Six degrees of Bernie Schrott

Aug 16, 2000 at 12:00 am

Felix was afraid of Bernie. So was Feodies. And Bernie had a few fears of his own.

Trust can be a rare commodity in a business world where drug money is common currency and the word cutthroat isn’t always a metaphor. But that didn’t stop this trio from pursuing profits with awe-inspiring zeal.

Working solo and in different combinations, they spawned deals across the map apartment complexes, flea markets and trucking in Detroit, real estate in Arizona, a furniture business and warehouse in Milwaukee, mortgage action in California, and a multimillion-dollar casino project in the Bahamas.

But any deals between the three weren’t long-lived, lasting only a few years before being brought to an abrupt end by murder and federal agents. Now one is in prison. Another is in his grave. And the third, who walked away completely unscathed, carried on without much notice until emerging recently as the promoter of a $200 million State Fairgrounds development he promises will help revitalize Detroit.

Feodies Shipp, Felix Walls and Bernie Schrott.

Using trial transcripts, court filings, Justice Department files, police reports and other records, the Metro Times has compiled documents indicating how these three lives intertwined, coming together as if part of some underworld six-degrees game where separation from a crime never seems more than a few steps away.

One hustle too many

Holed up in typically high style with four rooms under two different names at the Dearborn Ritz-Carlton hotel, Feodies Shipp worked the phone as if his life depended on it.

For the dapper, jovial 46-year-old with an appreciation for $2,000 suits and luxury cars, the time to fully pay for his champagne ways had apparently come.

Three days earlier, on July 18, 1992, he’d met with federal agents at Pasquale’s restaurant in Royal Oak. Before he could dip his fork into a nice antipasto at the family style eatery, Shipp was served up an arrest warrant. The feds had him nailed.

An alphabet of agencies — DEA, FBI, IRS —were in on an investigation fingering him as the head of a drug ring responsible for smuggling $1 million dollars of cocaine a month into Michigan.

His back to the wall, Shipp quickly called upon his most valuable asset: smooth talk.

As his longtime pal Felix Walls would say, “Feodies could con the socks off of anybody.”

According to testimony later given by agents, this is what happened:

Shipp’s first move after being arrested was to ask if he could stow his Gucci brief case in the trunk of his Cadillac Seville before riding in a government sedan to the Federal Building in downtown Detroit.

As improbable as it seems, the agents nodded their assent without bothering to check the bag’s contents.

Typical Shipp. That same hustling instinct was again summoned once they arrived downtown. Sitting with officers from three different agencies, plus an assistant U.S. attorney on the phone, all telling Feodies what deep shit he truly was in, he suggested the agents give him $400,000.

It seems his friend Walls, a one-time heroin dealer the feds thought a key player in Shipp’s cocaine ring, was growing ever more anxious over an unpaid debt.

The agents declined to help.

Then Shipp suggested the feds create a bogus search warrant to make it look as if they’d seized $327,000 from him. That pretense would at least give Shipp some breathing room with his creditors.

Walls, it seems, wasn’t the only one he owed.

The feds again declined.

Finally he agreed to consider becoming a government informant, but said he needed a few days to get his affairs in order. Deal, said the feds, setting him free, saying later that they weren’t even sure where he was staying or how to contact him.

“He said he’d call us,” testified one of the agents.

Shipp was driven back to Pasquale’s to pick up his car and the briefcase inside.

The reprieve, Shipp knew, wouldn’t last long. Even for a guy with his wiles, there didn’t appear to be many options. Failure to cooperate with the authorities would mean risking spending the rest of his life in a federal prison. The fate of a snitch couldn’t have held much appeal either. According to one source, he would even consider suicide in the days to come.

Shipp had been in jams before, but nothing like this. Back in the late ’70s he was convicted of defrauding the Department of Housing and Urban Development in a bit of chicanery that earned him two years in a federal penitentiary. And then there was a bankruptcy with more than $6 million owed his creditors, many claiming their money had been lost through fraud. But neither the financial flameout nor the prison time appeared to seriously hurt his social standing.

A man possessing the rare ability to move with charming ease through worlds both low and high, Shipp had a special penchant for establishing close ties to judges. He twice wed Recorder’s Court Judge Wendy Baxter, joining hands with her before his 1977 imprisonment, and then, after she obtained a divorce while he was behind bars, marrying her again following his release.

A subsequent wife, Lydia Mallett, made him brother-in-law to then-state Supreme Court Justice Conrad Mallett Jr.

