Eight New York lawyers, real estate brokers and landlords were named in indictments today in connection with the torching of 37 buildings in Manhattan, Brooklyn and the Bronx in an alleged scheme to collect $1.8 million in phony insurance claims.
The indictments are the first to come out of a major federal investigation into arson for profit, which has devastated large sections of the South Bronx, Harlem and Bedford-Stuyvesant as well as poor neighborhoods in other cities in recent years.
"This is the most significant arson racketeering conspiracy the federal government has investigated," said John M. Walker Jr., assistant treasury secretary in charge of the Bureau of Alcohol, Tobacco and Firearms (BATF). "The pattern of arson for profit has become a major problem for cities around the country."
Until recently, arson was relegated to local police and fire departments, Walker said. However, the dramatic rise in arson for profit in cities such as New York and Los Angeles prompted Congress to press for a broader federal role. Last year it gave the BATF jurisdiction over arson cases and increased its arson budget by more than 50 percent.
In a joint news conference with Walker, U.S. Attorney Raymond J. Dearie said the investigation began in November because "people were complaining that this city was being burned down."
The arson scheme, he said, was "frighteningly simple." Between 1976 and 1980, with little or no up-front money, the accused men allegedly bought buildings with large mortgages and tax arrears, insured them for high prices and ordered them burned, in some cases within days of taking out the insurance policies, he said.
The 37 buildings were multi-family residences, partially occupied. Most of the fires were set on the roofs, with gasoline.
Dearie said 44 firefighters were injured in the blazes, suffering heart attacks, broken limbs and smoke inhalation. None of the residents was hurt.
According to the indictment, the men collected $616,000 on $1.8 million in policies with companies that included Lloyds Insurance Co., New York Property Insurance Underwriters and Royale Belge Incendie Rassurance, a Belgian insurance company.
Dearie said more indictments are expected in the investigation.
Charged in five separate federal racketeering and mail fraud counts in U.S. District Court in Brooklyn were two Brooklyn real estate brokers, Abraham Slochowsky, 55, and David Gold, 42; two Monsey, N.Y., real estate brokers, Philip Holzer, 55, and Abraham Srulowitz, 32; Oyster Bay Cove real estate broker Henry Katkin, 49, and Alvin Donnelly, 35, address unknown.
Israel Bilus, 53, a Manhattan insurance broker, was charged in a separate indictment with two counts of mail fraud for misrepresenting the identity of the true owners of properties to Lloyds.
Each defendent faces a maximum sentence of 20 years in prison and a $25,000 fine for each racketeering charge, and five years and a $1,000 fine on each mail-fraud offense.
With the exception of Donnelly, who remained at large, the men pleaded not guilty and were released on $100,000 bond.
Slochowsky and Elliott are awaiting trials in the Bronx and in Brooklyn on arson charges, according to Assistant U.S. Attorney Max Sayah.
Asked if the defendants are tied to the mob, Dearie said, "I reject any reference to organized crime."
In an interview, Walker said that the issue of federal involvement in arson was hotly debated in the Reagan administration.
"Some were saying this is really insurance fraud," he said. "Why should we spend federal money to bail out the insurance industry? The insurance companies have not been very careful in writing policies. They don't always conduct pre-insurance investigations. Brokers get paid according to how many policies they write, so there is no incentive to be careful."
However, Walker said that because arson for profit "is a major crime problem that was not being adequately addressed at the state and local level--and because insurance companies were anxious for the federal government to play a role--congressional hearings were held and the Treasury Department pledged to step up its involvement."
In May, three New York landlords were sentenced to up to 14 years in jail for torching 14 occupied apartment buildings they owned in the Bronx and Manhattan. They had netted about $1 million in insurance payments over three years. More than 40 firefighters were injured in the blazes.