Law360, New York (June 26, 2019, 9:31 PM EDT) — An attorney for Platinum Partners co-founder Mark Nordlicht on Wednesday sought to turn the tables on prosecutors in closing arguments, accusing the government of peddling more lies at trial than top executives at the defunct hedge fund are alleged to have told to investors.
The jury weighing the fate of Nordlicht, former Platinum co-chief investment officer David Levy and former Chief Financial Officer Joseph SanFilippo heard the first part of Nordlicht’s final pitch to escape fraud and conspiracy charges from his attorney Jose Baez, who argued that prosecutors have been eliciting misleading testimony and presented flawed and incomplete evidence from the start of trial.
“We agree this case is all about lies. It’s all about the lies of the government,” Baez told the jury. “They came in here and lied to you with a straight face.”
Prosecutors say Nordlicht, Levy and SanFilippo were part of a conspiracy stretching from 2014 to 2016 to defraud investors by lying about a liquidity crisis at Platinum’s signature fund, preferential redemption payments that were made to certain investors and high interest, interfund loans Platinum was arranging to keep the fund afloat.
Baez told jurors that Nordlicht had been forthright with his investors, and as the largest investor in Platinum’s flagship fund, Platinum Partners Value Arbitrage Fund, he stood side by side with the other investors.
“For you to believe he defrauded them, he would have had to defraud himself,” Baez said.
The Platinum Partners have beaten (most of) the rap.
Way back in the early days of the Platinum Partners scandal, a truly operatic adventure featuring alleged bribes paid via designer handbags, an FBI raid, $1.17 billion in missing money, an alleged Ponzi scheme, and a succession of judges alternately bewildered and enraged, the latter due to some alleged witness and prosecutor intimidation, we mused: Wouldn’t it be funny if the thing that got Mark Nordlicht & co. in the end was the scuzzy if allegedly legitimate energy investments by which it made its name? Well, wouldn’t you know….
Mark Nordlicht, the founder of defunct hedge fund firm Platinum Partners, was found guilty on Tuesday of defrauding bondholders of an oil exploration company Platinum controlled, but cleared of charges he defrauded investors in Platinum’s hedge funds….
The three men were accused of lying to investors about the health and liquidity of the flagship Platinum Partners Value Arbitrage fund. Prosecutors said Platinum operated “like a Ponzi scheme” by using new money to fund redemptions by earlier investors, a practice referred to internally as “Hail Mary time.”
The jury, however, rejected those charges, finding all three men not guilty.
This is a truly shocking outcome, given the alleged bribe and all of that missing money and all of the things the Platinum execs did to avoid facing the music, from the aforementioned alleged witness intimidation to the alleged plan to spend the rest of their days safe from extradition in Israel, and also how relatively easy it is to win convictions on these sorts of things. And it could get yet more shocking still.
After the jury left, lawyers for Nordlicht and Levy moved to overturn the guilty verdicts. U.S. District Judge Brian Cogan ordered them to file papers in support of their motions and said he might hold a hearing to consider them.
“It’s not over yet,” the judge said.
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“Rav Safra was approached to sell something he had and was offered a price which suited him, but he was unable at the time to signify his consent because he was reciting his prayers and was unable to interrupt them. The prospective buyer, under the impression that the rabbi had rejected his bid, kept on increasing the price but the rabbi insisted on selling for the original price to which he had consented “in his heart.” Naturally, this kind of exemplary conduct was not intended for all, otherwise it would not have been recorded for a saintly man like Rav Safra.
But the stern injunctions throughout Jewish literature against cheating and dishonesty in business affairs and in other areas of life are directed toward every Jew, as when the prophet says of his people: “They have taught their tongue to speak lies, they weary themselves to commit iniquity” (Jeremiah 9:4).”
The Illusions We Want to Believe About People – Platinum Parnters
Simply Because an Investment Manager is Invested in the Fund he Manages Does not Mean he Cannot Defraud Other Investors in the Same Fund –
[OPINION Edited 7.2.19 11:46am]
In his closing statement, Jose Baez, the attorney for Mark Nordlicht asked rhetorically, how Mark Nordlicht could have defrauded investors when he himself was invested. “For you to believe he defrauded them, he would have had to defraud himself,” Baez said.
