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"I was supposed to be going with Norm," Pomilio told a private investigator later. "In fact, he gave me a ring." After Norm went back to his wife, Pomilio thought of selling the ring and had it appraised. "It wasn't even a diamond," she said. "It was CZ [cubic zirconia, a fake diamond]...I thought, 'That son of a bitch!'"

Norm says these days that it was all an act, that Pomilio was not even his girlfriend. "I met her at the Top of the Trop," he says, referring to a club at the hotel where he usually stayed. "I think I banged her that night. But that was it."

After the Atlantic City trips, the IRS phased Berger out of the investigation and replaced him with an undercover IRS agent actually in the government's employ. Berger told Gray he was being promoted to "capo" and would be busy with other mob matters. "Norm worked best making the introductions," says Webster. "He was in his eyes the star government witness, when he was in fact the introduction. His bravado...was important, but most of the subsequent transactions took place once the IRS agent took over."

By that, Webster meant another series of bank transactions -- taking the money from Atlantic City, depositing it in a fake business account in Reunion Bank in Dallas, then running it through a bank account in Toronto that happened to be operated by the Canadian Mounties. In all the shuffling, the government let most of the money from the cashed checks flow back to Gray. It was never recovered.

Gray and his wife spent lavishly on cars, houses, and things such as "$4,000 lunches at Cabaret Royale. There was ostentatious wealth, lots of traveling," recalls Webster. In all, the government recovered about $3.3 million in investors' funds, Webster says, and the yearlong undercover operation yielded a well-documented case against Gray, his wife, and several associates. They were charged with conspiracy, money laundering, and wire fraud. Gray was convicted of 27 counts and sentenced in October 1991 to 12 years in prison. Marty Weisberg, a New York attorney who worked with Gray, was acquitted.

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.

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Thomas Korosec
Contact: Thomas Korosec