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“$1,700 from the gentleman in the back. Do I hear $1,750? $1,750? Fair warning now… . Sold for $1,700, to the gentleman in the back.” With that, a New York auction-goer secured a Czechoslovakian jewelry box. And Chicago’s Baker & McKenzie got back a few hundred of the millions of dollars stolen from its New York office over the last decade. The costume jewelry auction, held the day after Halloween at a Manhattan auction house, marked the sad end of a bizarre chapter in the annals of Baker & McKenzie. The drama started in 1989, when the firm hired Dennis Masellis for its New York office’s payroll department. Masellis admits to having cooked the books to the tune of $13 million over the course of 11 years, mostly through direct payroll debits that he shifted into his own account. Baker & McKenzie remained oblivious to the thievery until this spring, when a new, centralized accounting system uncovered massive discrepancies. Finally alerted, the firm confronted Masellis, who quickly retained Douglas Grover of New York’s Grover & Bloch. A few days later, Masellis struck a plea bargain with the Manhattan D.A.’s office, pleading guilty to embezzlement in return for leniency in sentencing. But for Baker & McKenzie, a major obstacle remained to getting the money back: Masellis had sunk almost all the pilfered millions into what the Doyle New York auction house now describes as “the world’s largest and most important collection of costume jewelry, Bakelite, and accessories ever to reach the auction block.” In layman’s terms, that means 10,000 trinkets, among them jeweled tiaras, polka-dotted Bakelite bracelets, Judith Leiber minaudieres, 400 Barbie dolls, and more than a few Czechoslovakian jewelry boxes. Still, the plea agreement gave Baker & McKenzie reason to hope for restitution. In return for the prospect of further leniency, Masellis agreed to help the firm recover the maximum value of the collection before his sentencing. Prosecutors say he was cooperative, but William Linklater, the Chicago-based Baker & McKenzie partner handling the affair, disagrees. The judge seemed to take a middle tack at Masellis’ sentencing on October 27. Presiding over a scene exceptional for its pitifulness, the judge asked Masellis what he had to say for himself. Masellis, disfigured by his extreme obesity and wearing electric-blue pants, began by apologizing to “McKenzie and Baker.” He said he’d done his best to cooperate with the D.A. — and promised to try to “normalize my compulsions and addictions.” The judge sentenced Masellis to three-to-nine years in prison, the rough midpoint between the minimum and maximum sentences agreed to in the plea bargain. Baker & McKenzie’s Linklater says this could have happened to any firm: “I expect that every large organization relies on the honesty and integrity of its employees, and if that integrity breaks down, that organization is at the mercy of the dishonest employee.” But that, says a private fraud investigator, is exactly how not to run a payroll department, where proper safeguards would prevent a lone employee from stealing so much for so long. Says Michael Jaeger of Kroll & Associates: “You can’t run an accounting system based on trust.”

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