Giuliani's Kerik Woes Resurface Through Informant

"Rudy's nephew in the Tradewaste has been appointed from Inspector General to Deputy Commissioner of Investigations," Kerik wrote. "That's how he's aware of everything going on. He's overseeing all of the investigations. That could be bad for me at the moment but I think overall good for us."

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In the same e-mail, Kerik lamented his problems paying for his new apartment. He also mentioned that his brother Donald was looking for a new job. Within months, Interstate started renovations at Kerik's apartment and hired Donald.

Interstate President Frank DiTommaso wrote to the trade waste agency to announce his new employee. "The day to day operations of Interstate Materials Corp. have been taken over by Mr. Don Kerik," the note said. "Don is a fine individual and will continue to provide your agency with full cooperation."

In July 1999, Bernard Kerik arranged a meeting with Casey and a New York Department of Investigations agent at a Manhattan restaurant to discuss Interstate, according to the recent federal indictment of Kerik. Kerik "questioned" city officials' concerns about the company having alleged mob ties. "I put my reputation and integrity on the line" for the company, he wrote in an e-mail to the company's owners after that meeting.

Kerik arranged a subsequent meeting between city officials and an Interstate representative later that summer in his Department of Corrections office, the indictment states.

As Kerik pressed Interstate's case, he asked Ray for money. "I've got to take care of those things we talked about a few weeks ago," he said. "If possible, I need about 2 to 2,5 to take care of it," Kerik wrote in an e-mail in May 1999 asking for $2,000 to $2,500. A few weeks later, Kerik sought more. "If possible I don't want to spend any of the down payment for the apartment and I've got a few things that I've got to pay off," he wrote to Ray. "Can we spare 2500 to get me by until something else comes up."

The materials Ray provided to law enforcement also suggest that he and Kerik discussed a range of private business proposals. Kerik sent and received numerous faxes from his city office addressed to Ray about several possible deals, including one in 1998 titled "Proposed Acquisition of Sugar From Brazil for Russia." Another in 1997 from a major international bank concerned possible real estate transactions in New York and Russia. The investigative files give no indication whether any of the deals occurred. Ray also alleges that Kerik notified him when Giuliani planned to appoint Kerik in 1997 to New York's gambling regulatory commission. Ray had an application for a license to run a riverboat, according to the documents he turned over to police.

"Kerik was real excited about that. He wanted me to purchase the ship and do the retrofitting," Ray said. "It was supposed to be offshore. He would get 50 percent. We would set up a company to own the ship." That plan never materialized.

Parting Ways

Kerik and Ray began parting ways in 2000 around the time Ray was indicted on charges of securities fraud in connection with the mob stock scheme. The indictment surprised Ray and his lawyers because Ray had worked with the FBI as a confidential informant to make the case, according to FBI documents. The documents show that the FBI eventually came to believe that Ray had not told them everything about his own role in the scheme.

In a November 2001 e-mail exchange, Ray reached out to Kerik for help. "I am sorry I have to burden you with any of this at all. But I need you and my family needs you. I have done my best to keep you out of it all along. . . . As a friend I was mindful of the sensitivity of your position. . . . Now I need you as a friend to do nothing more than be willing to state the truth as to the things that you do know."

Kerik's stinging reply arrived the next morning. "In the event that I am called to testify, I must tell you that my recollection of the events is not consistent with what you remember. And this would have a severely negative impact on your credibility." Ray eventually pleaded guilty to the securities charge in 2003 and was sentenced to house arrest and probation.

When Kerik's nomination to head up the Department of Homeland Security was announced in 2004, Ray went public with his allegations about Kerik and Interstate, giving an interview to the New York Daily News and going to authorities in New York and New Jersey. Kerik's nomination was quickly withdrawn.

The next year, Ray's life continued its downward spiral. His marriage fell apart, and he became embroiled in the custody battle. Ray's New Jersey home was raided by police in connection with the dispute. Eventually, the case led to Ray's probation violation -- he was accused of ignoring a restraining order to stay away from his children -- and he was sent to prison.

Ray became convinced that Kerik was exerting influence behind the scenes to damage his reputation with police and prosecutors in New Jersey. He said that a local prosecutor told him "the party line is to get Larry Ray." That prosecutor, Michele D'Onofrio, concluded that the police search of Ray's home was illegal and recently was interviewed by the FBI about the search, according to court records.

Ray filed a civil rights lawsuit against local authorities about the search. His 18-year-old daughter hired Florida lawyer Mark Gelman, a specialist in child sex abuse cases, to prepare a lawsuit that was filed last Friday alleging that she was abused by her mother and one of her relatives. A lawyer for the wife has said that Ray has repeatedly made such allegations and that they have always been determined to be unfounded. Messages left for Ray's ex-wife were not returned.

The ugliness of the New Jersey custody case is what prompted Baumgarten, whose law license was recently restored after it was revoked over billing issues, to reach out to Segarra, the former Giuliani deputy mayor.

"It just sickened me what was going on against the children," said Baumgarten, a retired brigadier general who was a deputy mayor in New York. He was credited during the 1970s with overseeing a law enforcement effort to clean up vice-infested Midtown Manhattan.