They're getting closer to you everyday Isaac: ""Authorities say they believe Lehmann was deeply involved in penny stock fraud at a New York brokerage, Patterson-Travis, although he was not a licensed broker or principal there."
The Star-Ledger Archive
COPYRIGHT ¸ The Star-Ledger 1999
Date: 1999/11/28 Sunday Page: 001 Section: NEWS Edition: FINAL Size: 2183 words
A shady deal united 2 doomed promoters
Secrets slowly surface after Colts Neck deaths
By John T. Ward and Ted Sherman
Star-Ledger Staff
The setting was as gilded and glittering as New York gets: the Plaza Hotel at the peak of the Christmas season. But
the deal on the table was dross - a scheme based on penny stocks.
In short, five men were meeting to arrange for stock of dubious value to be used as collateral for a brokerage
account.
Not quite two years later, two of the men were killed gangland-style, and a third found their bodies. At least one of
the other two present at the meeting was at the murder scene earlier in the day.
Albert Alain Chalem and Maier S. Lehmann had never met before the December 1997 gathering.
On Oct. 25, Chalem and Lehmann were gunned down in a barrage of bullets in a Colts Neck mansion. Their bodies
were found early the next morning by a stockbroker friend of Chalem's, Allen Conkling, who also had been at the
meeting, according to sworn testimony to the Securities and Exchange Commission.
Conkling and an unidentified person found the murdered men on the marble floor of the house where Chalem lived
with his girlfriend. Both victims had been disabled by initial shots before the killer or killers finished them off.
Authorities refuse to say what, if anything, they have learned about why Chalem and Lehmann were killed. They also
won't say if the deaths were related to the pair's business dealings. What is known is that the Plaza Hotel meeting
brought the two together and they died together.
While the deal discussed at the Plaza Hotel never materialized, a review of the victims' lives shows that Chalem and
Lehmann prowled the outer margins of the stock market before and after they met. Moving fluidly from deal to deal,
they apparently were regular players in a world where traders pump up the values of cheap stocks and then dump
them on unsuspecting investors.
Chalem and Lehmann appeared to have made careers out of hiding their true interests in both their business and
personal lives:
Federal prosecutors in New York say Chalem, 41, was secretly controlling Toluca Pacific Securities, a now-defunct
penny stock brokerage based in Burbank, Calif., with purported ties to organized crime. The company, which had
offices in Manhattan and on Long Island, had run afoul of regulators for unauthorized trading, misrepresentatio n and
high-pressure sales tactics. Chalem was never charged.
Chalem owned two boats, a Florida condominium and expensive cars, none of them in his name. A home in the
Hamptons was in his mother's name. Cars registered at his Hamptons address were in the name of a company that
bore his initials. The $1.1 million house where he and Lehmann died was in the name of Russell Candela, the father of
Chalem's girlfriend.
Chalem was said by Bennett Oppenheim, the founder of a controversial heroin-detoxification business, to be the
company's owner. Oppenheim, in an interview after Chalem's death, said Chalem didn't want his identity disclosed.
After Chalem's death, federal prosecutors subpoenaed the records of a recently failed day-trading firm, Harbor
Securities, to determine whether Chalem racked up $800,000 in losses last April while trading under an assumed
name, according to a report in the New York Times.
Lehmann, a 37-year-old from Woodmere, N.Y., with five young children - including two sets of twins - had no
visible means of support. His wife, Tamar, told the SEC as part of a fraud probe that her husband's sole source of
income was a job at a Manhattan property-management firm in which her brother is a partner. But her brother, Ziel
Feldman, swore he never paid Lehmann for his services.
Lehmann refused to testify in that case, invoking his Fifth Amendment right not to incriminate himself.
Authorities say they believe Lehmann was deeply involved in penny stock fraud at a New York brokerage,
Patterson-Travis, although he was not a licensed broker or principal there.
Lehmann sought out securities regulators and several financial publications late last year in an effort to implicate the
neighbor with whom he shared his commute to the firm, all the while claiming his own hands were clean.
Chalem also had attracted the attention of federal prosecutors. According to a person familiar with the Toluca Pacific
case who spoke on condition of anonymity, prosecutors met with Chalem about 18 months ago and told him they
regarded him as the firm's unseen master.
Prosecutors "weren't shy about it," the source said. "They said they thought Toluca was a bucket shop manipulating
securities; that they thought it was a pump-and-dump operation. They thought he was behind it, and they were giving
him a chance to come in and cooperate against others. They were giving him a chance to cut his losses."
In response, Chalem told the prosecutors that he shared office space with Toluca but had nothing to do with
ownership or management of the firm, the source said. Sensing that the government was short of evidence to obtain
an indictment, Chalem refused to cooperate, according to the source.
Those prosecutors had not contacted Chalem for several months, leading him to believe the matter might have been
dropped, the source said.
George S. Canellos, the assistant U.S. attorney identified by the source as the prosecutor on the case, declined to
confirm there was a probe of Toluca and declined to comment on Chalem.
After Chalem's death, the Associated Press reported that he had been a government witness in an unspecified case.
(A Star-Ledger story used the AP quote.) But he wasn't a witness in the Toluca probe, the source insisted.
'That's absolutely impossible," the source said. "I don't think anybody would have suspected Alain Chalem of
cooperating with the government."
Public records do not tie Chalem to Toluca, which was one of several brokerages that picked up jobless brokers
from Hanover Stirling after federal prosecutors busted that firm for fraud.
(Such scampering from firm to firm by brokers is what authorities call "cockroaching." "You step on it, it's like
cockroaches running in five different directions, and they create new nests," said former federal prosecutor Joel M.