Read more at: here.
But that is a far cry from the realities of our financial markets. That was the bait for the trap Nordlicht set for investors. Most hedge fund managers are also investors who have money invested in their own schemes, not enigmatic but rather a show of legitimacy intended to entice new money. If Nordlicht had not been invested, he would have lacked credibility and would not have attracted investors.
Baez, an incredibly gifted attorney, presented a remarkably simplistic view of hedge funds and private equity funds to the jury. Fund managers don’t just invest and get returns on their investments. They earn (a loaded word in the case of Platinum) management fees and dozens of other benefits, depending upon how the fund is established. Nordlicht was well compensated during his Platinum tenure. There were so many funds, so many scams, so many left bereft of their financial futures and Nordlicht was enriched.
The fact that Mark Nordlicht had deferred compensation of $55,000,000.00 at the end of the day, which he allegedly lost as a result of the fall of his empire, does not speak to what money he had received up until that point – on the order of tens of millions. He had been paid management fees and other benefits that were not clearly elaborated during the trial. He had been enriched when the fund was prospering. The problem was, Nordlicht’s kingdom was made of glass.
Baez claimed that the government told lies, many investors made money. The fact that many investors profited from their investment is not mutually exclusive of those defrauded in the scheme. Were that to be the case, Madoff would be a free man.
Hedge Fund Managers nearly always invest in their funds. Investors frequently make money in fraudulent schemes, never the wiser to having been initially defrauded. This is not uncommon. Hedge fund managers can simultaneously defraud investors and have their own money locked up in the fund; and it is an absurdity of epic proportions to assume that because they are invested, they are judgement proof for the unthruths they tell their investors. Many of Madoff’s investors got very wealthy on Madoff’s trickery, whether they knew of frauds committed or otherwise.
With respect to Platinum, the “deferred compensation” and the other money Nordlicht had tied in the fund, the role he played in keeping each entity wholly compartmentalized, the return of the money to the Holocaust survivor as a preferential withdrawal were all part of the show. These particulars, are evidence of guilt as opposed to innocence, they point to the premeditation involved. That they added a perception of honesty, credibility and integrity was an illusion created to ensnare new investors. And he should be held to account.
When a hedge fund manager, a private equity company, an investment group defrauds investors it undermines the integrity of the entire financial investment culture. When Jewish hedge funds do it, they undermine the worldview of Judaism and Jewish morality. Both have unintended consequences and each must be addressed with an equal level of gravity.
If the defendants are acquitted of the charges against them, both with respect to the Platinum Partners Value Arbitrage Fund and with respect to Black Elk, there will be little need to have a Securities and Exchange Commission in place because their acquittal will invite market participants to follow in the footsteps of the defendants in the current case. Moreover, an acquittal will pave the way for these men to do the same again, just in a different format. It will render each defendant now and in the future impervious, virtually untouchable. In addition, an acquittal will leave each defrauded investor with little recourse and it will set a bad example for the future of Jews, particularly those honest among us engaged with and perhaps more honestly, married to the financial world.
In the late 1990’s Murray Huberfeld and David Bodner (two of the earliest investors in Platinum and their precursor entities) paid someone to take their SEC registration exams. To an outsider looking in, this payment was not only a sign of a wholesale willingness to cheat the system but something more nefarious. It was a show of fundamentally and unequivocally morally bankrupt behavior.
Huberfeld and Bodner were let off with little more than a slap on the wrist, setting an example for future generations, placing them in the bubble of the impervious, two of the untouchables. Nordlicht, Levy, SanFilippo and the others have been disciples, learning a craft. The stage Huberfeld and Bodner set for all in their sphere of influence was a profoundly public license to skirt the laws, or more accurately to plow right through them.
It is now nearly twenty five years since those events; and history repeats itself. All of the men involved in these grand and elaborate schemes have mentored others. They, along with their Platinum understudies, have repeatedly exhibited a pattern and practice of skirting the laws, shared by so many Jewish men within their social sphere.
It is about time that the legal and judicial system put an end to it. The honest should not be forever left at the mercy of the half-truths of those who have no problem telling them, and have the money to defend themselves on the rare occasion they get caught.
