The Department of Veterans Affairs Bids

The Department of Veterans Affairs Bids

The Department

of Veterans Affairs Bids

One of the subjects of inquiry during

the trial was Maxi-Aids' efforts to strengthen its hand in the bidding process

conducted by the Department of Veterans Affairs. In 1993 the Maxi-Aids bid

on a number of items came in indicating that the vendor was a woman-owned company,

which gave it an advantage. The next year it announced that it was minority-owned.

The story was that Pamela Stein had been the majority shareholder and was running

the business, even though Mitchel was the president. Then, the story went,

Pamela sold her interest to Harold, who became the majority shareholder.

Sandler called to the VA's attention

the fact that in neither instance was this the case with Maxi-Aids, but the

VA dismissed his claims because he was a competitor. Sandler's anger over this

ploy continued, apparently, to be a mystery to the Zaretskys. During the trial

Elliot pointed out that, even if Maxi-Aids had been eliminated from the VA

bidding, ILA would not have gotten the bids in question, so he could not see

what all the fuss was about.

Here are the facts that clearly emerged

during the trial. Apparently Pamela has never owned more than a third interest

in the company, and she has never run its day-to-day operations. She was paid

for her stock at the end of 1987, a full six years before she was supposed

to have sold her interest to Harold. Harold has never held more than a third

of the company's stock and, of course, has never been a part of the company's

management.

When Marvin Sandler was gathering documents

for the trial, he received a copy of a document from the VA dated May 25, 1993,

which stated that by April 30, 1994, Pamela Stein would sell her interest in

Maxi-Aids to Harold. VA officials said that Elliot Zaretsky had turned over

this document shortly after a VA investigator came to interview him in the

summer of 1994 about whether or not his company had been woman-owned in '93

and was minority-owned in '94. The Zaretskys maintained that this had been

an internal document only and that they had not given it to the Department

of Veterans Affairs. The fact remains, however, that the plaintiff knew of

the document's existence and knew to demand that the defendant produce it because

the Department of Veterans Affairs had received it from somebody and, upon

request, had turned it over to Sandler.

The allegations in this part of the case,

if found to have substance, may well lead to criminal charges. The VA has reopened

its investigation. It certainly did not do much of a job investigating the

first time around; only time will tell whether more zeal will be shown in round

two. Here is Mitchel Zaretsky's testimony under direct examination by Jack

Dweck:

MR. DWECK: I call for the production

of the original guaranty, your Honor. This is a copy that counsel furnished

us. THE COURT: Do you have an original, Mr. Mulholland? MR. MULHOLLAND: I have

never seen an original, judge. I have to inquire of Mr. Zaretsky.

THE COURT: You can inquire at the proper

time. (Plaintiff's Exhibit 110 received in evidence.)

Q: Mr. Zaretsky, when this guaranty was

signed by you and your brother Harold—you identified your signatures the

other day; do you remember that, sir?

A: Yes.

Q: And you submitted that guaranty to

the Veterans Administration, did you not, sir?

MR. MULHOLLAND: Objection.

THE COURT: Overruled.

A: I did not.

Q: Did someone from your company submit

this guaranty to the Veterans Administration?

MR. MULHOLLAND: Objection.

THE COURT: What ground?

MR. MULHOLLAND: Asked and answered. Judge,

we covered that ground.

THE COURT: I don't recall if we did.

If it was, it will have to be repetitive. Overruled.

A: I did not, no.

Q: Mr. Zaretsky, you signed this guaranty,

did you not, sir?

A: It has my signature on it, yes.

Q: And you signed this guaranty for a

governmental agency; is that correct?

A: No.

Q: Who did you sign this guaranty for,

Mr. Zaretsky?

A: I don't recall for whom, but it wasn't

a governmental agency. Q: Did you not submit this to Thomas Valerie of the

investigative unit of the Veterans Administration?

A: No.