And then there was Sam Gardner, a former Detroit Recorder’s Court chief judge. He served as best man at two of Shipp’s weddings.

Shipp would turn again to that best man on a day that must have felt as if his whole world were collapsing.

Gardner provided an account of that meeting to investigators from the FBI and IRS.

Reminiscing about old times, they spent three hours talking over breakfast at the hotel, according to a report filed by the agents. Shipp mentioned his run-in with the feds, but didn’t go into great detail.

And though they talked about better days, a sense of trouble permeated the get-together. Throughout the meal, Shipp kept working the phone, responding to calls on his pager and checking the front desk for messages.

With a debt of several hundred thousand dollars that needed to be paid back in a hurry and the law breathing down his neck, time was running out.

Shipp didn’t realize it, but federal agents were close at hand as he met with his old friend. They occupied a room of their own at the Ritz-Carlton, with more agents watching the parking lot for good measure. When asked on the witness stand years later how they came to discover Shipp’s exact whereabouts, a DEA agent testified that his agency received a phone tip from an anonymous employee at the hotel.

How that person knew the DEA would be interested in such information is a question that has never been answered.

Also unexplained was why a group of several agents who had Shipp under surveillance for 24 hours would decide to all go to dinner at the same time.

But, according to the testimony of one agent, that is exactly what they did.

For Shipp, the timing would prove unfortunate. Shortly before 9:30 p.m., two men paid a visit to one of his rooms. They bound his hands and feet with phone cord, then slit his throat with a knife. He died there, on the floor, plush carpet soaking up a puddle of blood as the life pumped out of him.

The men then burst into another of Shipp’s rooms, one containing his wife, Lydia, and their 9-month-old daughter. According to a Dearborn Police Department report, one of the men grabbed Lydia’s head, threw her to the floor, held her down with his knee and covered her head with an area rug. She screamed and struggled, but was unable to break free. Meanwhile, the man’s partner ransacked the room until he found Shipp’s dark brown Gucci briefcase.

Lydia, who was unharmed, told police she didn’t know what was in the valise. Police had reason to believe the bag contained as much as $350,000 in cash.

When investigators began probing Shipp’s death, they found no shortage of people who might be motivated to end Shipp’s career. Dearborn police identified at least six primary suspects.

One story illustrates both the cunning and nerve Shipp employed in his business dealings, and how those actions could create the sort of enemies capable of putting a serious crimp into dreams of longevity.

At one point Shipp fell $400,000 behind in payments to his main supplier — a former minor league baseball player in Los Angeles named Thomas Berry who, by his own admission, generated more than $25 million in profits dealing drugs. Instead of coming up with the money to get the supply line reopened, Shipp pulled a con. He recruited one of his low-level couriers to pose as a top dealer with a distribution network of his own. Shipp outfitted him with an expensive wardrobe, then tutored him in the attitude and mannerisms appropriate for someone that high in the drug-world hierarchy. The ruse worked, and the cocaine again began to flow into Shipp’s organization, at least for a while. Two more multi-kilo shipments arrived without a problem, but when the California connection got stiffed again following a third delivery to Shipp’s stand-in, the supply was cut off for good.

So, yes, there were plenty of people who could have wanted to see Shipp pay with his life for one shady deal or another.

But of all the people Feodies Shipp had reason to fear, the one he mentioned while talking with Gardner in the hours before his death, according to a report compiled by federal investigators, was Oakland County mortgage broker and real estate developer Bernie Schrott.

For his part, Schrott says he’s dumbfounded to learn that Shipp would tell anyone he was afraid of him. The way Schrott tells it, he knew Shipp socially, but that was all.

“He was kind of a court jester,” Schrott recalls. “He was the kind of guy who’d see you at the London Chop House and buy you an expensive bottle of champagne, and the next day they’d be cutting off his phone because he couldn’t pay the bill.”

But that, he says, was about all he knew of Shipp. As with much of what Bernie Schrott told the Metro Times over the course of three interviews, there is compelling evidence to the contrary.

According to testimony provided in 1995 by Shipp’s Los Angeles cocaine supplier, Schrott was allegedly the money launderer for a drug ring headed by Shipp and Walls.

Furthermore, in his interview with federal agents, Gardner told of a meeting he’d had with Schrott following the murder. According to Gardner, Schrott said he had met with Shipp a few days prior to the killing, and he was aware Shipp “had gone to the feds.”

