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  But then, suddenly, she seemed to have plenty of money. She had bought a 1981 BMW 320i and paid the $17,700 purchase price with a cashier’s check, and then came up with another couple of hunded dollars for some extras. The BMW, Lewis noted, was registered in New Jersey at an address in Teaneck, the home of Edward and Jenny Soo Chin, who other than being Barbera’s assistant at Candor and her very close friend and frequent companion “does little else but watch her children.”

  In sum, Lewis concluded, there was nothing to point to her having committed any criminal acts. The only suspicious facts he could find was where she had come up with the money to pay for the BMW and where she kept her money, since she kept nothing in New York State, perhaps because she owed money in the state. But that was all.

  There was, though, something else that Margolies and Oestericher asked Lewis to do. They asked him to break into Barbera’s apartment and search it. Margolies was sure she had books and records of Candor somewhere in that apartment, he told Lewis, and they didn’t belong to her, she had stolen them, and he wanted them back. Lewis was appalled. He wouldn’t hear of doing such a thing. He had a license and Margolies was asking him to commit a criminal act that, if discovered, would cost him that license and drive him out of his profession.

  If Margolies was disappointed that Lewis would not do this bidding, still, the private detective had served a purpose. He had noted a few strange things about Barbera and her behavior, and he knew that Margolies was concerned about her and about her honesty and loyalty. Thus, should Margolies ever need a witness to testify that, as early as the spring of 1981 if not before, Irwin Margolies had been suspicious of his comptroller, he had one.

  So Margolies, with Oestericher’s help, was weaving a web to entrap Barbera. He had what he thought was solid evidence—on the surface, anyway—in the form of the Merrill Lynch slip, that Barbera had made away with nearly $800,000. He had Lewis’s report and Lewis’s memory of what he had seen and been told. And there was more. In the spring of 1981, the diamonds turned over to Margolies and Candor by Van Mopes had disappeared, and so had the diamonds turned over to Margolies by Oxenberg. Margolies was concocting evidence to show that it was not he but Margaret Barbera who had made away with them, and not only them but also Candor’s entire inventory of diamonds, worth, he would claim, about $2.5 million, and she was holding them for ransom, demanding an immediate payment of $100,000 in cash for their return.

  So Margolies was prepared to turn all the blame for all that had happened, to Maguire and everyone else, on Barbera. He was sure he had covered every aspect, that nothing could touch him. It was not that he expected his scheme to tumble yet. He thought it still had a long way to go before anyone caught on, and that there still were millions more to be made.

  And, then, suddenly, it all collapsed.

  13

  One hot evening late in the spring of 1981, two old acquaintances ran into each other at a cocktail party in Westchester County. One was an executive of John P. Maguire and the other an executive from the Zayre department store chain. They had known each other socially for years, and they often had met at such parties, since they had many mutual friends. They had not, of course, ever done any business together, Zayre not being in the habit of turning to factors for its short-term money, and Maguire not supplying funds to the retail industry nor, as it happened, having manufacturing clients who sold to Zayre.

  Sometime in the middle of that evening, the two found themselves alone in the middle of the crowd. There were some pleasantries, inconsequential conversation, and then the man from Maguire commented lightly that maybe one of these days they ought to have lunch in town to celebrate the fact that finally they were doing some business together.

  The man from Zayre looked blank. He wasn’t aware, he said, that Zayre had turned to Maguire for some factoring money, or that Maguire had moved into the retail financing business.

  The man from Maguire laughed. That wasn’t what he meant, of course, he said. What he meant was that Zayre was buying a lot of jewelry from Candor Diamond and that Maguire was factoring Candor’s sales, so in that way, at least, they were obviously on a business footing these days.

  The man from Zayre still looked blank. The name Candor Diamond rang no bells with him.

  Well, the man from Maguire said, he guessed people don’t always know what other people in the same company are up to.

  The conversation went on to other things then. But the man from Zayre kept thinking through the weekend about what his friend had said. There was something troubling about it. If one of Zayre’s suppliers was factoring its sales, which meant that Zayre would be sending checks to the factor, he was in a position to know. And he knew nothing, could remember nothing about sending any checks to Maguire, could remember nothing about a company called Candor Diamond.

