Deposing Bloomberg: Mayor Not Anxious To Spill in Own Suit

In a development that could shed light on the closely guarded inner workings of Michael Bloomberg’s multibillion-dollar media empire, the Mayor is scheduled to submittoawide-ranging deposition on Jan. 11 as part of a bitter civil lawsuit which the company he founded is waging against a former associate, The Observer has learned.

Mr. Bloomberg’s lawyers waged a fierce legal battle to prevent the Mayor from sitting for the deposition, according to sources familiar with the situation. It marks another turn in a long white-collar crime drama that stretches back to the mid-1990’s and involves everything from a complex embezzlement scheme to charges of sexual harassment against Mr. Bloomberg that surfaced during his successful Mayoral campaign last year.

The deposition looms as a potential headache for Mr. Bloomberg at a time when he is trying to separate himself from his duties running a global financial-news organization and manage the transition from private to public citizen. He now may be compelled to answer a range of questions about his company, whose inner workings he has scrupulously shielded from public view. The deposition will take place at an undisclosed location; the lawsuit has been filed in federal court in Manhattan.

It won’t be the first time that Mr. Bloomberg has struggled to disentangle his aspirations as a public servant from legal battles relating to his private business career. During last year’s Mayoral campaign, for instance, a 1998 deposition from another sexual-harassment suit against him surfaced in which he was quoted as saying he would believe a rape charge only if it was supported by “an unimpeachable third-party” witness.

This week’s scheduled deposition has arisen from a lawsuit that Mr. Bloomberg’s company is pursuing against a Philadelphia-based architect named Alan Feltoon, who designed several office interiors for Mr. Bloomberg’s company, according to sources. Mr. Feltoon has been accused by Bloomberg L.P., which Mr. Bloomberg founded, of being part of a complex scheme to embezzle from the company. According to sources familiar with the case, a deposition of Mr. Bloomberg would seek to lay bare in intricate detail the inner workings of the top echelons of Bloomberg L.P., from questions about profitability to the boardroom tactics employed by Mr. Bloomberg’s top business lieutenants to Mr. Bloomberg’s style of corporate leadership.

Such a line of questioning, sources said, could serve to demonstrate that Mr. Feltoon’s movements were closely monitored by top Bloomberg management-including Mr. Bloomberg himself-which would serve as possible evidence that he couldn’t have been involved in a scheme to defraud the company. Indeed, sources familiar with the case said, the deposition could establish that Mr. Bloomberg was such a hands-on manager that he personally oversaw an internal investigation into the alleged scam, which is surprising given the immensity and scope of his company.

The scheduled deposition will set the stage for a dramatic legal battle, in which lawyers from Willkie, Farr and Gallagher-the firm that represented Mr. Bloomberg in his previous incarnation and continues to represent the company-may try to narrow the line of questioning aimed at the Mayor.

Federal Judge Richard Casey had ordered Mr. Bloomberg to appear by Dec. 31 of last year, sources said. Mr. Bloomberg’s attorneys managed to put off the deposition, sources said, but the date was fixed for

Jan. 11.

David Mair, a lawyer for Mr. Feltoon, refused to confirm the time or date of the deposition and declined any comment on the case. Mr. Feltoon refused to comment on any aspect of the situation.ChristineTaylor,a spokesman for Bloomberg L.P., declined to comment on the deposition, except to say that its contents will remain private.

Ed Skyler, the Mayor’s press secretary, said that the contents of Mr. Bloomberg’s deposition would not be made public.

The legal wrangling involving the new Mayor stems from an investigation into a scheme that a handful of former Bloomberg L.P. employees and associates allegedly used to embezzle millions of dollars from the company. The arrangement was brought to the attention of federal prosecutors by Bloomberg executives, and in May 1999 a former Bloomberg employee named Joseph Menno-the man charged with masterminding the scheme-ultimately pleaded guilty in federal court to defrauding the company of $1.5 million.

Lawsuit Surfaces

In an intriguing side drama, Mr. Menno’s wife, T. Diane Winger, was also charged as part of the scheme. Ms. Winger had sued Mr. Bloomberg for sexual harassment several years earlier, alleging that he had made explicit comments about her body and encouraged her to spend time alone with him. The lawsuit was withdrawn in 1999, but it surfaced during Mr. Bloomberg’s Mayoral campaign. It’s possible, though not likely, that Mr. Bloomberg may be forced to revisit this episode under oath during his deposition.

Afterthecriminalprosecution, Bloomberg L.P. launched a civil action against Mr. Menno and several other associates, including Mr. Feltoon, charging them with conspiring to defraud the company by inflating bills and then laundering kickbacks to each other. It was a complex scheme in which the defendants allegedly conspired to submit fraudulent and inflated invoices to Bloomberg L.P. for everything from food vending to parking costs, bilking the company for millions. The scheme was discovered when the company conducted an internal investigation into the activities.

In the suit, Bloomberg L.P. alleged that Mr. Feltoon, who was then doing architectural work for the company, knew about the scheme and facilitated it by passing embezzled funds between companies that had allegedly been set up solely to defraud Bloomberg L.P. Mr. Feltoon has adamantly denied knowing about the scheme or benefiting from it in any way.

Bloomberg L.P. dropped its lawsuit against Mr. Menno after he pled guilty to the scheme. But the company continues to pursue a civil action against Mr. Feltoon, despite the fact that, according to sources familiar with the situation, Mr. Feltoon never faced any charges as part of the investigation that resulted in Mr. Menno’s guilty plea. Mr. Feltoon, according to sources, even acted as a cooperating witness in that investigation.

“We brought the lawsuits against all parties to the fraud, and we have gotten back the money from all of them except for Feltoon,” said Ms. Taylor, the spokeswoman for Bloomberg L.P. “Therefore the case is continuing against him.”

Now the lawsuit has spilled into Mr. Bloomberg’s Mayoralty, which could have the unintended effect of forcing the city’s new chief executive to answer a range of detailed questions about his private-sector life.