That intimate knowledge of Shipp’s predicament would later fuel allegations by Walls that Schrott had beaten his partner to the punch and was already working as a government informant prior to the con man’s murder.

Schrott calls that accusation ludicrous.

In any event, according to testimony provided by one federal agent, Schrott — despite Shipp’s stated fears of him — was never even interviewed in connection with the murder.

Felix Walls’ theory, laid out in court documents, is that there was some collusion between Schrott and the government agents he was allegedly working with. Assistant U.S. Attorney Michael Leibson, who played a key role in breaking up Shipp’s drug ring, responded by claiming the accusation was absurd.

“The identity of Shipp’s killers is known and no connection has been established between them and Schrott, much less the federal agents,” asserted Leibson in a court motion filed last year.

According to Leibson, the evidence points to another of Shipp’s former business partners as the person responsible for the murder: Felix Walls.

Pen pals

In 1977, when Feodies Shipp began serving his two-year sentence for housing fraud at the federal penitentiary in Terre Haute, Ind., Felix Walls was nearing the end of a 10-year stint.

A native of Arkansas, Walls began his criminal career in the late 1960s as a car thief, then quickly graduated to the big-money world of heroin trafficking. He lacked Shipp’s polish and prominent political connections, but shared the desire to lead a life of limos and influence.

The two convicts, both in their early 30s, became fast friends.

“We’d walk the yard every day and talk,” Walls told Metro Times during a series of phone interviews from the federal prison in Milan, where he is serving a 30 year sentence for his alleged role in the Shipp drug ring. “We’d talk a lot about real estate. Feodies was a sort of real estate genius.”

Walls would prove to have some business acumen of his own.

By his own admission, he’d accumulated somewhere between $4 million and $6 million dealing heroin before being locked away for a decade. Some of the money — a million dollars — was placed in a Swiss bank account. The rest was stashed in various places, much of it put in a safe and buried in the cellar of one of his homes.

When he was released from prison, most of the cash remained untouched. There was a nephew who’d stolen a million, Walls testified, but didn’t get to spend much of it. According to Walls, two agents from the Bureau of Alcohol, Tobacco and Firearms kidnapped and then killed the teenager, then stole the money.

Even so, Walls emerged from prison a rich man. And, like most wealthy people, he quickly set about making investments.

He started by refurbishing the former Silvercup Bakery building at Vernor and Chene in Detroit, then opening a flea market there. After that, he bought an even bigger place, the historic Kelsey-Hayes wheel plant on Livernois, where he opened another flea market he called the World Trade Center. Walls traveled to closeout sales at salvage houses around the country, buying tens of thousands of dollars worth of toys, cookware and household items. Back in Detroit he’d lease out booths to would-be merchants who then sell the items, splitting the profits with them.

When a carnival went bankrupt, he bought up the amusements, bringing in kiddie rides and a Ferris wheel so big the building’s roof had to be opened to accommodate it.

Before long he began buying up discount carpet down in Georgia, which was sold at his flea markets as well. Walls also ventured into real estate deals with Shipp and Schrott — apartment buildings in Detroit with Shipp, and a warehouse in Milwaukee with Schrott.

In addition to all that, Walls also started buying up vacant schools. In all, he purchased four such properties in Georgia, Arkansas and Texas, with the intent, he said, of turning them into vocational training centers.

“When I was in jail I became a very religious person,” testified Walls, “and I had the money and I wanted to do something to spend it to put something together that would benefit the community.” In the meantime, he was living large.

Deborah Cherry, a former employee in the Detroit Police Department narcotics division who met Walls at a party shortly after he was released from prison in 1978, testified during his trial about the lifestyle of the man who became her business partner and fathered her son.

Cherry stood at Walls’ side as he started building his way toward becoming — as Assistant U.S. Attorney Leibson would sarcastically characterize him — “Detroit’s flea market king.”

While on the witness stand, Cherry was asked how much money she saw Walls spend while the two were together from 1978 through 1985.

“A good guesstimate,” she testified, “... between two or three million dollars.”

The cash — and it was always cash with Felix — came from a combination of the millions he’d stashed from his heroin dealing before going to prison (he was “very up front” about that, she testified) and income from the flea markets, which quickly began generating profits. A good deal of that money he lavished on Cherry.

“What type of things did he buy?” asked Walls’ attorney, David Steingold.