Cohen. "Of course, now the linkages are different because it's all Internet stuff. So instead of cockroaching, they're all
linking to each other over the Internet and all moving the same stocks.")
Few of those who knew Chalem and Lehmann would talk about them on the record. Kimberly Scarola, Chalem's
girlfriend, did not respond to requests for an interview. Neither did Chalem's mother or sister.
Lehmann's widow and parents in Monsey, N.Y., also did not respond to requests for interviews.
Cheap stocks, high style
Chalem's business dealings ranged from cheap hotels to cheap stocks. With his father, he ran a Clifton printing ink
company that went bankrupt in 1988. He later acquired a stake in a Hunter, N.Y., bar and hotel that burned to the
ground in 1994.
Chalem also operated a motel in Hampton Bays, N.Y., called Allen's Acres. Plans were announced to sell the
property under a lease-back deal to Clean-X-Press, a San Francisco-based laundromat chain, but property records
do not indicate the sale ever went through.
Clean-X-Press figured in an indictment in June of several West Coast brokerages that federal prosecutors linked to
associates of the Colombo crime family. The shares of the thinly traded company were manipulated to artificially
inflate its value, the federal government alleged.
Chalem was said to be active in short-selling, an investing technique in which stock is borrowed from a broker and
sold at the prevailing price, in the expectation that the price will fall. If the price drops, the short-seller buys the
replacement shares at a discount, making a profit. If the price rises, the short-seller has to replace the borrowed
shares at a loss.
Though he was not a licensed broker, Chalem worked for two years in the offices of A.S. Goldmen & Co., a
brokerage that was indicted in July on charges that it cheated thousands of investors out of nearly $100 million.
Conkling worked there at the same time, records show. Neither Chalem nor Conkling was named in the federal
indictment.
Whatever the source of his money, Chalem clearly liked to spend it and enjoyed entertaining his friends.
Acquaintances say he wore a gold Rolex watch and bought boats and numerous cars, including a Hummer, the
civilian sports utility version of the military's big Humvee truck, an expensive, limited-production vehicle driven by the
likes of Arnold Schwarzenegger.
One friend recalled that Chalem would offer his watch to anyone who admired it. He had a boat docked on the
Hudson River and another one near his condominium in Fort Lauderdale, Fla.
'Alain was very friendly," said Ada Garay-Logan, who is married to Joe Logan Jr., a friend of Chalem's. "He always
has people around him. He would invite friends over, always friends."
Joe Logan Jr. was one of the men present at the Plaza Hotel meeting in 1997, according to SEC depositions in
another case. The fifth man was not identified. Logan also was at the Colts Neck house earlier in the day that Chalem
and Lehmann were killed. Logan has not returned phone calls.
Instant fountain
The Colts Neck house, faced in gleaming white brick and fronted by an ostentatious gate, was all but unfurnished 10
months after Chalem and Scarola moved in. Then, friends say, Chalem had an ornate, Italian-style fountain plopped in
the front of the home on the day of a party for Scarola's mother because he wanted the entrance to impress his
guests.
The heavy white fountain, added three weeks before the murders, features a nude male figure in apparent distress as
he is encircled by open-mouthed horse heads. It was hurriedly installed on a still-wet concrete foundation, and
Chalem was trying to get it filled with water just hours before the party.
He also lavished attention on his pet bulldogs, named Sophia Loren and Spikey, and on the night of his murder was
planning a trip to Florida around their comfort, investigators said. Determined not to put the dogs in the cargo bay of
a commercial airliner, Chalem intended to drive 700 miles to Tennessee, where he would meet a friend who would fly
him the rest of the way, according to one of Chalem's friends.
Lehmann, who was buried on his 15th wedding anniversary, pleaded guilty in 1992 to mail fraud over false insurance
reports of burglaries at a camera business he owned; his cooperation led to convictions of more than 100 people.
More recently, Lehmann settled civil charges by the SEC that he had helped rig trading in the stock of
Electro-Optical Systems, a Boston company whose stock rose from 50 cents to $7 per share in one day before
collapsing. Without admitting any wrongdoing, Lehmann agreed to pay the government $500,000 he was alleged to
have illegally pocketed, plus $130,000 in fines. At the time of his death, Lehmann was purported to have been
helping prosecutors build a criminal case in the matter.
Fateful visit
Those who knew both men insist that Chalem and Lehmann were not business partners as prosecutors have alleged.
The Monmouth County Prosecutor's Office said the two were involved in a stock-touting Web site on the Internet
called StockInvestor.com, which promoted penny stocks to subscribers. Such sites have been the focus of increasing
attention by financial regulators because of their penchant to fraudulently hype stocks.
Several of Chalem's acquaintances, however, insisted that the Internet service, registered in Panama and administered
out of Budapest, Hungary, was strictly Lehmann's brainchild.
Lehmann was a frequent visitor to Chalem's Colts Neck home but never stayed overnight, always returning home to
Woodmere, where he was active in an Orthodox Jewish temple.
On the day of Oct. 25, he drove to Chalem's place in a rented car. Conkling had left earlier in the day, after spending
the night, and Scarola had departed several days earlier to spend some time in the Fort Lauderdale condo.
According to police, the last time anyone spoke with Chalem was about 8:30 p.m. Conkling found the bodies early
the next morning, when he arrived to pick up some decorative molding that Chalem was replacing.
Both bodies were on the floor in a formal dining room that no one ever used, where the chairs were still wrapped in
plastic to protect the upholstered fabric from the dust of workers. Papers were strewn across the dining room table -
an expensive piece of furniture that Chalem normally forbade anyone to touch.
Chalem, clad in a blue sweatshirt, was shot multiple times in the head and chest. Lehmann was shot in the legs to
cripple him, then in the chest.
Police have named no suspects.
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