While FBI agents Monday began reviewing the books of a Bohemia finance company at the center of an alleged massive fraud of up to $90 million, a federal judge denied an attempt by a consortium of five banks that loaned the money to have a federal trustee immediately take over the company to preserve any remaining assets.
Bankruptcy Court Judge Dorothy Eisenberg in Central Islip acted after lawyers for Cliff Zucker -- a New Jersey CPA who has been running Oak Rock Financial, located at 3900 Veterans Memorial Hwy., for only the past four days -- maintained he was independent of any possible scandal.
Attorneys for the banks, including Melanie Cyganowski, the retired chief bankruptcy judge for the Eastern District, argued unsuccessfully that Zucker and his firm CohnReznick, did not have the experience to run Oak Rock and questioned his independence from the company's former officers.
The judge set a further hearing on the matter next week.
Also Monday, in another development, a well-known Garden City lawyer said he represented the founder and longtime operator of Oak Rock, Joseph Murphy.
Attorneys for Israel Discount Bank of New York, head of the bank consortium, had argued in court papers that Murphy had disappeared three weeks ago after he admitted to engaging in fraud and resigned from the company.
The lawyer, Stephen Scaring, said in a telephone interview that his client was not in hiding.
"He's certainly around," Scaring said. "We are in touch with the United States attorney's office."
But Scaring declined to comment further on the case.
The FBI and Eastern District federal prosecutors are investigating whether crimes occurred at Oak Rock, according to sources.
Monday, the FBI was at the Oak Rock offices examining records, Zucker said.
Besides possible criminal charges, at stake in the Oak Rock situation is the free flow of credit to many area companies that finance various consumer transactions.
Oak Rock serves as a kind of financial middleman, borrowing money from the banks and loaning the money, in turn, to companies that supply credit to businesses that specialize in consumer credit and or need temporary financing.
One of the many attorneys present for Monday's hearing, who represented such consumer-credit firms, was Joseph Capobianco, a Garden City attorney.
His client supplies financing to more than a thousand businesses nationwide, many of them restaurants, Capobianco said.
These businesses depend on temporary financing to operate until they can collect on their customers' bills, Capobianco said.