Dimitry Sheinman in Inwood Hill Park with his daughter and his dog in 2004. (Photo: TheSheinmanSource.com)

Dimitry Sheinman is an author, painter, self-proclaimed clairvoyant and, most importantly, a suspect in the brutal 2004 killing of Juilliard student Sarah Fox.

In June, after several years in Africa, Mr. Sheinman returned to New York to deliver police information that he claimed he obtained through psychic visions—and to shop around a book about his experience with this still-unsolved Manhattan murder mystery.

About a month after Mr. Sheinman’s re-emergence, the Fox case sprang back into the headlines when an unnamed official told reporters that DNA from a discman found near Fox’s body matched a chain that Occupy Wall Street protesters used to hold open gates at subway stations to provide commuters with free rides. A day later, another unnamed official revealed the DNA match was the result of an error: evidence from both cases was tainted by a lab worker.

In 2004, then-DA Robert Morgenthau said that Mr. Sheinman was the “number-one suspect, but there is not enough evidence to charge him.” Police and the district attorney’s office declined to update that statement, and the investigation is still open.

The Observer sat down with Mr. Sheinman at a Midtown bar earlier this month. Accompanied by his wife, Jane, who has stood by him since he was named as a suspect in the Fox case, he was unassuming, with closely cropped salt-and-pepper hair and well-muscled arms poking out of a tight T-shirt.

Mr. Sheinman, who was born in Moscow, spoke rapidly, with a thick Russian accent, fixing his wide blue eyes intently on us throughout the conversation. As a demonstration of the existence of psychic “sensitivities,” he asked us to hold our arm across the table.

“This might be a little strange for you, but look at this, I’m not going to touch you,” he said, passing his fingers over our skin and ever-so-slightly grazing the arm hairs that rose up as he moved. “Here you’re starting to feel what I’m doing, and at first you didn’t, but then you did. And so, I was pulling a little bit on your flesh. I can go more deeper, then I know things about you. It’s like a computer, 0-1-1-1-0-0. That just shows me your amount of sensitivity; people sometimes block it. Like, I also—I know what you feel, it sounds creepy to regular people.”

Indeed, Mr. Sheinman’s claims do sound disturbing to some. According to Mr. Sheinman, detectives began suspecting him in the Fox case after his first psychic vision, which occurred while he was being questioned in the police precinct. He details the experience in the third chapter of his manuscript.

While looking at a map of Inwood Hill Park, where Ms. Fox was found naked, strangled and surrounded by tulip petals, Mr. Sheinman writes that he was “transported to the murder site, suspended from above,observing the nightmare unfolding below,” with Ms. Fox “hovering over the crime scene” beside him. Mr Sheinman said he shared his observations with the police in an attempt to help them solve the crime.

“I had a vision of the killer grabbing her and punching her and, as a result, smashing her ribs. So I said maybe she has a broken rib,” Mr. Sheinman remembered.

A question from the police provoked another psychic revelation, he said.

“They asked if he f--ked her. ...You know, they tried to speak in that kind of a tone to, like, strike up camaraderie between sick minds,” said Mr. Sheinman. “I saw her clothes neatly piled up ... and her tampon, on top of the clothes. So I thought, my God, she had the period. Probably not, that’s what I said.”

After he was questioned, police asked Mr. Sheinman to return to the 8precinct again. During this visit, he made another observation about the crime. However, Mr. Sheinman said he’s not sure whether it was genuine clairvoyance.

“This one big-shot detective was insinuating a stick, so I don’t even think it’s a clairvoyant vision ...Then they go, ‘Did he put a stick into her?’” Mr. Sheinman said. “Then he was showing me with his hand, and then maybe clairvoyantly, or whatever, I thought maybe he did, but I’m not sure that’s pure clairvoyance.”

Whether it was clairvoyance or not, Mr. Sheinman said his three revelations about Ms. Fox’s death all proved correct. Since they also all involved facts investigators hadn’t revealed to the public, Mr. Sheinman became the police’s main suspect.

Mr. Sheinman steadfastly maintained his innocence and refused to have further discussions with detectives.

Both the NYPD and the Manhattan District Attorney’s Office have declined multiple requests to comment on this case.

