UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA In re: STEPHAN JAY LAWRENCE Debtor Case No.

97-14687-BKC-AJC Chapter 7

DEBTOR'S MOTION TO I) RECONSIDER ORDER GRANTING IN PART AND DENYING IN PART TRUSTEE'S MOTION FOR LEAVE TO FILE AND PROSECUTE A FREEDOM OF INFORMATION ACT REQUEST REGARDING NAMES OF TAXPAYERS TURNED OVER BY UBS AG AND ANY OTHER SWISS BANKS TO THE UNITED STATES OF AMERICA OR, IN THE ALTERNATIVE, RENEWED MOTION TO ESTABLISH CASE CLOSING PROCEDURES; II) ORDER PRODUCTION OF DOCUMENTS AND WITNESSES; AND III) CONDUCT AN EVIDENTIARY HEARING Debtor, Stephan J. Lawrence, hereby files his Motion to I) Reconsider Order Granting in Part and Denying in Part Trustee's Motion for Leave to File and Prosecute A Freedom of Information Act Request Regarding Names of Taxpayers Turned Over By UBS AG and Any Other Swiss Banks to the United States of America Or, in the Alternative, Renewed Motion to Establish Case Closing Procedures; II) Order Production of Documents and Witnesses; and I) t-Conduct an Evidentiary Hearing, and states:
r..720

This motion requests reconsideration of the Court's Order (CP#2057) of a travel ban, production of documents and witnesses and an evidentiary hearing concerning the extensive eit.0 -, 4.0 parte trial proceedings, from which Lawrence and his attorneys were excluded, and that were held concerning the turnover order and the underlying 11 U.S.C. 727 discharge discovery hearing that form an apparent but unexplained basis. A. The Court Lacks Jurisdiction the Travel Ban is Already an Issue Under Appeal The Court has previously ruled it lacks jurisdiction to further rule on the travel ban issue because the matter was already under appeal. Lawrence has timely appealed every relevant order

issued by the Court and amended all appeals and Fed.R.Bankr.P. 9033 objections. In CP#1835 the Court previously ruled on the travel ban issue: the Court has been divested of subject matter jurisdiction The Courts lack of subject matter jurisdiction is due to the fact that the Debtor is currently prosecuting appeals of prior orders of the Court prohibiting the relief sought in the Motion, see C.P. No. 1774; C.P. No. 1776. Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982) (The filing of a notice of appeal is an event of jurisdictional significance-it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal.) (Emphasis added) The Motion is DENIED for lack of subject matter jurisdiction.

Since that Order, Lawrence has timely appealed every subsequent order issued by this court and has no control over the workings of the district court, the court with jurisdiction over the travel ban issue already under appeal. Until the district court resolves the still pending appeal, this Courts ruling [CP#1835] of having no jurisdiction over the travel issue remains effective. Because the travel ban and related issues have been previously addressed by Lawrence in his pleadings, which are already a part of the appeal process, to the extent argument is necessary and in an abundance of caution, that record is hereby incorporated in its entirety. To the extent argument on the travel ban issue is required, neither the notice of hearing nor the Trustees motion gave indication that the travel ban, an issue already under appeal and ruled to be a subject outside of the Courts current jurisdiction [ CP#1835], would be heard. Moreover, Lawrence previously had been precluded from presenting input as to the estate administration on the basis of not having a financial interest in the bankruptcy estate and thereby was led to believe estate administration was the only purpose for the hearing. Moreover, there was no evidentiary hearing conducted on the travel ban prior to entry of the Order concerning the very same previous travel ban already under appeal. This resulted in a due process violation and

denial of counsel under both the 5th & 6th Amendments (issues previously pleaded by Lawrence in his earlier pleadings incorporated herein). Furthermore, the imposition of a travel ban is a punitive sanction and therefore a Criminal Contempt sanction which is outside the jurisdiction of a bankruptcy court. Lawrence was entitled to a jury trial and demands such a jury trial in the event this criminal contempt sanction is pursued. This issue has already been addressed in Lawrences prior pleadings concerning the initial travel ban and those pleadings have been incorporated herein in their entirety. As a result of the foregoing, Lawrence was denied due process by the procedure of issuing a duplicative travel ban when that very matter was already under appeal. B. The Request for Production of Witnesses, Documents and An Evidentiary Hearing on the Travel Ban To the extent necessary, concerning the travel ban, Lawrence requests an order compelling the Trustee to produce the following witnesses at an evidentiary hearing: Juval Aviv, any confidential informants Mr. Aviv relied on in his direct or indirect testimony to the Court either through written communications, affidavits, or other communications during sealed hearings; Mr. James Fierberg; private investigator Mr. William Riley; Mr. Michael Budwick; Edward Tillinghast, III; Paul Singerman; and every other person who communicated with the Court concerning or related to the issue of turnover or in connection with the sealed hearings subject matter. Lawrence also requests an order compelling the Trustee, Berger, Singerman, Juval Aviv, William Riley and Bear Stearns successor in interest, JP Morgan to produce the following documents: all billing records and record of payments for Juval Aviv, William Riley, all private