  Back in the office on Monday, he did a little checking, then called his friend from Maguire. I think somebody’s putting one over on you, he said. I’ve looked at the records. Zayre did a little buying from this company, Candor Diamond, a couple of years ago. We took about two thousand dollars’ worth of their stuff. There wasn’t much demand for the jewelry and it didn’t sell very well, so that was the end of it. We haven’t bought anything from them since.

  That was very disturbing news, indeed. Candor had filed a number of invoices with Maguire showing very large sales and shipments to Zayre, had just filed another one declaring it had sold and shipped $124,000 worth of merchandise to the chain, and Maguire had deposited the required $105,400 in Candor’s account.

  The worried executive went to W. H. Casey, who recently had succeeded Peter O’Neill as the Maguire official in charge of the Candor account. What to do? A look through the records revealed that by that date, Candor was into Maguire for nearly $5.5 million that remained outstanding and unpaid. If Margolies was pulling a fraud, which it certainly looked as though he was, then Maguire was in very serious trouble. It could, of course, move rapidly and try to seize the Candor inventory of diamonds, which Margolies had given the factor a lien on and that the jeweler had said was worth $2.5 million. But that still would leave another $3 million owing. That was just too big a loss to swallow. Perhaps, Casey and others at Maguire, with whom he discussed the troubling situation, reasoned, a little quiet pressure might set things aright, might salvage something.

  Another Maguire executive had a friend who was an FBI agent assigned to the New Rochelle office in Westchester. He called his friend and explained the problem and the growing suspicions that Margolies had perpetrated a major fraud. The agent listened. Did Maguire want to press federal fraud charges? Not at the moment, the Maguire executive said. What the factor wanted was its money back, or at least as much of it as it could get. Maybe a little quiet investigation to see if, indeed, Margolies had committed a fraud, and if that turned up, then maybe a semi-official call to Margolies to tell him that the game was up, that all was known, that he was, at the moment, facing the possibility of a civil action, but that if he made good on what he owed Maguire, then perhaps no criminal action would follow and the whole thing would just fade away.

  It didn’t take long for the agent to discover that the feared fraud had taken place, though its dimensions still were unclear. But the call to Margolies resulted only in denial, only in Margolies’s claim that he didn’t know what the agent was talking about. And it did something else: It alerted Margolies. He knew now that the scheme was coming apart.

  He got further evidence of that a few days later, in mid-June. Casey called. Maguire, he said, had been marveling at the miraculous growth in Candor’s sales in the past few months. It was so miraculous that he wanted to bring a team of auditors into Candor’s offices and go over the books.

  When? Margolies asked.

  He’d like to do it right away, Casey said. But, unfortunately, that wouldn’t be possible. He and an important member of the audit team were about to go on a month-long vacation. They wouldn’t be back until the middle of July. How about then?<
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  Fine, Margolies said.

  That gave Margolies another month and he made the most of it. Invoices, claiming millions of dollars in sales and shipments, poured out of Candor’s offices and into Maguire. And within a week of that call from Casey, announcing the impending audit, Irwin and Madeleine Margolies applied for United States passports on an expedited basis. They claimed they had reservations for a flight to Israel in June. Actually, their travel plans, which were made only after the Casey call, scheduled them to leave for Tel Aviv on August 9. But they wanted those passports, and they wanted them as quickly as possible, ready for use in case of an emergency. They did more. They prepared for what might turn out to be a lengthy stay abroad. They prepaid three months of installments on the mortgage on their Westchester home. They paid notes given for the purchase of high-quality diamonds, notes that were not due for several months. They somehow managed to persuade Candor’s few legitimate customers, among them Caldor and the Army-Air Force Exchange Service, who knew of the factoring agreement with Maguire and had been paying the factor as required, to skip that step and pay their bills directly to Candor, which enriched them by another $100,000. And they began to siphon off more money and transfer it out of the United States, perhaps to enable them to live in the style to which they were growing accustomed. Through Bank Leumi in New York, Margolies opened a personal account at Bank Leumi Israel in Tel Aviv and then, between June 19 and July 23, he transferred $200,000 out of Candor’s New York account into that new personal one in Israel.

