$26 Million in Corporate Checks

Asked by Counsel Gaal to comment on the suspiciously large volume of checks payable to businesses that were cashed at check cashing outlets, Cimino cited as an example the auditing of client transactions at City Check Cashing in Jersey City.

MR. CIMINO: Let me just cite some statistical data from one check casher. Over a 15-month period, from January, 1986, to March of 1987 we identified $26 million in checks payable to businesses. We can say 70 companies each cashed at least $30,000 worth of those checks. Of [these 70 companies], 34 cashed over a hundred thousand dollars each ... We had eight go over a million and in that group there was one which cashed almost four and a half million dollars in checks payable to three com­panies.

MS. GAAL: Mr. Cimino, how many companies did you find in that $26 million worth of busi­ness checks? Were you able to get a total number of companies?
MR. CIMINO: We stopped counting at 500 although some were not-you know, not into it with a lot of checks, but we found at least 500 companies involved in that activity.

MS. GAAL: Mr. Czyzyk, was this type of activity found in our review of other check casher re­cords?
MR. CZYZYK: Yes, definitely but on a much smaller scale.

MS. GAAL: And on the other hand, Mr. Miller, were there instances that we found [of] check cashers who did handle the ordinary type of business expected of check cashers?
MR. MILLER: Yes, there were. They handled the normal welfare, unemployment and pay­roll-type checks, yes.

Customers Could Not Be Located

Counsel Gaal's questioning of the three accoun­tants elicited comments on some of the difficulties of investigating New Jersey's check cashing in­dustry. One problem was the inability of the SCI to locate and identify certain check casher cus­tomers:

MS. GAAL: Mr. Cimino, did the staff run into problems trying to identify and locate the cus­tomers?
MR. CIMINO: Yes. Some we still haven't located. Some are known now to be fictitious, the payees were fictitious.

Graf Air's $4 Million Check Spree

Utilizing the Commission's chart on "examples of questionable transactions," Counsel Gaal asked the accountants to indicate what had be­come suspect in the check cashing activities of the companies listed on the exhibit. The company with the biggest dollar amount of checks cashed during the 15 months between January of 1986 and March of 1987 was Graf Air (and its subsidiaries), a New York trucking entity that was involved in an extortion conspiracy to assure labor peace at John F. Kennedy Airport. The company's owner, George L. Parker, is under indictment for labor racketeering and extortion. Two others in the case. Salvatore J. Reale, a Gambino/Gotti as­sociate, and Frank Calese, a teamsters union leader, are in prison after pleading guilty to Feder­al indictments charging extortion and conspiracy. Counsel Gaal asked accountant Miller about this case:

MS. GAAL: Mr. Miller, let's take a look at the chart starting with the first entity, Graf Air. What can you tell us about that entity and what our investigation revealed?
MR. MILLER: : The correct name is Graf Air Associates and its affiliated company is Com­modity Haulage, Incorporated. Both com­panies are located in Jamaica, New York. They presented problems for us since we couldn't get witnesses and records because of a jurisdictional problem. What we did find out was that, during the 15-month period, some $4 million dollars worth of checks were cashed through City Check Cashing and that the per­son who cashed the checks was a Richard Ramhap. He's the son-in-law of the owner, George L. Parker. Now, Mr. Parker, we de­termined later, had been a defendant in a fed­eral indictment in 1986 with two other individ­uals, namely, Salvatore J. Reale, who was at the time head of security, and a Frank Calese, who was then a president of Local 295 of the Teamsters. The indictment indicated that they used the firm of Commodity Haulage to gener­ate a source of extortion. The payments were handled from [a] third party into Commodity Haulage concerning labor peace at the John F. Kennedy Airport. The period covered in the indictment was from September, 1985, through April of '86, and by some coincidence the cashing of the checks at City [Check Cashing] began in May of '86 and continued to March of '87. Also curious is that on May 22, 1987, which is approximately a month or so after our records indicated that the checks stopped, George L. Parker petitioned the Bankruptcy Court in Brooklyn for involuntary bankruptcy ...

MS. GAAL: Mr. Miller, this particular scenario illustrates one point I think we ought to bring out at this time. Did you notice during this investigation that although many of the cus­tomers were out-of-state customers and had access to New Jersey check cashers, we were unable to secure the principals in terms of asking them questions or to obtain their re­cords? In fact, [were not] many of the largest customers beyond the jurisdiction of this Commission?
MR. MILLER: Yes.

