Lisa Bershan sentenced to 7 years in prison

Lisa Bershan, former President and CEO of All American Pet Company (AAPT) and Starship Snacks Corporation, was sentenced to 7 years in prison on November 22.

Bershan will be required to pay restitution of $2,926,702.54 at the rate of 15% of her gross monthly income beginning 1 month after she is released from prison.

The sentence also includes 5 years of supervised release.

The conditions of release include mandatory drug treatment and testing, and mandatory mental health treatment.

U.S. District Judge Jed Rakoff said he will recommend that Bershan is incarcerated in California at the defense’s request.

The Starship indictment

In October 2017, Bershan and co-defendants Barry Schwartz and Joel Margulies were accused of making false statements to Starship investors and misappropriating investor funds.

Bershan pleads guilty

In December 2018, Bershan pled guilty to a 9-count superseding information that accused her of making false statements to investors, misappropriating investor funds, using investor funds to buy cocaine, and receiving an unlicensed handgun. She also withdrew cash from bank accounts in amounts designed to avoid federal reporting requirements.

At the time, Bershan was facing up to 132 years in prison.

She agreed to cooperate with the government in exchange for a potential reduction in her sentence.

Bershan’s bail is revoked for violating bail conditions

Bershan’s bail was revoked in October 2019 after the government learned that she had participated in a new fraudulent scheme involving a company called “Caffeinated Brands” in December 2018. 

Bershan and Schwartz also defrauded a dog breeder of two expensive purebred dogs in July 2019.

A history of mental illness and addiction

According to Bershan’s sentencing submission, she has been living with untreated mental illness and addiction for years. She was prescribed antidepressants after her father died in 1997, but she did not start seeing a psychiatrist until 2019.

Bershan’s defense team submitted a forensic psychiatric report by Alexander Bardey, M.D. and Kate Termini, Psy.D. 

Judge Rakoff summarized the report saying it is Dr. Bardey’s opinion that Bershan’s involvement was a product of psychiatric conditions, which could be considered mitigating factors at sentencing.

Dr. Bardey testified that Bershan suffers from Bipolar Disorder, Type II, Stimulant Use Disorder, Cocaine, and Narcissistic Personality Disorder.

Judge Rakoff asked Dr. Bardey if there is any reason to believe that Bershan’s anti-social behavior won’t continue indefinitely.

Dr. Bardey responded that treatment would reduce the chance of her engaging in that type of conduct. 

Judge Rakoff asked Dr. Bardey whether he had accounted for the possibility that Bershan was faking illness considering “her relationship to the truth is problematic”.

Dr. Bardey said there is no evidence that Bershan was malingering.

Judge Rakoff pointed out that the probation office believes that Bershan “liked to live the high life”.

Bershan’s defense

Bershan’s attorney, Christopher Madiou, said that Bershan is on a long road of trauma, mental illness, and addiction.

He acknowledged that she committed an immoral act, but argued that revenge is not a moral response. 

Madiou said that incarceration is an infliction of suffering, and must not exceed what is necessary.

He asked for the least amount of jail time, along with the maximum amount of supervision, and psychological treatment.

Madiou recommended a sentence of less than 6 years.

Bershan’s victims testify

Eric Grushkin served as the Comptroller of AAPT from February 2012 to January 2013. He said that he has extensive knowledge of Bershan and Schwartz’s crimes. Grushkin said that the victims include employees, investors, vendors, and others. He estimated the company’s losses at around $22 million with $350,000 in revenue.

According to Grushkin, there were 10 claims for unpaid wages including Schwartz’s son who was owed $30,000.

Schwartz’s sister also sued the company as an investor.

Grushkin said that he was subjected to a smear campaign and personally sued by Bershan after he released a letter to investors outlining the frauds in January 2013. He was falsely accused of two federal crimes and three state crimes. Other employees were sued for fraud. 

Grushkin testified that the government and taxpayers are also victims. 

He said that pets are also victims because the company sold moldy dog treats.

Victim Simon Gershon testified that he lost around $350,000. He said that he grew up in poverty and worked hard to provide for his family. 

After meeting Bershan, Gershon lost his job, his house, and friends who he encouraged to invest with her. He said that he can’t get a job to this day. 

Gershon said that Bershan took his 21-year-old daughter’s life savings and convinced his gambling-addicted brother to invest $50,000 which led to bankruptcy. 

He claimed that Bershan stole millions from her neighbor Fred Fordham. 

Gershon said that Bershan lied about him and ruined his reputation. He said that his life has been hell for 3 years. 

Gershon pointed out that Bershan only took small investments from nonprofessionals to avoid lawsuits from informed investors. 

He said he believes that Bershan was motivated by a desire to live the high life. 

The government makes its case

Assistant U.S. Attorney Negar Tekeei said that Bershan left a trail of destruction.

She pointed out that the victims in this case did not have as much money as traditional white collar crime victims.

Tekeei said that Bershan opened a bank account in her cousin’s name and routed funds from victims through that account.

She described her as calculating and manipulative.

Tekeei said that Bershan’s mental illness is an aggravating factor that will cause more crimes if she is released.

Bershan addresses the court

Bershan apologized and said that she takes full responsibility for her actions. 

She said that she never intended to cause suffering, and that she has suffered.

I can’t say how much I regret everything that I’ve done.

-Lisa Bershan

Bershan claimed that she is facing her lies for the first time in her life. 

She said that facing her illness will be her life’s work. 

Bershan claimed that she wants to get a job and live humbly after she’s released.

Judge Rakoff passes his sentence

Judge Rakoff said that the offenses are despicable, and they caused immense pain and suffering. 

He said that this case is worse than other securities fraud cases because of repeated personal deception of victims who invested their life savings. 

Judge Rakoff said that he disagrees with the victims who said that Bershan acted completely out of calculation and greed. He said she has a quality that suggests mental illness, and that must be taken into account.

Judge Rakoff said that the sentence must provide general deterrence because there are too many Lisa Bershans out there.

Schwartz pleads guilty

Schwartz pled guilty to one count of conspiring to commit securities fraud and wire fraud in October 2018. 

He agreed to a sentencing range of 41 to 51 months in prison, a fine of $15,000 to $150,000, and restitution of $2,163,214.

Schwartz is scheduled to be sentenced by Judge Rakoff on December 12.

Margulies convicted at trial 

Margulies was found guilty of multiple counts in August, after a 7-day trial.

During his trial, Margulies admitted that he sent a gun and hollow-point bullets to Bershan after she was allegedly threatened by Gershon’s brother.

The day after the trial, he pled guilty to conspiracy to distribute cocaine.

Margulies is scheduled to be sentenced by Judge Rakoff on December 16.