  Then Casey was back from vacation. On July 24, first thing in the morning, he called Margolies to invite him to lunch, not just with Casey but also with Casey’s superior, James Amato. It was hardly an invitation. It was an order. Margolies arrived. Casey and Amato told him that the audit was going to take place immediately. Margolies balked. That was impossible, he declared. The jewelry show was taking place over the weekend and into the following week. Everybody at Candor would be involved, and so nobody would be available to assist the Maguire auditors. They could come in sometime later the following week and go over the books, and they would have complete cooperation. Then Margolies turned back into his affable self. He invited Casey and Amato to visit the Candor display at the New York Hilton during the show and take a look at just how good the line was. Were they interested? They were. Fine, Margolies said, he would call and set a convenient time for the visit. Then, lunch finished, he departed, saying he would be in touch with Casey very soon.

  That night, Margaret Barbera went looking for Margolies. She had important things to discuss with him if they were to be prepared fully for the impending Maguire audit. She went to the Hilton, to the Candor booth. Margolies was not there. She went down to the Candor offices on Forty-seventh Street. When she reached the office doors, she could hear a lot of noise from inside, the sound of things being moved around, loud voices, perhaps an argument of some kind. She couldn’t be sure. But when she tried to enter, Scott Malen barred the way. She was not permitted into the offices, he told her. Why not? she asked. It was vital that she see Margolies without delay. Impossible, Malen told her. Margolies himself had given specific instructions that she was to be kept out. Barbera turned and went home.

  On Monday morning, July 27, Margolies called his travel agency. He and Madeleine, he said, had to leave for Israel right away. They couldn’t wait until August 9, when they were supposed to leave. Was there a flight that day? If so, they had to be on it. The travel agency checked. There were seats available on a TWA flight leaving that evening. Book them, Margolies ordered.

  Before he and Madeleine departed for the airport, he went to Bank Leumi and cashed a check for $15,000. And then he wrote two more checks, for $25,000 each, to Oestericher and Oestericher’s law partner, Norman Schwartz, and delivered them. The checks were for legal services, already rendered and to be rendered.

  And then they were off.

  Through the weekend, Casey waited for Margolies to call to set up the visit to the jewelry show. The call did not come. Monday passed and still he did not hear from his client. On Tuesday morning, he called Candor’s office and spoke to Thelma Williams, the receptionist. He told her he had been expecting a call from Margolies but it had not come, and he was wondering just when he could go up to the Hilton to see the Candor exhibit. Williams said Margolies was traveling and she had not heard from him for several days, but someone would get back to Casey.

  No one got back to Casey. He called Candor again on Wednesday and again on Thursday, and got the same response from the receptionist. He began to get very worried. On Friday, July 31, he called Harris Freedman, Candor’s accountant and, though Casey didn’t know it, Margolies’s partner in Gortz, Inc. He told Freedman that over the past couple of months, Maguire had been receiving an assignment of about $500,000 a week in Candor sales and had been depositing about $450,000 every week in Candor’s bank account. Suddenly it had stopped. Over the past week, he said, there had been no assignment of sales and no requests for advances. What’s up? he asked. Freedman had no idea. Could Freedman check, Casey asked, since he had been unable to locate Margolies all week? Freedman agreed.

  Later in the day, Freedman called Casey. He had called the Margolies home in Westchester, he reported, and had spoken to Madeleine’s parents, Herman and Molly Malen. They told him they had no idea where Irwin and Madeleine were and that they were staying at the house to take care of the two boys.

  Casey immediately called Candor again. Once more, Thelma Williams told him that Margolies was away. But this time she said that his brother-in-law, Scott Malen, was in charge. He asked whether she knew if there would be any sales assignments for that week. She didn’t know, and then she asked if Maguire was going to make an advance so Candor could meet its payroll.

  Casey was a very worried man. He decided it was time to do some very close checking. He ordered his collection department to begin trying to verify the nearly $6 million in accounts receivable assigned by Candor to Maguire.

