A Platinum Vindication – Platinum Partners and Sufficient Evidence of Fraud

As the readers of this blog may remember, the Platinum Partners fraud was widely covered in and around 2016 and 2017. The coverage included years of research on the part of a small group of very dedicated people who collaboratively amassed a treasure trove of information regarding the Platinum Partners hedge fund, its activities, the defrauding of millions of dollars in investor money, bribery, securities fraud and the list goes on.

We attended hearings on the frauds related to Black Elk Energy in 2019 and, by all estimation and analyses, we had the partners dead-to-rights on, at the very least, the securities fraud. And then, in what we believed to be a shocking turn of events, Judge Cogan, an altogether brilliant member of the legal community, overturned a jury verdict and acquitted one of the partners and granted the other a new trial. Overturning a jury verdict is unusual. Acquitting a convicted man made our heads turn.

The Black Elk Energy deal, while complicated and nuanced, represented a clever, if not unimaginably creative manipulation of the rights of the unsecured bondholders against the secured bondholders, allowing the Platinum Partners (unsecured bondholders) to divest Black Elk of Millions and Millions of Dollars in valuable oil assets, thereby leaving the secured investors (those same voting shareholders) with nothing. You see, once the secured property is filtered out of any company, the secured holders of debt and financial obligations are left with nothing to secure. This can, if properly directed, reduce the secured bondholders to a position below the unsecured bondholders who, in the ordinary course, would have been paid out first. However, such a vote would have required the Platinum Partners responsible for that vote to have sat down and affirmatively orchestrated such a corporate action. This could not have lacked criminal intent, particularly when David Levy (who was acquitted on those grounds) was and continues to be, one of the largest beneficiaries of the Black Elk deal.

Taking a step back in time, the takeover of control of Black Elk, which began in 2007 when Platinum began investing in the Black Elk Energy company, was a corporate move that legends are made of, a slight of hand and a measure of serendipity. The slow bleed of that company of its assets and value, by the very partners who were supposed to be acting in the best interest of the company did not go unnoticed, at least by us. It was carefully orchestrated and it had a measure of well-honed finesse.

In simple terms convincing secured shareholders to vote on a measure which was framed to them as a vote in the best interest of the company, and ultimately paved the way for the Platinum Partners to drain assets, followed a pattern and practice of corporate behavior by Platinum’s Partners, at least for anyone keeping tabs of their activities.

And yet, at the end of it all Judge Cogan ruled that David Levy lacked criminal intent and Mark Nordlicht was entitled to a new trial. Sadly, we were left bereft by the miscarriage of justice. What occurred in the years leading up to that trial was more than criminally intentional, it was very dark. What has transpired since, is astounding.

The Partners have not starved, as one would think when a company goes from having $1.7 Billions of Assets under Management to nothing (at least nothing being reported). At the end of the day, the greatest beneficiaries of that vote, were the Platinum Partners, and despite contentions to the contrary, these men got very rich off their crimes.

And while Mark Nordlicht later filed for bankruptcy protection (in and around late 2019), anyone who looks hard enough will likely find that he siphoned off his personal assets to family members and offshore accounts and is really, not impoverished. Nor, might we add, is he entitled to bankruptcy protections.

On Thursday, November 5, 2021, a three panel U.S. Appeals Court, after 9 weeks of testimony, unanimously restored the convictions of Mark Nordlicht and David Levy. In a 102-page decision, they determined that the evidence supported the conviction of Mark Nordlicht and did not support a finding of David Levy’s lacking “criminal intent.”

A little vindication goes a long way. Murray Huberfeld’s dramatically reduced sentence remains a slap in the face for his victims in the Platinum Partners fraud. Hopefully David Levy and Mark Nordlicht and their high-priced legal team will not succeed in convincing a judge that they deserve a reduced sentence. They unequivocally do not.

See below for additional reading and a copy of he decision.

U.S. appeals court restores Platinum Partners executives’ fraud convictions

NEW YORK, Nov 5 (Reuters) – A U.S. appeals court on Friday restored the fraud convictions of two former top executives at the now-defunct Platinum Partners hedge fund, saying a trial judge erred in acquitting one defendant and granting the other a new trial.