Law360, New York (June 25, 2019, 9:24 PM EDT) — A federal jury in Brooklyn on Tuesday heard of how the former top executives of Platinum Partners schemed with a dozen other co-conspirators tied to the hedge fund manager to defraud existing and prospective investors by telling lie after lie about a liquidity crisis at Platinum’s flagship fund.
Jurors heard the first part of closing arguments from Assistant U.S. Attorney Alicyn L. Cooley, who argued as cash flow problems left Platinum Partners Value Arbitrage Fund unable to pay all redemptions to investors, Platinum insiders mounted a campaign of deception to retain investor money and to raise new cash for the fund.
Platinum co-founder Mark Nordlicht, former co-chief investment officer David Levy and chief financial officer Joseph SanFilippo — who have been standing trial on fraud and conspiracy charges since late April — each played a critical role in the scheme, Cooley said.
“They chose the path of deception and by doing that they committed fraud,” Cooley told the jury.
Prosecutors say Nordlicht, Levy and SanFilippo were part of a conspiracy that stretched from 2014 to 2016 to defraud investors by lying about PPVA’s liquidity crisis, its practice of making preferential redemption payments to certain key investors and insiders as well as high interest, interfund loans Platinum was arranging to keep PPVA afloat.
Cooley further argued that the executives and their co-conspirators falsely told investors that PPVA was a diversified fund, when in reality its biggest investments were in failing oil and gas companies.
“By 2014, this diversified, liquid hedge fund did not exist,” Cooley said.
Despite painting a rosy picture of PPVA to existing and prospective investors, Cooley said the conspirators knew full well of the problems inside the fund. She cited a June 2014 email between Nordlicht and PPVA president and Platinum partner Uri Landesman — who was also charged but died before trial — in which Nordlicht cited the liquidity crisis at PPVA and said it was becoming impossible to manage the outflows of cash from the fund.
Great liars are also great magicians.
Platinum Partners’ Feats of Magic and the Potential for a Great Escape –
The Existential Threat to All of Judaism
The anti-Semitism of Eastern Europe in the mid-1900’s was perpetuated by fear. The prominent Jewish families of Eastern Europe were financiers, bankers, jewelers, clothiers and well-known figures in art and antiquities collection. In whatever form of religious observance our family members took, they were feared because of their successes not because of their improprieties. Hitler’s hold on his own supporters was dominated in large part by a culture of fear shared by Bavaria and surrounding German areas, of the possibility of losing their German Arian identity to Jews, who did not inspire trust, not because they were untrustworthy but because they were gloriously successful at everything they did. Our family members were accomplished. There were very few who exchanged education for Talmud even in the most religious families of the time. Rather for many families, mastery of life encompassed an aptitude at religious and non-religious subjects and a strong mentality of self-sufficiency. And, the Jewish identity of perseverance and tenaciousness inspired unfounded mistrust, xenophobia and anti-Semitism. As such, Hitler gained power and Jews were slaughtered.
Fast-forward fifty, sixty, seventy years and the world is seeing an increase in anti-Semitism. Unlike in the past, however, it is not a blind mistrust, it is one based upon what feels almost like a culture of fraud and deceit ingrained in so much of the Jewish Zeitgeist that it is tainting all Jews. It can almost be said that the mistrust is justified, based in Ponzi Schemes, privatized, inadequate education to the detriment of non-Jews and secular Jews and an uncanny ability to circumvent laws. Everything from vaccines and education to financial accountability and governmental regulations, are not outside the scope of subject the pubic Jewish collective is trying to manipulate.
Those of us willing to call out wrongs are relegated to courtrooms and lawsuits with no end in site. As such, anti-Semitism is far more difficult to counter than it was in the times immediately preceding Hitler’s power and during the war. And if our Jewish brothers are not held to account, Jews everywhere will be castaway as pariahs.
The Platinum Partners Ponzi Scheme, the Madoff Ponzi Scheme, the Philip Esformes conviction are so deeply rooted in the Jewish run ethos, they are leaving far more than financial ruin in their wake. They are increasing the breadth of a community of people who hate Jews because we are viewed in the unfavorable light these Jewish fraudsters shine on our community. That these frauds are perpetrated with such grace and ease by members of the Jewish community is a travesty. That the moral compass of the community supporting them is so skewed it is unwilling to even acknowledge that the acts of Platinum’s Partners’ partners were calculated, orchestrated and choreographed like any great magic show.