“Oh, gee, everything,” she replied. “I had all kinds of shoes, all types of fur coats, cars, two washers, two dryers. I had two of everything, everything. ... I had a home and he paid off my mortgage, and he gave me money to redo my entire house over. ... I had a fireplace added and a bar and other stuff added to my basement. My son was driven to school every day in a limousine.”

There were also jewels, she said, “diamonds and gold, emeralds.”

Despite claiming to have made millions of dollars both legally and illegally, Walls freely admits to never paying a cent of income tax.

Asked why, he said:

“My grandfather lived to be 106 years old. And, like he explained to me, we were never given a choice as to whether we wanted to stay here or to repatriate back to Africa. He told me ‘... don’t ever pay taxes, you don’t owe them anything. They owe us.’”

There were other debts owed Felix Walls, debts much more quantifiable than those described by his grandfather.

Bernie’s world

Felix was afraid of Bernie, and Bernie was afraid right back.

Schrott denies this now. During his three interviews with the Metro Times, the Bloomfield Hills resident vehemently denied having any substantive relationship with Walls at all.

“I only met him a few times,” said Schrott. He recalled briefly considering a development deal with Walls involving the Kelsey-Hayes plant, but claims to have quickly pulled out after judging Walls to be unreliable.

“I walked away from the guy,” said Schrott. “I just thought he was a flake.” However, according to court records and other documents, Schrott had extensive business dealings with Walls.

In fact, Schrott admitted as much during a sworn deposition given as part of an Oakland County civil suit filed by another of his former business partners.

The lawsuit was one of two filed in 1997 in connection with a failed plan to build a resort casino on 320 acres of beachfront property Schrott allegedly claimed to own in the Bahamas.

Schrott denies ever telling any investor that he owned the property outright. But at least two investors provided statements claiming otherwise, according to court filings. An Oakland County judge eventually issued an opinion stating there was ample evidence indicating Schrott did claim to own the land, and that there was also evidence the claim was false.

One of those suing Schrott was Oakland County attorney David Foster. According to documents filed in connection with that lawsuit, Foster first put his own money into the Bahamas project, then began recruiting other investors. They were told the funds would be used to help develop and market the project, with the goal to bring in a casino or other deep-pocketed source with access to the tens of millions of dollars needed to actually build it. Finding the smaller investors wasn’t terribly difficult. With Schrott purportedly owning the land, the worst that could happen (or so they thought) would be that no big investor would materialize. In that event, the land could be sold and the small shareholders could recoup their money.

Instead, according to court documents, investors discovered that Schrott had obtained a purchase agreement but, after making an initial down payment, failed to come up with the bulk of the money owed and defaulted on the agreement.

The casino deal wasn’t the only project Foster would partner up on with Schrott. He also invested more than $60,000 in a Milwaukee warehouse, along with Schrott and Walls.

According to a brief filed as part of his lawsuit, Foster claimed that, in early 1990, Schrott came to his office in “a very excited and nervous state.” Schrott allegedly told him they “had to get away from their ‘silent partner’ in the Milwaukee industrial building, a Mr. Felix Walls.”

When Foster asked why, Schrott said he could not explain and that Foster would just have to trust him. According to the brief, Foster felt that he and Schrott were “best friends who spoke at least once a day on the phone,” and so he relinquished his 25 percent stake in the 200,000-square-foot building in return for more shares in the casino deal. It wasn’t until seven years later, Foster alleged in the suit, that he discovered the stock was worthless.

During a contentious deposition taken in 1998, Foster, serving as his own lawyer, asserted that Schrott once told him Walls was a major investor in Cobra Inc., the company issuing stock for the casino project. Foster stated that Schrott told him “Felix Walls gave me $300,000 for 10 percent of Cobra stock.”

At one point in his deposition, Schrott states: “... you’re making a statement that Felix Walls owned 10 percent of the Cobra stock, that’s just an outright outrageous lie. ... The truth, the only truthful thing I can tell you is I did make the statement we must get away from Felix Walls.”

During that same deposition, when asked about another of his many businesses, Insured Mortgage Co., Schrott said: “I formed that company to invest in commercial properties and a fellow by the name of Felix Walls loaned that company approximately $400,000 via a bank transfer.”

According to Walls, the transfer was from his Swiss bank account, for $485,000. About $125,000 went to purchase the Milwaukee warehouse. Walls also claims that, out of that $485,000, $300,000 went toward purchasing shares in the Bahamian casino deal.

