Last Monday, in a windowless courtroom in Riverhead, L.I., George Guldi approached a wood lectern and delivered a lesson in aesthetics. A former Suffolk County legislator, Mr. Guldi is currently defending himself against charges that he stole an $853,000 insurance check, following a fire at his home. But what color was the check? he wanted to know. The witness called it “blue or tan.”
“Tan can be yellow,” Mr. Guldi pointed out, straining to seem nonchalant, his belly dangling over his leather belt. “Is it possible the check was red?”
“I don’t believe so,” said the witness, Ethan Ellner.
“Blue and yellow are only two of the primary colors,” said Mr. Guldi. A prosecutor’s objection struck that remark from the record, and the bizarre trial whirled onward.
For more than three weeks, before 12 jurors and a steadily growing audience of press and local citizens, Mr. Guldi has huffed and puffed, invoking everything from steroids to Lord Voldemort in a desperate attempt to discredit his accusers and salvage his good name. He has turned what was meant to be a weeklong trial into a war of attrition, and he is just getting started.
In March of 2009, the district attorney’s office charged Mr. Guldi, Mr. Ellner and three others with an incredible mortgage-fraud scheme, one whose $82 million haul ranks among the largest in state history. This strange investigation touches on almost every aspect of life in Suffolk County, including the Hamptons, and stretches to Manhattan in the form of mortgage trial codefendant Donald MacPherson, who owns the SoHo Journal and a downtown fetish photography studio. Five months after the allegations of mortgage trickery, Mr. Guldi was arrested a second time and charged with insurance fraud. Because of its comparative simplicity–four felony counts, as opposed to a staggering 110–the insurance trial began first.
Although only a prelude to the main event, this trial, expected to conclude sometime within the next week, is no trifle. Each charge carries a minimum five-year sentence, and a conviction would mark Mr. Guldi as a criminal in the eyes of future juries, making the already daunting mortgage-fraud trial, tentatively scheduled for later this year, an even steeper climb.
In his opening statement, Mr. Guldi made a play for the jury’s sympathy. “I lost everything,” he said, his normally powerful voice lowered for effect. He is not accused of setting his house on fire, but of pocketing the insurance company’s $853,000 check, which was supposed to be deposited in escrow and put toward the home’s reconstruction. Instead, Mr. Guldi, prosecutors say, stashed the money in a private account and left the destroyed home to fester.
“This insurance check was my money, not the bank’s,” he told the room, with mournful sincerity. “They’re prosecuting me for taking my own money!”
Mr. Guldi is a bulging man, with a great squeezed reptilian neck, brillo-pad hair and pockmarks dotting his face. He has a penchant for colorful bow ties. In court last Monday, his tie was orange, his suit tan, with bits of fraying visible along a shoulder seam and a pant leg. Besides occasional barks of laughter, Mr. Guldi’s expression was mostly stern; at one point, he stared down a giggling toddler in the back of the courtroom.
Raised in Westhampton Beach, the 56-year-old millionaire has been a fixture of political life in Suffolk County for two decades. He used the wealth that came from a successful real estate law practice to put three sons through college and raise two more children with his second wife.
The 2008 recession, however, devastated his business; his second marriage collapsed; and a fire destroyed his sprawling Westhampton Beach home, which was also the house he grew up in. A few months after Mr. Guldi’s arrest the following year, District Attorney Thomas Spota froze his assets, forcing him to slowly sell off his possessions and dismiss his legal representation.
“I can’t count the number of times that the electricity’s been off at [his] office, or he’s lost computer service at home, or the cell phones have gone off,” said Terri Scofield, a loyal ex-girlfriend of Mr. Guldi’s who has chronicled his court battle on the message board 631Politics.com. Her daily transcripts of the court proceedings, taken down in longhand, include not just every moment of legal minutiae, but also fanciful flights of observation, like her note on Feb. 4 that “I almost dry retch when I notice number eight is picking his nose AGAIN!”
Ms. Scofield, a hyperkinetic citizen journalist, has known Mr. Guldi for nearly 20 years, and she describes a very different man from the stubborn crusader on display in Judge Doyle’s courtroom. On the phone last week, she called him “wickedly funny,” “fairly spiritual” and “big on thrill,” a downhill skier with an abiding love for his children and his Harley.
“He’ll do stuff like outrun the cops,” she told The Observer. “He calls the bike his vibrator.”
