Ex-Florham Park man pleads guilty to mail fraud

On paper, David Kaye had a thriving export business.

Intaport Trading Corp. purchased U.S. goods like liquor, perfume and razor blades for sale in "duty free" shops in Europe and elsewhere, with the help of $13.7million in financing from private investors.

Yesterday, however, the former Florham Park man admitted his Fairfield company had no real business. Instead, Kaye took millions from new investors to pay off older ones -- in what U.S. Attorney Christopher Christie called a classic Ponzi scheme.

In pleading guilty to mail fraud before U.S. District Judge Freda Wolfson in Trenton, Kaye admitted the company was a sham, and that he had used fake invoices, financial statements and wire transfer notices to give the appearance it was successful.

His attorney, Martin Goldman, said Kaye, 55, had operated a real business that fell apart after he was cheated in a Russian deal that went sour.

"This is a story of a guy who started out as legitimate, got ripped off by a bunch of bad Russian people, and in trying to buy time to do right by everybody, he ran out of time," Goldman said.

According to the attorney, Kaye gave several million dollars worth of goods to the Russians on credit, and they took the merchandise and never paid him.

"As a result he couldn't meet his own obligations," the attorney said.

Kaye then began raising money from other investors to provide a return for those who had already financed his business, Goldman said.

"It did not start out to be that way, but in the end it was a mail fraud," said Goldman, adding that Kaye did not keep most of the money, but paid it back out to investors to keep the company afloat.

A criminal complaint and arrest warrant had been issued against Kaye in 2003, after he left the United States for South Africa as he came under investigation for fraud. He was finally arrested in December 2006 in London on a U.S. arrest warrant after traveling there from South Africa, where he holds dual citizenship, and waived extradition to face the charges here.

The case was prosecuted by Assistant U.S. Attorney Craig Carpenito.

Kaye, divorced with two daughters, is being held in the Salem County jail on $1.5million bail. He could get up to 20 years in jail when he is sentenced in October.

He also faces a string of civil suits that have already been filed seeking return of the money he took. Goldman said Kaye intends to pay back the money.

Ted Sherman may be reached at tsherman@starledger.com or (973) 392-4278.