Walls testified that after transferring the money, Schrott provided him with a credit card because he could not obtain one himself. Records obtained from the federal government by Walls’ lawyer and provided to the Metro Times show Walls being listed on Schrott’s American Express account. Also listed are Walls’ former wife, Letha, and a man named John Journe.

Journe, a friend of Walls’, was alleged to have been a member of Shipp’s drug ring. Six weeks before Shipp was killed, police found Journe’s body in the trunk of a Lincoln Continental parked at Detroit Metro Airport. As with Shipp’s killing, no arrests were made.

Over a period of a few years, the three ran up bills totaling thousands of dollars, using Schrott’s account to rent hotel rooms and cars in cities across the country, and purchasing everything from expensive perfume and jewelry to clothes and children’s toys.

But all was not well with the partnership between Walls and Schrott.

“I started pressing Bernie,” testified Walls, “to take my property out of his name, and to make a showing of all that money that I had given him.

“So Feodies Shipp told me, he said, ‘Look, I feel like you are in some danger. Bernie killed his other partner and I think it was a big mistake for me to introduce you to him. I feel that you might be in some danger.’”

According to newspaper accounts, in 1983 the blood-covered body of E. David Auer was found in the trunk of his silver Mercedes in the parking lot of a Pontiac motel, choked with a cord and beaten to death. He was president of Auer Mortgage; Schrott, the company’s executive vice president, was reportedly the last person known to have seen Auer alive. The two parted company in a bar parking lot following a business meeting. Earlier that year, according to a press account, the company was sued by the state of Michigan for “allegedly bilking borrowers through high-interest loans.”

Following Auer’s death, Schrott sued to force payment on a $1 million insurance policy taken out on his partner. “It was a business obligation,” explained Schrott. The insurance company, he said, eventually paid up.

No one was ever charged in connection with Auer’s murder. When the Metro Times submitted a Freedom of Information Act request seeking to review the Auer case file, the city of Pontiac Law Department replied that the information could not be found.

The death of Schrott’s partner was not the only thing that spooked Shipp.

“Was it ever suggested to you that he (Schrott) was a dangerous guy?” confessed drug dealer Thomas Berry was asked during his appearance at the Walls trial.

“Yes, it was,” testified Berry. “He (Shipp) said that Bernie could be dangerous. He was hooked up with organized crime.”

According to testimony provided by FBI agent Michael Carone in 1995, Schrott shared an office with Billy Giacalone for approximately six years spanning the late 1980s and early ’90s.

Vito William Giacalone, now in his late 70s, has long been alleged to be one of metro Detroit’s Mafia leaders. His brushes with the law include a 1994 conviction for tax evasion, for which he received a three-year sentence.

Schrott also had at least one close encounter with the law: In 1991, government agents seized business documents from him. As noted in the court record by Walls’ attorney David Steingold in 1995, “the government had an entire room” at the federal building in Detroit “devoted to documents confiscated from Bernard Schrott.”

However, no charges were filed against Schrott as a result of the seizure. In fact, as Schrott himself points out, he has no criminal record whatsoever.

“I’ve never even been charged with a misdemeanor,” he told Metro Times.

Felix Walls takes off

By 1989, Walls was beginning to feel some heat. The FBI was nosing around asking questions. And, he would testify later, there was someone following him. Unsure who was on his tail, he called a friend to meet him, crawled out the back window of his Detroit house, and lit out, heading to California for a time, and then Mexico.

While in California, he established a business, called Home Savers, that involved paper transfers of homes about to be foreclosed on.

Assistant U.S. Attorney Leibson would later call it fraud.

But it was lucrative, producing $1,000 a month or more per home, according to Walls. His friend Shipp, however, saw how it could be even more profitable if they could establish a mortgage company.

“All the people that had their homes, some of the people had as much as 50, 60 percent equity in their homes,” testified Walls. “So Mr. Shipp, being a real estate man, saw the potential of being able to put mortgages on these homes for the people … you put a group of mortgages together, and then you lay them off to somebody else. Well, he was showing me how I could make millions of dollars being a part of this.”

According to Walls, Schrott, whose résumé shows a long history in the mortgage business, had access to about $50 million in investor money.

“Bernie showed me a Telex from this bank in Liechtenstein,” testified Walls.

He alleged that Schrott told him and Walls that, if they put up some good faith money, Schrott would use the Lichtenstein account to bankroll the deal. Acting upon Schrott’s instructions, testified Walls, he and Shipp sent $2.8 million in cash to Ontario, Calif., aboard a Learjet Schrott had chartered. Walls said Schrott was supposed to have been aboard the plane, but never showed up.

