By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Eric Nicholson
Had Gray and his attorney not mounted a vigorous defense, Norm's alleged shenanigans -- his purported scam against the scammers -- never would have come to light. "They had private investigators running around Atlantic City, checking out everything they could about Norm and his friends," Webster recalls.
Defense attorney Charles Blau was the first to mention some checks missing from the two packets of checks and money orders Gray and Berger were supposed to have deposited in the account in Jersey.
Blau's client, Weisberg, had been on one of the Atlantic City trips. "Gray was completely sucked in by Berger," says Blau. "My client didn't know what to make of him. Here was this guy who claimed to be a mobster whose girlfriend used to go out with Don Corleone."
According to the IRS internal-affairs investigative report prepared in Berger's case, Blau first alleged that IRS agents had procured the prostitutes in Atlantic City. As an IRS internal-affairs agent got to work investigating that charge, the issue of about $70,000 in missing checks also arose.
Berger, who had handled nearly all the peso investors' checks in Atlantic City, had told IRS agents that Weisberg had taken the checks. He testified under oath at Gray's trial that he thought Gray had given the checks to Weisberg -- a scenario both men denied.
Dennis Wilson, the IRS internal-affairs investigator assigned to the case, began an exhaustive investigation into the checks. He followed bank records, tracked checks back to scammed investors, and questioned a long list of Berger's associates in Atlantic City. Nearly three years later, he emerged with evidence of an interconnected set of transactions in which Berger is alleged to have stolen 38 checks worth about $123,000 -- right out from under the noses of Gray and the IRS agents with whom he was working. Berger, he reported, then either used the checks as the basis for high-interest, short-term loans to several Atlantic City acquaintances or gave them directly to his girlfriend Pomilio to cash for him. All this happened in the weeks and months following Gray's trips to the coast.
"They accused me of loan-sharking," says Berger, who denies any wrongdoing.
Here's how one of the transactions worked, according to Wilson's interviews with Berger's Atlantic City chums: Joe Galanti, an old friend of Berger's who owned a motel in Ventnor, New Jersey, said Berger gave him two of the investors' cashier's checks -- one for $20,000, which bounced, and another for $24,000, which cleared. Galanti says he wrote a check to Berger's girlfriend -- on Berger's instructions -- for $4,000 and loaned the other $20,000 to a man named Edward Griffith. Griffith told the IRS investigator that he had asked Galanti for a loan and that Galanti obliged by lending him Berger's money. To pay back the loan, Griffith wrote Berger 22 checks for $1,000 each, meaning Berger received 10 percent in interest for the five-month loan. The principal, of course, was money Berger allegedly had just stolen from the targets of the IRS investigation.
Gray, too, says he received a Berger gambling loan in Atlantic City, paying back $20,000 for borrowing $15,000.
In the largest of the transactions, Pomilio says, Berger asked her to cash a batch of 33 checks and money orders for him. He told her he needed her help because he didn't have an account at a New Jersey bank. Bank records show that the money orders were deposited in Pomilio's account and that she withdrew the money in cash.
Yet another Berger associate, Marty Mazurek, a friend from the clothing business, told investigators Berger agreed to lend him $20,000 so he could complete work on a swimming pool at his house. Berger is alleged to have given him one of the peso investors' checks, but a stop-payment order had been placed on it, so the loan was never made.
The agents watching Berger never picked up on all these transactions, and there are several explanations why. For one, Berger refused to wear a concealed microphone or recording device in Atlantic City. He had told agents that if one of his mob friends were to come along and hug him, it could get dangerous.
Beyond that, only two agents had the job of watching Berger and several targets. "I'll be the first to say that investigation was a little fast and loose," says Webster, the prosecutor. "The Ponzi scheme was working fast and hard, and there weren't enough people on this case. Norm was without sufficient supervision, and the agents weren't in a position to account for every check."
"He [Norm] was running the case, flat out," alleges Blau, the Dallas defense attorney who worked for 20 years as a federal prosecutor. "We traced a couple of the missing checks, and it turned out these people who cashed them were Norm's bosom acquaintances. The government didn't know anything about them until we brought it up."
The checks formed the heart of an indictment handed up against Berger in 1994 alleging 47 counts of embezzlement and fraud -- a case that went to trial in the summer of 1995 and could have put Berger in prison for the rest of his life. "They wanted me bad," says Norm.
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