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Mr. David. He said he couldn't afford lawyers' fees, but certainly at that time it would have been strange he needed a lawyer in the first place, if he were innocent, and in the second place there was no question of cost for him, as there would be now, because he was right there in Newark.
Senator WILLIAMS. I go home weekends and I was willing to hear him Saturday, Morning morning, without any expense to this committee. This committee does not spend money on travel, as I recall. Is that right, Senator Thurmond?
Senator THURMOND. I haven't spent any. I don't know.
Senator WILLIAMS. If we ever leave the city it is at our expense. Senator Robertson is very conservative and I think probably he is wise about this.
Senator THURMOND. Mr. Chairman, I thought it might be well to get this settled about the witnesses. Do you want to go ahead?
Senator WILLIAMS. We have a witness from Newark, N.J., who is most interesting.
Senator THURMOND. I thought you had one from further away.
Senator WILLIAMS. Oh, Mr. McCulloch. He has been on. He was great. You should have heard him.
Senator THURMOND. At any rate, do you want to take one more now? That would take us beyond 12 m. I would have no objection, provided there is no business transacted or anything brought up, or any other kind of business, in other words, if you just want to hear the witness.
Senator Williams. Yes. This testimony is most interesting. All of the testimony this morning has been. I am glad you are back.
Mr. DAVID. Shall I continue, Mr. Chairman?
Mr. DAVID. Mr. Fleishman, who was the president of the Atlantic & Pacific, figures in three stock frauds, two of which are now before the Securities and Exchange Commission, and in one case he was charged jointly with Mr. Pilnick? So you see there is a link between all of these people.
In accordance with the SEC News Digest of July 18, 1966, Mr. Fleishman has been barred, "barred from any further association with any broker-dealer firm on grounds that he violated the antitrust provisions of the Federal securities laws in the sale of securities of Device Seals, Inc., Lou Kornhandler, Inc., and Tabach Industries, Inc."
At the time of these activities, Mr. Fleishman was a salesman for the broker-dealer firm of Costello, Russotto & Co., of Beverly Hills, whose registration has been revoked.
In the case in which Mr. Pilnick was involved together with Mr. Fleishman concerns the New York brokerage of Waldman & Co., now before the SEC in New York.
The two, working as salesmen, were among a group of persons charged with fraudulent security sales. Mr. Pilnick was barred last January from working as a stockbroker or dealer. The hearing on Mr. Fleishman's case began last week.
He is up on similar charges in connection with the New York brokerage of William & Lee, Inc. Mr. Fleishman has appealed the charge and no date for a hearing has been set.
From stocks Mr. Fleishman turned to land sales, and purchased land from Golden Palm Acres, Inc., which he subsequently sold, at least in part. At first he rented desk space at 744 Broad Street, in the heart of downtown. On May 1 he rented a suite on the next block, at 24 Commerce Street.
But it seems the climate for Florida land selling was not a good one in New Jersey. A spokesman for Helmsley-Spear, Inc., managers of both buildings, said, "Mr. Fleishman owes us rent for June and July. Our attorneys have been unable to get in touch with him. We haven't seen him or heard from him in 2 months, and his office is locked.”
Mr. Fleishman's company has no listed telephone number, nor is there a telephone listed in his name at the Manhattan address he gave Helmsley-Spear-153 East 57th Street.
Now I feel that the measure proposed by you, Senator, is very much needed unless all States could be convinced to impose similar restrictions themselves.
Senator WILLIAMS. That is unlikely, isn't it?
Mr. DAVID. Yes. For example, in New Jersey, a victim might complain to the State real estate commission, but he will learn that the jurisdiction of the commission extends only to real estate agents or brokers. These must register with the commission and the properties they wish to sell undergo careful examination by commission.
Now we are talking about interstate sales. I am not dealing with sales of property within a State. This is interstate. But persons selling their own land, either as a private individual or as officers of corporations which own land for sale are exempt from the commission's requirements. That is because the commission operates under a law dating back to 1921.
If the intent of the law was to exempt the individual land or home owner from State interference in the sale of the property, the law now serves as a shield for unscrupulous land sales operators. Yet, while various parts of the real estate statutes have been amended, this one has not. We can only be as good as the law under which we operate, as said a staff member of the commission.
Naturally, a land sales promoter, wishing to avoid scrutiny of the law, will take advantage of this loophole, and Golden Palm Acres is a recent example.
From the real estate commission's office at 1118 Raymond Boulevard in Newark it is only a short walk down the hall to the offices of the consumer fraud bureau. John A. Lombardy, deputy general attorney in charge of the bureau, will explain his office deals mainly with complaints regarding goods and services. Any complaint regarding real estate is referred to the real estate commission, which has no law covering such situations. Therefore, the real estate commission itself does its own bit of referring. It refers cases to the prosecutor's office. But prosecutors in New Jersey must deal with a variety of complaints, and a land fraud complaint is liable to be put on the bottom of the heap.
