Daily News from New York, New York • 28

DAILY NEWS, MONDAY, MARCH 20, 1978 28 1,1 1,1111 1 e3 Players in Bankruptcy Same 1 I c-mCc by Dan Far. el! and J'm V-cGrath Murray Guy: got $70,000 for supervising repairs. Ivan Babitt: judge's brother, partner in auditing firm. Robert Herzog: made receiver in move by Babbitt. Banic Overmyer: owner of ilefoi-ridden empire.

The Judge Speaks Here are seme quotations from Judge Roy Babitt from the transcripts of the Overmyer case. Here, Babitt draws similarities between himself and the debtor, Daniel Overmyer: "There is something about people who collect. I collect stamps and hate to give them up when they are torn. Overmyer collected warehouses. We collectors don't like to give up what we have acquired, whether it be stamps, pieces of string, women or warehouses." The judge has sometimes lashed out at those who appear before him.

After Overmyer accused the court-appointed management of abuses, Babbit said: "This (Overmyer) is a dangerous man. and you (others in the case) are going to be poisoned in one way cr another by underlying character flaws in this person I don't trust Mr. Overmyer and you shouldn't either You have been manipulated. You have been swept by it. We have all been involved.

You are dealing with a very sinister individual and 1 say it to his face. This man is dangerous. I am telling you." Babitt at first vowed to investigate charges that the Overmyer Co. was being ripped off: "'I don't want two years or six months from now the charges made (that) this court covered up corruption or allegations of it. I am not looking to be the next subject of a dossier." However, the investigation by Babitt ended there.

Continued from page 3) role to receiver with the consent of both sides. The decision sot the rubber stamp approval of a fetitnil district court Daniel Overmyer was effectively ousted and Herzog would manage the firm. The jude would approve Herzog's fees nd salaries for employes Hei-zog hired to help run the company. It was the first time in 20 years, according to Judge Babitt. that a receiver uts appointed in such a case in the Soutnern District.

Denies Conflict of Interest In short order. Herzog hired Weber Lipshie and of which Ivan Babitt is a partner. That company began auditing work. Later. Herzog hired several of his own friends to perform other tasks.

In an interview, the stocky judge said there was no conflict of interest with regard to his appointments. The 51-year-old jurist maintained that the fees he awarded were niggardly." But the issue here is the relationship between the judge, his biothtr and their friends. The American Bar Association's Canons of Judicial Ethics prohibit even the appearance of impropriety. The rules state, "A judge should exercise the power of his appointment only on the basis of merit, avoiding nepotism and favoritism or fees beyond the fair value of services rendered." Before and after the Overmyer case began, Herzog, a husky graying New Yorker, and the judge frequently dined together at expensive midtown restaurants, including The Palm. The Babitt brothers visited Herzog's Easton.

Conn, home last year. Herzog, a flashy dresser, said, came to my house to plant tomatoes The judge has quite a green thumb." The judge said he paid his own way bt restaurants and explained, "'We (judges) are not monastics." Judge Babitt socializes with other lawyers who appear before him as well. At fraternal meetings the judge, who is aa opera buff, often breaks into song with convivial attorneys. And only a few days before the Overmyer case began, the Babitt brothers and Herzog joined a group of other attorneys on a junket to Madrid, one of several they have attended. Ivan Babitt, the judge's younger brother, joined Weber Lipshie and Co.

about a month before it got the Overmyer account. In an interview, Ivan Babitt said he saw no conflict because he hadn't done any work on the case. Abe Nowick, the firm's managing partner, was present and made a similar assertion. Bat in a second interview, when can-fronted with expense account vouchers and statements to the contrary, Nowick changed his story and conceded that Ivan Babitt 60 hours of the approximately 330 hours of partners time on the engagement." Nowick called this "an insignificant amount of time." Fees and appointments notwithstanding, the bottom line is that Judge Babitt and Herzog authorized checks to non-existent entities. Both said they were not aware of the apparent fraud despite questionable invoices requesting ville Nashville.