Prior to his trance at the precinct, Mr. Sheinman’s neighbors brought him to the attention of the police. Mr. Sheinman often walked his dog in the park where Ms. Fox’s body was found, and he admits he regularly got into minor altercations when people questioned him about why the large Rhodesian Ridgeback wasn’t on a leash. In his book, Mr. Sheinman
detailed the “unpleasant” experience of being “pestered every other second” by people concerned by his dog.

One year after Ms. Fox’s murder, Mr. Sheinman got into another confrontation in the park that resulted in him being charged with
assaulting another man and spending 59 days on Riker’s Island. Ms. Sheinman claims the incident occurred after the other man’s dog jumped on her and that the man was clearly aware of Mr. Sheinman’s status as a suspect in the Fox case.

“He punched someone whose dog jumped on my belly. I was eight months pregnant lying in the meadow in Inwood Park,” Ms. Sheinman said. “My husband pulls the dog off, and suddenly the owner is right there screaming ‘You bloody murderer!’ And he punched him.”

According to The Daily News, law enforcement sources said Mr. Sheinman’s assault prosecution was “part of a psychological squeeze on Sheinman as the anniversary of Fox’s slaying approache[d].” However, Mr. Sheinman’s arrest yielded no new information about the Fox killing, and the experience convinced the Sheinmans to get out of the country and move to Cape Town once he served his sentence.

While in South Africa, Mr. Sheinman began writing his book. He said he used his psychic abilities to travel to the past and review the events surrounding the murder as they happened.

“I had to go back in time and see how the whole thing was happening,” Mr. Sheinman said. “I literally felt what the police ate, how the coffee bubbled up in their stomachs.”

Mr. Sheinman also said he has gotten in touch with other professed clairvoyants to work on solving the Fox case. Along with four other alleged psychics, Mr. Sheinman said he had visions about the murder that led him to focus on the name of a man that he believes may have been involved in the murder.

When he arrived back in New York City last month, Mr. Sheinman delivered the police a letter with information gleaned from himself and his fellow clairvoyants. Mr. Sheinman invited the press to wait outside as he brought the envelope into the precinct. Law enforcement sources told the news site DNAInfo they were “unable to question Sheinman further because he still has an attorney of record dating back to when he was originally questioned in the case. Mr. Sheinman’s letter named a former teacher of Ms. Fox’s at Juilliard who was reportedly ruled out as a suspect eight years ago.

Mr. Sheinman dismissed reports that the police wanted to question him about the case beyond the information in his letter.

“The police, when they said that they want to talk to us or whatever, that was like their form of harassment, because I made sure all the information that I know of is in the letter,” said Mr. Sheinman. “If I have any information—new information that I think would help police to catch—my God I want to catch the guy, I would give them immediately that information, obviously.”

Mr. Sheinman reported he and his wife were planning to head back to Africa in mid-July. As of press time, calls to his U.S. cell phone went unanswered.

hwalker@observer.com

Manhattan District Attorney Cyrus Vance recently announced the indictment of a serial killer and sex offender, Rodney Alcala, for the murders of Crilley and Hover. The indictments were the result of determined police work and a prosecutor who was unwilling to allow a brutal crime to remain unresolved, even though the suspect is on death row in California for murders committed there in the late 1970s.

The red tape and expenses involved in extraditing and trying the suspect are not inconsiderable. But Mr. Vance is absolutely right to argue that no murder case, no heinous crime, should remain unresolved if a suspect can be identified and tried. All the state can offer the victims and their loved ones is justice. Mr. Vance promises to deliver on that obligation.

Last year, Mr. Vance took over from one of the 20th century's great New Yorkers, Robert Morgenthau, who served as district attorney of New York County for nearly 35 years. Mr. Morgenthau was the only DA many Manhattanites ever knew. His retirement, at age 90, in 2009 naturally led to concerns about the office's continued leadership under its first new boss since Mr. Morgenthau succeeded Richard Kuh on Jan. 1, 1975.

Mr. Vance has put to rest those concerns. Without a great deal of fanfare, he has invigorated the office and maintained its close, productive relationship with the Police Department and other law-enforcement agencies.