EXAMPLES OF QUESTIONABLE TRANSACTIONS BY CUSTOMERS OF CHECK CASHERS

Graf Air's Organized Crime Taint

The SCI's intelligence chief, Justin Dintino, was asked by Counsel Gaal to comment on some of the principals in the federal government's pros­ecution of the Graf Air case:

Chief, during this investigation the Com­mission has found that George Parker, a prin­cipal in Graf Air, Incorporated, an air freight trucking service in the New York area and owner of Commodity Haulage operating at J.F.K. International Airport, hired a Salvatore J. Reale as his director of security, with Frank Calese ... [Parker and Reale were indicted] for extortion of money to insure labor peace. On January 15 of '88, Parker was indicted on four additional counts of violating the Federal Hobbs Act relating to racketeering in interstate travel. Does the name Salvatore J. Reale mean anything to you in the area of organized crime?
A. Yes. Salvatore Reale is a significant associate of the Gambino/Gotti crime family [and] was John Gotti's representative at Kennedy Air­port. Reale has convictions on federal RICO charges involving gambling, loansharking and extortion. His criminal associates include John Gotti, capo Anthony Ruggiano and soldiers Leonard DeMaria and Anthony Garrio, all of the Gambino/Gotti crime family.

Q. Since he was hired as director of security for Mr. Parker's firm at the JFK International Air­port, does that hold any meaning to you based upon his organized crime associations?
A. Obviously, Mr. Reale was Gambino boss John Gotti's representative at the Kennedy Airport. As director of security for Mr. Parker's firm, [he was] in a position to perform criminal acts for the Gambino group, such as labor racketeering, theft and other illegal activities.

Pier Services' Cash "Disappears"

Counsel Gaal next asked the SCI accountants about Pier Services, whose president, Joseph Odorisio, cashed $1.765 million in checks:

MS. GAAL: Mr. Cimino, what did the investiga­tion reveal concerning Pier Services?
MR. CIMINO: This is a small trucking company that works the piers. The president is Joseph Odorisio, and that individual cashed $1,765,000 worth of checks over the period of time we're talking about. Significantly, we esti­mate-and I examined his records my­self-that approximately $1 million of that amount simply disappeared. It's not recorded in his books and records and the cash disap­peared. Mr. Odorisio asserted his Fifth Amendment privilege on what happened to the cash.

Corporate Mail Lacked Records

Accountant Cimino recalled that Corporate Mail Services of New York, another company listed on the chart, had cashed at least $1.366 million in receivables-but its books and records were not available to the SCI. Cimino noted that this com­pany's attorney "represented [to the New York SIC] that they now have real tax problems due to this activity." He also recalled that the company utilized its check cashing proceeds to pay its em­ployees "off the books," which he indicated was an "underground economy" ploy to avoid paying taxes. Counsel Gaal noted that the chart showed that no records were available from Corporate Mail Services. She asked Accountant Miller to comment on that part of the exhibit:

MS. GAAL: Mr. Miller, before I ask you about the next entity, I know that one of the categories on our chart is "Condition Of Re­cords Subpoenaed." Why did the staff feel that that was [such] a significant category that we should put it on the chart? What did you find generally when you went out to the customers?
MR. MILLER: Almost consistently we found that there was an absence of adequate re­cords. In fact, there were indications where tax returns had not been filed [and] the records that were submitted to us were wholly inade­quate.

MS. GAAL: Were there instances where there were no records.
MR. MILLER: Yes. I was going to say-there were no records-what little records were produced were, obviously, of no benefit to us as accountants.

