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Bankruptcy lawyers search for LI Ponzi schemer's cash

Jay Korn, 70, is believed to have committed

Jay Korn, 70, is believed to have committed suicide by jumping off the roof of his Rockville Centre office building on March 24, 2010, police said. Credit: Newsday File / 1992

Four years after Long Island Ponzi schemer Jay Korn's suicide in March 2010, bankruptcy lawyers are starting to find sources of cash through legal settlements that may be used to pay back victims and other creditors.

Investigators say Korn, a Hempstead attorney, stole about $30 million from as many as 100 people in the years before he died. Only about $85,000 in cash has been recovered so far, but a trustee handling the Korn law firm's involuntary bankruptcy case plans to press ahead with a lawsuit against his wife, Ellen Korn, in hopes of retrieving up to $1.25 million.

The suit is currently before U.S. District Judge Sandra J. Feuerstein in Central Islip.

The money, according to papers filed recently by trustee Andrew Thaler, was used by Korn to "pay for his lavish lifestyle" and that of his wife.

Thaler, who has a law office in Westbury, states in the court filings that Korn sold bogus "loan participation notes" to would-be real estate investors.

As is typical in Ponzi schemes, Korn used money he received from later investors to make payments to earlier investors who elected to take "interest payments" rather than roll over their money, Thaler stated.

Proceeds from the scheme were either used to pay the operating expenses of Korn's law firm, Korn & Spirn, or transferred to himself or family members for "personal enrichment," Thaler alleged in court papers.

Ellen Korn's Manhattan attorney, Michael Cornacchia, declined to comment on the case.

Cornacchia has denied that Ellen Korn had any prior knowledge of the scheme. She signed joint tax returns that included the law firm income, but did so based on the advice of her husband and their accountant, Cornacchia said in court documents.

In a related matter, Thaler said he recently settled a proceeding he started in bankruptcy court against Glen Ferens and S. Ferens & Co. of Westbury.

In court documents, Thaler said Ferens and the firm were paid about $250,000 for soliciting investors for Korn between November 2008 and November 2010.

In the $85,000 settlement, Ferens and the firm denied any wrongdoing.

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