And if Platinum Partners’ partners do not get convicted, the result could be catastrophic for Jews everywhere. If we are incapable of bringing swift and harsh justice against those Jews who commit wrongs, we will all suffer the consequences. That fraud is with increasing frequency seeping into the “Jewish identity” and is damaging that identity for everyone. The Platinum Partners case is a blight on our community and it should be viewed as such, whispered like the big C-Word (cancer) when our parents talked at the Shabbos table about a friend diagnosed days before. Jewish orchestrated fraud is a cancer, a blight, a disease of the worst form and if not stopped, it will spread. This is not anti-Semitic but an honest view of the dangers that rampant fraud within our community creates.
The Magic of the Platinum Partners’ Ponzi Scheme was the ease with which it was orchestrated, the complexity of the scheme and the corresponding complications involved in painting a clear picture for a jury such that the jurors can convict. The case was and continues to be simply too chaotic, too scattered, too unintelligible and we opine that this is by design, a master creation by a brilliant defense team.
If the Judge does not rule a mistrial, we believe there is a significant likelihood that this jury will come back without the clarity necessary to convict. Like the crimes themselves, a mistrial or a failure to convict will be deeply unjust for those defrauded, for future victims, for public trust and most importantly, for Jews everywhere and the world’s perception of us. We will once again be viewed as having a magical ability to escape unscathed.
It is very likely that when the Defendants sat with their team of lawyers, negotiated their joint defense agreements, and strategized, it was clear that the first thing they needed to manipulate was the jury. They did not trust their fates to fellow Jews, a jury of their peers, but to the diametric opposite, a mostly African America pool of jurors likely inexperienced in the private equity investment world.
Mark Nordlicht, David Levy and Joseph SanFilippo are smart, savvy and well-educated. They are the epitome of privilege and money. Nordlicht comes from a polished, Jewish, observant Yeshiva-related upbringing. Levy is much the same. These are not men who have ever had to live from paycheck to paycheck. These are not men who have experienced racism or the African American experience, a far cry in fact. And the jury, with all respect due to each of the jurors, most likely knows little about what it is to be born with a silver spoon in one’s mouth. The Defendants are, have been and will always be men of privilege. The jury, as a matter of profiling by appearance alone, does not share this providence.
The breadth of the evidence that was admitted, or excluded, was a remarkable play of legal defense gamesmanship, cleverly manipulated to share as little damaging information as possible. This is not unusual. But anyone who thinks that this was not calculated as the financiers of Platinum’s top brass were defrauding their investors is either naive or stupid. We believe, based upon previous experiences of some of that brass and their closest confidants, that Platinum Partners knew what to expect if their fiefdom fell. And as they were performing their magical feats of financial optical illusions, they set the stage for a worst-case-scenario.
Very early on the Judge presiding over the case ruled that Murray Huberfeld’s conviction for bribery, the avalanche that set in motion the public unraveling of Platinum Partners, was not permissible evidence in the case against Nordlicht, Levy and SanFilippo. The fact that Huberfeld was acting in consort with the partners at Platinum to bribe Norman Seabrook and entice COBA money was deemed to be outside the scope of the presentation that the government could make to the jury. As such, the corresponding testimony of Jonah Rechnitz in the previous trials was also not admissible evidence. The legal maneuvering was brilliant, awe inspiring.
Huberfeld acted as an Agent of Platinum Partners when he convinced Seabrook to invest. He was one of Platinum Partners’ alter egos. His actions and the resulting convictions could have set the stage for a clear picture for the jury regarding the maneuvering to bring in investors.
But it was deemed inadmissible.
The judge has already dismissed the count of “Fraudulent Investment Scheme” from the indictment. Why? Because the government proved no match for the defense team. They failed ingloriously to use the same arguments the judge made for dismissal, as proof of guilt, namely that Platinum Partners’ partners calculated what needed to be put in place to cover their collective asses, the “CYA” term of endearment. The hiring of a valuation team was not a sign of care and compliance, quite the opposite. It was a distraction to mislead the government into believing that the valuations were conducted honestly.