Q: Isn't it a fact that this guaranty

was delivered by your father Elliot Zaretsky to special Investigative Agent

Thomas Valerie of the Veterans Administration? A: I don't know what my father

did.

Q: You are telling us that you as president

and a one-third owner signed the guaranty and you don't know what it was for;

is that what you are telling us?

A: Yes.

Q: Wasn't this guaranty in connection

with a representation by you to the Veterans Administration, sir, that your

sister, Pamela Stein was to relinquish her majority interest in Maxi-Aids by

April 30th, 1994?

A: No. I never met with a representative

from the Veterans Administration.

Q: You signed this statement, sir, which

says that in order to induce your sister Pamela Stein to relinquish her majority

in Maxi-Aids by April 30th, 1994, a certain sum was to be paid to her; isn't

that correct?

A: I don't recall what is on that statement.

Q: Let me read the first paragraph, sir. "On retirement of Elliot Zaretsky

on May 31, 1993, and in order to induce Pamela Stein to relinquish her majority

in Maxi-Aids by April 30th, 1994, the sum of blank dollars will be paid to

her, payee, and as of May 1, 1994, Harold Zaretsky will become the majority

stockholder"; that's your statement, is it not, sir, in the first paragraph?

A: I am not familiar with this document.

Q: You are not familiar with it, but

you signed it?

A: I sign tons of things.

Q: Did you read this document before

you signed it, sir?

A: I don't recall.

Q: Do you normally sign a document entitled

"guaranty" without reading it?

A: I sign a lot of things without reading

it.

Q: A guaranty, sir?

A: Even guaranties, yes.

Q: And who asked you to sign it?

A: I don't recall when it was signed.

Q: It is dated May 25, 1993. Do you see

that, sir?

A: It has a date on it, yes.

Q: According to the documents we have

in evidence, your sister didn't even own one share of Maxi-Aids as of the date

of this guaranty; isn't that correct, sir?

A: I am not sure.

Q: Do we have to go through the K-1's

again for '91, '92, '93, '94 that we brought in evidence? [The K-1 is a tax

form filed by shareholders in small companies indicating the extent of their

holdings.]

A: On the K-1's, yes.

Q: Your sister didn't own one share?

A: The K-1's show that just Harold, Elliot,

and myself own shares, yes.

Q: Mr. Zaretsky, what was this document

signed for if your sister didn't even own one share as of May 25, 1993? A:

As I stated, I don't recall that document. Q: Your attorney produced during

the course of the discovery your stock minutes and stock transfer ledger and

your stock certificate receipt book; is that right, sir? A: Yes.

Q: Initially, when the stock was issued

in the beginning of the corporation, your sister had 50 shares, then it was

changed to 33 and a third as of what looks like 5/15/86, correct? A: Yes.

Q: And Harold as of the same date, who

originally had 50 shares, had his reduced to 33 and a third also; isn't that

correct, sir? A: Yes.

Q: And Mitchel, and that's you, who also

had 50, had that changed to 33 and a third as of the same date, 5/15/86; is

that correct? A: Yes.

Q: It looks to us from the stock book,

which are the official corporate records, your sister, Harold, and you each

owned a third as of 5/15/86, correct?

A: Way back in '86.

Q: Way back in '86?

A: Way back in '86.

Q: Okay. Then your father as of 1/1/88

got the 33 and a third shares in the company, and presumably that was transferred

by Pamela Stein because that sheet says canceled, correct? A: You can presume—

THE COURT: Is that in evidence?

MR. DWECK: I will offer it now.

THE COURT: Do not show it to the jury.

MR. DWECK: Sorry, your Honor. I would

like to offer this in evidence, your Honor.

THE COURT: Show it to counsel.

MR. MULHOLLAND: I have no objection to

it.

THE COURT: I don't hear the number.

MR. DWECK: 111, your Honor.

THE COURT: Is that a stock transfer book?

