Dead attorney's deals have legal aftermath

Taking a page from the Bernard Madoff case, a Long Island bankruptcy trustee is going after family members of a Hempstead attorney who killed himself after his suspected Ponzi scheme fell apart.

Andrew Thaler, an East Meadow attorney who was appointed trustee in a Brooklyn bankruptcy court action, has filed a million-dollar lawsuit against one of Jay Korn's relatives and wants to question his wife, Ellen Korn, about her spouse's finances.

Korn jumped from a Hempstead office building in March 2010. Soon after that, investigators with the Nassau district attorney's office said they received more than 100 complaints from Jay Korn's investors of losses over $30 million. But prosecutors quickly closed the case after they determined that Jay Korn, the only suspect in the fraud, was dead. Several creditors of Korn's law firm then filed an involuntary bankruptcy case last year against the firm known as Korn & Spirn for claims totaling more than $4 million.

Thaler said his $1.03-million lawsuit against Joan Korn, identified in court records as the wife of Korn's brother Robert, is similar to the clawback actions being used on a grander scale by Madoff bankruptcy trustee Irving Picard.

"It's the same thing," explained Thaler, referring to a proceeding he filed against Joan Korn last month in which he alleged that the Florida woman received money that came from Jay Korn's investors. Thaler is seeking to recover what he calls "preference transfers" or "avoidable transfers" under the bankruptcy laws, court papers stated.

But recently, Robert Korn said in a telephone interview that he wasn't Jay's brother, but a cousin. When he sold his house in Old Westbury in 2010, Robert Korn said he used his cousin as an attorney and the payments received from the law firm escrow account represented the sale proceeds, not investment returns.

"I am not worried," said Robert Korn about the trustee's lawsuit.

In his court filing, Thaler described how Jay Korn and his firm solicited investors for what were purportedly real-estate and other business ventures to generate high returns. The money was held in the firm's escrow account and sometimes paid out in the form of interest payments to investors, Thaler said. At times, investors rolled over their cash into future deals or were paid back their principal, the trustee stated.

But Thaler said in his court filings that there was no evidence that Jay Korn, 70, ever invested in any real estate or other deals. Instead, the money was paid to earlier investors, used to fund law firm expenses or transferred to Korn and his family members, the filings stated.

Earlier this week, the trustee and lawyers for Ellen Korn agreed to discuss what documents she has to produce. The court adjourned the bankruptcy hearing until Aug. 23.

Ellen Korn, of Rockville Centre, declined to comment for this story.