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SAC Extortion Case Conviction of Brooklyn Rabbi Is Upheld

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March 19 (Bloomberg) -- A federal appeals court upheld the conviction of Milton Balkany, a Brooklyn, New York, rabbi found guilty of trying to extort $4 million from Steven Cohen’s SAC Capital Advisors LP.

The U.S. Court of Appeals in Manhattan today rejected Balkany’s claim that he was induced to commit the crime by the firm’s lawyer, Martin Klotz, and was barred from putting on a defense that he had been entrapped by the lawyer working on behalf of prosecutors.

Balkany was convicted of extortion and blackmail by a jury in November 2010 for threatening to disclose insider trading by SAC unless $4 million was paid to charities he operated. There was no evidence at the trial that he had any such evidence. He was sentenced to four years in prison.

“The District Court did not err in refusing to give an entrapment charge because Balkany failed to present any evidence that the government ‘induced’ him to commit the crimes charged,” a panel of judges on the Manhattan-based appeals said today.

“The evidence with respect to the extortion, wire fraud, and blackmail counts established that it was Balkany who first made an unsolicited call to SAC,” the panel said.

Paul Shechtman, a lawyer for Balkany, didn’t immediately reply to a voice-mail message left at his office seeking comment on the decision. Jonathan Gasthalter, a spokesman for SAC, declined to comment.

Day School Dean

Prosecutors said the rabbi, who was dean of the Bais Yaakov day school in the Borough Park neighborhood of Brooklyn, told the Stamford, Connecticut-based fund that a federal prisoner in Otisville, New York, to whom he was a spiritual adviser, had described the purported insider-trading scheme to him.

Balkany called prosecutors in the Manhattan U.S. Attorney’s Office in an attempt to put pressure on SAC to further his scheme and cause prosecutors to interview the prisoner, testimony showed.

Witnesses testified that Balkany told the lawyer for SAC that the inmate would keep quiet about illegal in 2004 and 2005 if it paid his school and another $2 million each.

Klotz instead recorded his phone calls and meetings with Balkany, who was arrested after taking two checks from SAC totaling $3.25 million.

Balkany told an SAC official at the time that the inmate wouldn’t talk to authorities at a meeting scheduled for the following day. No such meeting was planned, according to the government.

The case is U.S. v. Balkany, 10-cr-441, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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