Bankruptcy case converted for jeweler who sold fakes

Amherst, N.Y.--After more than three years under Chapter 13 bankruptcy to pay back his debt, the case of Paul Blarr--the jeweler who pleaded guilty this spring to selling stones that he misrepresented as diamonds--now is under Chapter 7.

Court papers show that Blarr initially applied in U.S. Bankruptcy Court for the Western District of New York for Chapter 13 bankruptcy--a repayment plan bankruptcy, in which debts are consolidated and re-paid over a three- to five-year period--in February 2011, and it was confirmed in November of that same year.

The initial plan provided for a payment of $645 a month and 9 percent repayment to unsecured debtors, according to court documents.

Then in May of this year, Albert Mogavero, a Chapter 13 trustee covering the western region of New York, filed a motion with U.S. Bankruptcy Court to have the case converted to a Chapter 7, under which debts are discharged and certain assets may be liquidated under court supervision.

The filing noted that as of May 28 the case was delinquent by more than $2,000 and that the case has also been the subject of a motion to dismiss. Additionally, the filing notes the possibility that “the original petition and schedules may not disclose all assets and liabilities,” in which case it may not be appropriate for it to continue under Chapter 13.

The conversion was granted on July 7.

More recent court papers show that Blarr’s attorney in the case, Barry Sternberg, filed just days after that to withdraw as the attorney of record “as the debtor’s Chapter 13 case has been involuntarily converted to Chapter 7, and the debtor has not communicated with counsel despite counsel’s attempt to contact debtor.”

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In May, Blarr pleaded guilty as charged to one count of scheme to defraud in the first degree and 10 counts of grand larceny in the third degree, encompassing 89 victims who lost $630,000.

He admitted that between Jan. 1, 1998 and March 21, 2014, he sold counterfeit jewelry, including diamond simulants misrepresented as real diamonds, at his two Amherst, N.Y.-based companies, RSNP Diamond Exchange and Amherst Diamond Exchange.

His sentencing is scheduled for Friday, and he faces up to 50 years in state prison, the maximum period of incarceration under New York law for a non-murder offense.