Cyrus Vance found himself in the unenviable position of succeeding a living legend. But Mr. Vance has proven more than equal to the task. New Yorkers will never forget Bob Morgenthau, but his replacement is off to very promising start.

Over 70 Queens kids are in the hospital after drinking tainted school water. [NYDN]

Facebook advertisers quadruple. How's that "Quit Facebook Day" going? [Bloomberg]

Lots of hate over Robert Indiana's "LOVE." [NYP] 

Robert Morgenthau quits monitor job in a huff. [NYT]

Mayor Bloomberg likes, cannot use his iPad. [NYDN]

Silence does not invoke the right to remain silent, Supreme Court says. Plus, Sotomayor's first dissent! [NYT]

"I don’t want to see us descend into a nation of bloggers,” says Steve Jobs. [AllThingsD]

Conan O'Brien kills at Radio City Music Hall. [VillageVoice]

It was a dark time for the city. In 2008, and early into the next year, morale was low, Wall Street was sputtering and Mayor Michael Bloomberg was steeling New Yorkers for pain. Brace for service cuts and tax hikes, he warned—while also pledging to find a way to keep tax money, particularly from the city’s richest citizens, from fleeing.

“I’ve said this before, but the first rule of taxation is, you can’t tax too much those that can move,” Mr. Bloomberg intoned on a radio show late in the crisis. “You know, we’re yelling and screaming about the rich. We want the rich from around this county to move here. We love the rich people.”

And yet the richest New Yorker of them all—Mr. Bloomberg himself—had been ignoring his own advice.

According to an extensive review of the mayor’s financial records by The Observer, even as Mr. Bloomberg was trying to counter the loss of taxes and other income from the richest New Yorkers, the foundation he controls was in the process of shuttling hundreds of millions of dollars out of the city and into controversial offshore tax havens that would produce nothing at all for the city in terms of tax revenue.

By the end of 2008, the Bloomberg Family Foundation had transferred almost $300 million into various offshore destinations—some of them notorious tax-dodge hideouts. The Caymans and Cyprus. Bermuda and Brazil. Even Mauritius, a speck of an island in the Indian Ocean, off the coast of Madagascar. Other investments were spread around disparate locations, from Japan to Luxembourg to Romania.

Why was the mayor’s flagship foundation sending hundreds of millions of dollars offshore? Neither the charity nor the mayor will explain. What is clear is that the issue could get prickly for Mr. Bloomberg, in part because his investment strategies have been so closely associated with Steve Rattner, the onetime boy wonder financier who remains under investigation by Attorney General Andrew Cuomo for his involvement in a state pension controversy. Last week, Mr. Rattner’s former firm, Quadrangle Group, took the extraordinary step of excommunicating him, saying in a statement that it “wholly disavow[ed]” Mr. Rattner over his role in securing state pension contracts—conduct the company called “inappropriate, wrong, and unethical.”

On December 26, 2007—the same day that the city’s Conflicts of Interest Board opened the door for Mr. Rattner’s firm to manage the foundation’s money— the foundation immediately sent $210 million to a new fund—“QAM Select Investors (Offshore) Ltd.”—based in the Cayman Islands.

A month later, the foundation was given clearance to allow two city workers to use municipal time and resources on foundation work—on the assumption that the charity would “ultimately serve the city” and “further the interests and purposes of the city.”

And what of the benefit that was supposed to come New York’s way as a result of all of these millions? Mr. Bloomberg donated more than $1.8 billion to the foundation in its first three years of life, according to the foundation’s tax filings. About $67 million—$36 million in 2007 and $31 million in 2008—was given away. Much of it went to anti-smoking initiatives, including the World Lung Federation and an Indian anti-smoking group; other grants went to the government of Vietnam and the World Health Organization, for injury-prevention efforts. No grants went to organizations directly benefiting New York City.

Today, at a five-story Beaux Arts mansion on the corner of 78th Street and Madison, workers are putting the finishing touches on the foundation’s new headquarters, which Mr. Bloomberg purchased for $45 million. Flatbed trucks unload marble tiles for the building’s floors; electricians have installed subdued lighting and a heavy, automatic glass sliding door.

