Indictments in Israel Coming, Litzman and Deri

Indictments Expected Against Both Deri and Litzman in the Coming Weeks

After the dramatic announcement that he is going to file criminal indictments against Prime Minister Binyamin Netanyahu, Attorney General Dr. Avichai Mandelblit in the near future is expected to make a similar announcement regarding Interior Minister Aryeh Deri and Deputy Health Minister Yaakov Litzman.

Litzman will face charges of bribery, breach of trust and fraud and Deri’s charges will include money laundering, fraud and breach of trust.

According to a report released by KAN News11 correspondent Mordechai Gilit, the attorney general delayed the decisions regarding Deri and Litzman until completing his work on the cases involving Prime Minister Netanyahu.

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Arrest of 3 in Monsey for Illegal Money Transmitting Business

FBI Makes Three Arrests In Monsey On Thursday Morning

The FBI arrested three people in Monsey early Thursday morning. The U.S. Attorney says the were arrested for carrying out a multimillion-dollar scheme to operate an unlicensed money transmitting business for the purpose of transmitting proceeds derived from illegal activity.

According to allegations contained in the complaint unsealed today in Manhattan federal court, the three were arrested following a sting operation.

From approximately in or about September 2014 to in or about August 2016, the three engaged in a series of conversations and meetings with a confidential witness (the “CW”). In order to induce the CW to invest approximately $6 million in property owned by one of the men and his family, the defendants agreed to receive and transmit what they believed to be millions of dollars of funds that the CW had illegally obtained from his business. The defendants agreed to conceal the source of the CW’s money by transmitting the CW’s money to third parties, with the expectation that it would be returned to the CW, in return for a 10% “fee.”

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Netanyahu Indicted – Fraud, Breach of Trust, Bribery

POLITICO Playbook PM: Trump’s man in Israel indicted on bribery and fraud charges

BREAKING IN ISRAEL — “Israeli Prime Minister Netanyahu Indicted on Bribery, Fraud, Breach of Trust Charges,” by WSJ’s Felicia Schwartz in Tel Aviv: “Israeli Prime Minister Benjamin Netanyahu was indicted on bribery charges Thursday, imperiling the country’s longest-serving leader as he looks set to fight for his personal and political future in a third election contest.

“Israel’s Attorney General Avichai Mandelblit said Mr. Netanyahu will be charged with bribery, fraud and breach of trust in connection to three corruption probes known as Cases 1000, 2000 and 4000. Mr. Netanyahu allegedly traded official favors for flattering news coverage as well as gifts worth hundreds of thousands of dollars, including pink champagne, cigars and jewelry. The bribery charge, a key element of Case 4000, is the most serious and, if convicted, Mr. Netanyahu could face up to 10 years in prison. The lesser charges could result in three to five years in jail.” WSJ

— @jaketapper: “I’m sure this will alarm all of those who profess to be concerned about corruption abroad.”

NYT JERUSALEM BUREAU CHIEF DAVID HALBFINGER: “There were already signs of unrest in Mr. Netanyahu’s right-wing Likud party, as a popular younger lawmaker, Gideon Saar, called Thursday for a primary contest for prime minister, and said he would be a contender.

“Even if Mr. Netanyahu fends off intraparty challengers, and assembles a viable coalition in Parliament, Mr. Plesner said that the Israeli president, Reuven Rivlin, might balk at assigning him the task of forming a government while he awaits trial. In addition, critics are expected to petition the Supreme Court to rule that Mr. Netanyahu must step down.” NYT

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Monsey, NY Banker and Toms River, NJ Man and Brilliant Straw-Borrower Scheme

 

Former banker from Monsey helped steal $1.4 million through loan scam: U.S. Attorney

A 61-year-old former bank director from Monsey faces federal fraud charges involving a scheme to obtain a $1.4 million loan from the financial institution to finance a home health care business, federal prosecutors said.

Tuesday’s indictment charges attorney Mendel Zilberberg and Aron Fried, 46, of Toms River, New Jersey, with filing loan documents based on false statements and misrepresentations through a “straw borrower,” U.S. Attorney Geoffrey Berman stated in a news release. 

Zilberberg and Fried received the loan through the fraud and used the proceeds, causing the Park Avenue Bank to default on $1 million, Berman said.

INDICTMENT from the U.S. Attorney’s Office

Scales of Justice (Photo: File)

The scheme involved an unnamed co-conspirator who received a share of the money from the loan and a fourth person, identified by prosecutors as a straw borrower.