In addition, fraud is most difficult to prove, according to Mr. Lombardy. You have to prove, he said, that there has been the intent to defraud, and that is difficult to do. The accused will apologize, say it was a mistake, and offer to make good.
At least in New Jersey, and as far as I know in most States, the interstate land buyer has very little protection.
One prosecutor's investigator put it to me this way: "Well, after all, it is a gamble. So if these people lost, they lost."
Buying stocks and bonds is generally a gamble, too, and yet we have stringent laws that are enforced by the Securities and Exchange Commission to protect the public from fraud. Surely the land buyer deserves the same protection.
The innocence or the folly of the public should not serve as protection for the crooked. It is just because of such an attitude of indifference, and because of lack of property legislation that people like Mr. Pilnick and Mr. Fleishman are able to hop from one field of endeavor to another, from one geographical location to another, starting their businesses all over again. Thank you. (The following articles by Mr. David were received for the record:)
SWAMP LAND SOLD-FLORIDA AGENCY PROBES N.J. FIRM
(By Gunter David) The Central and Southern Florida Flood Control District is looking into the activities of a firm selling land in Dade County, Florida, from an office in Newark.
The firm is Golden Palm Acres of 20 Bradford Place, which has sold more than 300 acres to 13 persons in New Jersey and to nearly 100 persons in New York, Pennsylvania, Connecticut, Maryland, Alabama, California, Indiana, Ne braska and Kansas.
According to the Florida agency, the property is swamp land, located under water in a conservation area used by the state of Florida as a catch basin for rainwater for the Everglades National Park.
The firm has been selling the land with the indication that the property has oil exploitation possibilities as well as industrial value. The state agency said such exploitation would be barred by the state and any development would be impossible, since the agency, which maintains control over the area, including privately owned parcels, such as those sold by Golden Acres, needs the land for conservation purposes. The agency also casts doubts on the existence of oil sources in the area.
The land is being sold in parcels of 114 acres in prices ranging from $195 to $395. All transactions are in cash.
President of Golden Palm Acres, a Florida corporation, is Louis Pilnick, 52, of 148 Newman St., Metuchen. Pilnick was barred by the Securities and Exchange Commission in Washington in January from working as a stock broker or dealer on charges of violating anti-fraud provisions.
At the time, Pilnick was employed by the New York brokerage of Waldman & Co., whose operations were suspended by the SEC pending a hearing on fraud charges in June. Pilnick, according to SEC records, "made false and misleading representations to customers concerning the business activities and prospects of Development Corp. of America and United Utilities Corp. of Florida, and used high pressure selling techniques” to place unsophisticated investors in a position in which they were induced to make hasty investment decisions upon deceptive representations, and sold such securities (common stocks) at prices which were excessive and unreasonable.”
Thomas E. Huser, director of information and education for the Central and Southern Florida Flood Control District, said the property being sold by Golden Palm Acres is 10 miles north of the Tamiami Trail—U.S. 41-connecting Miami with Tampa via the Everglades.
"You need a swamp buggy or an airboat or a helicopter to get there," Huser said. “At present the land is under nearly two feet of water. We have a flowage easement over the land, which means that we can flood it anytime. The property is inside Conservation Area Three, a tract of 914 square miles of Everglades, north of the Everglades National Park.
"There are dikes all around the area to store and save rainy season water. This is nothing but a swamp."
NO OIL FOUND As far as oil prospects are concerned, Huser said: "Some of the fiercest wilderness in the North American continent separates this land from where oil was found. In addition, a road would have to be built to gain access to the land, and the agency would refuse permission."
Ben Redding, chief of land acquisition for the agency and assistant director of its real estate division, said, "A test well was drilled a year ago at the 40 Mile Bend of the Tamiami Trail, about 12 miles away from the property, but in an area just outside the conservation land. No oil was found."
Redding said it would cost thousands of dollars to survey the property since lines would have to be run about three miles from a dike, the nearest landmark.
"People who buy this land and expect to clean up by exploring for oil, why, with all the stumbling blocks, they would be better off going to Las Vegas and trying the roulette wheel," Redding said.
As far as industrial development is concerned, Robert Cook, building and zoning director for Dade County, said, “There is no chance whatsoever for any construction there. The land is not zoned for industry. We have given it an interim zoning of nothing special."
Golden Palm Acres was incorporated in Florida last August, but from reports by New Jerseyans, operations went into full swing about three months ago. Solicitation is by mail and through telephone calls.
"The caller almost made me smell oil," said a physician from Passaic. “Brochures, a diagram and a map arrived in the mail two or three months ago. I bought one parcel."
Another buyer, who lives in West Orange, was approached in the same manner.
"The man told me there had been a definite oil break and that I was sure to have resold my land to an oil company by September at a good profit,” the buyer recalled.
