CEO of American Tissue Gets 15-Year Prison Term

The former chief executive of paper company American Tissue Corp. was sentenced to 15 years in federal prison Monday and ordered to forfeit $65 million for his role in a $300-million accounting scheme that led to the bankruptcy of the company.

U.S. District Judge Joanna Seybert at the U.S. Courthouse in Central Islip, N.Y., handed down the sentence to Mehdi Gabayzadeh, the former president and CEO of the Hauppauge, N.Y.-based company.

Gabayzadeh, 61, was indicted in March 2003 on securities and bank fraud and conspiracy charges, accused of inflating American Tissue’s accounts receivable and inventory in an effort to defraud a group of banks that loaned the company $145 million and bondholders who in 1999 bought $165 million of the company’s notes.

He was convicted of those and other charges April 13, 2005, after a 10-week trial.

At its height, American Tissue was the fourth-largest U.S. tissue paper manufacturer, employing nearly 5,000 people at factories across the country. The company filed for Chapter 11 bankruptcy protection from creditors in September 2001 and was eventually liquidated.