Platinum Partners – Can the Charges Stick? If not, We are All Doomed…


Dear Readers:

We cannot overstate the importance of the verdict in the Platinum Partners’ case. The complexities involved in the scams perpetrated on investors, as well as the historical practice of the Defendants can also not be overstated. We followed Platinum for years. There was more than enough evidence to obtain a conviction. Those convictions should stand.

But then, there’s a master orator and talented attorney… Jose Baez.

Jose Baez, whose talent as a show-man, a skilled craftsman and an artist within a legal defense career, can only be admired by those of us who don’t have that type of skill. In a creative and theatrical cinematic courtroom performance, Baez likened the Platinum Partners scheme to a “run on the bank” of the It’s a Wonderful Life variety. He made a direct analogy between George Bailey and the Defendants, trying to place them in the same heroic conundrum of Bailey. What a way to ruin a great Jimmy Stewart movie. 

The major problem with that analogy is that George Bailey did not defraud people out of money. To the contrary, he was prepared to go to jail if the envelope of money was not found. He was prepared to be accountable to the bank’s clients.  The Platinum Partners’ funds did not misplace the money in an envelope. There were no absent-minded employees. Platinum Partners’ assets were intentionally, carefully, and craftily transferred to the benefit of the same partners in other funds. Platinum’s Partners could not meet redemptions because the entire movement of assets by the fund was one scheme after another, a series of  misrepresentations and untruths told to investors. There is no correlation. If anything, the closest comparison to any character from It’s a Wonderful Life is one that makes an analogy between Mark Nordlicht and Mr. Potter, the story’s antagonist who refused to lend Bailey money and wanted to close the bank and destroy the Bailey family.

Unlike the It’s a Wonderful Life story, Platinum Partners were not protagonists, kind decent people who made a terrible and hapless error. To turn Mark Nordlicht into George Bailey is like turning  John and Timothy Rigas into the Bailey Brothers or, Anna Gristina into a virgin. Just not happening… 

This blogger finds it mind-boggling that amidst the confusion associated with the sheer complexity of the scheme, the prosecution was able to create a narrative that the jury could understand. Kudos to the Prosecution. That was no easy task, especially given Baez’s theatrics and uncanny ability to pull rabbits from hats.

The Judge, however, should allow the conviction to remain and any appeal should be denied. Correctly stated in the article below, if the partners from Platinum Partners cannot be convicted in New York, no one can. For anyone who understands financial crimes, this conviction is a no-brainer. For those who don’t, a conviction provides protection to unsavvy investors. An Acquittal will make another crime only that much easier. 

Ring the bell, please. But don’t expect Nordlicht to get his wings. Read on…

Jose Baez, Robert Capers, David Levy, Brian Cogan, Mark Nordlicht. (Illustrations by Want Some Studio)

‘If a Charge Can’t
Stick on These Guys,
No Charges Can
Stick on Anyone.’

A jury convicted a hedge fund manager
of securities fraud. The judge didn’t care.

Ever since he won a surprise acquittal for accused child murderer Casey Anthony in 2011, criminal defense attorney Jose Baez has had a flamboyant reputation for convincing jurors to let his often-unsavory clients walk free.

But when he took on the complex federal securities fraud case against Platinum Partners co-founder Mark Nordlicht — who ran what was once a $1.7 billion hedge fund firm — Baez nonetheless seemed an odd choice. His eponymous law firm is based in Orlando, Florida, not Manhattan; his other notable clients have included celebrities like Aaron Hernandez, whom he managed to get acquitted of a double homicide while the former NFL star was serving time for another murder.

In the Platinum case, Baez’s client was accused of something far less sensational, but serious nonetheless: defrauding investors in his hedge fund as well as bondholders in a company Platinum controlled.

Baez believes, however, that all juries are alike. Whether in a murder trial or a white-collar case, they’re “just fine folks like you and me,” he says. And as the nine-week Platinum trial wound to a grueling finish last June, the New York native had a brainstorm he thought would help jurors in a Brooklyn courtroom feel his client’s pain: a clip from the Hollywood classic It’s a Wonderful Life.

