Ex-Shoplet GC Gets 3 To 9 Years In Prison For $6M Theft

By Frank G. Runyeon
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Law360, New York (October 8, 2020, 7:23 PM EDT) -- After hearing his ex-boss condemn him to hell, Shoplet's former top attorney was sentenced to three to nine years in prison in New York state court Thursday for stealing millions from the online retailer's PayPal account.

Leslie H. Scharf was sentenced as part of a plea bargain after admitting to a single count of first-degree grand larceny for his theft of $5.9 million. The deal with prosecutors will also strip him of the $1.5 million his attorneys say is all that remains of the ill-gotten gains that Scharf acknowledges he spent on expensive cars, vacations and luxury watches.

Scharf chatted buoyantly on a bench outside the courtroom before entering — wearing a New York Yankees face mask because of the coronavirus pandemic, purple plaid shirt and sneakers — but his posture before Supreme Court Justice Gregory Carro changed to slouching silence.

"Well, there was a negotiated plea," Justice Carro said from behind a plexiglass wall, another virus precaution, after confirming that the government would not seek any further restitution beyond another $47,000 and a few luxury watches Scharf had handed over. "I've accepted it."

Scharf, who inititally faced up to 25 years behind bars, declined to speak for himself, but his attorney Victor Rocco of Herrick Feinstein LLP said his client was remorseful, would be disbarred for his crime and must "give every penny" that he has.

"Mr. Ellison," Justice Carro said, nodding toward Shoplet CEO Tony Ellison seated in the gallery, "I know this may not satisfy you."

Before the sentencing, the online office supplies retailer's CEO, Tony Ellison, had condemned his former general counsel to hell, invoking Dante's "Inferno" in a seven-page victim impact statement.

"It is easy to imagine where the poet would consign this pathological liar and con artist, who admitted to stealing as much as $7 million and countless of peoples' dreams: to the Pit, the Ninth (and deepest) Circle of Hell," Ellison thundered into a microphone from behind the bar. "That's where he belongs for the rest of his life."

Scharf stared straight ahead and did not appear to acknowledge his former boss.

When Ellison first met Scharf, the attorney was working part time and "having a hard time supporting his family," Ellison said. He said he gave Scharf a chance because he came from a respected law firm, Brown Rudnick LLP. But then his general counsel "controlled, deceived, and manipulated everyone around him while he committed over 9,000 separate larcenies and thefts over a period of 10 years."

"What really infuriates me," Ellison said, is that Scharf saw that single moms and people with limited means "were losing their jobs while he was taking the bread out of their mouths by stealing larger and larger amounts of money to support a lavish lifestyle filled with an expensive home, extravagant vacations, and expensive gifts."

Ellison called it "chilling" that Scharf played a key role in downsizing at Shoplet, which led to 70 people losing their jobs. "He was actively suggesting who should be fired — all because of his lies and theft." Ellison propped up the company with his own savings, he said.

The Shoplet CEO was particularly incensed by the idea that the court would accept that Scharf, a former bankruptcy attorney, truly had no money left after stealing millions of dollars.

"How can anybody believe that he has no means and money left to make restitution for the full amount while being represented by top gun lawyers that very few people can afford?" Ellison said. He alleged that Scharf had checked himself into a hospital to avoid being served papers and transferred his assets to family members.

"Scharf is now laughing at all of us today," Ellison said.

Scharf's attorney denied his client was hiding money or mocking the court.

Prosecutors told the judge at Scharf's plea hearing that little was left of the millions he stole. In a statement, the district attorney's office said Scharf had frittered the money away on "extravagant personal expenses, such as travel, high-end designer shopping, and purchases of a BMW and a Porsche."

Prosecutors said Scharf's accounts were frozen pursuant to a civil judgment in the retailer's lawsuit against him. Justice Andrew Borrok entered a judgment of $6.8 million in favor of Shoplet against its former top attorney in February for embezzling company funds.

Ellison did not immediately respond to a request for comment on how much money Scharf has paid him to date.

Shoplet claimed in the civil action that from 2014 until June 2019 Scharf, who was also senior vice president, funneled $6.8 million in transactions of $1,000 or less to his PayPal accounts, including one with an email containing his last name.

Since PayPal notifies both sender and recipient of each transaction, Shoplet found evidence of thousands of deleted transaction notifications on Scharf's Shoplet email account, the retailer said in filings.

Scharf was arrested and arraigned Jan. 11 and was indicted on grand larceny charges later that month for thefts spanning from May 2013 to July 2019.

Scharf was immediately handed over to correction officers after the judge sentenced him.

"You can cuff him," Justice Carro said, as the metal hoops closed around Scharf's wrists.

The government is represented by Natallia Krauchuk and Daniel J. Koevary of the Manhattan District Attorney's Office.

Scharf is represented by Victor J. Rocco and Gabrielle Fromer of Herrick Feinstein LLP.

The criminal case is New York v. Leslie Scharf, case number 00120-2020, in the Supreme Court of the State of New York, County of New York.

The civil case is Ellison Systems Inc. v. Scharf, case number 653888/2019, in the Supreme Court of the State of New York, County of New York.

--Additional reporting by Dave Simpson. Editing by Orlando Lorenzo.

For a reprint of this article, please contact reprints@law360.com.

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