  Over the next twenty-four hours, Carlos Paniagua, Maguire’s collection manager, made thirteen calls to thirteen supposed Candor customers. All but two denied they had ever bought or received or been billed for any Candor merchandise. The two exceptions were Caldor and the Army-Air Force Exchange Service. And Caldor said yes, they had bought Candor jewelry, about $3,500 worth, but that the money had not been paid, since it went against a $31,716 debt owed to it by Candor. According to the invoices assigned by Candor to Maguire, Caldor had purchased $415,000 worth of trinkets during that period.

  Over the same period, Paniagua’s next in command, Peter Paul Petraglia, called sixteen other supposed Candor customers. Every one of them denied having any record of open accounts with Candor, though a few said that in the past they had bought jewelry from the manufacturer, but not in the amounts Petraglia questioned them about. On his books, for example, Helzberg’s Diamonds in Kansas City owed Candor, and thus Maguire, $342,000. On Helzberg’s books, the amount bought from Candor during all of 1981 was only $32,000, and that had long since been paid.

  Casey was staggered. It now looked as though nearly every assignment of sales by Candor to Maguire had been a fiction, and Maguire had advanced millions against nothing. He called Harris Freedman and broke the news to him. Freedman said he was thunderstruck. When Casey asked, Freedman agreed to go with the Maguire official to Candor’s offices, look at the books and records, and check to make sure that the gold and diamond inventory was intact, was worth the more than the $2.5 million that Margolies had claimed in his agreement with Maguire, giving Maguire a security interest in that stock.

  On the afternoon of August 7, Casey, Freedman, and one of Freedman’s associates made the trip to Forty-seventh Street. They were greeted by the receptionist, Thelma Williams. They told her they had come to examine the books and records and take a physical audit of the inventory. She told them Malen was away, at the bank, and she could not let them in.

  Later, two more Maguire officials made the journ
ey to Forty-seventh Street. They, too, were blocked at the door. Casey called the office, spoke once more to Williams, asked again if he could come to Candor. Once more she told him Malen was not in and she could do nothing without his permission. Casey asked if Candor intended to assign any more sales or request any more advances. Williams said she didn’t know. And then, just before the conversation ended, she asked, plaintively, if she was going to be paid that week.

  Maguire officials now summoned their attorney, David Blejwas of Hahn and Hessen, for advice. When Blejwas heard what they had turned up—that about 80% of all the invoices assigned to Maguire for payment since the beginning of the factoring agreement were phony, and that nearly all of those submitted since April 1981, on which more than $5 million had been advanced, had no basis in reality—he said that the only answer was to throw Candor into bankruptcy and thus try to save what could be saved, if anything. On August 10, Blejwas went into Bankruptcy Court and made his arguments won his point, and obtained an order declaring Candor involuntarily bankrupt. The court then authorized an interim trustee and a federal marshal to enter Candor’s premises, by force if necessary, and seize the company’s assets.

  Before the day was out, the trustee, the marshal, and Maguire representatives were in the Forty-seventh Street offices. They searched every corner. They went through the inventory and what books they could find. When they left, they were filled with disbelief and shock. The inventory was practically nonexistent. There was only about $10,000 worth of jewelry. Half the books were missing. And the bank records revealed that Candor’s account stood at $52,000.

  PART THREE

  DEALS

  14

  They were no innocents abroad, taking in the sights and sounds of the Holy Land and the Old World with wide-eyed incredulity. Irwin Margolies later would say that the trip was a long-planned vacation, not a hurried flight, that it was a needed respite from the incredible pressures of his hectic business, and that it was also an attempt to combine a little business with some deserved pleasure, to renew old contacts and make new ones, to find sources for the materials he needed to make his jewelry, to sell his merchandise in new markets, and to settle some business problems. He and his wife, he would say, had not traveled in high style. Far from it. They had actually lived on the edge of penury while abroad. To pay for the trip and to pay off some outstanding business obligations, he had been forced to sell Madeleine’s engagement ring, earrings, and other jewelry within days of their arrival in Israel.