informants used directly or indirectly in supporting the case presented against Lawrence in the secret hearings and otherwise; all court papers from the British litigation; all ex parte submissions to the Court that have not been unsealed and on the court docket; the identification of and copies of all law enforcement and other materials provided by the U.S. Attorneys Office (USAO) to the Trustee, directly or indirectly including provided to Juval Aviv and all other parties connected to the Trustee; All communications from the Trustee or any other party directly or indirectly connected to the Trustee or the Estate, including Edward Tillinghast, III and Coudert Brothers LLP, who had knowledge of the phone surveillance of Lawrence, his attorneys, his friends and family members, which communications disclosed to the USAO that law enforcement materials were provided to Bear Stearns. C. In Further Support of a Defense to the Travel Ban The bar on travel is simply a thinly disguised and internationally condemned "exit tax" to pay through execution (turnover) on a judgment that never existed. The illusory money judgment was created in its entirety from on a discovery sanction order, in a discharge proceeding under 11 U.S.C. 727, in which proceeding a remedy of personal liability is not present as a remedy or otherwise possible. The beneficiary of the present, internationally condemned "exit tax" from the United States of America, is, as most US citizens have already come to realize, the most successful corporate criminal enterprise in the late 20th and early 21st century, Bear Stearns & Co., an entity that no longer exists. Moreover, as previously pleaded, Lawrence was denied is due process rights and his inalienable Constitutional right to travel, all without a proper hearing, the right to confront the multiple secret witnesses presented against him or to have disclosed to him the secret evidence 4

presented against him in the multitude of sealed and undocketed hearings held without him and counsel over a number of years all of which proceedings were connected directly or indirectly to the turnover order. The balance of this motion primarily concentrates on new issues and information obtained from the files of Lawrences previous attorneys, Storch & Brenner, and other widely publicized later events that are relevant to the reasons and purposes of the travel ban and the turnover order. D. The Discharge Sanction Order In re Lawrence 227 BR 907 (SD Fla. Bankr. 1998) The foundation of the travel ban was the single order, In re Lawrence, 227 BR 907 (SD Fla. Bankr. 1998) resulting from a plain discovery hearing in a discharge proceeding. The order was written, in its entirety, by Berger Singerman attorney Paul Singerman and his associates. The hearing the order resulted from was the first discovery hearing at the very beginning of a proceeding to deny Lawrence his discharge under 11 U.S.C. 727. It was the only proceeding relating to the 1991 Lawrence Family Trust since the inception of the bankruptcy case. The issue of the legality of turning a discovery sanction order, issued under Fed.R.Bankr.P. 7037 in a discharge proceeding a proceeding that by law cannot be used to assign liability to a debtor, but which was then unlawfully mutated into a money judgment subject to execution has previously been pleaded as part of the pending appeal and has been incorporated into this motion. This motion will further address the "factual findings" that were fictionalized by Berger Singerman in the discharge sanction order it wrote as a result of the July 1998 three day discovery hearing. At the discovery hearing Lawrence was barred from presenting any witnesses or evidence and the hearing was conducted on effectively no notice, to prevent Lawrence from 5

assembling a defense. The basis for the hearing was that Lawrence was to provide information and therefore, since it was not a trial, he could not present witnesses or evidence to support his testimony. Because of the conditions the hearing was conducted under, the discovery orders "findings," written by Berger Singerman, were directly and indirectly contradicted by evidence and witnesses Lawrence was barred from presenting. By now it is known that Bear Stearns and company engineered and carried out the greatest swindle in history by: 1) being one of the principal architects of the great collateralized mortgage obligation scandal that brought down the US economy; and 2) ultimately selling to the US government the worthless CMO's it created and had placed in its offshore Cayman islands hedge funds for the incredible sum of $30 billion (see Exhibit A). What is little-known is that Bear Stearns began its long crime spree in the 1980s and its swindle tactics related to the same type swindle it used to loot Lawrence's trading companies during the 1987 crash. Berger Singerman and Bear Stearns, by the time of the discharge discovery hearing, knew Lawrences intended to use as a witness Leon Pomerance, who is recognized as being the principal force in created the U.S. options markets (Exhibit B). So a fictionalized version of the history between Lawrence's companies and Bear Stearns was created out of whole cloth by the expediency of assuring Lawrence had no opportunity to present his defenses at the discovery hearing. In particular, the discharge order recited Bear Stearns fictionalized version of the history of the events surrounding the 1987 market crash and at no time was there ever an evidentiary hearing on the events of 1987 and thereafter. The true events were successfully distorted by Berger Singerman and Bear Stearns and that distortion played a key role in this case. Also, as a result, Bear Stearns proceeded unhindered in engineering one of the largest and most

