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(Updates with Bernstein biography in 10th paragraph.)
Aug. 9 (Bloomberg) -- The Manhattan Chamber of Commerce’s chairman illegally transferred more than $2.5 million to his own accounts while running the Albert Ellis Institute, the nonprofit said in a lawsuit claiming JPMorgan Chase & Co. let it happen.
Jeffrey Bernstein, the former president of Albert Ellis’ board of trustees, “secretly and without authority or the knowledge of its other trustees” moved institute funds into personal bank accounts he owns or controls, the organization said in the lawsuit.
Bernstein was first elected to the institute’s board of trustees in March 2006 and was chosen as president of the board in July 2006, the institute said in the lawsuit. He was named acting director of administration in January 2010 and appointed to the permanent post the following month. Bernstein resigned from all offices he held at the institute after the fraud was discovered in February 2011, lawyers for the group said in the complaint, which was filed today in federal court in Manhattan.
JPMorgan has been provided with a list of 65 unauthorized transactions by Bernstein and has refused to restore the funds to the institute’s account, lawyers for the institute said in the lawsuit, which seeks more than $2.3 million in damages.
The institute contacted Manhattan District Attorney Cyrus Vance’s office about the alleged fraud, and the U.S. Attorney’s Office in Manhattan is investigating, David Blasband, an attorney representing the institute, said in a telephone interview.
Joan Vollero, a spokeswoman for Vance’s office, declined to comment on whether the district attorney is investigating. Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara, didn’t respond to an e-mail seeking comment on the lawsuit.
Jennifer Zuccarelli, a spokeswoman for JPMorgan Chase, declined to comment on the lawsuit. Patrick J. Smith, an attorney representing Bernstein, didn’t return a telephone message left at his office seeking comment on the complaint. Bernstein isn’t named as a defendant in the suit.
The institute, located on East 65th Street in Manhattan, is a not-for-profit psychotherapy organization founded in 1959 by its late namesake, Dr. Albert Ellis. It is “committed to alleviating emotional disturbances and enhancing emotional well- being through the study, teaching and application of rational emotive and cognitive behavioral therapy,” according to the lawsuit.
‘Chart Our Course’
The Manhattan Chamber of Commerce has no information about the matter, President Nancy Ploeger said in an e-mailed statement. Bernstein has resigned as the chamber’s chairman effective immediately, and the organization’s board will meet as soon as possible to “chart our course going forward,” Ploeger said in the statement.
Bernstein serves as chairman of the New York-based Archstone Group, a corporate management consulting group, and was the founder of TruFoods Systems Inc., a company that operated more than 100 restaurants until 2007 when it was sold to Trufoods LLC, according to a biography posted on the Manhattan Chamber of Commerce’s website.
TruFoods began in 1998 when Bernstein acquired Pudgie’s Famous Chicken at a bankruptcy court auction, according to the biography. Digital Creative Development Corp., which operated the Arthur Treacher’s Fish & Chips chain, bought Pudgie’s in October 2000 and named Bernstein chief executive officer of the combined company.
Stalking Horse Bidder
Digital Creative sold its interest in the combined company to an affiliate of Bernstein’s in March 2002. TruFoods also participated as a stalking horse bidder in bankruptcy transactions, according to Bernstein’s biography.
Bernstein previously served as president and CEO of Consolidated Services Inc., a management consulting firm that was retained by debtors, creditor committees and secured lenders in more than 100 Chapter 11 bankruptcy cases, according to the biography. Bernstein has also served as chief restructuring officer and an examiner in several Chapter 11 cases, the biography says.
Bernstein told the institute shortly after he was appointed director of administration that an operating account it had maintained at JPMorgan had been closed, the institute said in the lawsuit.
The institute discovered in February that the account hadn’t been closed and started an investigation that revealed that the funds in question had been used by Bernstein for his “personal benefit,” the institute claims in the complaint.
“When questioned about the allegedly closed Chase Bank account, Bernstein refused to provide any information, failed to explain his actions or account for the monies misappropriated from the institute,” lawyers for the institute said in the lawsuit. “However, as noted, Bernstein resigned all offices he held at the institute. Bernstein’s fraud was immediately reported to law enforcement authorities.”
The case is Albert Ellis Institute v. JP Morgan Chase Bank NA, 11-cv-5504, U.S. District Court, Southern District of New York (Manhattan).
--With assistance from Karen Freifeld in New York. Editors: Glenn Holdcraft, Charles Carter
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