B. Fraudulent Investment Scheme
As to the fraudulent investment scheme, defendants’ motion for a judgment of acquittal under Rule 29 is granted as to the allegation that they overvalued level 3 assets but otherwise denied.
The indictment alleges that defendants overvalued Platinum’s level 3 assets, but none of the Government’s witnesses challenged the accuracy of Platinum’s valuations of these assets. The Government has not even introduced witnesses who purport to be qualified to challenge these valuations, let alone attempted to introduce expert witnesses who could have guided the jury through assessing the values of level 3 assets – which are, by definition, difficult to value.
Case 1:16-cr-00640-BMC Document 752 Filed 06/17/19 Page 4 of 9 PageID #: 10473
Nor has the government shown that Platinum’s process for obtaining these valuations is so deeply flawed that the jury can fairly infer that the valuations were false, and fraudulently so. To the contrary, the testimony has shown that Platinum hired third parties to confirm its valuations; hired an experienced director of valuations; and maintained a valuation committee. There is insufficient evidence for a reasonable juror to conclude that defendants have falsified any valuations, let alone evidence that would support defendants’ conviction for fraudulently overvaluing assets.
Contrary to the Judge’s comments, Level 3 assets are not difficult to value if you mark them against the market in which they are traded. The government simply needed to find a market against which to mark the assets.
Justice will not be served because the perpetrators of the crimes have far greater knowledge of their craft than the government prosecutors. The brilliance of the defense attorneys in making it all look so complicated is not by chance. Platinum’s partners took their precautionary measures when they placed a value on the assets well above their market. They had a team of quasi-conspirators in place.
The government needed to bring in a valuation expert to counter what Platinum was suggesting, that the valuation team was evidence they they acted admirably and honestly. Our analysis is that the Defendants breached their fiduciary duty to their investors by over-valuing assets, that they had taken all the necessary precautions to make it look kosher and that this was choreographed with remarkable dexterity. In reality, the magicians at Platinum had performed what is known as “CYA” and had done so with the skill commensurate with their experience, what any good hedge fund manager would have done.
Platinum Partners’ partners knew what they were doing. The very argument that the judge makes regarding Platinum’s valuation team should be the argument that substantiates the fraud: that Platinum hired the people who would paint a rosy picture to cover up financial impropriety. They brought in Picasso and commissioned him a painting, and paint he did.
Platinum knew its assets were worth far less than they were being valued and created a charade. The told “a tale, full of sound and fury” (Shakespeare) but for them, it is signifying exactly what they wanted it to… everything.
But we digress. As the Judge rightly pointed out, a reasonable juror would likely not have concluded that the Defendants falsified valuations.
We believe, however, that it is not because the charge is wrong but because the government did not understand that the very act of hiring a valuation committees and valuations’ experts was just part of the magic, the optical illusion.
Platinum Partners’ victims are many, a vast range of people, mostly from their own community. Their victims are also COBA members who deserve the best the government has to offer and is not getting their justice.
The Defendants’ seats in the courtroom are full, almost every day while the Plaintiff’s seats are comprised mostly of victims, their lawyers, journalists and those most curious. It is a sad state of affairs for the greater Jewish collective.
For a parent, a child can do no wrong so it is understandable that the Defendants’ families would be making a show of support. But, an acquittal poses an existential threat to the greater Jewish identity. Not only do we surmise that these men are likely already planning their next major magic show, but we fear the darkness that would come of an acquittal.
Justice should be served. The victims are entitled to justice and the greater Jewish collective deserves the optics of an equitable distribution of accountability, only accomplished by a conviction. But the government will need to start pulling better punches, or a rabbit from a hat.
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Prosecutors say Nordlicht, former Platinum co-chief investment officer David Levy and others used their secret sway over the majority of $150 million in Black Elk bonds to funnel the bulk of proceeds from a sale of the company’s assets back to Platinum, ahead of bondholders who had priority to the funds.
During the testimony of Black Elk’s former outside counsel at BakerHostetler, W. Robert Shearer, the jury heard of how a group of independent bondholders in late 2013 were threatening to push the bonds into default after Black Elk violated the indenture’s terms by exceeding its limits on capital expenditures.