Former mill owner set to be released from prison in May

By Barbara Tetreault

BERLIN — Former American Tissue CEO Mehdi Gabayzadeh will soon be released from federal prison, a decade after he was sentenced for fraud and conspiracy charges that lead to the closure of the paper mills in Berlin and Gorham.

Found guilty in 2005 of engineering a $300 million fraud that lead to the collapse of his company, the 72-year old Gabayzadeh was sentenced in U.S. District Court in Central Islip, N.Y., to serve 15 years in prison. With time off for good behavior and for completing a drug course, he is scheduled to be released on May 7.

A court spokesman said Gabayzadeh is currently under the supervision of the system’s residential reentry office but said he could not reveal whether he is in a halfway house or under home confinement. He has served parts of his sentence in Federal Correctional Institution, Fort Dix, a low security prison in New Jersey, and at Cumberland FCI, a medium security prison in Maryland.

Once he is released, Gabayzadeh will be on probation for five years.

With another Iranian immigrant, Gabayzadeh founded American Tissue in 1981. The company purchased troubled paper mills and sought to turn them around. In 1999, American Tissue purchased the Berlin and Gorham paper mill complex from Crown Vantage for $45 million.

American Tissue grew to become the fourth largest paper company in the country but then, prosecutors argued, he began to inflate the value of company assets, created fictitious sales and engaged in complex deals that resulted in the company’s bankruptcy in 2001. When the company closed, an estimated 4,700 people lost their jobs, including approximately 800 in Berlin and Gorham. The two mills were later repurchased but only the Gorham mill remains open today with about 140 employees.

Gabayzadeh was convicted of eight charges, including bank and securities fraud and conspiracy, following a nine-week trial in April 2005. His sentencing was delayed over a year because he reported suffering from numerous ailments while being held in federal custody.

Gabayzadeh appealed his conviction but it was upheld and he unsuccessfully petitioned the U.S. Supreme Court questioning the legality of the sentencing guidelines. He also tried to sue his former defense attorney, Benjamin Brafman, but his suit was dismissed.