Whoops! Andrew Martin's NYT Sunday Business Puff Piece On "Alternative" Lender Leaves Out Key Detail -- His Felony Arrest Record.

On the front page of today's NYT Sunday Business section, Andrew Martin delivers a puff piece on Richard Eitelberg -- the founder and president of Hartsko, a company that lends money to small businesses to tide them over on pending purchase orders.

As is so often the case with the fawning NYT Sunday Business section, Martin devotes himself to a mostly positive 2,126-word profile of his subject -- barely delving into Eitelberg's background in business, let alone questioning him closely about how he found himself in this line of work.

But had Martin bothered to investigate his subject a little -- or even Google him -- he would have quickly discovered that less than eight years ago, Eitelberg was arrested and charged by the U.S. Attorney for the Southern District of New York with breaking into the computer of a former employer, and deleting its purchase orders.

If convicted, Eitelberg faced a maximum five-year prison sentence and $250,000 fine. The NYTPicker is seeking comment from the U.S. Attorney's office, and from Eitelberg, about the final disposition of the case. [UPDATE -- see below.]

The U.S. Attorney's complaint -- announced in a news release on April 26, 2002 -- alleges that Eitelberg used his former employer's password to illegally access its computer system after quitting his job. He had served as comptroller the company, MP Limited LLC, a Manhattan-based apparel manufacturer, for less than a year.

From the U.S. Attorney's press release:

The computer records at MP allegedly indicated that an individual accessed the MP computer system using a password from at or about 9:21 P.M. until at or about 9:46 P.M. on April 10, 2002, and that orders in the database were deleted during this computer session.

AT&T phone records indicated that between February 27, 2002, more than three weeks after EITELBERG stopped work at MP, and April 10, 2002, the phone line registered to the wife of EITELBERG, and located at the EITELBERG residence was used to call MP’s modem connection approximately 13 times, including the call made at or about 9:24 P.M. on April 10, 2002.

Martin's story makes no mention of the arrest -- or even of any significant information about Eitelberg before 2004, when he founded Hartsko. Martin reports only that Eitelberg worked "for years on the financial side of the garment industry, following in the footsteps of his father."

Eitelberg told Martin that many of the businesses he worked for "struggled to stay afloat and had to seek purchase-order financing" and that he "had an epiphany one day that he was in the wrong business."

Interestingly, the crime that Eitelberg was charged with would have given him a leg up in creating his current business -- in that he was alleged to have taken purchase orders from his former employer's computer. But all Martin says about the Hartsko's start is that he began "with a loan from several investors and a $1 million credit line from a bank."

The nature of Hartsko's business, as one of its current clients puts it, is roughly akin to "loan sharking."

Basically, Hartsko lends a manufacturer the money to make its product for a committed buyer -- and then takes a liberal cut of the proceeds, typically much bigger than a bank would take in interest on a loan -- an annual percentage cut of more thasn 40% of the loan amount.

It's worth noting that Eitelberg told Martin he believed in "the importance of background checks" of customers and uses private detectives to conduct them.

We've contacted the NYT and Eitelberg for comment on today's story, and will update when we hear something.

UPDATE: We've now learned that Richard Eitelberg -- whose new purchase-loan operation was the focus of Andrew Martin's Sunday Business profile yesterday -- pled guilty in May of 2003 to felony charges of computer intrusion, and was sentenced to three years' probation, and paid more than $25,000 in restitution and fees.

Eitelberg had been charged by the U.S. Attorney in April of 2002 with criminal intrusion into the computers of a former garment district employer -- a fact overlooked by Martin in his lengthy profile of the Queens businessman who now runs an "alternative" lending company.

Yesterday, we first reported on Martin's failure to mention Eitelberg's past criminal history in the 2,126-word cover profile.

Did Martin had access to information bout the case of "USA vs. Eitelberg" -- which pops up as the lead item in a Google search of "Richard Eitelberg" -- annd choose not to include it, or did the reporter simply fail to adequately research his profile subject? That not couldn't be learned yesterday, as NYT spokeswoman Diane McNulty and NT business editor Larry Ingrassia didn't respond to a request for comment.

But it would seem that Eitelberg's criminal record relates directly to the story Martin wrote, and would be of interest to anyone doing business with him.

The criminal charges against Eitelberg included the accusation that he had deleted purchase orders from the computers of MP Limited LLC; his current business involves lending money to companies with pending purchase orders. Also, the story referenced his past work experience in the garment district -- which, of course, included his employment at MP Limited.

We'll try again to elicit comment from the NYT concerning Martin's omission of this information from his story.