In a 102-page decision, the 2nd U.S. Circuit Court of Appeals in Manhattan said sufficient evidence supported the July 2019 jury convictions of Platinum co-founder Mark Nordlicht and co-chief investment officer David Levy.

The appeals court returned the case to U.S. District Judge Brian Cogan in Brooklyn for sentencing. Platinum was based in Manhattan and once had about $1.7 billion of assets.

Appeals Court Reinstates Convictions of Platinum Partners Executives

Hedge fund founder Mark Nordlicht and co-chief investment officer David Levy were convicted in 2019 of securities fraud and other charges

Mark Nordlicht, the founder of defunct hedge fund Platinum Partners, leaving federal court in the Brooklyn borough of New York in 2019.

The U.S. attorney’s office for the Eastern District of New York, which prosecuted the case, appealed that decision.

In Friday’s ruling, U.S. Circuit Judge Robert Sack wrote that there had been sufficient evidence for a rational jury to convict the defendants, and neither an acquittal or new trial was warranted.

“It is accordingly only in exceptional circumstances, where there is ‘a real concern that an innocent person may have been convicted,’ that a court ‘may intrude upon the jury function of credibility assessment’ and grant a [motion for a new trial],” he wrote, quoting from another case.

Lawyers for Messrs. Nordlicht and Levy didn’t respond to requests for comment.  A spokesman for the U.S. attorney’s office declined to comment.

The Decision decided on November 5, 2021 by the 3 Member Appellate Panel

19-3207_opnDownload

A Platinum Preservation of Assets, Mark Nordlicht, the SEC and Bankruptcy… ummmm, Hiding Something?

SEC receiver sues Platinum Partners founder Mark Nordlicht in $220M bankruptcy action

An SEC receiver appointed to preserve assets of the defunct Platinum Partners funds claims that the manager, Mark Nordlicht, of New Rochelle, owes the funds $220 million.

Melanie L. Cyganowski sued Nordlicht Dec. 7 in U.S. Bankruptcy Court, White Plains, to stop him from using bankruptcy to get out of paying back creditors.

Nordlicht omitted information and made false statements in bankruptcy documents, the complaint states, as “part of a fraudulent scheme by the debtor to conceal estate assets from the Chapter 7 trustee and his creditors.”

Nordlicht’s bankruptcy attorneys did not respond to a message asking for their client’s side of the story.

Nordlicht co-founded Platinum Partners in 2003, and at one point managed $1.7 billion in assets. But by 2016, the funds were nearly insolvent.

The federal prosecutor in Brooklyn indicted him for securities fraud and the U.S. Securities and Exchange Commission filed civil charges. Both cases are pending.

Cyganowski was appointed to marshal assets of several Platinum funds, on behalf of the SEC.

This past June, Nordlicht petitioned for Chapter 7 liquidation, declaring assets of $137,052 and liabilities of more than $206 million.

But according to the Cyganowski complaint, Nordlicht should not be allowed to use bankruptcy to discharge debt because he engaged in a “long-running pattern of fraudulent conduct, by filing false schedules, lying under oath and knowingly deceiving the Chapter 7 trustee.”

A bankruptcy schedule, for instance, shows that Nordlicht and his wife, Dahlia Kalter, receive $25,000 a month from his mother for tuition and other expenses. But Nordlicht’s mother actually wrote them one check, according to the complaint, for $1.4 million.

Nordlicht allegedly did not disclose ownership of a luxury condominium on Manhattan’s Upper West Side or the use of shell companies to conceal assets, as “part of a larger scheme to frustrate a recovery by his creditors in this bankruptcy.”

Cyganowski links the alleged bankruptcy misinformation to Nordlicht’s management of the Platinum funds.

To continue reading click here.

The Shocking Departure of Judge in Platinum Partners Trial, A Defense Ace-in-the-Hole

Intrigue surrounds NYC judge’s withdrawal from case against hedge fund founder who fleeced correction officers’ union

A Manhattan federal judge has abruptly withdrawn from a case involving a crooked hedge fund founder who screwed the correction officers’ union out of $20 million — and sources say it’s due to the judge’s close relationship with an executive who testified about the fund swindling investors.

