A former executive director of the Friars Club took advantage of its lax financial oversight to try to enrich himself at the expense of the organization and its members, federal prosecutors wrote this week in a sentencing memo.
The prosecutors accused the former director, Michael Gyure, who faces a possible prison sentence for filing false tax returns, of being driven by “avarice and deception.”
They said, for example, that when the Friars were negotiating with ESPN to produce a 2015 roast of Terry Bradshaw, Mr. Gyure arranged that a contract be written so that a company he led would receive any profits instead of the club.
They said he covered losses from the roast — an event that prosecutors described as a “financial disaster” — with a line of credit that he got from a bank by saying the money would be used to organize another roast, this time of a former NBA player.
And the prosecutors with the United States attorney’s office in Manhattan said Mr. Gyure briefly received $150,000 in deferred compensation to which he was not yet entitled.
“Gyure has run the Club with the twin goals of enriching himself and ensuring that no one knew the extent of his self-dealing and mismanagement,” the sentencing memo states. “This was possible because of a yawning gap in oversight of the Club’s finances, which Gyure exploited to the fullest extent possible.”
Mr. Gyure has been charged only with the tax offense, for which he will be sentenced Monday. Prosecutors did not describe the additional behavior they outlined in the sentencing memo as criminal. But they said Mr. Gyure had abused his position at the club, even acting inappropriately after he pleaded guilty in the tax matter.
Some Friars have been complaining for years about lax management. Disputes over finances have led to multiple departures from the club, some by people who were upset with the oversight and some who say they were forced from the club after raising questions.
In a response to be filed with the court on Wednesday, Mr. Gyure’s lawyers, Paul Shechtman and Maggie Lynaugh, disputed many of the government’s assertions and said their client had helped the club by declining some payments to which he was entitled.
“Rhetoric has a place in a sentencing memorandum, but painting a false picture of a defendant does not,” the lawyers wrote, adding that “Mr. Gyure did not take a penny from the club that was not his.”
In its 115-year history, the Friars Club has included members like Frank Sinatra, Milton Berle and Johnny Carson. But the club’s fortunes have declined over the last decade or so. Bills went unpaid and the club lost its tax-exempt status as a fraternal organization in 2010.
Federal agents raided the club’s offices in 2017, carting off boxes of files. They later charged Mr. Gyure with filing false returns for four years, ending in 2015. He pleaded guilty in January to that offense. Prosecutors wrote that he had received more than $400,000 in untaxed compensation, in the form of expenses and a $160,000 loan that was forgiven. Mr. Schechtman has said Mr. Gyure ultimately repaid the $160,000, partly through salary reductions.
Prosecutors have asked that Mr. Gyure serve 12 to 18 months in prison.
Still, support for him runs strong in some parts of the club. For example, the board voted to continue his employment for five years “in recognition of his vital role” in keeping the institution alive, Mr. Shechtman told the court in a filing. His position has changed, though, and he is now serving as the club’s executive producer and no longer has any responsibility for the club’s finances.
Mr. Shechtman has asked that Mr. Gyure be spared prison time and he forwarded dozens of letters to the court, many from people attesting to his client’s generosity and importance to the club. One letter came from David Dinkins, the former mayor who is an honorary member. Another was written by the talk show host Larry King, who is a leader of the club.
But in its memo, the government said Mr. Gyure’s conduct came at a time when the Friars Club faced financial difficulties so severe that its own accountants wondered whether it could still be considered a “going concern.”
“Gyure responded to this crisis by trying to squeeze money out of the Club’s charitable arm, by forcing vendors to accept reduced payments, by propping up the financial statements with unrealistic, and ultimately unrealized, ‘accounts receivable’ entries, and by keeping this information from the Club’s leadership,” the prosecutors wrote.
In the case of the roast of Mr. Bradshaw, the government said Mr. Gyure arranged that any profits would go to a company of which he was executive director, Phoenix International LLC, instead of the Friars Club.
Prosecutors said Mr. Gyure did not disclose “this financial arrangement to the Club.” Under the arrangement Phoenix was supposed to pay the club a licensing fee of $150,000, but prosecutors said they had not seen evidence that the fee was ever paid.
Mr. Gyure’s lawyers said the Friars had a practice of creating separate companies to handle roasts so that the club would avoid liability. The plan, they said, was for Phoenix to turn over any profits, after expenses, to the club, but the event did not turn a profit.
The club was left to pay bills from vendors for the event. The government said it paid them using a line of credit that Mr. Gyure secured from a Manhattan bank. But prosecutors said Mr. Gyure told the bank that the money would be used to organize the roast of the unnamed former NBA player, even after the former player said he was unavailable for such an event. Mr. Gyure went so far, the memo said, as to send the bank a proposed menu and budget.
Mr. Gyure's lawyers said that the loan had been repaid in full and that “there was no personal benefit.”
Prosecutors also said Mr. Gyure was not entitled to $150,000 that he received as so-called “deferred compensation” from the club in the days after he pleaded guilty. The money was sent to his bank account, prosecutors said, by the treasurer of the club, whose wife had applied for a $100,000 loan from the same bank. The treasurer’s wife told bank officials that Mr. Gyure would act as her guarantor for the loan, according to the memo.
Prosecutors said that, although Mr. Gyure’s contract with the club entitled him to deferred compensation, it was to be paid only after he had stopped working for it. The bank later returned the $150,000 after the loan was apparently denied.
“Despite the fact that this transaction was rife with conflicts,” the prosecutors wrote, “Gyure and the Treasurer never disclosed this transaction to any member of the Club’s leadership.”
Mr. Gyure’s lawyers said he agreed to accept the payment as potential collateral at the treasurer’s request and never intended to withdraw the money prematurely. They said he had notified the bank that the money was restricted and that, when the bank decided it did not qualify as collateral, he had recommended it be returned to the club.
One longtime member, Carol Scibelli, said in a telephone interview that the conduct cited in the government’s memo should warrant banishment from the club for Mr. Gyure, who she said still shows up at its six-story headquarters, known as the Monastery, on East 55th Street.
“How could he be the face of the club at this point?” she said.
Rachel Abrams contributed reporting.
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