Alexandra "Lexi" Karlsen (Playboy's Miss March 1999; Penthouse Pet, July 2006) flipped her long red hair and placed her hand on a Bible. Then, she shifted her dark green eyes to U.S. District Judge Gregory M. Sleet.
"Hi," she chirped.
Yao, 45, is standing trial on charges that he lied during a bankruptcy deposition about a six-month extramarital affair he had with Karlsen, 28. He admits that he lied, but said he did it to save his marriage, not to defraud creditors.
During 20 minutes of poised testimony, Karlsen detailed how Yao gave her nearly $1 million worth of cash, jewelry, a Lexus and a home in Scottsdale, Ariz.
"It was all a gift," she said. He took her to Palm Springs, Beverly Hills, the Super Bowl. When the couple could not locate a suitable gold Lexus SUV in Scottsdale, she testified, "he got a dealer in Philly and they literally delivered it to me on a flat-bed truck."
Yao's criminal case is fallout from a tangled bankruptcy proceeding with claims approaching $400 million that began in 2002. It involved Yao's company, Student Finance Corp., which sold loans to vocational students, mostly truck drivers. Government officials and lawyers who have sued Yao describe SFC as a giant Ponzi scheme, "a spectacular fraud" in which as many as 80 percent of the loans went bad.
Yao still faces likely related federal criminal fraud charges in Philadelphia, including accusations that he made false statements to obtain a $25 million corporate line of credit and a $6 million personal line of credit. He is also accused of money-laundering related to the purchase of a home on Nantucket.
But none of that was legally relevant yesterday.
The only issue for the jurors in this trial is whether Yao lied about his relationship with Karlsen during a August 2003 deposition related to the SFC bankruptcy. During the deposition, attorneys in that case suspected fraud and were trying to trace SFC and Yao funds.
When an attorney for an insurance company asked Yao about wire transfers to the account of "A. Karlsen" totaling $669,000, Yao replied that it was probably something related to the maintenance of his two planes, a Hawker and a Learjet. Asked about $150,000 wired to Las Vegas casinos, Yao said in his deposition that the money went for a family celebration.
Eric D. Freed, a Philadelphia lawyer who attended the deposition on behalf of a bank owed nearly $15 million, was suspicious of Yao's answers. Freed said he mentioned this to a colleague, Patricia Biswanger, who then ran a Google search with the names Yao and Karlsen.
Up popped a photo from Playboy magazine's Web site: Yao and Karlsen at Hugh Hefner's mansion.
"It's absolutely remarkable what you can find on the Internet, searching two names put together," Freed told jurors.
"Did you then put two and two together?" asked Yao's defense attorney, Brian McMonagle.
"I didn't have to be a rocket scientist to make that leap," Freed said.
When Karlsen testified, Assistant U.S. Attorney Douglas McCann flashed the party photo of Yao and Karlsen on a large screen. She wore an olive bustier and short shorts. He wore a tuxedo and a smile.
"I took him to a party at the Playboy Mansion for New Year's Eve," Karlsen explained to jurors. "I called Hef's secretary - all the guys have to be approved by Hef himself . . ."
Shortly after the party, Yao saw the photo on Playboy's Web site. "He seemed pretty excited about it," Karlsen told jurors.
As she spoke, Yao stared at the photo, expressionless.
Before Karlsen captivated the courtroom yesterday, three Las Vegas casino supervisors used records to detail Yao's spending and gambling in late 2001 and 2002.
Mark Hug of the Bellagio Casino told the jury about evidence that a woman named Erica Lookadoo Jiles cashed $39,000 in chips linked to Yao's frequent-betting card.
If he knew, Hug did not tell jurors that Jiles uses the stage name Juliet Cariaga, and that she is Penthouse's Pet of the Millennium. Or that Karlsen claims to be the only woman in America who has won Playmate, Pet and Perfect 10 magazine honors.
From pit boss Diane Hewitt, jurors learned that casino records show that Yao shared a penthouse suite with, at separate times, both Jiles and Karlsen.
After she testified, Karlsen told reporters that she broke up with Yao because he refused to get divorced.
"I told him he should be home with his kids," she said.
Karlsen, whose scheduled appearance at a Reading strip club was postponed because of the trial, is also an author.
Her new book: The Divorced Guy's Guide to Dating: How to Meet More Women.
Contact staff writer John Shiffman at 215-854-2658 or email@example.com.