Judge Alvin Hellerstein, 86, transferred Murray Huberfeld’s case to another court Tuesday without explanation. The move came only weeks before Hellerstein was to re-sentence Huberfeld for his role in a bribery scheme involving former jails union boss Norman Seabrook and notorious Mayor de Blasio donor Jona Rechnitz.

Sources say that behind the scenes, defense attorneys argued Hellerstein should not be on the case because he is close with Andrew Kaplan, a former executive at Huberfeld’s hedge fund, Platinum Partners. Huberfeld recently hired a new attorney, Andrew Levander, records show.

“One of the defendants in the Platinum case … is Andrew Kaplan. I have known Andrew Kaplan since he was born. He and one of my daughters grew up together, went to school together, were friends together. His sister and my eldest daughter remain close friends. His father was a good friend of mine but passed away about five, six years ago, and his mother remains a very good friend of mine, so there is that relationship,” Hellerstein said at a 2018 hearing. “I can’t see that whatever happened, whatever conduct occurred at Platinum affects the issues of this case, which is an honest services issue.”

Online records show Kaplan and Hellerstein’s names on newsletters for The Jewish Center synagogue on the Upper West Side, as well as other charities.

The revelation came after Huberfeld pleaded guilty but had not been sentenced for his role in a $60,000 bribe to Seabrook in December 2014 in exchange for a $20 million investment of union money in Platinum Partners. The union lost its money when the hedge fund went bankrupt. The Correction Officers’ Benevolent Association is still fighting in court to recover the loss. Seabrook asked last week to serve his 58-month sentence in home confinement due to the coronavirus pandemic.

Continue reading in the New York Daily News, click here.

Crimes and Misdemeanors, Survival of the Frummest – Systemic Fraud [Opinion]

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This opinion piece is being posted with full permission of the Author, Rabbi Yossi N. Minor edits and formatting changes have been made from the original which can be found on Facebook, here.

Survival of the Frummest, Part 3 — Crimes and Misdemeanors –

One of the most troubling aspects of today’s ultra-Orthodox community is the systemic fraud perpetuated by so-called frumme Yidden. This fraud, aka geneivishe shtick, comes in many varieties and flavors, but the common denominator is that it’s all illegal. The most prevalent of these frauds are those perpetrated against government social welfare programs.To the extent that there is welfare abuse within the hareidi community, one may ask, what makes it systemic? The answer is simple: the various Hareidi community councils (BP, CH, Willie, etc.) actively encourage and assist community members to sign up for every welfare program available. Now, it is true that many of these individuals were eligible for the programs at the time they signed up, but as their income grows, they become ineligible. However, once a hareidi individual with little secular education is dependent on government welfare, he will be reluctant to give up welfare benefits.And this is precisely the Hareidi communities’ game plan from day one. In other words, the community consciously regards the government’s social safety net — food stamps, medicaid, wic, section 8, etc. — as part of their budget, not as a last resort for a few struggling individuals. Every year, hundreds of Hareidim get married with the intention beforehand of relying on government welfare to make ends meet. The Crown Heights Community Council and the various other Hareidi community councils in NYC were established with the purpose, among others, of filling out welfare forms for community members. Thus, to use yeshiva language, welfare for Hareidim is not a believed, but rather a lechatchillah.An integral part of the welfare fraud and abuse within the Hareidi community is the wide-spread phenomena of working off the books, or under the table. Without working off the books, families’ income may increase over time to the point of risking losing welfare benefits. This is the reason that most, if not all, yeshiva teachers, rebbes, and administrators work either completely off the books or half on and half off. By working off the books, the Hareidi community also ensures that their taxes will be lower than otherwise – or that they’ll pay no taxes at all. In short, as the Talmud teaches, aveirah goreret aveirah, a transgression brings another transgression in its wake.

This is how Hareidi welfare fraud leads to tax fraud.

One might assume that welfare fraud would be more likely to be committed by the 40% of Hareidim who live below the poverty line. But Hareidi fraud is not confined to the poor alone. On the contrary, as you climb up the food chain, the fraud only gets larger and more pernicious.

Rubashkin from Crown Heights and Samet from Kiryas Joel are perhaps the most colorful and well-known criminal defendants within the Hareidi community. However, the minyan at the Otisville Correctional Facility is large and ever-changing as new members join and old members leave .This is not to say there is no fraud within the Modern Orthodox Jewish community.