Several weeks ago, the foundation named a new 19-person board that reads like a who’s who of national politics and finance: Former Florida governor Jeb Bush, former Georgia senator Sam Nunn and former Treasury secretary Hank Paulson are among the members. It is all part of a  push by Mr. Bloomberg to put the foundation on a par with other big charities and put his name on the list of America’s great philanthropists: Gates, Carnegie, Rockefeller and Ford have their foundations, and now so does Bloomberg.

 
BEYOND THE U.S. BORDER, in places like the Caymans, the climate for charities is much more inviting. Nonprofits like the Bloomberg Family Foundation are tax-exempt, but some investments that aren’t related to an organization’s core mission can be subject to a levy called the Unrelated Business Income Tax (UBIT, for short). So to avoid more than 40 percent in federal and local taxes on unrelated businesses, nonprofits use a legal loophole, routing investments through offshore tax havens.

“It cleanses the unrelated business taint from the total return,” Harvey Dale, of the N.Y.U. School of Law, told The Observer. “You invest in the same thing through an offshore entity. You are making the same investment; you are just putting an intermediary entity in the middle. Instead of investing directly in the hedge fund, you invest in the foreign entity, which, in turn, invests in the hedge fund.”

“Is (using the loophole) allowable under the law? Yes,” said tax expert Dean Zerbe, a former staffer at the Senate Finance Committee. “Is it something that is a best practice, particularly by an elected official? I think they should look very hard when they are engaging in this kind of activity. What does it say to the average New Yorker?”

The foundation’s tax returns indicate that Mr. Rattner’s team migrated much of its money to large hedge funds with ostensible island charters, including several in the Caymans, two of which list an address at P.O. Box 309 of the Ugland House, a building that “houses” an estimated 12,000 to 18,000 foreign businesses.

“Now, that’s either the biggest building in the world or the biggest tax scam in the world,” said Senator Barack Obama during his campaign for president. “And I think we know which one it is.”

But tax havens—despite the protestations of the president, a slew of senators and at least one district attorney—remain legal. “I made a lot of effort to shut down that loophole,” former district attorney Robert Morgenthau told The Observer.

Mr. Morgenthau said he’d spoken generally about offshore loopholes to four U.S. secretaries of the Treasury, twice to the commissioner of the general revenue and, as it happens, to Mr. Bloomberg himself. The mayor seemed uninterested in the offshore issue, he said. “I’ve talked to the mayor about it, and the budget director,” Mr.

Morgenthau said. “We did get help from the State Division of Taxation and Finance. But nothing from the city.”

In spite of the flurry of investments, it appears that for years, Mr. Bloomberg’s foundation had no office, phones, staff, Web site or public brochures. In late 2007, the mayor wrote a second letter to the Conflicts of Interest Board, looking for another blessing: Some of his staffers at City Hall, he argued, were asking him, “unsolicited,” if they could help with his foundation. Saying that the foundation would “ultimately serve city goals,” the board approved. At least three of his staffers were even allowed to use government resources, like office space, phones and Internet service, for foundation work.

One of the staffers was Deputy Mayor Patricia Harris. Aside from Mr. Bloomberg, Ms. Harris was the sole officer listed on his foundation’s tax return. A longtime Bloomberg loyalist, Ms. Harris worked at Bloomberg LP before joining the mayor at City Hall. On foundation tax returns, Mr. Bloomberg and Ms. Harris each claimed to have spent .25 hours, or 15 minutes, per week on the charity—as it gave away tens of millions.

Last month, the mayor announced that Ms. Harris would take on even more duties at the foundation, although it is unclear if she will increase her time commitment.

The mayor’s press office referred all questions about the foundation to the organization’s press office, run by former mayoral aide James Anderson. “In order to avoid conflicts, the Mayor is neither involved in nor apprised of the specific investment decisions made on behalf of the foundation—and we are therefore not in a position to discuss them,” Mr. Anderson wrote in an email.

Yet Mr. Bloomberg does often discuss his charitable endeavors. “Other than Gates, nobody’s given away this amount of money,” he boasted to the New York Post’s editorial board earlier this month.

