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… 

Continue reading

Madoff on the Outside, Compassionate Release – Was he Compassionate?

From the files of Larry Noodles, see here.

MADOFF WANTS TO JOIN POLLARD ON THE OUTSIDE

Ten years ago Bernie Madoff got locked up in medium security Federal prison in Butner, North Carolina. Madoff joined fellow Jewish criminal Jonathan Pollard in a facility with about 750 other inmates. Butner is less violent than most medium facilities. The Feds put a lot of child molesters and sexual deviants in Butner. Pedophiles are targets for attack in prison. If you put them all in one place they can protect each other. This results in less violence, and less work for correctional officers.

Pollard was released from Butner five years ago. Before Pollard was released he spent a few years with Madoff. A number of former inmates at Butner were interviewed and said that Pollard and Madoff didn’t get along very well and almost came to blows. Other former inmates have said that they got along great. You can’t always trust the truth and veracity of criminals.

Yesterday Madoff filed a motion to be released under the compassionate release law. Madoff is dying from renal failure. Madoff wants to get out of Butner and spend his last days on earth with his wife. Madoff’s two sons died, one of cancer and the other of suicide. Madoff needs a new kidney. Nobody is lining up to donate a kidney to Madoff. Madoff has refused to be put on dialysis at Butner. Medical care at Federal prisons is about as advanced as medical care provided in the North Pole. The CO’s, or the inmates, would probably figure out a way to kill Madoff with the dialysis machine, just for the fun of it. The Feds still haven’t figured out how Jeffrey Epstein died.

Madoff’s doctors have said that his life expectancy is about 18 months. Madoff wants to die on the outside with his wife by his side. Madoff argued in his motion that a “friend” has agreed to take him in if he is released. Madoff refused to disclose the name of the friend, out of concerns for this friend’s “privacy.” Did Jonathan Pollard agreed to take in Madoff? Why would Madoff not request that he be released to his wife? Or, is the “friend” referring to Madoff’s wife?

A former inmate at Butner told a reporter that Madoff bragged about robbing money from little old bubbes, causing Pollard to rebuke Madoff. According to this inmate Rabbi Pollard told Madoff he would have to answer to G-d for his sins. Madoff allegedly laughed at Pollard. Bubbe maisa or fact? When I report on inmate activities in Otisville I make sure to verify my information with at least two independent inmate sources who don’t know each other. You can’t trust the word of an inmate.

The Feds at the Bureau of Prisons have opposed Madoff’s early release motion. The Feds think that his crime is far too serious to allow Madoff to benefit from the compassionate release law. The compassionate release law should be reserved for more upstanding criminals, like Worldcom executive inmate Bernie Ebbers. Madoff argued in his motion that Bernard Ebbers was just released by New York Federal Judge Valerie Caproni under the compassionate release law, over the objection of Federal prosecutors. Ebbers argued to Judge Caproni that he is 78 years old, he just lost 50 pounds in six months, he suffers from incontinence and dementia and fell down four times which required multiple hospitalizations. The Feds argued that Ebbers was faking his medical conditions in order to get out of jail early. The Feds even got the prison psychologist to eavesdrop on Ebbers prison phone calls with his daughter. The prison shrink said that Ebbers did not sound demented when he spoke with his daughter. I would suggest that Bernie Madoff fake incontinence in order to get the Feds to kick him out of Butner.

To continue reading click here.

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.

To continue reading in Crains, click here.

 

Black Elk and the Bond Proceeds – Another Platinum Bait-and-Switch

Law360, New York (May 30, 2019, 9:59 PM EDT) — Jurors in the securities fraud trial of former top Platinum Partners executives on Thursday heard of how co-founder Mark Nordlicht floated plans to wield control over bonds of the hedge fund’s portfolio company Black Elk Offshore Operations LLC using Platinum affiliates, which prosecutors say was part of a scheme to defraud the oil and gas driller’s bondholders.

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.

To read the remainder of the article, you will need a Law360 Subscription, click here.

