

Q. Was that as a result of complaints that you made to the bank?
A. Yes, it was. And so that's when he found this other check casher at City.

Q. And the customer checks that he cashed at City Check Cashing, was that money ever re­turned to the business?
A. No.

Frka Takes the Fifth

Frka, who was subpoenaed as a witness at the hearing, refused to testify, asserting his Fifth Amendment privilege against self-incrimination. (He was permitted to respond "same answer" as he reiterated his refusal to talk). He did admit that he resided in Edison and was employed by an Elizabeth trucking company, but no other data could be obtained from him. The questions he refused to answer included:

Q. The investigation conducted by the State Commission of Investigation has established that Jack Frka cashed 50 checks worth over $50,000 at North Avenue East Check Cashing and approximately 35 checks written in excess of $66,000 at City Check Cashing. Did you, using the name Jack Frka, cash those checks?
A. Same answer.

Q. What did you do with the money that you re­ceived from the checks cashed at North Av­enue East Check Cashing and City Check Cashing?
A. Same answer.

Although Frka cashed Horizon's business re­ceivables at two check cashing entities, neither had obtained the required corporate resolutions authorizing such transactions. Since he now knew that Frka was cashing checks from Horizon's cus­tomers at check cashers, Decina began notifying all clients to send their payments directly to Horizon's bank. However, each time Decina tried to resolve a problem, another setback would occur. In February, 1986, for example, he learned that Frka had not been paying the rent. He man­aged to postpone a scheduled eviction. He next persuaded Frka to relinquish his control of com­pany assets and to sign a notice that he was volun­tarily leaving the business. Despite the negotiation of a new lease, the enlistment of a new partner, the infusion of new funds by the new partnership's families, Horizon had been ransacked too com­pletely to avoid bankruptcy. As Decina told Coun­sel Saros:

Q. And that was directly related to Jack Frka's activities?
A. Well, I would say most of it. There was no money coming into the company. There was no way to pay the bills or meet payroll or pay rent.

Although Herb Siegel knew that Horizon was out of money, he nonetheless charged excessive fees on the few occasions that Decina had to cash corporate checks at North Avenue East to meet rent and insurance deadlines. Decina recalled that he paid fees of 11/2 percent on about $6,000 worth of checks that Herb Siegel processed, that rate being a half-percent higher than the limit on fees for in-state checks. Later, when Herb Siegel re­vealed that he intended once again to lease the former Horizon location in Linden to Jack Frka, Decina severed all connections with the check casher. For one thing, in addition to confirming that Frka had cashed 50 checks from Horizon's customers worth $58,000 at North Avenue East Check Cashing and 35 customer checks worth $66,000 at City Check Cashing, Decina also learned that Frka signed more than $10,000 in corporate checks payable to North Avenue East, in amounts of $1,600, $2,200 and $6,780. Such transactions strongly suggested why Herb Siegel so readily accommodated Frka's corporate check cashing spree.

There were other indications that payoffs, or bribes, were a part of Frka's trucking operations. There were, for example, the clandestine meet­ings Frka had at Horizon's office, from which Deci­na was excluded. Some of these meetings lasted into the night, and took place weekly during cer­tain periods of the year. Counsel Saros asked Decina about these sessions:

Q. What were you told why you were excluded from those meetings?
A. There were certain instances where business was discussed which I-you know, they didn't want me to be privy to, which involved the darker side of trucking and pier work and things like that.

Commissioner James R. Zazzali questioned Decina about Frka's secret meetings:

COMMISSIONER ZAZZALI: Without naming names, can you identify the people who at­tended these secret meetings? Were they cus­tomers?
WITNESS: No, they weren't customers.

COMMISSIONER ZAZZALI: Representatives of other people?
WITNESS: Yes, yes. You know, somebody would be introduced as, "Well, he's got a friend who has a trucking company who might have some business for us." Another one was introduced, "This is my Uncle Sonny who has several connections on the waterfront who helps us move the containers."

COMMISSIONER ZAZZALI: You made a refer­ence to "the darker side" of the trucking busi­ness. Can you elaborate on that?
WITNESS: I imagine in order to expedite freight from the piers, you know that some kind of financial compensation has to be given on a daily basis or maybe more than a daily basis to certain people involved with the authority at the piers. I always wondered when I was working in Hackensack [why] Jack Frka and whatever company he was operating at the time was the only trucker that I knew-and I knew just about every trucker in the area-who could ever pull eight import containers from Redhook Marine Terminal in Brooklyn in one day. That's totally, you know, unheard of in the industry.

Frka's Organized Crime Ties

At one point in Counsel Saro's questioning of Decina, he could not recall whether he had "con­fronted" Frka with evidence of his misconduct. There were times, the witness said, when such a confrontation was "totally out of the question." Counsel Saros pressed him about this:

Q. And why was it out of question?
A. I valued my life, my wife's life, my children's life. I didn't like being threatened. I'm not a fighter.

Indeed, Decina ultimately learned that he had good reason to fear for his safety in Frka's pres­ence:

Q. Did there come a point in time when you learned that he was wanted [for questioning] by the police in Nassau County?
A. Yes.

Q. For what?
A. It was during a murder investigation.

Q. Did you learn that it was an organized crime­-related murder in that county?
A. Yes.

Q. That he was wanted for?
A. Yes.

Additional evidence of Frka's organized crime connections came later in the hearing when the Commission's chief of organized crime in­telligence, Justin J. Dintino, testified. At one point Dintino said that City Check Cashing in Jersey City, where Frka cashed $66,000 in Horizon re­ceivables, "has always been and is today a front for the DiGilio faction of the Genovese operation, to facilitate extortion payments, pay off loans and launder money."

Bust-Out's Sad Ending

The Horizon companies Frka created no longer exist, nor does the successor company that Deci­na organized in hopes of surviving Frka's piracy. Decina, now a salaried official of another freight company, recalled the corporate demise with evi­dent chagrin:

Q. Did you find your business was getting more and more in debt?
A. Well, we found that we didn't realize the amount of debt we took on because everybody started knocking on the door saying, you know, Jack had bounced the check. Jack had bought merchandise. Jack owed them money, so when we finally sat down and figured' out rent and creditors who were knocking on the door, we were up against $85,000.

Q. As a result of those financial difficulties did your father have to give up his stock that he put up as collateral with the bank?
A. Yes.

Q. And did the landlord take a second mortgage on your home as a result?
A. Yes, he did.

Q. When Herb Siegel offered to give you cash for post-dated checks did you accept his offer?
A. Yes.

Q. After Jack Frka left the business were you negotiating with the bank to settle the busi­ness's debts?
A. Yes, I was

Q. Has that been resolved yet?
A. No, it hasn't.

Q. And as a result of trying to assist you was your father also in debt?
A. Yes. He was probably short $25,000.

Q. When your business dealings with Jack Frka came to an end did you find yourself in a great deal of debt?
A. About $250,000.

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