“As I was learning about the case, this phrase ‘bank run’ kept coming up. And then I remembered in It’s a Wonderful Life there was a bank run scene,” he told Institutional Investor in a recent interview. “So I went on YouTube and I played it, and I’m like, ‘This is this case.’”

Baez has gained a grudging respect from others in the defense bar for his many high-profile wins and his uncanny ability to connect with jurors in a way some corporate lawyers also involved in the Platinum case acknowledge they could not. (“Let’s rock and roll,” one juror was heard saying as Baez began a day of cross-examination.)

“This is going to break things up a little bit for you,” Baez told jurors in the middle of his closing argument before proceeding to show the film’s famous Depression-era scene, in which Jimmy Stewart plays a beloved small-town banker fending off a run on the bank by explaining to depositors that their money isn’t in a vault — it has been lent out to others in the community.

“That’s illiquidity,” says Baez — the same fate, he argues, that befell Platinum.

In his telling, Nordlicht was George Bailey, the movie’s protagonist, and Mrs. Nordlicht was Bailey’s wife — both putting in their own money to save the bank. In the film, there is even a surly investor demanding all of his money back. That person, Baez said, was like Amir Shaked, a fund-of-funds manager and whistleblower who was one of four investors who testified that Platinum insiders had lied to them about the fund’s financial situation and refused to return their money as they believed the terms of their investment required.

“This bank run could bring the whole fund down,” Baez explained as he finished playing the clip. In that one visual, the attorney conjured the problems facing Platinum in the most benign way possible. Says Baez: “It was literally the same exact thing that was unfolding in this case.”

There was no argument that Platinum was a fund in trouble.

After years of double-digit performance, in 2012 Platinum’s main hedge fund encountered serious problems and was soon facing angry investors who wanted their money back — money Platinum did not have.

By 2016 these problems had led several investors to file whistleblower complaints to the Securities and Exchange Commission, and bondholders in an oil company it controlled had sued Platinum. To top it off, another of the fund’s founders, Murray Huberfeld, was charged that June with a kickback scheme in which he had paid $60,000 in bribes to the president of the New York City corrections officers union in exchange for a $20 million union investment in Platinum — money Platinum desperately needed to meet a rising tide of redemptions.

Less than a week after Huberfeld’s arrest, Platinum announced it would go into liquidation, and six months later an eight-count indictment against seven individuals connected with the hedge fund was filed in federal court.

When the U.S. attorney for the Eastern District of New York, Robert Capers, unveiled the charges on Dec. 19  2016, he accused Platinum insiders of running a $1 billion “Ponzi-like scheme,” masterminded by Nordlicht, that defrauded Platinum’s investors by using loans and new investor funds to pay off existing investors.

To pull off the scheme, Capers said, the Platinum executives were “falsely claiming that their flagship hedge fund was thriving when in fact it was not, and by overvaluing its assets when in reality the assets were doomed and the fund was a sinking ship.”

Nordlicht and three others were also charged with rigging a vote to change the bond covenants of Black Elk Energy, Platinum’s biggest investment, to extract millions of dollars from the company.

Platinum looked to be the most significant hedge fund scandal since Preet Bharara, then the U.S. attorney for the Southern District of New York, sent dozens of insider traders to prison — and even wrangled a guilty plea from Steve Cohen’s SAC Capital in 2013.

But this case didn’t turn out as expected.

Three of the men who went to trial last year — Nordlicht, his co-CIO David Levy, and CFO Joseph SanFilippo — were found not guilty of the “Ponzi-like” investment fraud.

And while Nordlicht and Levy were convicted in the alleged bond-rigging scheme, soon there was an even bigger upset.

In what former prosecutors and defense attorneys say is an exceedingly rare move, U.S. District Judge Brian Cogan — who told jurors as they went into deliberations that they were “the sole, exclusive judges of the facts” — threw out Levy’s convictions and ordered a new trial for Nordlicht.

The judge’s move was a shocker. “The court decision essentially nullifies the jury verdict and all of the hard work that the jury did,” says Christopher Nasson, a former prosecutor in the Eastern District of New York who is now a partner at K&L Gates. “There are times when that may be appropriate, but those times are few and far between.”

Prosecutors quickly appealed, arguing that the judge had overstepped his authority and “usurped the role of the jury by imposing [his] own view of the evidence.”

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