Mr. Guldi was not born rich. He comes from a family of electricians with deep roots in the area–they did the wiring for the Vanderbilt estate on the North Shore–and he trained to join the business before deciding to go into law. Building a fortune as a property lawyer in the booming Hamptons real estate market, he was elected to the Legislature in 1993.
“When he was engaged in legislation, he was very engaged,” said Vivian Viloria-Fisher, one of Mr. Guldi’s fellow legislators. “When he didn’t deem it to be important, he wasn’t.” Meetings of the Guldi-dominated Ways and Means Committee dragged on, she said, “because he would talk and talk and talk.”
He embraced big causes, opposing development that threatened the East End’s parks and sponsoring legislation for sweeping housing reform. In 1995, he spearheaded a campaign for pool safety, after finding a neighbor’s child drowning in his backyard pool. He dove in to save the child, but the boy died soon after.
Although impressed by the ease with which he “sold the room,” Ms. Viloria-Fisher remembered Mr. Guldi as a man who talked down to his aides and had “a sense of immunity to those rules that govern everybody else.” That he is defending himself is appropriate, she went on, because “there’s no other lawyer as brilliant as he thinks he is.”
In 2003, Mr. Guldi ran for reelection against Jay Schneiderman, and the race turned vicious as only local politics can. In one debate, he accused Mr. Schneiderman of taking money from drug traffickers; at another, he declared that the U.S. attorney’s office had investigated Mr. Schneiderman for fraud.
These were not outright lies, but distortions of innocent facts: The fraud charges were determined to be baseless, and the supposed drug trafficker was in fact a donor to Mr. Schneiderman who had helped the F.B.I. arrest one of his own employees for smuggling–an act of courage that won him the Presidential Medal of Honor.
“He didn’t lie, he just skirted, he shaped the truth in a crafty, clever way,” said Mr. Schneiderman, who won the election and sent Mr. Guldi back into private practice.
According to Ms. Scofield, he was happy to be out of politics, because putting three boys through college, paying alimony and supporting an ex-wife who didn’t work was impossible on a legislator’s salary. Returning to private practice also meant more money for his hobbies, which included collecting rare guitars and flying small planes. But then in late 2008 came an expensive divorce from his second wife, who took their two young children and moved out–”as soon as he stopped marking $50,000 a month,” said Ms. Scofield.
As badly as 2008 ended, 2009 started off worse when the district attorney’s office raided Mr. Guldi’s offices in Westhampton Beach, leaving with nearly all his computers and 49 boxes of files. Soon after came the arrest for mortgage fraud, and the legal battles that have consumed his past two years.
Although it seldom received sweeping headlines, mortgage fraud was the It Crime of the past decade. The massive scope of this quiet crime wave, supported by the same easy lending bubble that led to the recent recession, did not become apparent until the market’s 2007 collapse. New York was one of the hardest hit–a LexisNexis survey released last summer placed the state second in national mortgage fraud, outpaced only by Florida.
The indictment explains several different ruses Mr. Guldi used to fool banks into making unwise loans. A typical instance involved a house in Water Mill owned by Mr. Guldi’s father, which went into foreclosure in 2005, the result of an unpaid $1.5 million mortgage. In 2008, Mr. Spota’s office alleges, the defendants falsified the property’s title, making it appear that the house carried no mortgage at all. Using a stolen identity–a “straw buyer”–they purchased the house with a new $1.8 million mortgage, pocketing the money and letting the bank foreclose on the property.
With homes valued so highly, profits piled up quickly. Marcus Asner, who formerly headed the Southern District’s Major Crimes Unit and now works in white-collar defense at Arnold & Porter, said the $82 million charge in the Guldi case was the largest he had heard of in the region. The complexity of such a scheme, he said, would be staggering. “In a case like this, someone would have to manage a number of straw buyers for a number of properties all at once,” he said.
Some of the straw buyers were reportedly employees of Arena Studios, a fetish photography outfit on Broome Street, now shuttered. When the shop’s owner, Mr. MacPherson, was arrested, along with his wife, the New York press had a field day–painting her as dominatrix and him as an S&M mogul. (Mr. MacPherson “took a beating” on his East End investments, joked The Daily News.)
Last month, at a small cafe near the SoHo Journal‘s offices, Mr. MacPherson, 66, spoke very carefully about the crimes he and Mr. Guldi have been accused of committing. A dignified man, he is tall, with long gray hair and thick, caterpillar-like eyebrows. Whether by accident or design, the former fetish entrepreneur comes across more like a classics professor than a crook.
