Prebul pleads guilty to misdemeanor

A federal judge chided a prominent New York City jazz club owner, who claimed he was the victim of fraud at the hands of his brother-in law and former Chattanooga auto dealership mogul Joseph Prebul, for not keeping better track of his money.

The surprising comments came last Friday during a pre-trial conference, before intense negotiations over the weekend resulted in the federal government allowing Mr. Prebul to plead guilty on Monday to misdemeanor larceny of just $750.

Had Mr. Prebul gone to trial as scheduled, U.S prosecutors were prepared to show evidence that Mr. Prebul bilked Danny Bensusan, who is married to Mr. Prebul's sister, out of close to $7 million.

"The Bensusans were investing with (Mr. Prebul) from 1995," U.S. District Judge William H. Pauley said Friday, according to court transcripts. "They didn't do any due diligence. They never had their accountant check it out. They didn't care."

During the Friday conference, Judge Pauley also strongly warned the government not to mention Mr. Prebul's "lavish lifestyle" in its opening statements to jurors had the trial proceeded, transcripts show.

Prosecutors claimed that Mr. Prebul had for years been using Mr. Bensusan's investment money to pay off huge personal monthly American Express bills that usually totaled between $100,000 and $200,000 -- all the while telling his relative that the money was safe and sound in a high-interest bank account with Chrysler.

Documents show Mr. Prebul's auto dealerships, which he inherited in the 1980s and had big-name recognition in the area, in reality were more than $3 million in the hole. Just a day after federal authorities arrested him in February on 11 counts of wire fraud in connection with Mr. Bensusan's allegations, those dealerships went into bankruptcy and have since been sold off to the highest bidders. Mr. Prebul currently is in personal bankruptcy.

Assistant U.S. Attorney Marissa Mole argued at the pretrial conference that Mr. Prebul's lifestyle over the years, such as maintaining a personal plane and going on big shopping sprees in New York City, essentially convinced Mr. Bensusan that everything was "OK" and that he should "send more money."

Judge Pauley disagreed.

"In the end, if there was a scheme to defraud here," Judge Pauley noted Friday, according to transcripts, "it doesn't matter whether Mr. Prebul spent the money on wine, women and song in Las Vegas or he gave it to Mother Teresa. It's irrelevant."

Mr. Prebul could spend up to a year in prison when he is sentenced in March, but he could have received up to 20 years if a jury had convicted him on each felony wire fraud count.

Defense attorney Maurice Sercarz repeatedly said Mr. Prebul never planned on pleading guilty to a felony and said they were "fully prepared" to begin trying the case Monday.

"One of the real tragedies here is that Lilly Bensusan is my client's sister and Danny Bensusan's wife, and this tore her apart," Mr. Sercarz said. "If this disposition in this case causes the anguish to stop, it will have been a wonderful service for the entire family."

Yet the bad blood between Mr. Prebul and his family was evident in court Monday when Mrs. Bensusan started sobbing uncontrollably.

Prosecutors told Judge Pauley that the Bensusans always had been "seeking a different result," but agreed that Mr. Prebul's plea was the "proper way to proceed." According to the plea agreement, Mr. Prebul still must forfeit about $7 million, which is to be passed on to the Bensusans.

Mrs. Bensusan said outside the courtroom in lower Manhattan that her brother cheated them out of their money, plain and simple.

"My husband worked his way up," Mrs. Bensusan said. "He wasn't handed a business like my brother was."