CEO's past drops a dime

Executive charged with tax, mail fraud

false invoices alleged

Anonymous phone call

November 23, 2001|By Dennis O'Brien | Dennis O'Brien,SUN STAFF

Benjamin J. Gilbert seemed to have it all.

A $2.4 million house in western Montgomery County, a Porsche and a Rolls-Royce in his driveway and a position as chief executive of a well-known Frederick clothing firm with 600 workers and annual sales of $60 million.

But Gilbert also had a hidden past, and that past returned to haunt him last year - by way of an anonymous phone call.

Gilbert, 54, of Germantown is confronted by a 15-count federal indictment, the prospect of a lengthy prison sentence, long-term debt, unemployment and the loss of his house in foreclosure proceedings.

Prosecutors allege that Gilbert defrauded the Hartz & Co. Inc. clothing company by creating false invoices for up to $200,000 worth of goods and services, including lawn-care work, security and improvements at his home. Court records say he was reimbursed for personal expenses such as paying support to his ex-wife and rent on his girlfriend's Gaithersburg apartment.

Finally, according to court papers, he used Hartz's money to pay $500,000 in restitution to a Pennsylvania company for which he had previously worked.

"In a way, the person he may have hurt most was himself," said Jane Wilcom, a former co-worker and current executive at Hartz.

Gilbert's problems began in 1994, the year he was hired at Hartz using a resume that listed experience with the FBI, a degree from the University of Pennsylvania's prestigious Wharton School and extensive work as a financial consultant, according to court papers and lawyers familiar with the case.

Gilbert was promoted in 1996 from vice president to president and chief executive officer, which put him in charge of the Frederick plant, gave him authority to write company checks and placed him second only to Abraham Cohen, who as chairman of the board worked from the company's New York offices.

But Wilcom said that in the spring of last year, someone began repeatedly calling Hartz headquarters, asking to speak to Cohen and refusing to leave a name.

"It got to be annoying, but it was persistent, and when Mr. Cohen heard about it, he took the call," Wilcom said.

A few days later, Cohen received a copy of an article that appeared May 22 last year in The Morning Call, an Allentown, Pa., newspaper, describing how a Benjamin J. Gilbert recently had avoided going to jail by paying the $500,000 in restitution.

Gilbert had owed the restitution since 1994, when he pleaded no contest in a Pennsylvania court to embezzling $700,000 from an Easton, Pa., hosiery company where he had worked part time as comptroller in the early 1990s, according to the article.

Cohen, who has died, checked the company's accounts and found that $500,000 had been withdrawn from Hartz's accounts May 10 of last year, with a check payable to Gary Asteak, who was Gilbert's Pennsylvania lawyer, according to court papers.

Cohen hired an accounting firm to review the company's books and discovered that "as a result of Gilbert's dishonesty" a total of $1.3 million was missing, according to court papers.

Investigators say they have learned that Gilbert falsified his resume, omitting any reference to the Pennsylvania company from which the cash was embezzled. He also never worked for the FBI and never graduated from the Wharton School, they say.

"He listed jobs he really held, but changed the dates," said Wilcom, who became Hartz's human resources director recently and had no part in Gilbert's hiring. "For one extended period, he listed himself as a self-employed consultant, so even if they checked based on his resume, there would have been no way of knowing about his problems in Pennsylvania."

Efforts to reach Gilbert were unsuccessful this week. His lawyer, Joseph A. Balter, an assistant federal public defender, did not return phone calls.

Gilbert was fired May 30 last year, according to court papers.

But his problems are far from over.

Last month, a federal grand jury in Baltimore indicted Gilbert on charges of filing false income tax returns, mail fraud and making false statements when he applied for a $1.6 million mortgage in 1998 to purchase his house in the 15000 block of River Road, with its gated entrance, circular driveway and 5 acres of rolling woodlands.

His federal trial is scheduled for May 13. A conviction carries maximum penalties of more than 30 years in prison and $1 million in fines.

The indictment alleges that Gilbert defrauded Hartz by creating up to $200,000 in false invoices between August 1997 and May last year. As CEO, Gilbert had authority to approve payment of the invoices.

When Cohen confronted Gilbert in a meeting May 31 last year, he acknowledged "use of his company credit card for personal expenses and the filing of phony expense reports," according to court papers. He also admitted using Hartz's funds to pay the $500,000 restitution order, court papers allege.

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