“I see my primary occupation as a journalist,” Mr. MacPherson told The Observer. Though he owns a home and several businesses in the Hamptons, his priority has never been real estate, he said, but maintaining Soho’s “sadly neglected” artistic heritage. Like Mr. Guldi, he is drawn to large causes. He opposes the proliferation of billboards in the neighborhood, for one. Perhaps more importantly, he has fought to recover statues by an artist named Bob Bolles, forgotten pieces of artwork that, as Mr. MacPherson explained, were removed from a park on Broome Street in 2000 and left to rot on Randall’s Island.
Mr. MacPherson met Mr. Guldi through his former attorney Thomas McVann, a partner in the Guldi firm. Over the course of the decade, he said, he worked occasionally with Mr. Guldi without ever becoming close.
“I think he’s a little bit crazy,” said Mr. MacPherson, “but I mean that as a compliment.” When pressed on this apparent paradox, he described his co-defendant as “a very opinionated individual who believes strongly in his point of view.”
Mr. Guldi had been planning a bid to reclaim his old seat in the Legislature when the arrest warrants came down, and he did not let the indictments stop him. After securing release on a $500,000 bail, he went on with his plans for the September primary against his old opponent, Jay Schneiderman.
“That’s the boldness of the man,” said Ms. Viloria-Fisher, the sort of behavior that “sometimes makes you wonder whether he knows what the boundaries should be.”
“It was strange that he still considered himself viable,” said Mr. Schneiderman, who won handily. “Granted,” he said, “it’s not a big choice: George Guldi or myself.” He joked that Mr. Guldi got less votes than he did indictments, which is not quite true. Although indicted on 110 counts, in the September primary Mr. Guldi received 163 votes.
The prosecution’s key witness is Mr. Ellner, a lawyer alleged to have assisted in the mortgage scheme. A year ago, he pleaded guilty to fraud charges and has been testifying against Mr. Guldi as part of his plea bargain. Burly and bearded, wearing a gold chain and cowboy boots, he recalled the story of a car ride in which he claims that Mr. Guldi laid out his plan to abscond with the $853,000 check, a damning tale to which Mr. Guldi offered a blistering response.
The cross-examination began with a warning from Judge Doyle. “Both of you went to law school,” he said. “Act courteously.”
Courtesy faded fast. Attempting to discredit the witness, Mr. Guldi painted him as a steroid abuser, a perjurer and a snitch. In an attempt to depict his former associate as a chronic betrayer of friends, he asked how many of the people Mr. Ellner had testified against had also attended his wedding. Then he asserted that Mr. Ellner had opened up his own mother to an accessory charge by telling her of some of his crimes.
“Isn’t it a fact, Mr. Ellner,” he asked coolly, “that by that testimony, you threw your mother under the bus?”
That and many other questions were quickly struck down by Judge Doyle, who began saying “sustained” before Assistant District Attorney Thalia Stavrides had a chance to rise from her seat and object. The frustration of watching Mr. Guldi defend himself began to affect her, and she spent much of the afternoon rubbing her temples, eyes screwed shut.
In his continuing effort to characterize Mr. Ellner as a villain, Mr. Guldi has recently attempted to establish a connection between the witness and Steve Levy, the Suffolk County executive who left the Democratic Party last year in a failed attempt to gain the Republican nomination for governor. Mr. Levy, who is up for reelection in the fall, has admitted to recommending Mr. Ellner for about $85,000 in county work, and Mr. Ellner, on the stand last week, said that he had donated more than $8,000 to the executive’s campaign. But Mr. Guldi has not been able to do any more than imply that a bribe was made.
In the first days of the trial, he served Mr. Levy with a subpoena that was later quashed. Since then, Judge Doyle has made it clear that any mention of Mr. Levy is ancillary to the matter at hand. By Monday, Mr. Guldi had taken to referring to the executive as “He Who Must Not Be Named.”
Mr. Guldi’s supporters, who gather on Ms. Scofield’s blog–20,000 unique visitors in the past three weeks, she points out–interpret Judge Doyle’s behavior as the most transparent sign of a conspiracy that stretches the length of Suffolk County. In particular, they believe that Mr. Guldi is being targeted for his bold legislative work in the ’90s. Optimists all, they consider Ms. Stavrides to be on the run, and are convinced that an acquittal is imminent. To one degree or another, they have all been charmed by Mr. Guldi, who has an intellect that even his opponents admire.
“I thought George was a really bright guy,” said Mr. Schneiderman. “In that sense, maybe I’m more surprised that he had gotten caught.”