Unpaid Invoices Piled Up

As with his previous factoring customer, Cardinal Container, Formisano testified that at first the factoring business with L.A.T. "went very well." Suddenly in the spring of 1987, there was a big increase in unpaid invoices, "close to a million dollars," according to Formisano. Ques­tioned by Counsel Gaal, Formisano recalled the incident:

Q. When you realized that there was such a sig­nificant amount of outstanding invoices did you talk to anyone about it?
A. Yes.

Q.Well, let me take you to L.A. T. Did you talk to anyone from L.A. T. about it first? Did you ever talk to Andy Thorry about it?
A. Yes, I did.

Q.What did he say?
A. He said that they would be getting caught up, that the president of the company was in Taiwan or, you know, something to that effect.

Q.Okay. In looking at those invoices were the bulk of them all to one particular customer of L. A. T. ?
A. The bulk of them, yes, but there were other companies involved.

Q.Who was that one customer?
A. Evergreen International.

After the discussion with Thorry, Formisano met J. Ernst Celosse, senior vice president of Ever­green International:

Q.Now, what was the bottom line that you got from this meeting with the gentleman from Evergreen? What was your understanding?
A. The understanding was that I had a computer read-out of the outstanding invoices due Rutherford Commercial from Evergreen at that particular time, and he said that the amount of money did not correspond with the amount of money Evergreen had in their system and I confronted Andy Thorry with that.

Q.When you say it didn't correspond, which way was it? Was yours­
A. Mine was much greater.

Q.Do you recall how much money Evergreen had outstanding in their system; even a ballpark figure?
A. It was a very low amount, like 35, $36,000.

CHAIRMAN PATTERSON: How much of yours was outstanding?
WITNESS: To Evergreen alone, close to a half a million dollars.

Formisano contacted Thorry again. Thorry con­tradicted Celosse's figures and, as if to prove his point, he quickly produced $60,000 to $70,000 in Evergreen checks for Rutherford Commercial. Formisano said this "led me to believe that the information I was getting out of Evergreen was incorrect" and he continued, therefore, to serve as L.A.T.'s factor-for a week or two:

Q.And after you factored [for Thorry] a little bit longer what did you do?
A. I told Andy that I could no longer factor L.A.T. Transportation.

Q.And was that because of this large number of outstanding invoices that were still there?
A. Yes, yes.

Although Thorry continued to work for L.A.T., a new management team took over the company. The Giampa brothers, Joseph and Frank, told For­misano in July, 1987, they would guarantee L.A.T.'s debts if Rutherford Commercial continued factoring the company's invoices. However, For­misano's financial problems worsened. Counsel Gaal questioned him about his next reversals:

Q.Now, the large number of outstanding in­voices, and I'm speaking not just about the ones relating to Evergreen but with respect to any other customers of L.A. T., are they still outstanding today?
A. Yes, ma'am.

Q.Mr. Formisano, did you turn over to the SCI staff this large number of outstanding invoices including the Evergreen International invoices which we've been talking about today? Did you turn them over to us?
A. Yes, at your request.

Q.Mr. Formisano, there are, I guess, four stacks there of invoices, and I'll represent to you that those are photocopies of the outstanding Evergreen invoices that you supplied to us. Do those invoices represent the bulk of that large amount of unpaid invoices that you have been talking about today which built up in the spring of 1987?
A. Yes, ma'am.

Q.Are there other unpaid invoices besides those Evergreen International invoices?
A. Yes.

Q.Now, did the Giampas represent to you that these invoices would be paid?
A. The Giampas represented to me that in their opinion at the time that these invoices were valid and would eventually be paid.

Q.Mr. Formisano, we took those invoices to Ever­green and we learned from a representative of Evergreen that of those 745 invoices, 19 of the invoices representing 23 container moves for a total of only $8,540 were legitimate invoices which represented work that L.A. T. Transpor­tation had done and, incidentally, had been paid for. The vast majority of the invoices, the remaining 726 invoices, representing 1,421 container moves for a total of $463,640 are bad invoices; that is, they are not legitimate invoices for work performed according to Evergreen. Were you aware of these facts?
A. I was very suspicious of it ... I was holding out false hope, I guess, that they would eventually be paid. However, the State Commission of Investigation did convince me they were no good.

SCI Exposed L.A.T. Scam

Formisano said he learned how his Rutherford Commercial checks to L.A.T. were disposed of from the SCI:

Q.Mr. Formisano, did you have an opportunity to examine the checks you paid to L.A. T. Trans­portation after you factored the invoices?
A. Yes.

Q.And was that after the SCI subpoened your records?
A. Yes.

Q.And how were those checks negotiated?
A. They were cashed at check cashers.

Q. Have you ever been to a check casher?
A. No.

Q.Have you received cash from Thorry or anyone else ... either for payment of those invoices or for any other reason?
A. No, I did not.

Q.Are you still factoring for L.A. T. ?
A. No, I'm not.

Q.When did you stop factoring from them?
A. About eight weeks ago.

What Happened to the Cash?

Formisano testified that Rutherford Com­mercial was about a million dollars in debt, thanks to the disappearance of his payments for L.A.T.'s purported invoices. He had no idea, he said, what happened to the cash:

Q. The bulk of the money that you utilized in your factoring business, where did you get that money from?
A. Most of it was borrowed from banks.