Federal agents, however, did. They were waiting when the plane landed, and followed a courier to a nearby home. Walls, who had been waiting at the airport, followed as well. He, along with three others, was arrested, then released.

The $2.8 million and the jet were seized under suspicion of being used in an illegal drug transaction.

At that point, said Walls in an interview, “I knew Bernie was an informant.”

According to Schrott, the allegation is absolutely false.

“It’s just crazy,” he told Metro Times when asked if what Walls said was true. “His brain must be burned. Why would they tell me about something like that?”

Asked specifically if he’d ever been an informant, Schrott said, “That’s ludicrous. I didn’t know anything to inform on.”

Not long afterward, Walls went into hiding, spending most of his time in Mexico, but with forays into California, Arizona and Texas. Throughout that time, he kept in close contact with Shipp, who would occasionally visit bearing cash, small repayments on the nearly $500,000 Walls had put into apartment projects. At one point Shipp had a Rolls-Royce delivered to Walls.

Even after other deals had fallen through, Shipp could still talk Walls — who was well acquainted with his friend’s ways — out of more cash.

“He’d make you think the next deal was so good you’d make your money back and end up coming out ahead,” explained Walls.

A ghost on trial

The law finally caught up with Felix Walls in 1994, when he went again to the airport in Ontario, Calif., this time to meet Nedja Robinson, his girlfriend and the mother of another of his children.

Police had been keeping a close eye on Robinson for some time. Five years earlier she was detained at Detroit Metro Airport, where authorities found $1.8 million in suitcases she was carrying.

She had $8,000 on her when Walls was apprehended in California.

In the summer of 1995, Walls stood trial on drug-dealing and money-laundering charges, accused of heading a crew that smuggled more than a ton of cocaine into Michigan during the late 1980s and early ’90s.

Though Walls alone faced judge and jury, his two former partners hovered over the proceedings from start to finish, Feodies Shipp a ghost, Bernie Schrott a phantom, each conjured up often by name but never appearing in the flesh.

Feodies Shipp, by that time, was three years dead, but his role in the trial was crucial. With a string of confessed drug-ring conspirators testifying against Walls in return for leniency, attorney David Steingold mounted a vigorous defense. Steingold depicted Shipp as both the true head of the drug ring and a con man of such consummate skill he could deceive even a street-savvy close friend like Walls.

Along with concealing from Walls that he was generating millions of dollars in drug income, argued Steingold, Shipp also hatched a plan to set up his old pal as the fall guy should the law ever come knocking.

Shipp did indeed have a “Plan B” that involved pinning blame on a scapegoat, according to testimony provided by one of the drug ring’s key players. Who that scapegoat was, however, was not revealed.

If nothing else, Steingold’s efforts left little doubt as to Shipp’s role in the whole operation.

“You’ve done a superb job through cross-examination of putting Feodies Shipp on trial,” observed U.S. District Court Judge Avern Cohn. “I imagine if we gave this jury a verdict form that asked if Feodies Shipp was guilty or not guilty beyond a reasonable doubt of the charges in the indictment, this jury surely would convict Feodies Shipp.”

“But,” the judge added, “convicting Feodies Shipp doesn’t exonerate Mr. Walls.”

The second prong of Steingold’s defense was to paint Schrott as the drug ring’s true money launderer.

In an interview with Metro Times, Schrott denied the allegation. But it wasn’t just Felix Walls making the claim. One of the government’s own star witnesses testifying against Walls corroborated the accusation.

Thomas Berry, the former minor league ballplayer turned music executive, admitted on the stand to grossing an estimated $25 million during his drug-dealing career. Identified as a main supplier to the distribution network he said was controlled by Shipp and Walls, Berry testified that, during a meeting at the Beverly Hills Hotel, Shipp introduced him to a “gentleman there named Bernie, a white Jewish cat that was supposed to be the money launderer, an older guy. He was around 60, 65. They said he had a lot of money. He was the money launderer. He bought property supposedly for Feodies and Felix.”

Court records show several real estate transactions in Arizona involving Schrott and either Shipp or his wife, Lydia Mallett.

During the Walls trial, Steingold asked Berry, “Would you know Bernie’s last name if I told it to you?”

“I was told Bernie’s last name back then by two or three of the guys.”

“Schrott?” asked Steingold.


“Bernie Schrott?”

“Yes,” replied Berry, “that’s how they pronounced it.”