Platinum Partners – Nordlicht, Levy and SanFilippo and A Crime So Complicated No One Understands it

IMG_8796

If Mark Nordlicht, David Levy and Joseph SanFilippo are Acquitted, it will not be Because no Fraud was Committed but Because the Whole Story was Too Confusing, Even for Defense Attorney Baez

Jose Baez is representing Mark Nordlicht in Nordlicht’s fraud trial. Baez is a remarkable and seasoned attorney. He knows the law. He knows his jury. He tests the boundaries of his questions with a bright smile; and he knows how to defend his client with the sheer will of his conviction.  As defense counsel, Baez draws blood from stones. He pulls rabbits from hats. He colors the wings of butterflies while in mid flight; and he sets a scene creating doubt like a Picasso with a paintbrush shading his canvas.

So long as there is doubt, there cannot be a conviction. And the intricacies of the Platinum Ponzi Scheme were so savvy, we would be surprised if there were even a modicum of steadfast clarity for the jurors. We can only hope the government has some more tricks up its sleeves.

Unlike a murder trial where there are black and white lines drawn with very few grey areas, fraud is grey and murky. The waters one needs to navigate to convict a fraudster require a periscope that can see through a curved mirror and a jury that can see through the clouds.

Baez and the counsel for co-Defendants Levy and SanFilippo picked their jury well, not a jury of Platinum’s partners’ peers, but a jury of African Americans and young adults. There may not be a Jew among them. It is hard to tell. 

And the subject matter of the Platinum case, along with the Jewish identity associated with Platinum’s main partners and its investors is ripe for confusion, so much so that today even Baez seemed to falter.

Baez began his cross examination of the witness, Daniel Mandelbaum a former CFO for Platinum, by asking whether he was Hasidic. Mandlebaum responded with an unequivocal, “No”. Baez then attempted to somehow change Mandelbaum’s response by associating Hasidic with a wife covering her hair and a man wearing a kippa. Mandelbaum was almost offended.  A jury, like Baez, would not understand the distinction between Mandelbaum’s Orthodoxy and Hasidim. But the word “Hasidic” carries its own subliminal messages. 

Baez was playing on anti-Semitisim and associations and as such setting the stage for a cultural and religious sort of confusion.

The Platinum Partners’ partners are largely modern Orthodox. Many of them live in the same neighborhood. They share the same simchas (joyous events), attend synagogue together, break bread together raise their children together, gossip with the same people, sit shiva when someone dies and keep up with one another’s increases in wealth. There are very few secrets within this community, something the jury, like Baez will not understand.

And, the investors like the partners were community members, a part of the larger Jewish Zeitgeist, only too eager to hand over their money to Nordlicht whom they trusted. That trust defined the nature of the investment and by implication, the seriousness of the crimes. They were defrauded, and sadly blinded by their own sense of community. 

The investors were wooed by Mark Nordlicht and Murray Huberfeld, David Bodner and David Levy so much so that they did not see the signs, the patterns, the inconsistencies, the numbers and returns that made no sense. They were victims, Jewish or otherwise. Mark Nordlicht knew his craft and his audience; and he dictated and controlled the documents and hence the grift. For Baez, the documents protected Platinum and Nordlicht because they were a measure of “disclosure” a waiver of sorts. For us, they were confusing and confused. They represent an admission of guilt and by deviating from market standard, the fraud committed was all the more criminal.

The overly complicated investment documents, nuanced to give Nordlicht control over every aspect of the investment, including discretionary redemptions,  a/k/a proprietary redemptions were part of Mandelbaum’s discomfit. As a matter of general business course, when redemptions are to be distributed, they are done pari passu with other members of the class of investors requesting redemptions.

By their very nature, redemptions should not be discretionary, not even for a Holocaust survivor. One of the redemptions Nordlicht did satisfy was to a Holocaust survivor. This was not done out of the goodness of Nordlicht’s heart but out of a knowledge that he should not have taken the man’s money in the first place. That’s a story for another day. The goodness of an investment manager’s heart, or lack thereof, is not something that should play into a privately held investment vehicle.  Suffice it to say, proprietary redemptions of the sort advertised in the Platinum Partners’ private placement documents were inherently fraudulent insofar as they provided preferential and discretionary treatment. As such, investors of the same class were not pari passu with others of the same class. That is, by its very nature, a fraud. 

