News and Press Releases

Former President and Ceo of American Tissue Corporation Sentenced to 15 Years of Imprisonment and Ordered to Forfeit $65 Million on His Conviction for a $300 Million Bank and Securities Fraud

September 25, 2006

Roslynn R. Mauskopf, United States Attorney for the Eastern District of New York, announced that MEHDI GABAYZADEH, the former president and chief executive officer of the Hauppauge, New York-based American Tissue Corporation, was sentenced today to 15 years of imprisonment and ordered to forfeit $65 million on his conviction for conspiring to commit a multi-million dollar bank and securities fraud, and related offenses, that led to the bankruptcy of the paper manufacturer. The sentencing proceeding was held this morning before United States District Judge Joanna Seybert at the U.S. Courthouse in Central Islip, New York.

American Tissue was once the fourth largest tissue paper and pulp manufacturing company in the United States. Its bankruptcy left 2,700 workers unemployed, and closed paper and pulp mills located throughout the country. The company's failure cost banks, financial institutions, and investors almost $300 million.

GABAYZADEH was originally indicted in March 2003 on securities fraud, bank fraud, and conspiracy arising from his efforts to inflate American Tissue's accounts receivables and inventory in an effort to defraud a group of banks that loaned the company $145 million, and bondholders who in 1999 purchased $165 million in American Tissue bonds. A superseding indictment, returned in April 2004, included bankruptcy fraud, conspiracy to commit perjury, and obstruction of justice charges. On April 13, 2005, following a 10-week trial, GABAYZADEH was convicted of all eight counts in the superseding indictment.

"This case involved a massive corporate fraud and breach of trust that led to the bankruptcy of a major corporation, hundreds of millions of dollars in losses to lenders and investors, and the elimination of jobs for thousands of former employees," stated United States Attorney Mauskopf. "The lengthy sentence imposed today reflects the magnitude of the defendant's crimes." Ms. Mauskopf praised the U.S. Postal Inspection Service, New York Division, and the Federal Bureau of Investigation, Long Island Field Office, for their work in the criminal investigation, and thanked the Securities and Exchange Commission for its assistance.

The government's case was prosecuted by Assistant United States Attorneys James Miskiewicz and John G. Martin.

The Defendant:


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