MR. DWECK: These are, as the combined exhibits, it looks like the corporate

minutes with a copy of the certificate of incorporation of Maxi-Aids, with

a copy of the by-laws, with a specimen stock certificate, with some shareholders'

minutes meeting— shareholder meeting minutes, and with the stock receipt

from the stock receipt book or from the stock book, which I was just questioning

Mr. Zaretsky about, and blank stock certificate number five.

THE COURT: Plaintiff's Exhibit 111 in

evidence.

(Plaintiff's Exhibit 111 received in

evidence.) Q: Mr. Zaretsky, the certificate on the receipt page as part of

this 111 exhibit shows that the 33 and a third shares of Pamela Stein were

canceled; is that right, sir? A: It shows they were canceled, yes.

Q: And presumably it was canceled as

of the date that your father took over the 33 and a third shares, which is

1/1/88, correct? A: I don't know when, so I can't assume.

Q: You see your father's share was issued

on 1/1/88, correct?

A: Yes.

Q: That we see?

A: That we see.

Q: So we see the 33 and a third share

to you and your brother Harold; the receipt doesn't say canceled, does it,

sir? A: No, it doesn't.

Q: But the one to Pamela says canceled?

A: Yes.

Q: Then certificate number four was issued

to your father as of 1/1/88; is that correct?

A: Originally it was 50 shares, crossed

out to 33 and a third, yes.

Q: Okay. Mr. Zaretsky, as of the time

that your sister's stock certificate was canceled, she didn't own a single

share in Maxi-Aids, correct?

A: Can you repeat that?

Q: I said, as of the time that that stock

certificate was canceled, that was issued to your sister, she did not even

have a single share of ownership in the corporation; isn't that right, sir?

A: I honestly don't know.

Q: Well we know that as of '92, '93,

'94, she didn't have a single share; isn't that right, sir?

A: According to the K-1's, yes.

Q: So sometime between '88 and '92, presumably

something took place where your father took over the one-third interest that

Pamela had, agreed?

A: No.

MR. DWECK: Your Honor, I would call for

production of the K-1's for the years 1986 through 1991 inclusive on behalf

of Maxi-Aids. We have subpoenaed them, your Honor.

THE COURT: Do you have those records?

MR. MULHOLLAND: We don't have them here

today, no, Judge.

THE COURT: Do you want to bring them

here tomorrow?

MR. MULHOLLAND: Surely. If they exist,

Judge. THE COURT: If they exist. You are going to keep a record of all these

things, Mr. Dweck?

MR. DWECK: We are.

Dr. Mimi Berman

THE COURT: I am not.

MR. DWECK: That's why we have Mr. Hubell,

Mr. Sandler, and Dr.

Berman [Marvin Sandler's wife].

Q: Mr. Zaretsky, isn't it a fact that

your sister sold her shares in the company, and the company paid her out? A:

She sold shares, and she was paid.

Q: Your sister received $833.33 on a

monthly basis over a number of years; isn't that right, sir?

A: I don't recall the exact number, but

she received, yes. Q: And that was the monthly basis that she was paid out;

is that correct?

A: She was paid. I am not sure of the

timing, yes. Q: Okay. I show you this document, Maxi-Aids check

Dr. Mimi Berman

$833.33. The first one is dated, it looks like 8/6/92. Do you see that

check number 14539, $833.33, correct?

A: Yes.

Q: And you signed that check?

A: Yes.

Q: And the next check 10/29/92, a check

14736, the same amount, Pamela Stein, correct?

A: Yes.

Q: The first check was signed by you,

and the next one signed by your father, correct?

A: Yes.

Q: And then after that, I am sorry, it

looks like March 12th or March 6th, 1412 check number, the same amount, Pamela

Stein, correct?

A: It is cut off, but yes.

Q: In April of '92 the same amount, same

person, check number 14215, to Pamela Stein?

A: Yes.

Q: August of '92, check number 14594

to Pamela Stein, same amount, is that correct?

A: Yes.

Q: Signed by your father?

A: Yes.

Q: And then we have one in January '92,

$833.33, correct?

A: Yes.

