Mr. Zherka’s Plea
By Mary Keon
On Thursday, August 27th, our publisher, Sam Zherka returned to court, appearing before Judge Cathy Seibel. Reading from a prepared statement, he pled guilty to one count of a Superceding Information that was filed against him which charged Conspiracy, in violation of Title 18, United States Code, Section 371, carrying a maximum term of imprisonment of 5 years, a maximum term of supervised release of 3 years, a maximum fine of the greatest of $250,000 or twice the gross pecuniary gain derived from the offense, and a $100 mandatory special assessment. The charges referenced false statements on a loan application to Sovereign Bank; making and subscribing to false tax returns; and assisting another to file false tax returns. Mr. Zherka admitted the conduct he pleaded guilty to in the superseding information and admitted his liability for that particular conduct.
The agreement does not bar the Tax Division of the Justice Dept. from using this conduct as a predicate act or as the basis for a sentencing enhancement in a subsequent prosecution including, but not limited to, a prosecution pursuant to 18 U.S.C. §§ 1961 et seq.
The United States Attorneys moved to dismiss any open Count(s) against him. The agreement does not provide any protection against prosecution except as set forth above and he is prohibited from filing as a prevailing party under the Hyde Amendment, preventing him from suing for prosecutorial misconduct.
Mr. Zherka will pay a monetary fine of $5,232,922.63 as forfeiture for Count One along with restitution in the amount of several outstanding judgments along with accrued interest on a property he formerly owned in Tennessee.
Under the agreement proffered by the U. S. Attorneys, he is also required to pay restitution to Robert S. Ryan for a monetary judgment in a civil case and interest accrued on this with the caveat that if Mr. Zherka is successful in vacating the Zherka v. Ryan judgment with newly discovered evidence of perjury, he may appeal to have this judgment reduced or rescinded. Mr. Zherka is also required to prepare revised personal and business tax returns for the years 2004-2014 within 30 days, pay any additional taxes, satisfy any additional Federal, New York and Massachusetts taxes, tax warrants, fraud penalties and interest accrued as a condition of probation.
The plea commands Mr. Zherka to dismiss with prejudice, two lawsuits against all defendants therein: United States of America, ex re, Sam Zherka, appearing Qui Tam v Sovereign Bank, Santander Holdings, U.S.A., Banco Santander, S.A., 12 Civ. 4464 (EDNY) and Selim ‘Sam’ Zherka v “Agent” Ryan of the Federal Bureau of Investigation, “Agent” Ashcroft of Internal Revenue Service, Lois Lerner, sued in her individual capacity, 13 Civ. 3940. (SDNY).
In 2007 Mr. Zherka purchased a package of multifamily apartment buildings in Tennessee. The seller misrepresented the tenancy to him, describing 10% of the tenants as military employees. On the day of the closing, the property incurred millions of dollars in damage from a hailstorm and several months later it turned out that far more than 10% of his tenants were military employees, a fact Mr. Zherka learned when they were deployed to the Middle East, eviscerating the rent roll. This property is the subject of the Qui Tam case involving bankers at Sovereign Bank, underwriters for Fannie Mae. Though this property went into foreclosure, it was through no actions of Mr. Zherka and this is stipulated in the plea agreement.
The negotiated plea capped 11 months of intense litigation in pre-trial conferences. Mr. Zherka clearly accepts responsibility for the acts to which he has pleaded guilty. However, those acts, false statements on a loan application to Sovereign Bank and tax filing inaccuracies, rarely, if ever, result in the treatment and penalties imposed and sought by the government and court in this case. Though Mr. Zherka preferred to go to trial, the reality is that he would run the risk, if convicted of even one charge, of a ten-year minimum jail term, should the jury not understand the intricacies of commercial real estate, real estate flips, finance and family trusts; a risk that as a husband and as a parent, he did not feel free to take.
Mr. Zherka’s has spoken out against powerful politicians through the years and his many enemies are no doubt delighted with the outcome. The penalties against our publisher are harsh: designed to hobble him financially and to serve as a cautionary tale for others who choose to speak out, forcing him to live his own personal version of Jean Valjean in Les Miserables. Even if the government succeeded in winning a conviction against him, persons convicted of the crimes he was accused of, do not do time at level 6 prisons such as the Manhattan Correctional Center where Mr. Zherka has spent the past 11 months; they are placed in much less restrictive facilities.
At sentencing Judge Seibel, who smiled brightly through the entire proceeding, stated several times that she is not bound by the agreement proffered by the United States Attorneys, nor by their estimated sentence calculation. She declined to give Mr. Zherka a brief parole, with a security bracelet requirement, to settle his business affairs in order to comply with the requirements of the U. S. Attorneys. He was remanded back into the custody of Federal Marshalls and returned to Manhattan Correctional where he will remain until his sentencing hearing scheduled for Dec. 22, 2015.