“As alleged, Mendel Zilberberg and Aron Fried conspired with another to defraud the bank where Zilberberg served as a director,” Berman said. “In a textbook case of self-dealing and breach of fiduciary duty, Zilberberg allegedly exploited his position at the bank to grease the skids for a loan given under blatantly false pretenses, a huge chunk of the proceeds of which he himself dipped into.”

The indictment charges that in 2009, Fried and a co-conspirator sought to obtain a fraudulent loan from the Manhattan-based bank to finance an investment in a home health care business.

Knowing the co-conspirator would not be credit-worthy and had a criminal record, they used a straw borrower for the loan application.

To make the scam work, Fried and the co-conspirator partnered with Zilberberg, who had the authority to personally shepherd the loan through the bank’s approval process and guard it from scrutiny, according to the U.S. Attorney’s Office.

The defendants then concocted a false premise for the loan, supported the loan application with false representations, and set up pass-through bank accounts to funnel the proceeds of the fraudulent loan to themselves, the prosecutor’s office said.

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The Platinum (Teflon) Partners – and a New Trial for One an Acquittal for Another – An Unheard of Move…

Note to readers:

One of the problems with having lost total anonymity (see here) is the second hat worn by the blogger, that of an attorney. Unfortunately of late, attorneys have been suspended for criticizing judges. Whistle blowers are now at risk for their lives from the ruler of what used to be the free world; and the moral compass of the judicial system in the US seems to have turned on its axis. Being a nameless and faceless spokesperson for truth or some form of justice is risky; but putting a face to that is like removing a Kevlar vest. 

Anonymity provided protection, not by allowing us to type words we otherwise would not have typed, but by affording us with a voice without the weights and burdens of multiple degrees and professional demands and what could appear to be attorney advertising were it to have a face. Our voice spoke words of a faceless anybody who did the research and came to a set of conclusions. We no longer have that level of protection. So we tread lightly, a chilling of speech in full force and effect. And for the sake of attorney ethics, perhaps call this attorney advertising, perhaps not. View it as you will. 

And we digress. The ruling below by Judge Brian Cogan feels nothing short of a betrayal of justice for the victims, for justice and for the entire financial system. The jury had it right despite the theatrics of truly gifted attorneys representing the defendants. The attorneys did their jobs and the jury ruled, even at the many legal and judicial disadvantages imposed by Judge Cogan. And then the judge overruled. 

We don’t get it. It feels very wrong.

The jury was an unsophisticated jury with likely precious little by way of experience in the investment world. And yet they were convinced that there was enough evidence to convict Mark Nordlicht and David Levy. We were disappointed they missed the whole picture but they got a piece of it right.

Unfortunately the Prosecution team did a rather inadequate job of breaking up the entire fraud piece by precious piece; and missed so many crucial bits of evidence to put before the jury, not the least of which was a comparison to how the global markets were performing at the time the Platinum Partners were active. This comparison shed light on how lacking in transparency were the activities of Platinum Partners now Teflon Partners at the time.

It was all very complicated; but could have been broken down by someone with enough experience in investments to break it all down. Yet the jury got the significance of Black Elk, a feat of epic proportions. 

We have years of research behind our stories on this subject, a lifetime in the hedge fund world and extensive knowledge of the subject matter. The lawyers representing the State were out-played by master craftsmen. Simple.

But the jury got it right.

To be undone by the judge came as a surprise, accompanied by a deep sense of sadness and a feeling of despair for everything just and true about our judicial system, if such truth exists, and our financial markets. The markets work because of the integrity of the investment vehicles, the rules the hedge fund managers MUST play by.  Teflon/Platinum Partners did not play by those rules. It all only works in concert when the investors can count on the judicial system to ensure act as referees or alternatively dole out equitable and judicial remedies when all else has failed. In this case, the justice system was in discord, as we see it.

The world’s financial markets continue to function only when investors can trust the underlying materials about the risks,  solely when investors understand the thickness of the ice they are going to be skating on, which is supposed to be transparently laid out. There can be no substrata of lies and deceit or the entire endeavor is accompanied by hidden risks. That was the Teflon/Platinum Partners strategy. They hid risks, the ice was thinner in places. 

This case, if not for any other in our anonymous and not-so-anonymous viewpoint, is representative of an entirely broken system. If risks can be so well hidden that minutiae determine a Judge’s unilateral decision to overturn a verdict, no market is safe.