Attorney Steingold announced at trial that he wanted to bring Schrott in to testify. Judge Cohn met with Assistant U.S. Attorney Leibson and government agents in his chambers to discuss the matter. When he emerged, Cohn ruled that Schrott’s testimony would bear no relevance.

When Steingold continued to press the issue, Cohn instructed the parties to stop referring to Schrott by name. Cohn himself would adhere to his own instructions, referring to Schrott as “Witness A.”

Steingold told Metro Times he found Cohn’s decision perplexing. He couldn’t understand why a witness considered to be key to his defense strategy wouldn’t be allowed to take the stand.

When first learning that the judge had been assigned the case through a blind draw, Steingold considered it a stroke of good fortune. With a reputation as a staunch liberal and a solid record of protecting the rights of accused criminals, Cohn would easily have been his choice were he allowed to select the judge presiding over the Walls trial. As proof of his esteem for Cohn, Steingold, in an interview with Metro Times, related a case from years earlier.

“In my 21 years as an attorney, I’ve only once waived a jury trial, putting the outcome solely in the hands of the judge,” says Steingold. “That judge was Avern Cohn. That’s how much respect I had for him.”

Given his previous experience, Steingold says he found himself repeatedly baffled by the judge’s rulings during the Walls trial. The controversy surrounding his attempts to bring Schrott in as a witness was only part of what troubled him.

A bombshell drops

Despite the parade of witnesses, the jury had a hard time finding Felix Walls guilty. Perhaps it was because all the alleged co-conspirators — all of whom faced the possibility of serving 30 years-to-life in a federal penitentiary if convicted — were given sentences of three years or less in return for their confessions and cooperation. Some served no time at all, and at least one was placed in the witness protection program, pulling in a monthly stipend from the government.

All of their testimony was directed toward Walls, the only alleged member of the conspiracy to plead not guilty and stand trial.

On the charges of drug dealing and money laundering, the jury found Walls not guilty. But he was also charged with conspiring to commit both of those crimes. On that, the jury initially deadlocked, with all but two jurors voting to convict. On the fourth day, one of the two holdouts changed his vote. At that point, the final juror changed her vote as well.

On their way out of the courthouse, one of the jurors who had been a holdout told the other she had made the right decision in changing her vote. He said that, the previous night, he had met with his godmother, who told him she knew Walls from his days at the flea market, and that he was “guilty as sin.”

Troubled that a juror had apparently changed course as the result of contact with someone away from the trial, the woman contacted attorney Steingold, who immediately saw grounds for a mistrial.

Judge Cohn didn’t think so. After questioning the juror who had changed his vote after that conversation with his godmother, Cohn determined that the incident had no effect on the juror’s decision and let the verdict stand.

He sentenced Walls to serve 30 years in federal prison.

Soon after that, Steingold dropped a bombshell.

The attorney claimed in court documents that Sheldon Cohn, the judge’s son, was an investor both in Schrott’s Bahamian casino deal and another Schrott company that was supporting legislation that would legalize video poker machines for use in Michigan bars.

According to financial information made public in the lawsuit eight investors filed against Schrott in 1997, Sheldon Cohn owned 4 percent of the planned casino. According to the records, 1 percent was worth $30,000. (Cohn, it should be noted, was not one of the investors who sued Schrott.)

Neither Walls nor Steingold would disclose to Metro Times how they learned Sheldon Cohn was an investor, or when that information was obtained.

What is more important, says Steingold, is when Judge Cohn first became aware that his son had a financial relationship with Schrott.

Steingold again asked for a mistrial. When Cohn again denied the motion, Steingold turned to the appellate court.

The lawyer argued that if Cohn knew of his son’s investment prior to or during the trial, he would have an ulterior motive for keeping Schrott’s alleged involvement with Shipp and Wells covered up. Disclosure that Schrott was heavily involved with major cocaine traffickers, reasons Steingold, could have killed the casino deal and cost Cohn’s son his investment.

Mistrial declared

In August 1998, the U.S. Court of Appeals for the Sixth Circuit issued its opinion on the Walls case. A three-judge panel, in a 2-1 ruling, declared a mistrial.

“Because Walls was prevented from calling a witness necessary to his defense, and because the trial court failed to adequately ascertain whether a juror had been tainted by the receipt of extraneous information, both in violation of the Sixth Amendment, we must reverse the defendant’s conviction and remand for a new trial,” according to the appellate court ruling. The majority on the appellate court rejected Judge Cohn’s ruling that Schrott’s testimony would be irrelevant.