As Baez rightfully pointed out many times, Nordlicht had discretion. NORDLICHT HAD DISCRETION. But he also had the ability to move money from one fund to another virtually unhindered. It was all a shell game.

Mandelbaum was, during his shortlived employment with Platinum, savvy enough to see the problems, Mark Nordlicht controlled everything. There were too few checks and balances.

Baez emphasized that point by sharing screens and screens of Platinum’s various documents. But in his cross examination he stumbled over the mere suggestion that the level of discretion provided to Nordlicht was anything but acceptable. The purpose of disclosures and documents in the securities world is in short “fairness.” Investments, win or lose, high risk or low risk, are supposed to be, at the very least, fair. A jury will never understand that and Baez, as a defense counsel doesn’t have to.  

Baez asked Daniel Mandelbaum about a loan from one Platinum Partners fund to another, demanding to know whether Mandelbaum had the right, during his tenure, to question the propriety of that loan. Sixteen percent (16%) in 2015 was too high. Mandelbaum responded that generally the lender gets to decide the interest rate. The Lender was Platinum a/k/a Nordlicht. The Borrower was Platinum a/k/a Nordlicht. There was no interest rate that would have made legal sense given the financially incestuous nature of the funds and their investors. Sixteen percent was simply a shnorer-type number. Nordlicht might have wanted to choose 18% instead.

At the end of the day, Nordlicht and Platinums’ partners have likely convinced themselves and anyone who will listen that they are being wrongly accused. Why us?  The defense counsel have collectively done a splendid job keeping Murray Huberfeld’s name from being mentioned at Nordlicht’s trial. When Huberfeld is mentioned, the defense insures that his 30 month conviction for bribery is not disclosed to the jury. While Federal rules of evidence may preclude this information from being conveyed to the jury, the fact remains, it was this bribe that tipped the FEDS off to the nefarious and criminal behavior of Platinum Partners’ partners. Keeping the jury in the dark will not change this fact. 

In the event that Nordlict and his fellow Defendants are acquitted, which is not unlikely due to the complexity of the case and the ignorance of the jury, it will not be the last time that the house wins. The house always wins! 

Ultimately, the very fact that Nordlicht had the discretion in all things Platinum, a point drafted into Platinum’s funds’ documents, and emphasized repeatedly by Baez, should tell the whole story. But by and by, the jury gets to decide. We fear that Baez painted a very confusing picture by his own lack of understanding of the documents themselves. It was likely quite intentional. He is a gifted attorney. And if the Defendant’s are acquitted, he will have graduated from the Sorcerer’s apprentice to the Sorcerer himself.

We give Baez credit which cannot be understated. If you are confused, you are supposed to be.  If not, it’s a shame you are not sitting in the jury box.

 

 

A Platinum Response – Fear Would Prevent Reporting, The Nordlicht Hedge

LAW360 [by subscription]

Law360, New York (May 28, 2019, 8:15 PM EDT) — A former chief financial officer for Platinum Partners on Tuesday told a New York federal jury that Platinum co-founder Mark Nordlicht told him that “mutually assured destruction” would keep aggrieved investors from ratting the hedge fund manager out to regulators, despite Platinum’s inability to make timely repayments.

Daniel Mandelbaum, who was Platinum’s CFO for about 9 1/2 months in 2014 and 2015, said he spoke to Nordlicht amid a liquidity crisis that year at Platinum’s signature fund, Platinum Partners Value Arbitrage Fund.

Mandelbaum testified that he was protesting Platinum’s practice of preferentially repaying certain investors — including insiders and those with large stakes in PPVA — ahead of other investors who had outstanding redemption requests.

Nordlicht, however, told Mandelbaum at a meeting in Nordlicht’s office that investors wouldn’t complain to the Securities and Exchange Commission, since if the regulator got involved, PPVA would be shut down and its assets sold at fire sale prices, Mandelbaum testified.

To continue reading, click here.