The jury understood the material and afforded us with a just result. The judge here we simply do not understand. 

Hopefully the prosecution team will retry this case; and perhaps they will contact those with an abundance of knowledge on the materials for assistance. If they decide not to retry the case, the victims will have been re-victimized by the very system designed to protect them. 

If the Prosecution does not retry this case it will only either serve to substantiate a belief in unequal justice for the wealthy or prove that the Securities Acts and the investor laws are meaningless or some combination of the two. The Jury got it right. One of those convicted has been acquitted by Judge Cogan. Game well played.

We implore upon the Prosecution to take up the case again and to do better. 

New Life In Platinum Partners Case, Acquittal And New Trial

In a rare move, U.S. District Judge Brian Cogan (Eastern District of New York) overturned a jury’s conviction.  Cogan acquitted David Levy and granted a new trial for Mark Nordlicht.  Levy and Nordlicht, both executives at now defunct hedge fund Platinum Partners, were convicted of securities fraud, conspiracy to commit securities fraud, and conspiracy to commit wire fraud in July of this year after a 9-week trial.  A third defendant, former Chief Financial Officer Joseph SanFilippo, was cleared of all charges.

Back on December 14, 2016, seven individuals were indicted for their alleged participation in transactions at Platinum Partners, which was founded in 2003.  Two of the primary targets of the investigation were Nordlicht, one of Platinum’s founder partners and its Chief Investment Officer, and David Levy, a senior executive at Platinum who also served as co-portfolio manager for Black Elk, an oil and gas company that Platinum controlled from August 2010 through September 2015.

As the trial approached,  Nordlicht made a change in counsel from high powered attorneys at Quinn Emanuel Urquhart & Sullivan LLP to Jose Baez who gained notoriety when he won “not-guilty’ decisions in two separate high profile murder cases defending Casey Anthony (Florida) and former New England Patriot tight end Aaron Hernandez.  It was an interesting strategy and one that seems to have paid off for now.

There is no doubt that there was some great lawyering here, but the case is also interesting because it went from some slam dunk Ponzi scheme, to a real hedge, who had some exotic investments, that went out of business after the FBI raided the place.  So was it the hedge fund that was a fraud or an FBI raid that caused the fund to shut down?  One thing is clear, there was a raid.

Platinum managed multiple funds, including Platinum Partners Value Arbitrage Fund, L.P. (“PPVA”), Platinum Partners Credit Opportunities Master Fund, L.P. (“PPCO”), and Platinum Partners Liquid Opportunity Master Fund L.P. (“PPLO”). One transaction involved the valuation of one of the funds’ investments, Black Elk – an oil and gas company that Platinum controlled from August 2010 through September 2015, and the subsequent sale.

Government prosecutors claimed that Nordlicht and Levy hatched a plan to get the money from Black Elk’s sale through misrepresentations to bondholders.  The Government claimed that the evidence would show that the defendants rigged the Black Elk bond consent solicitation.  At trial, the jury found Nordlicht and Levy guilty on counts six to eight (related to the Black Elk) but not guilty on counts one to five, which related to Platinum.   

After a 9-week trial and the partial guilty verdict, Nordlicht and Levy moved for a judgment of acquittal under Federal Rule of Criminal Procedure 29 and for a new trial under Federal Rule of Criminal Procedure 33. Judge Cogan deferred ruling on these motions until Nordlicht, Levy, and the government prosecutors fully briefed their respective positions.  So just when prosecutors thought the trial was over, it wasn’t.  After hearing arguments from both sides, Judge Cogan acquitted Levy and stated that Nordlicht’s motion for acquittal was denied, but a new trial was approved as prosecutors did not provide enough evidence to sustain the conviction.

Judge Cogan wrote;

“In considering whether to grant a new trial, a district court may itself weigh the evidence and the credibility of witnesses, but in doing so, it must be careful not to usurp the role of the jury .. The ultimate test is whether letting a guilty verdict stand would be a manifest injustice. … There must be a real concern that an innocent person may have been convicted.”

Although the Government adduced sufficient evidence for a judgment of acquittal to be unwarranted, letting the verdict stand against Nordlicht would be a manifest injustice. Thus, Nordlicht’s motion for a new trial is granted.

