Sholam Weiss

The son of Hungarian-Jewish Holocaust survivors, Weiss did construction work as a young man, and established Windsor Plumbing Supply in 1974, eventually making $20 million a year.[8][9]

After Windsor Plumbing declared bankruptcy in 1989, Weiss became a bankruptcy specialist. Through that business he met New York attorney Michael D. Blutrich, who was "outside counsel" to National Heritage Life Insurance Company, and his partner Lyle K. Pfeffer, also connected to National Heritage, through whom he became involved with National Heritage.[9]

Weiss was indicted on mail fraud charges and found guilty, for which he served eight months in prison.[9] He is an observant Hasidic Jew and has acted as a rabbi to other Jewish inmates while incarcerated.[10][11]

In late 1989, National Heritage reported an operating loss and 27% reduction of capital from a decline of sales, and in 1990 insurance regulators threatened to shut down the company if it did not raise additional capital.[3][12] A group of investors, offered $4 million to satisfy regulators, in exchange for a controlling interest in National Heritage. The group provided a $4 million check, but once in control of National Heritage, transferred $3 million from National Heritage to help cover the check.[13] This began a long series of schemes in which millions were stolen from National Heritage by the group of investors. Bad investments further depleted National Heritage capital creating a $35 million dollar hole plus an additional $10 million for the company.[14][15] In the early 1993, the group decided to cover up all the missing money by a "mortgage-backed bond scheme". Weiss was contracted by the investment group to purchase discounted mortgages with National Heritage funds, which were put into a mortgage-backed bond.[16]

Weiss and NHLC agreed that Weiss through his company South Star would place NHLC money into viable secured investments, which needed to be backed by real property, and be for the benefit of the insurance company. Weiss received approximately $100 million of NHLC funds and bought $177 million face-valued mortgages. They were mostly non-performing but was bought at a deep discount of roughly for $87 million. The mortgages were mostly FDIC-insured and secured by real property.[17] It was believed that the discounted mortgages could be rehabilitated, and thus make a large profit for NHLC. But once the mortgages were purchased and placed in a bond, the managers of NHLC fraudulently placed the bond on National Heritage's books with inflated values to conceal the missing money that was mismanaged or looted by the company's managers.[16]

Weiss and other business executives and lawyers working for NHLC either pleaded guilty or were convicted in the fraud case. Some of the executives who were the originators of the crime either received immunity or pleaded guilty with a plea deal for their testimony,[18][19] admitted to forging documents and lying to regulators. In exchange for their testimony against co-defendants like Weiss, the prosecutors would drop their criminal counts and recommend a reduction of their sentence.[20]

Weiss claims that if he were re-sentenced today under current sentencing guidelines, without losses attributed to him, he would receive a sentence of no more than 37 months.[21] Additionally, Weiss claims that the satisfaction of restitution was satisfied with the proceeds of the mortgages that he bought for the benefit of NHLC at a substantial discount from its face value (53% discount). The receivers settled these mortgages and collected the full face value, realizing a large profit for the insurance company.[22]

Weiss surrendered to Austrian authorities in the fall of 2000, and was extradited back to the United States in 2002. The extradition was challenged at the United Nations Human Rights Committee, and the European Court of Human Rights, both of which noted that the United States provided assurances that Weiss would receive a full appeal and a full re-sentencing.[29][30] The extradition was also raised in the Parliamentary Assembly of the Council of Europe, also noting the U.S. assurances.[31]

According to a 2017 letter from Austrian Chancellor Christian Kern to US President Donald Trump, under Austrian law, Weiss would have received no more than a 10-year sentence, and Austria granted extradition on assurances from the United States that Weiss would receive a full appeal and full re-sentencing.[32] Austria has requested Presidents Bush, Obama, and Trump for a commutation of sentence to time served.[33]

Weiss challenged his incarceration in federal court, arguing that the United States violated its extradition treaty with Austria by not providing a full re-sentencing and a full appeal (denied under the fugitive disentitlement doctrine), which United States assured Austria to effectuate the extradition.[34] In 2009, a judge restored his right of appeal to satisfy the treaty obligation, and took ten years off his sentence.[35] Weiss argued that the United States was also required to provide a full re-sentencing, but was denied for procedural reasons, with the court commenting that it was up to the Executive branch to satisfy the international obligation by a commutation of sentence.[36]

• White-collar crime
• Financial Action Task Force on Money Laundering
• Embezzlement
• FBI

• Sholam Weiss Official Website
• Freedom & Justice for Sholam Weiss