Cardinal Container: "Unusual" Case

Earlier in the hearing, it had been revealed that the assets of Cardinal Container, a trucker, were siphoned off-a ''bust-out' in mob parlance-mostly by means of a fraudulent scheme involving a factoring company, Rutherford Commercial, and the cashing of checks based on phony invoices. Counsel Gaal asked Miller for comments on this case:

MR. MILLER: It is an unusual scenario. We heard from Donald Sanns, [on the hearing's] first day, and he demonstrated how he fell prey to manipulation by a party by the name of Vince Murphy. What we found was this: About $904,000 of checks were cashed at City Check Cashing during the period up to October of '86, and it's interesting that Vince Murphy was the person who cashed the majority of those checks. An attempt to obtain the records of Cardinal was [found to be] almost impossible because there were disputes between them as to which person had the records, and the end result was [that] we had no access to any of the records. I doubt very much whether any tax returns were ever filed. What's interesting is that when we got into the factoring situation, where Sanns claimed ... [it was] unknown to him that Vince Murphy was both a principal in his company and also a principal in the factor [company] ... apparently a bulk of these checks, the $900,000, came from the factor and ... about $300,000 worth of the factoring invoices were determined to be false or fraudulent.

First Street Textile Scheme

Accountant Czyzyk testified that First Street Textile, another company on the SCI chart, had apparently conspired with a New Jersey check casher to circumvent the law requiring the filing of Currency Transaction Reports (CTRs) when amounts over $10,000 were involved:

MS. GAAL: Mr. Czyzyk, the next [company] is First Street Textile. What is their business and what did the investigation reveal?
MR. CZYZYK: They were a manufacturer of ladies apparel in Union City, New Jersey, and the investigation revealed that they cashed ap­proximately $728,000 in checks through a check casher in that are
A.

MS. GAAL: What was the amount?
MR. CZYZYK: $728,000 worth--a little over $600,000 was made payable to First Street directly and the remainder was made payable to a subcontractor that [it] controlled. The checks were presented to the people at First Street and the people at First Street were the ones who negotiated the checks at the check casher.

MS. GAAL: In connection with this aspect of the investigation, were Currency Transaction Report violations revealed?
MR. CZYZYK: It appears that there were. The checks that we examined were consecutively numbered, were made out on the same day from the same maker. If you took the checks individually each would be under the $10,000 CTR limit but collectively they were well over that limit, requiring a Currency Transaction Report. We found about 35 instances of poss­ible CTR violations with this company.

No Access to Books and Records

MS. GAAL: Mr. Czyzyk, the next customer. Mallory Truck Repair, [is it] in the truck repair business?
MR. CZYZYK: Yes.

MS. GAAL: And what did the investigation re­veal concerning that company?
MR. CZYZYK: Through one check casher, City Check Cashing, [it] cashed $593,000 worth o' checks. The company President, Gabriel Gnudi, was the individual who negotiated those checks. When we asked for books and records of the company, the answer was that they were in the hands of the accountant who had just passed away and we couldn't get ac­cess to them. In addition, no tax returns were filed for that company.

"Underreported Their Earnings"

Accountant Cimino testified that another com­pany, County Delivery Services, had cashed $523,000 in receivables at City Check Cashing in Jersey City and that, based on his scrutiny of available books and records, "I believe they underreported their earnings."

Diverted Funds From Creditors

As for another trucker in the public hearing spotlight,
A. Ambrosio & Sons, accountant Czyzyk testified:

The one important point that was brought out in investigating this company was that the reason Ambrosio used the check casher was to divert funds from one company that had liens and judgments filed against it to another company, an affiliated company, which was free of those problems.

Bankrupt-But Still Cashed Checks

Accountant Miller recalled how another com­pany filed for voluntary bankruptcy but continued to cash checks at a check cashing outlet. Finally it had to file for involuntary bankruptcy:

MS. GAAL: Mr. Miller, Companies Transport Incorporated? Same questions.
MR. MILLER: Companies Transport is also a trucking company. The records indicated there were about $238,000 worth of checks cashed at City Check Cashing during the period April of '86 to October of '86. The bulk of the checks that were cashed occurred in about May of '86 and ... [on] June 17, '86, the company went into voluntary bankruptcy. Now [it] proceeded to cash checks after that period of time and on October 7, 1987, was forced into involuntary bankruptcy.

Check Cashers Violate Regulations

The Commission's accountants testified about a number of infractions of regulations by check cashers:

MS. GAAL: Were obvious violations of the New Jersey Department of Banking rules and regu­lations found?
MR. CIMINO: Yes.

MS. GAAL: Were [there] violations of the rule requiring that corporate resolutions be on file before corporate customers cash checks?
MR. CIMINO: Yes. There were many of those violations although I think they're significant only because they show that the check casher really doesn't follow the rules.

