Racketeer With AIDS to Pay $2.5 Million, Avoid Prison

Malibu millionaire Sheldon L. Block, a 36-year-old AIDS victim who admitted running a nationwide “boiler room” sales scam, walked out of Los Angeles Federal Court on Tuesday with a 15-year suspended prison sentence and orders to turn over $2.5 million.

U.S. District Judge A. Andrew Hauk imposed the penalties as part of an agreement in which Block pleaded guilty to 76 counts of racketeering and mail fraud in bilking hundreds of office supply buyers out of $36 million in less than five years.

Assistant U.S. Atty. David A. Katz said that if Block recovers from his illness, he will face 15 years in prison on Count 76 of a federal grand jury indictment, a charge of racketeering. Meanwhile, Block will be on probation and under orders to assist the government in any prosecutions it may wish to pursue.

“This makes this ‘boiler room’ fraud case the largest non-drug forfeiture in the history of the district, as far as I am aware,” Katz told reporters.

Under terms of the agreement, Block was required to forfeit three pieces of property, valued at $2.2 million, to the federal government. He was fined $250,000 and ordered to pay $50,000 into a restitution fund.

Hauk also sentenced Block to five years in prison on each of 75 counts, to run concurrently, then suspended the sentences, placed the ailing defendant on probation for five years and directed him to perform 2,000 hours of community service.

It was only the second time in his 23 years on the bench that he had joined in a plea agreement, Hauk said, adding that he thinks the circumstances of Block’s physical condition called for it.

The judge read a letter quoting Block as saying that he “deeply regretted” his actions and assuring Hauk that he will not be involved in crime again. “As much as I can, I intend to start over,” Block wrote.

Telephone Sales Scheme

Block, president and owner of Park Distributing Inc., was indicted early last year, along with a dozen associates. The government charged that the defendants had operated “boiler room” telephone sales operations in Culver City, Los Angeles, San Diego and Phoenix.

Posing as a customer’s regular office products supplier, salesmen induced businesses to place orders for photocopying supplies. The customer then was frequently overbilled and cheated on orders, according to the government.

Atty. Mark E. Beck, representing Block, sought dismissal of charges against his client late in September because Block had been diagnosed as suffering from acquired immune deficiency syndrome and a related disease, Karposi’s sarcoma.

Hauk refused to dismiss the case, ordering the defendant to check in at a hospital. Later, Block was sent to a federal hospital in Springfield, Mo., where AIDS cases are handled. There he was found to be mentally competent to stand trail or to enter a plea bargain.