“Although, logically speaking, there could have been more than one money launderer in the drug ring in which Walls was accused of participating, it seems clear that, in theory, at least the existence of an alternate launderer would have made the defendant’s participation less necessary to the operation.

“Moreover,” continued the majority, “we have no doubt that Walls presented sufficient evidence to support his contention that Schrott did, indeed, launder money for the organization.”

The majority also disagreed with Cohn’s decision that, even if he did know of his son’s business relationship with Schrott, that relationship did not merit removing himself from the case:

“… the apparent substantial and ongoing business relationship involving the trial court’s son and Bernard Schrott plainly casts some light — how much and with what intensity we are unable to say — upon the district court’s puzzling and insubstantial refusal to permit the defendant to call Schrott as a witness.”

In his dissenting opinion, Chief Judge Boyce F. Martin Jr. sided with Cohn, saying Schrott’s possible role as a money launderer was irrelevant.

“I believe (Judge Cohn’s) exclusion of the testimony to have been entirely proper.”

Following the appellate court’s ruling calling for a new trial in October 1998, Steingold renewed his call for full governmental disclosure regarding information it has on Schrott. He also wants to know when both Cohn and the prosecutor first learned of Sheldon Cohn’s business dealings with Schrott.

If either the judge or the prosecutor knew of the association while the trial was under way, argues Steingold, then Walls would have a “strong argument” for governmental misconduct. If misconduct is proved, contends Steingold, Walls should be allowed to go free without having to stand trial again.

The reasoning is that the constitutional prohibition against double jeopardy — that is, being tried for the same crime twice —should kick in if a mistrial is declared because of misconduct either on the part of a prosecutor or judge.

In an interview with the Metro Times for this article, Judge Cohn — addressing the issue publicly for the first time — said he did know during the trial that his son had a business relationship with Schrott.

“I was aware that my son had a relationship with Schrott, but I had no knowledge of the details,” said Cohn. He insisted that whatever his son’s deal with Schrott, it had no bearing whatsoever on any rulings he made.

“As far as I was concerned, Schrott was not material to the case,” he explained. “It was no cause for me to withdraw. As far as I was concerned, this was just one more case.”

In his opinion, the whole issue of Schrott is a “red herring” being used as a desperate attempt by Walls, now 56, to win his freedom.

Walls, meanwhile, sits in prison, watching while the justice system’s wheels slowly grind. But he continues to carry the hope he will eventually win his freedom.

He also has the satisfaction of finally having corroboration of his long-held belief that Schrott was a government informant.

In May of this year, after more than five years of attempting to force the U.S. attorney’s office to turn over all its background information on Schrott, Walls and his attorney were given a six-page summary of information government agents say was provided to them by Schrott.

Among the comments was the following information: “Drug Enforcement Administration, FBI, Riverside California, along with several local police departments intercepted a courier with 2.8 million dollars in cash, seized a Lear Jet 24 D-B, value $500,000.00, arrested four people on local charges and searched a residence in Los Angeles. Schrott was paid a $150,000.00 reward on the seizure of this money.”

There is another piece of information Walls now has, only this one gives him no comfort. During his trial, one of the drug ring conspirators testified that Feodies Shipp had attempted to hire a hit man to kill Walls for $50,000.

“They wanted to bury me out in the desert where no one would ever find me,” Walls told Metro Times. A dead scapegoat, he explained, would be even more useful than a live one.

Schrott, for his part, can’t understand why anyone would be interested in dredging up what he considers to be ancient history. When it is suggested to him that it is all still relevant to Walls, he observes, “Yeah, if I was in prison I’d do anything I can to get out, too.”

As to this business about six degrees of separation and close connections to criminal activity, he’s not buying any of it.

“If I was a money launderer,” he said, “I’d be rich.”

Otherwise, Schrott is more than happy to take any reporter who’s interested on a tour of Detroit’s impoverished neighborhoods, to show them how the big-ticket projects going up downtown aren’t helping many areas climb out of despair. And in that ruin he sees an opportunity to make a few bucks building homes for people who deserve better communities.

“Little kids in this town don’t have a chance,” he said. “This city is a disaster.”

He just wants to help make things better.

“What I’d like to see is an article about what’s going on in Detroit,” he says. “If you want to do that, let me know. We’ll go for a ride and I’ll show you.”

Curt Guyette is Metro Times news editor. Contact him at 313-202-8004 or [email protected]