MS. GAAL: Are you saying that the require­ment for the corporate resolution is not a sig­nificant requirement?
MR. CIMINO: I don't think it is. I mean, it really doesn't protect much.

MS. GAAL: Mr. Miller, did the staff find in­stances where check cashers did not deposit checks into their check cashing accounts?
MR. MILLER: Yes.

MS. GAAL: What did they do with the checks?
MR. MILLER: There are several instances where the checks [were] deposited into other accounts. In fact, there are situations where the checks would find themselves in separate accounts and other accounts in other banks. We can only find that the endorsement stamps that normally are affixed to checks that are cashed indicate a licensed check casher. There were cases where the checks for the endorsement were "for deposit only" with an account number [and] with no indication that it was cashed. There's a requirement by the Department of Banking that the stamp [of] licensed check cashers [be] affixed on every check they cash and that's apparently an at­tempt to avoid that regulation.

MS. GAAL: Mr. Miller, did we discover one check casher who was operating without a checking account at all?
MR. MILLER. That's true.

MS. GAAL: How did he do it?
MR. MILLER: Well, he claimed that he went to his "friendly banker" and that person was able to take the checks in bulk and give him cash for them.

MS. GAAL: Right at the window?
MR. MILLER: Right at the window.

MS. GAAL: Mr. Czyzyk, does the investigation reveal the under-reporting of fees by check cashers to the Department of Banking?
MR. CZYZYK: That's correct. The Department of Banking requires annually the reporting of the number of checks cashed, the face values and the fees collected. We found situations where there was under-reporting to Banking and that followed through for tax purposes also.

MS. GAAL: Mr. Miller, the Public Advocate has issued a report on this subject, but with re­spect to our findings did we find evidence of check cashers charging excessive fees; that is, gouging customers?
MR. MILLER: I believe we heard testimony about the excessive fees and the gouging of the customers.

MS. GAAL: What about illegal loans in any form?
MR. MILLER: There were references to the holding of the checks, bouncing of the checks and of procedures where the check casher would accept checks, knowing that the checks were going to bounce in a short time.

MS. GAAL: Mr. Miller, we heard testimony at this hearing about floating or kiting of checks. Did we find such activity in a check casher's records and by that I mean [by] someone other than Tony Gallagher?
MR. MILLER: Yes. We found a licensed check casher who operated ostensibly a normal check cashing operation, that he maintained what we considered a kite between his facility and an out-of-state check casher to the extent of $5.7 million over a 10-month period of time.

MS. GAAL: Mr. Miller, again, one of the issues that's come up in the hearing is the use of fictitious payees, and by that I would include fictitious payroll and fictitious business names. What evidence was deduced concerning that during the investigation?
MR. MILLER: There's been a number of per­sons testifying [about that]. In fact, we had one episode here about Mr. Castagna and his con­tempt for the necessity of having an accurate payee ... It would seem that the check cashers are more concerned with whether or not the check is good than whether or not the payee's name is of an existing person or a fictitious person.

MS. GAAL: Mr. Czyzyk, were instances found where the check cashers endorsed customers' names on checks or supplied endorsements?
MR. CZYZYK: Yes, definitely.

MS. GAAL: Mr. Cimino, throughout the in­vestigation evidence was found of checks being received in batches from other check cashers, licensed or unlicensed, in or out of the State?
MR. CIMINO: Yes.

MS. GAAL: Is that something that was rela­tively prevalent?
MR. CIMINO: Yes. What that really ac­complishes is that you can have someone op­erating unlicensed and cashing checks and then they have access to a licensed check casher's account to facilitate the unlicensed operation.

NJ Check Cashers' Association

Accountant Miller indicated that the New Jersey Check Cashers Association, whose books and re­cords also were examined, spent almost 94 per­cent of its budget over a five-year period for politi­cal contributions and legal fees. As Banking Com­missioner Mary Little Parell had noted, the As­sociation customarily litigated against most of the Department's licensure approvals, apparently in an effort to limit competition against existing licensees:

MS. GAAL: Mr. Miller, did you examine the records of the New Jersey Check Cashers As­sociation and can you summarize your find­ings?
MR. MILLER: Yes, I did and can, and to briefly summarize the records, there were 93.9 per­cent of expenditures over a period of time for both political contributions and legal fees.

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