2000-07-01 / Front Page

Loeb & Mayer Plead Guilty!

Charged With Rigging Board Of Ed Bids

Twenty-one individuals and 13 food companies have been charged with rigging bids on contracts for the supply and delivery of more than $210 million of frozen food and fresh produce to the New York City Board of Education, the U.S. Department of Justice recently announced. Of those charged, 12 individuals and six companies agreed to plead guilty as of Thursday, June 1. The others were indicted by a federal grand jury.

Included in frozen food conspiracy charges was Loeb & Mayer, Inc., located in Arverne, and its president and co-owner, Barry Mayer, and vice president, Arthur Goldberg. Loeb & Mayer, which first opened in 1893 on Beach 81 street as a butcher shop, expanded into a wholesaler of meats and moved to Beach 64 street in the 1960s.

"These conspirators overcharged the Board by many millions of dollars," said Joel I. Klein, assistant attorney general in charge of the department’s antitrust division. "This money should have been spent on the schoolchildren of New York, not to line the pockets of greedy vendors."

The New York City Board of Education operates New York City’s public school system, the largest in the United States. It services a student population of nearly 1.1 million and serves approximately 640,000 lunches and 150,000 breakfasts every day. The Board of Education purchases more food than any other single customer in the U.S., other than the U.S. Department of Defense. It receives the bulk of its funding from federal, state and city governments. Most of the meals it serves are subsidized by the U.S. Department of Agriculture.

In addition to public schools, private and parochial schools also receive food under the Board of Education’s contracts, under programs that provide free or reduced-price meals to needy students. More than 80 percent of the students fed by the Board of Education receive free meals. Another 10 percent receive reduced-price meals.

The two conspiracies involved almost all of the Board of Ed’s suppliers of frozen food such as fish sticks, meat and french fries, and nearly all of its suppliers of fresh produce. According to the charges, the defendants and co-conspirators formed and carried out the conspiracies by agreeing to rig bids for the supply of frozen food and fresh produce to the Board of Ed and designating which of the co-conspirators would be the low bidder on the contracts. They also discussed and agreed on prices to bid, refrained from bidding, or submitted intentionally high or complementary bids on the contracts. They paid potential bidders not to bid competitively, including a single payment of $100,000 in cash to one produce supplier. They shared net profits earned on some of the contracts by giving each other money or free merchandise, and they certified falsely that their bids had been arrived at independently.

"These cases put an end to long-standing, sophisticated conspiracies that have gouged many millions of public dollars from the Board of Ed," said Klein. "In addition to the imposition of criminal penalties, including jail time and heavy fines, the antitrust division also will aggressively seek to have those charged pay restitution to the victims of their crimes."

In two separate indictments, the U.S. District Court in the Southern District of New York, a federal grand jury charged a total of 10 individuals and seven companies with rigging bids for the supply and delivery of frozen food and of fresh produce to New York City’s public, private and parochial schools.

Charged with rigging bids for the supply and delivery of $126 million in frozen food to the Board of Ed between May 1996 and April 1999 are:

-Nick Penachio Co., Inc., and its president and co-owner, Nicholas Penachio.

-Irving Libertoff, Inc., and its president and co-owner, Stuart Libertoff.

-West Side Food, Inc., and its president and co-owner, Thomas Ryan, and co-owner Alan R. Adelson.

-Bohrer, Inc., and its former president and co-owner, Arthur Bohrer, and its director of purchasing, William Greenspan.

-M&F Meat Products Co., and its president David Salomon.

-DiCarlo Distributors, Inc., and its vice president John DiCarlo.

-FHR Inc. and its president and owner, Frank Russo.

Charged with rigging bids for the supply and delivery of $87 million of fresh produce to the Board of Ed between approximately 1991 and April 1999 are:

-DiCarlo Distributors, Inc., and its vice president John DiCarlo.

-Nick Penachio Co., Inc., and its president and co-owner Nicholas A. Penachio.

-Landmark Food Corp. and its president and co-owner, Gordon Kerner.

Additionally, separate charges were also filed against 12 individuals and six companies for participating in one or both of the bid-rigging conspiracies involving frozen food and fresh produce charged in the indictments. Those charged by a criminal information and the conspiracy and conspiracies in which each participated are:

-Selwyn Lempert and employee Nick Penachio.

-Loeb & Mayer and its president and co-owner Barry Mayer and vice president Arthur Goldberg.

-Food Service Purchasing Agency, Inc., and its president and co-owner Alan Schneider and its vice president and co-owner Paul Schneider.

-A Bohrer, Inc., and its president and co-owner Leonard Nash.

-John Doody, independent sales agent for DiCarlo Distributors, Inc.

-Kanowitz Fruit and Produce and its president Steven Kanowitz.

-Clifton Fruit and Produce, Inc., and its president and co-owner Harry Levy.

-Baiardi Chain Food Corp. and its president and co-owner, David Axelrod, and salesperson Toby Unger.

Some of those charged were also charged with participating in other bid-rigging conspiracies, affecting additional victims, including the agency of the City of New York that serves the municipal hospitals, jails, homeless shelters and facilities serving children; Newark Public Schools; and Nassau County, among others.

All defendants are charged with violating Section One of the Sherman Act, which carries a maximum fine per count of $10 million for corporations, and a maximum penalty of three years of imprisonment and a $250,000 fine for individuals.

The maximum fine per count for a conviction of conspiracy is a fine of $500,000 for corporations and a maximum penalty of five years imprisonment and a $250,000 fine for individuals. Loeb & Mayer, Inc., Barry Mayer and Arthur Goldberg were charge with this offense.

The charges are the result of an ongoing investigation by the New York field office of the U.S. Department of Justice Antitrust Division, the Federal Bureau of Investigation, and the Internal Revenue Service Criminal Investigation Division.

The Wave contacted Loeb & Mayer for comment, but Barry Mayer was not available and was expected to return next week.


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