It was a complex case but Platinum was a complex hedge fund, something any jury would struggle with.  It all started with an FBI raid, allegations that Nordlicht was seeking to flee the country and that the hedge fund was a Ponzi scheme.  It turns out that the FBI’s raid was successful in taking down the Platinum but there was no clear motivation as to the defendants when they began to experience a liquidity crisis at Platinum (a real issue but not necessarily criminal).  It’s not against the law to make bad decisions or to lose money … something that seems to have been criminalized in this case.

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Rabbi Zvi Feiner Settles with SEC But, “he won’t be able to satisfy it because…” Where is the Outrage?

People Should Be Outraged, Rabbi Feiner Settles Suit with the SEC; but it is Hard to Imagine any Sense of Remorse Given Comments by his Attorney to Crains

Crain’s Chicago Business reported the below information about the SEC settlement with Rabbi Zvi Feiner and the associates who swindled fellow Jews out of millions. But just to throw salt in the wound, the attorney representing Feiner and FNR, Mr. Ariel Weissberg a respected Chicago attorney, in his comments stated that his client doesn’t have the financial means to pay the SEC fines (or presumably to repay his victims). We wonder how much his attorney is getting paid to have thrown that salt in wounds of Feiner’s victims. This is not intended to in any way malign an attorney who did well by his client.

Should there not be a sense of outrage?

There is something very, very wrong with the statements made by Feiner’s attorney throughout the entire article, but perhaps the last paragraph speaks volumes about the righteous indignant response of the defendant.  The last paragraph in the article reads as follows:

Feiner settled two civil suits, even though one ended in a judgment in his favor, Weissberg said. “It was the right thing to do,” he explained. “In the Jewish Orthodox community, that’s what we aim for. . . .There’s a higher authority that needs to be answered.”

Really? In the Jewish world we should not be committing these crimes at all. There is nothing about this entire incident, lasting years, that reflects “the right thing to do.”

A Rabbi, someone who had the respectability of his community,  should be held to an almost unachievable standard of decency. Rabbi Feiner used the respect of those around him to lure them in and then he financially harmed his investors.

A braggadocios statement saying that the SEC fines will not be met because the Rabbi doesn’t have the financial means (as he apparently spent or repatriated that money to another country) should be leaving everyone with a really sour taste.

It is time that the Orthodox community remove the Hasmachut (Rabbinical Ordination) of those who commit crimes against the Jewish community. If, indeed, we are all looking to the same “higher power.”

Rabbi accused of defrauding Holocaust survivor, other investors settles Ponzi scheme charges

A Chicago rabbi and a business associate settled charges they operated a Ponzi scheme that triggered a $146 million default, the biggest ever for a federally insured loan program for nursing homes. Still at issue is how much the rabbi, Zvi Feiner, will pay.

Feiner, Erez Baver and their Skokie firm, FNR Healthcare, were accused by the Securities & Exchange Commission of defrauding an elderly Holocaust survivor and other members of Chicago’s Orthodox Jewish community. They siphoned off at least $11.5 million raised from 62 or more investors to buy nursing homes and assisted-living facilities throughout the Midwest, according to a complaint filed Sept. 19 in federal court here.

Feiner, 49, is an ordained Orthodox rabbi and sole owner of FNR. Without telling investors in limited liability companies, according to the complaint, he sold facilities owned by other LLCs and used at least $9 million in proceeds to pay other investors and lenders. Baver, 39, is FNR’s executive vice president. He and his company, Cedarbrook Management, received more than $2.5 million for personal use, the filing said.

While Baver and Cedarbrook have agreed to pay back about $2.25 million and a civil penalty to be determined, Feiner and his attorney are negotiating a figure. “It’s going to be a big number,” said Ariel Weissberg, a Chicago attorney representing Feiner and FNR. Whatever it is, Weissberg added, “he won’t be able to satisfy it because he doesn’t have the financial resources.”

Baver’s attorney, Stephen Rosenfeld of McDonald Hopkins’ Chicago office, said he would check with his client before commenting.

Starting in 2010, Feiner solicited funding for 20 LLCs including four cited in the SEC complaint. One of those four, Rosewood Care Centers, operator of a dozen nursing homes and an assisted-living facility in Illinois and St. Louis, was seized last year by the U.S. Department of Housing & Urban Development after defaulting on HUD’s $146 million loan.

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Rabbi Zvi Feiner, FNR Healthcare, LLC, Erez Baver, Netzach and Cedarbrook – 10M Stolen from 62 Investors – Frauds…

The SEC Complaint Speaks for Itself