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.

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… 

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.

To continue reading click here.

Finding Assets – Who Owns What? Platinum Partners and Their Trusts

The Personal Assets of Platinum’s Partners and Their Wives – Who Owns What? It is Well Hidden, The Trust Confusion

EDITED 9.23.19 3:49PM

We have posted a tax grievance filed by the wife of Mark Nordlicht, Dahlia Kalter. In the interest of privacy, we have redacted both the property address and the telephone numbers, though they are accessible publicly. 

To provide some background, Mark Nordlicht along with one of the partners was convicted in the Black Elk scheme and has unsurprisingly appealed that conviction.  But, perhaps the Judge who has yet to rule on the appeals, might want to consider what has happened to assets and the concerted efforts (often apparently confusing) to keep those assets hidden.

The holding companies/trusts/family investments vehicles are so confused, it would seem, that those charged with managing them and defending them (against things like tax assessments) can’t keep them straight.

The paperwork speaks for itself…

The losses to Black Elk Investors, well… those should somehow be recoverable. Perhaps one of the many trusts the money could have seeped into?