The payment was for roofing and gutter repairs. There is indeed a Nolensville Rd. in Nashville, but there is no 3219 and there is no J. Penrod in Nashville, but there is no 3219 and there is no J. Pen-rod Co.

in that city. Where number 3219 would be, there is a vacant alleyway. Businessmen questioned at adjacent numbered addresses said they had never heard of a J. Penrod nor is there such a listing in the Nashville telephone book. Booth, whose law firm has been paid $267,000 so far for work on the Overmyer case, said he didn't check the address.

Another questionable item involves repairs and maintenance of an Overmyer warehouse in Woodbridge, N.J. A look at that incident disclosed that: Guy contracted for a $2,532 landscaping job with a Stamford, Conn, nursery, the Home and Garden Shop, instead of lining up a local outfit. Many of the black and white pines that were planted in the fall of 1976 have since died. Criticize Work AJlen St hectel, principal planner for the Woodbridge Department of Planning and Development had to inspect the work. In a letter to Overmyer.

Schectel said that a local nursery could have done the job less expensively. He also criticized the work and predicted the trees might die only weeks after they were planted. Here again, Judge Babitt and Herzog signed a check a month before the bill was dated; Nov 20, 1976. Landscaper Anthony Malagisi, who once worked for the Stamford nursery got a larger contracting job in Wood-bridge. He said he met Guy previously when he sent a crew to rake Guy's lawn in Stamford.

Now living in Port Charlotte, Malagisi said that Guy asked him to build a short cement wall around a sump pump. "He said he would draw up an invoice in my name," said Malagisi. On May 13, 1976, the judge and Herzog signed a $5,610 check to Malagisi for the work. The check was based on the invoice. Malagisi continued, "I was moving down to Florida and I couldn't finish the work.

So I gave the work back to Guy and I sent him a check for $5,100 to finish up." Malagasi's check to Guy is dated May 26, 1976. It is made out to "Construct-Rite." The address of this firm is 74 Briar Brae Stamford. This is Murray Guy's home address. When asked whether it was unusual for a construction and repair consultant to contract with himself for work, Herzog said, "He only did it when he could do the job sooner and cheaper than the Since Oct. 1, 1973, the day Ivan Babitt joined the firm, said Nowick, Weber Lipshie has worked on 89 bankruptcy matters in the Southern District, other bids." Questioned further, Herzog said that he did not review the bids.

"I took Guy's word," he said. Herzog approved Guy's expenses as (Cwtffraf vn following page) funds into his bank account. The check was signed by Judge Babitt and Herzog one day before the date on the invoice requesting payment. When asked about that check and others. Herzog, a former Army infantryman who recently married the daughter of a Connecticut judge, said, "I didn't run the minutiae of the business.

I relied on people I believe to be competent." Babitt, who earns $48,500 a year as a judge, verified his signature on the check and said, "I would be shocked, aggrieved and surprised if these allegations are true." He threw up his hands and added, "What am I supposed to do I can't track down every check. I have hundreds of other cases." In another instance. Judge Babitt authorized up to $13,000 for repairs on a Nashville warehouse. Edgar Booth, an attorney working for Herzog on the case was later asked to sign a check for some of the repairs that Murray Guy had contracted. On Nov.

3. 1975. Booth signed a check for $1,983 to the J. Penrod Roofing and Sheetmetal Co. at 3219 Nolens- payment.

Some invoices were handwritten, others were dated after checks in payment were issued. 70.000 Part-timer The News was able in some eases to trace laundered money back to Murray Guy, a man Herzog hired as a construction consultant to supervise repairs on Ovtrmyer's warehouses. Guy, of 74 Briar Brae Stamford, previously worked for Overmyer in the same capacity. He refused to be interviewed. For the first 35 months of the new management, Murray Guy was paid $70,000 for part-time work involving surveying warehouses and contracting for repairs.

and tha accounting firm passed on was One check that Herzog, Judge Babitt for $2,208 to a C. V. Callucci with a Houston, Texas, address. Thre was an invoice spelling out what repairs had been done, but when the check was traced, a widowed bookkeeper with seven children was found at ths address. She explained that Murray Guy had asked her to accept the check, cash it, and then transfer the cm i Bi I News photo Instead of J.

Penrod Roofing and Sheetmetal Co. there is only an empty alley at 3219 N'olensville Road, Nashville. In 1975 a $1,983 check, was made 09t to company for warehouse repairs on Overmyer building ia that Uy..