But the Bill and Melinda Gates Foundation provides a contrast in its investment style. While the Bloomberg Family Foundation is hardly alone in embracing the savings provided by the offshore loophole—according to a 2007 New York Times piece, large universities like Yale and Duke, along with charities like the Rockefeller Foundation, engaged in the practice—The Times also reported that the Gates Foundation did not invest in offshore hedge funds.

“When instructing the investment managers, Bill and Melinda also consider other issues beyond corporate profits, including the values that drive the foundation’s work,” explains the Gates Foundation’s Web site. “They have defined areas in which the endowment will not invest, such as companies whose profit model is centrally tied to corporate activity that they find egregious.”

Mr. Rattner’s Quadrangle Group wasn’t beholden to any such strictures relating to the Bloomberg Family Foundation’s portfolio, and throughout 2008, the foundation made liberal use of the offshore loophole.

The bulk of the investments ended up in the Caymans. The Rattner team transferred more than $71 million dollars to Highfields Capital Ltd., the Caymans arm of a Boston-based hedge fund. (Last month, Highfields’ co-founder, Richard Grubman, was arrested after he allegedly beaned a Ritz Carlton valet with the keys of his BMW.) Another $67.8 million went to Brookside Cayman Ltd, the island home of Brookside Capital.

Other money decamped for even more exotic locales: $710,000 zipped to the tiny Grand Duchy of Luxembourg. Another $700,000 went to two funds on the island nation of Mauritius, about 500 miles east of Madagascar in the Indian Ocean. A Brazilian hedge fund got $304,000.

Mystique surrounds even some of the smaller foreign investments. In one, the mayor’s foundation transferred $104,000 in cash to a Cyprus-based oil services firm called Geotech Oil Services Holdings Ltd., controlled by a Russian oligarch named Nikolai Levitsky; Mr. Levitsky was once the first deputy governor of the resource-rich Komi Republic in Russia’s Northwest.

Reached by phone, Geotech spokesman Denis Cherednichenko said he had no idea if the Bloomberg Family Foundation had invested in the company, but seemed surprised. He speculated it could have been through another hedge fund. He said three American funds invested in Geotech in 2007.

In another transaction, Mr. Rattner’s team invested $560,000 of the mayor’s charitable fund in BJJ Universul, a Cyprus-based company that develops real estate in central Eastern Europe. According to its Web site, BJJ was established in Romania in 2004 and has more than 40 employees, split between Bucharest and Sofia, Bulgaria, and focused on “greenfield and redevelopment opportunities in Eastern Europe with a current focus on Romania and Bulgaria.”

Compared with those of the great foundations of America, the Bloomberg investment strategies stand out. “I’ve never seen anything like it. It’s about as opaque set of investments as you can find,” said Rick Cohen, who covers foundations and charities for Nonprofit Quarterly, and who agreed to review the foundation’s tax return. “This involves extensive investments in hedge funds offshore, where the motivation and purpose is not discernible, so you can’t tell what kind of activity it is or who is going to benefit from the investments.”

One former state official, however, defended the activity. “I don’t think there is anything unusual here,” said Bill Josephson, who headed the state’s Charities Bureau when Eliot Spitzer was attorney general, and examined the tax returns for The Observer.

“It is impossible to look at this and determine the intent of the hedge funds investments. You can’t figure it out from the 990 [tax form],” Mr. Josephson said. “The Bloomberg foundation is not that significantly different from the foundations of other individuals who come out of the investment world.”

The mayor announced some time ago that he would strip his funds from the Quadrangle Group, while allowing many of the Quadrangle managers who tended to his money to continue to do so at another firm. Quadrangle continues to manage about $100 million in New York City pension funds, according to the comptroller’s office.

As for the increasingly isolated Mr. Rattner, who remains under investigation, the mayor stands by him. “He’s a friend whose advice the mayor has, and continues to, rely on,” said a Bloomberg spokesman. Mr. Rattner declined to comment.

While almost nothing is known about the foundation’s investments since 2008, Mr. Bloomberg is now preparing to burnish his place in the annals of philanthropy. What exactly that means is not yet public.

apaybarah@observer.com, rpillifant@observer.com

Research support for this article was provided by the Investigative Fund of the Nation Institute.

