Former exec guilty of fraud in failure of clothing company

A federal jury yesterday rejected a businessman's claim that he was the scapegoat for a clothing manufacturer's downfall and convicted him of bank fraud and lying to the company's bankers after a four-week trial.

Prosecutors said Joseph J. Connors, 50, of Blue Bell, former chief operating officer of Kleinert's Inc., a Plymouth Meeting children's clothing manufacturer, and two others defrauded banks of $36 million in an effort to keep the financially ailing company afloat.

Assistant U.S. Attorney Louis Lappen told jurors in his closing argument that Connors had "micromanaged" the fraud.

"He cooked the books and papered the files to deceive anybody who was looking," Lappen said.

"The paper trail leads you right to Joe Connors' door."

Kleinert's later filed for bankruptcy and its assets were sold off by the banks for $22 million.

Defense attorney Glenn Zeitz said two other former Kleinert's executives - sales director Jay Andrews and CFO Richard Shaffert - masterminded the chicanery and tried to make Connors the "fall guy" for Kleinert's downfall.

Andrews and Shaffert pleaded guilty last fall and testified for the government.

They are to be sentenced in September.

During the time of the fraud, Kleinert's ran its operations with $58 million in financing from a consortium of banks, including Wachovia and Fleet.

The feds charged that between July 2001 and February 2003, Connors and the others provided bogus financial information to the banks that inflated Kleinert's financial health and disguised its financial problems.

For example, at the end of 2001, the government said the defendants created about $10 million in phony sales - dubbed "bill-and-holds" on financial statements - that enabled the company to obtain additional financing. *