Q. Can you recall for us how much money you have outstanding from banks and financial in­stitutions in connection with this factoring business?
A. Not quite a million dollars.

Q. Mr. Formisano, were the invoices, including the bad ones we've heard about today, part of the collateral for the bank loans?
A. Yes.

Q. Presently, what is the L.A. T. debt to Rutherford Commercial?
A. In total?

Q. Yes.
A. In invoices alone without going into interest or anything else, it's approximately a little bit over a million dollars.

Q. What is your present financial situation, and I'm speaking about Rutherford Commercial and yourself if it intertwines, as a result of your factoring these invoices?
A. Not very healthy.

Q. Mr. Formisano, bad invoices were given to you and through the nature of your factoring busi­ness you wrote checks which our investigation has tracked to check cashers which result in untraceable cash. We have taken Andrew Thorry and Vincent Murphy to the check casher and our trail ends with them. Do you know what they did with the cash?
A. No, I do not.

Evergreen Aided SCI Probe

J. Ernst Celosse, senior vice president of Ever­green International Corporation, in charge of op­erations, testified candidly about the SCI's dis­covery of L.A.T.'s billing scam. This international corporation, which he described as the world's largest container operation, is headquartered in Taiwan but it has a United States office in Jersey City. He confirmed that L.A.T. was one of a number of Evergreen truckers utilized to transport containers to and from Port Elizabeth. Under questioning by Counsel Gaal. he confirmed that the SCI's inquiry had revealed that invoices Rutherford Commercial factored were fraudulent. He also explained the unorthodox manner in which Thorry dealt with Evergreen:

Q. In response to an inquiry from the State Com­mission of Investigation, did Evergreen Inter­national under your supervision check its re­cords to determine the validity of certain in­voices?
A. Yes, we did.

Q. Mr. Celosse, I'm going to show you Exhibit C-142. We'll represent to you that these are photocopies of invoices obtained from a fac­tor, Rutherford Commercial, which are accord­ing to their records outstanding. Are these copies of the invoices that we asked Evergreen International to check to determine their val­idity?
A. Yes, that's correct.

Q. And I'm going to represent to you, Mr. Celosse, that there are 745 invoices there total­ing $472,144 worth of work. Did you and your staff check those invoices?
A. Each and every one was checked and double­checked.

Q. And what did you learn? What did you find out at Evergreen?
A. That 95 percent were invalid.

Q. Do you recall [telling] the Commission that of those invoices merely 19 representing a little over $8,500 worth of work were legitimate in­voices [and] L.A. T. had already been paid on them?
A. That's correct.

Q. And the remaining, some 726 invoices, were invalid. Is that correct?
A. That's right.

Q. What did you learn about the work described on those invoices?
A. They can be divided into four categories. One would be the container number would be in­correct or not [in] existence-not existing in our fleet of containers. Number two, they would [be] an activity that had taken place but performed by another trucking company.

Q. Had that other trucking company been paid separately?
A. Yes.

Q. L.A. T. had nothing to do with the move?
A. No. That's correct. Number three, they were either invoices that were legitimate and had been paid and, number four, the invalid in­voices.

Q. Can you tell us what you've learned about how L.A. T. invoices typically got to Evergreen?
A. The invoices were hand delivered by Mr. Thor­ry and brought to the Intermodal Department.

Q. And what have you learned about how L.A.T. was typically paid?
A. The invoices-the checks would be picked up by Mr. Thorry himself.

Q. Was that typical of or is that typical of the way invoices come in and truckers are paid with respect to all the other truckers you use at Evergreen? Is that the typical way these things are handled?
A. It's not typical.

Q. How is it usually handled?
A. By mail.

Q. Does Evergreen still employ L.A. T. Transpor­tation?
A. No, not at the present moment.

Q. When did it stop?
A. Approximately four weeks ago.

Q. After this investigation began?
A. That's correct.

Another Silent Witness

Andrew Thorry invoked his Fifth Amendment privilege to remain silent when he was questioned at the hearing about his dealings with Evergreen International and Rutherford Commercial and Formisano. His refusal to answer even those ques­tions that he had answered during his private session interrogation at the SCI was challenged by the Commission but that legal issue could not be resolved within the time frame of the hearing. A reading of excerpts from his private testimony demonstrated that he admitted he had taken checks to check cashers, including North Avenue East in Elizabeth, another outlet in Bayonne and Mi Way Check Cashing in Kearny. (The Bayonne check casher was organized crime associate Anthony Gallagher, who figures in later testi­mony.) To set the record straight, despite Thorry's refusal to respond other than to cite the privilege, Counsel Gaal asked him certain questions perti­nent to the SCI's investigative findings as revealed by other witnesses at the hearing:

Q. Mr. Thorry, based upon an SCI staff review of books, records and documents available to us we found that you cashed some 1.4 million dollars in checks payable to L.A. T. Transpor­tation between August of 1986 and July of 1987. What did you do with that money?
A.I exercise my Fifth Amendment rights.

Q. According to the SCI staff review of books, records, documents made available to us, you cashed over one million dollars of those checks at Grand Street Check Cashing in Jer­sey City. What did you do with that money?
A. I exercise my Fifth Amendment rights.

Q. Mr. Thorry, isn't it a fact that at least 745 of the invoices you factored at Rutherford Com­mercial were fraudulent?
A. I exercise my Fifth Amendment rights.

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