The Times makes it sound uneventful, but the Post catches a few "thinly-veiled swipes" at his hand-picked successor, Cyrus Vance, Jr.

Mr. Vance recently demoted two of Mr. Morgenthau's top assistants, and replaced them with former aides to Eliot Spitzer and Michael Bloomberg, the outgoing D.A.'s longtime foe.

During the campaign, Mr. Morgenthau told the Times that his successor “should make changes,” but added, “I hope he’ll keep what’s good in the office.” Yesterday, Mr. Morgenthau said Nancy Ryan, one of the demoted staffers, had been ""extraordinarily valuable to this office," and called her perhaps "the best investigator in the United States."

"Hire people based on merit, not political connections," Mr. Morgenthau said.

But, as the Times would have you know, Mr. Vance does things his own way. In August, a campaign profile was headlined "In Campaign for Top Prosecutor, Candidate Finds Own Path," and another profile headline last week reminded readers "Cyrus R. Vance Jr. Found His Own Way to Manhattan District Attorney’s Office."

The Times--following up on its exit profile from two days ago--runs a story about his press conference yesterday, in which Mr. Morgenthau correctly pronounced two difficult names, and also made a few jokes. And he'll be here all week. "I'm going to have another one tomorrow," he said.

Unfortunately, Mr. Morgenthau's twilight isn't as entertaining as it looked like it might be a few weeks ago, when the outgoing district attorney accused Mayor Bloomberg of making "chickenshit" comments.

"I've been forbidden to use barnyard epithets by my wife," he told City Hall News.

In a weekend profile in the Journal--which is dressed up kind of like an episode of Law and Order, in case you weren't otherwise interested--the outgoing district attorney explains why the mayor might have been surprised that the D.A. was investigating the Deutsche Bank fire.

Because, says Mr. Morgenthau, Mr. Bloomberg "thinks all lawyers work for him" and "doesn't want anybody around who doesn't kiss his ring, or other parts of his body."

And he suggests the mayor gets a little defensive about all those tax dollars sitting offshore.

"I've talked to him three times about it and each time the conversation is almost identical. I tell him how much money is offshore and in the underground economy and he always says, 'I'm paying my taxes.' And I always say, 'Mike, no one is suggesting you don't, but there are a lot of other people who don't.' And then he says, 'I'm glad I'm not a lawyer.'"

The 90-year old district attorney doesn't have much to lose since he'll be otherwise employed next week. And the mayor, who is already trying to maintain his authority in his third term, doesn't gain much by firing back.

But Mr. Morgenthau doesn't entirely single out the mayor.

On the softness of sanctions against Iran, Mr. Morgenthau says: "The president is smoking pot or something if he thinks that being nice to these guys is going to get him anywhere." 

The letter, from outgoing Bill Thompson and incoming John Liu, seek to put the blame for the accounts on Bloomberg's administration (who have gone on the offensive to criticize others like Robert Morgenthau, for maintaing the accounts).

"We also note a troubling silence regarding any explanation as to how this widespread practice began," the letter says, "and why it was not remedied as soon as it came to your attention."

That's a bit more concern than Liu was expressing earlier.

The Times puts the mayor's "chickenshit" pursuit of Robert Morgenthau's "hidden" bank account in perspective this morning: Apparently there are 2,700 unauthorized city accounts around town, worth more than $122 million dollars. The most cryptic and intriguing is the unnamed account with $15 million dollars. (Perhaps Jay Walder can figure out a way to slap the M.T.A.'s name on there?)

The district attorney raises the obvious question: “If everybody else has it, why are they picking on the D.A.?” he wondered to the Times. “I felt the whole business was much ado about nothing.” Which is a much more diplomatic way of reiterating what Mr. Morgenthau initially said about the mayor's comments: "chickenshit."

The bad blood between the two men boiled over after the mayor followed through on a threat to expose the accounts if Mr. Morgenthau didn't help the city get more money from that $536 million dollar Credit Suisse settlement.

The mayor's office said that it made the threats because Mr. Morgenthau was refusing to disclose any additional information.