The implosion of Platinum Partners — the shady hedge fund run by Murray Huberfeld and Mark Nordlicht — is one example of fraudulent activity perpetrated by members of the MO community. Overall, though, MO fraud is not a community organized activity. An MO council to help individuals apply for welfare does not exist in Teaneck. The same cannot be said for the Hareidi community, where the fraud is wide-spread and systemic and where many members are semi-literate at best in English.

One may ask, how can systemic fraud be so prevalent in ultra-Orthodox communities? Aren’t they meant to be the ones upholding the Torah, which directly forbids stealing?

The answer is rather straightforward: stealing from the government, ie. gentiles, is not considered stealing. The logic behind this notion goes something like this: the Talmud rules that one need not return the lost object of a gentile or excess money paid for goods by mistake. Welfare benefits are akin to a lost object or excess money – and thus need not be returned. This is where racism also comes into play. Hareidim claim that welfare fraud is pervasive among other minority communities, so why shouldn’t we also get money from the government? At least we’re using it for Torah and Mitzvot!

It’s only a matter of time before the government wakes up and realizes the systemic nature of welfare fraud within Hareidi enclaves. When that time comes, which it will eventually, Hareidi society will have to begin preparing its youth for the real world. Until then, the fraud continues.

By: Rabbi Yossi N.

Mr. Seabrook, Will It Ever Be More Clear Who Has Pull in New York? A Losing Appeal

Former jails union boss Norman Seabrook loses appeal in bribery case

Disgraced jails union boss Norman Seabrook is going to jail.

The former leader of the Correction Officers’ Benevolent Association lost an appeal Tuesday of his conviction for accepting a $60,000 bribe in exchange for a $20 million investment of members’ money in a doomed hedge fund.

Seabrook had been out on bail while he fought the case. The decision means it is highly likely he will have to begin serving his sentence of four years and 10 months.

His appeal had hinged on his belief at the time he made the investment that it would get good returns for correction officers. He said details of the loss suffered as a result of the hedge fund, Platinum Partners, going bankrupt prejudiced his right to a fair trial.

The 2nd Circuit Court of Appeals rejected those arguments. Seabrook, the three-judge panel noted, had suppressed warnings from a union lawyer that the investment was risky.

To continue reading, click here.

Murray Huberfeld, Another Questionable Platinum Ruling and An Appellate Court that is “Not Confident”?

Dear Readers:

The above pages are from the ruling of the Appellate Court in the Murray Huberfeld/Norman Seabrook Platinum Saga. In our opinion it is nothing short of a travesty of justice.

The victims were indeed the retirees who invested pension funds under Norman Seabrook’s guidance and control. The retirees are the very people who stand to gain equitably by compelling Murray Huberfeld to repay some of the losses they incurred on a failed investment from which he stood to gain. Those losses were realized because of the actions of Huberfeld.

And, when the lower court Judge stated that the sentence would have been the same regardless of which guidelines were used, the Appellate Judges should have accepted the lower court Judge’s credibility, integrity and the process he used. It is somewhat disheartening that they did not.  

Moreover, the ruling raises questions about the integrity of the process moving forward. The Appellate Court has basically undermined the credibility of the lower court Judge with the following statement, which we find unsettling at best:

Appeal from United States District Court for the Southern District of New York (Alvin K. Hellerstein, J.), convicting Murray Huberfeld, after a guilty plea, of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 371. We hold that the district court erred at sentencing by applying the commercial bribery sentencing guideline based on an uncharged bribery scheme that the government dropped in exchange for Huberfeld pleading guilty to the wire fraud. Vacatur is warranted because we cannot be confident, despite the district court’s statement to the contrary, that it would have imposed the same sentence had it instead used the correct guideline.

We sincerely hope that the lower court will use another process and come to the same conclusions, the same sentence or even one that is longer, with greater restitution to be paid. The sentencing guidelines allowed the sentence imposed. It should remain. These were not victimless crimes. 

 

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

THE PLATINUM PARTNERS’ CONVICTION AND A VERDICT THAT, IF OVERTURNED, WILL ALLOW WHITE-COLLAR CRIME TO RUN RAMPANT…

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…