Pilnick told a visitor to his office : "There are excellent chances of oil on the property. There are also good chances for industrial development. I don't mind selling the land because I retain 50 per cent of all mineral and oil rights."
Pilnick did not mention swampland or the fact that the land is in a conservation area. Nor did he mention that drilling 12 miles away had produced no oil.
Literature disseminated by the firm notes Sun Oil Co. operations of profitable wells. These are 60 miles away and outside conservation land. The literature described the company as offering "oil, gas and mineral rights that are potentially invaluable.”
In a subsequent interview with a Newark News reporter Pilnick said he did not tell prospective buyers everything about the property, and added, “If I knew for sure there was oil there, I'd be an idiot to sell any of the land.”
He likened himself to someone selling a house. “Do they tell you everything that's wrong with it?” he asked.
Pilnick said he has a clause which guarantees money back within 60 days of purchase date on any land. A purchaser interviewed said no such offer was made to him.
Deeds issued by the firm do contain clauses which mention an easement to the flood control agency and the right of the state to build dikes or canals on the land. But the clause dealing with the flood control agency lists no details of state flood rights, except to cite the date and book in which the easement was recorded.
NOT REGISTERED IN NEW JERSEY The firm is not registered with the New Jersey Real Estate Commission, which has jurisdiction only over persons acting as agents for others. Pilnick and his associates sell corporate owned land and are not considered agents. Since payment is in cash, the firm is not registered with the Florida Installment Land Sales Board.
Vice presidents of Golden Palm Acres, as listed in incorporation papers in Florida, are Allan Harris of Irvington, and Sidney Richman of Newark. Subsequently named vice presidents were Julius Gladstein of Brooklyn, formerly of Union, and Bernard Portnoy of East Meadow, N.Y. Secretary-Treasurer is Mrs. Iris Helms of Irvington.
Portnoy, Gladstein and Harris are named in the SEC action as the result of which Pilnick was suspended from acting as stock broker or agent. They also were employes of the Waldman firm and their cases also come up for a hearing in June. The charges were made by the SEC staff and the hearing will be before an SEC examiner.
FLORIDA LAND SALE FIRM LEAVES STATE
(By Gunter David) Golden Palm Acres, a firm selling swamp land in Florida from an office in Newark, whose affairs are under investigation by the Fraud Squad of the Essex County Prosecutor's office, has moved out of the state.
The company's suite at 20 Branford Place has been vacated and its telephone changed to a Miami Beach number.
Louis Pilnick, 52, president of the firm, has moved to Florida from the Jefferson Park Apartments, 148 Newman St., Metuchen, without leaving a specific forwarding address with the management of the building.
Another firm the Atlantic and Pacific Land Co., of 24 Commerce St., founded only last March, had taken over some of Golden Palm Acres land. The president of the company, Martin A. Fleishman of New York, has not been seen by the management of the office building for several weeks.
In the meantime, a U.S. Senate banking and currency subcommittee, about to conduct hearings in Washington on Thursday, has been unable to locate Pilnick.
WANTED AS WITNESS
He is wanted as a witness in the hearing on a bill proposed by U.S. Sen. Harrison A. Williams, Jr., D-N.J., calling for federal controls over interstate land sales.
Investigation into the affairs of Golden Palm Acres was begun by the prosecutor's office following a story in The Newark News May 1. The firm had sold within a few months more than 300 acres to 13 persons in New Jersey and to nearly 100 persons in several other states. The land was sold with the indication that there were oil exploitation possibilities and industrial values.
The Central and Southern Florida Flood Control District said the property is swamp land under water in a conservation area in Dade County used by the State of Florida as a catch basin for rainwater for the Everglades National Park. While the land is privately owned, the state has jurisdiction over it and permits no drilling, digging or construction of any kind.
MOVED IN JUNE
A check at the Branford Place address revealed that Pilnick moved out of his sixth-floor two-room suite in June. An investigator for the New Jersey Real Estate Commission, who spoke to Pilnick in June, quoted Pilnick as saying his business in New Jersey was over. The investigator, Sidney Scharf, said Pilnick told him he had taken a larger suite on another floor of the building and was about to move there prior to the newspaper story and the subsequent investigation.
However, Golden Palm Acres continues to exist in Palm Beach, Fla., where it has maintained offices all along. The firm is incorporated in Florida. The answering service there said yesterday Pilnick was in Florida.
A spokesman for Williams' office said yesterday : “We've sent telegrams to Mr. Pilnick's office and to his home, but they came back with the notation that he is no longer there. We'd very much like to have him as a witness Thursday.”
DECLINED TO TESTIFY
Pilnick, while still in New Jersey, declined to testify at a hearing of the subcommittee June 22, on grounds that he was unable to obtain counsel.
The Atlantic & Pacific Land Co. was registered with the Essex County clerk's office on March 1, with Fleishman, then of Brooklyn, as president. The com