Q: And that check is marked stock sale?

A: Yes.

Q: Pamela Stein?

A: Yes.

Q: Does that refresh your recollection

that your sister sold her shares at least, and as of at least January of '92,

she was being paid out at the rate of $833.33 every month? A: Yes, it says

stock, yes.

MR. DWECK: Your Honor, these checks,

on eight pages, and consist of 23 checks, I would like to offer it as Plaintiff's

Exhibit 112.

THE COURT: Show it to counsel.

(Whereupon, at this time there was a

pause in the proceedings.)

THE COURT: Any objection?

MR. MULHOLLAND: No, Judge.

THE COURT: Plaintiff's Exhibit 112 in

evidence. MR. DWECK: Correct, Judge. (Plaintiff's Exhibit 112 received in evidence.)

Q: Mr. Zaretsky, can we agree, sir, that

some of these checks are signed by you, and some signed by your father? A:

It appears, yes.

Q: And can we agree that the earliest

of these checks as they appear on these copies date back to 1992? A: Some date

back to '92, yes.

MR. DWECK: I am sorry, I was remiss,

and I left two pages out which I would respectfully request to be added to

that exhibit. I was mixed up.

THE COURT: Show it to counsel. (Counsel

confer.)

THE COURT: Any objection?

MR. MULHOLLAND: No, Judge.

THE COURT: You will add the two pages

to Plaintiff's Exhibit 112 in evidence.

MR. DWECK: Thank you, your Honor.

Q: With the admission of these two pages,

Mr. Zaretsky, can we agree, sir, that the first of the checks issued to your

sister is January 3rd, 1992?

A: You said that was June of '92 before.

Q: Well, we have one in April, and we have one in March; is that correct?

A: March of '92, yes.

Q: Okay. Can we agree from March of '92,

right into '94, where some of those checks continue, your sister was paid out

on the sale of her stock in Maxi-Aids, yes?

A: She was paid out on stocks.

Q: Mr. Zaretsky, when you were questioned

on a deposition on September 10th, 1996, did you give these answers to these

questions, page 55, line 11--

MR. MULHOLLAND: Objection.

THE COURT: What ground?

MR. MULHOLLAND: Foundation. I don't know

where we are going with this, Judge.

THE COURT: I have to see a copy of the

transcript.

MR. DWECK: Just the portion I highlighted,

your Honor.

(Handed to the Court.)

THE COURT: Overruled. I will allow it.

MR. DWECK: Thank you, your Honor.

Q: Did you give these answers to these

two questions, sir:

Question: Mr. Zaretsky, did your sister

Pamela ever transfer her shares in Maxi-Aids?

Answer: I don't recall.

Question: Did your sister Pamela ever

sell her shares in Maxi-Aids?

Answer: I do not know.

Did you give those answers to those questions,

sir?

A: I believe I did.

Q: Mr. Zaretsky, when you signed this

guaranty for whatever purpose you signed it for, your sister had no ownership

of shares in Maxi-Aids as of May 25, 1993, correct? MR. MULHOLLAND: Objection.

THE COURT: Sustained.

MR. MULHOLLAND: Thank you.

Q: Mr. Zaretsky, when you signed this

guaranty which said: On the retirement of Elliot Zaretsky as of May 31, 1993,

and in order to induce Pamela Stein to relinquish her majority in Maxi-Aids

by April 30th, 1994, the sum of blank dollars will be paid to her— she

never owned the majority, did she, sir? MR. MULHOLLAND: Objection.

THE COURT: Overruled.

A: According to the K-1's, no.

Q: And according to the stock receipts

in your own stock book, she didn't either, did she, sir?

A: No.

Q: So this statement was false, wasn't

it, sir?

A: I mean I don't recall that document.

Q: This statement was false, wasn't it,

sir?

A: Again, I don't recall that document.

Q: Did you ever tell anybody that the statement that you signed on this guaranty

about your sister relinquishing her majority interest was false, sir?

A: No.