successful swindles in history using the worthless assets in its Cayman Island Offshore Hedge funds to collateralize a non-recourse loan of $30 billion to the US taxpayer that will never be repaid. The technique used by Bear Stearns, in selling the US government its $30 billion in worthless securities was not a new technique to Bear Stearns. Bear Stearns had a long history of defrauding clients and the public using fictitious trades or sales of worthless securities, many times forced on clients who were never able to recover the defrauded funds. What Berger Singerman and Bear Stearns so successfully concealed was contained in attached Exhibit C, which is the 1989 settlement statement Lawrence obtained from the Options Clearing Corporation and Chicago Board Options Exchange that completely described how Bear Stearns successfully swindled 10s of millions from Lawrences companies by creating backdated fictitious trades that were used to strip Lawrence's company accounts of its assets, and how those funds were laundered through secret Bear Stearns accounts to produce massive fictitious and "losses" to Lawrences companies. The date of that settlement statement is February 28, 1989 which was before Lawrence lawfully settled the Lawrence Family Trust and before the bizarre unexplained NASD arbitration ruling came down, that in effect, legitimized what the Options Clearing Corporation and Chicago Board Options Exchange identified as one of the largest swindles in the history of the US Options markets. So the fictionalized story that the Lawrence Family Trust was set up to somehow defraud Bear Stearns when it was not set up until after the Bear Stearns fictitious trade embezzlement of Lawrences companies had already been so effectively exposed. Moreover, by that time the fraud Bear Stearns was conducting was far wider then just backdated fictitious trades. At the time Bear

Stearns had been looting client accounts, including those of Lawrences companies, by consistently placing its own losing trades into client counts under cover of the crash in Lawrences case for an amount of over $6,000,000 of Bear Stearns own losses were dumped into Lawrences company accounts. Bear Stearns and Berger Singerman knew early in the case that Leon Pomerance had offered, without any fee compensation, to testify as Lawrences witness because he was so incensed about how an NASD panel of handpicked industry related arbitrators, could so easily legitimatize, without any explanation, a fraud that completely circumvented the very protections he personally had designed and set in place to prevent the massive embezzlement that had occurred. And this was done by an NASD panel that had no knowledge of the US Options markets and their design, and which panel did not permit him to testify once it learned the substance of what his testimony was about, which was the same as the conclusion reached in the Options Exchange and Clearing Corp settlement: that a massive embezzlement occurred. 1 The techniques Bear Stearns used to embezzle funds from Lawrence's companies were successfully repeated by Bear Stearns in various forms for the years leading up to the sale of the $30 billion in worthless securities from Bear Stearns Cayman Island Hedge Funds. Bear Stearns was so successful in its unabated crime spree that it farmed out its techniques, of using fictitious forced trades in client accounts, to many of the most notorious of Wall Street bucket shops who then used the cachet of the Bear Stearns name, as a clearing agent, to routinely defraud investors
1

Years later, the Bernie Madoff scandal erupted. Bernie Madoff, at the time the arbitration ruling, headed the NASD. Later, Bear Stearns was one of Madoffs principal clearing firms and played a key role in legitimizing and prolonging Madoffs Ponzi scheme. Madoffs scheme was similar in substance to the fictionalized accounting used by Bear Stearns to defraud Lawrences companies. Later, many complaints and reports came out about the conduct of NASD arbitrations and their inherent bias against victims of Wall Street fraud.

with the full knowledge and cooperation of Bear Stearns, who received huge clearance fees in return. Attached as Composite Exhibit D is a small snapshot of the many bucket shop frauds, using fictitious forced trades in client accounts, that Bear Stearns so effectively sponsored. The few times Bear Stearns was caught in these schemes it was a very profitable business to just pay wrist-slap penalties, and they always had the ability to escape criminal prosecutions. So, by barring Lawrence from ever presenting any defenses, the victim was magically transformed into the victimizer by Berger Singerman who completely wrote the key discharge discovery order. That order included dubious and fictitious findings and was then used as an illusory money judgment that was enforced through execution (turnover). The technique used in the discharge order was to take past dubious and false "credibility rulings," which by the time they were used against Lawrence in the discharge order were easily shown to have no basis in fact or reality, to support further fact findings based on a bootstrapped lack of credibility. The first credibility finding against Lawrence occurred early in the case when he was found to be lying because he briefly testified for a few minutes that he believed Bear Stearns would be paying Alan Goldberg's expenses. It was never explained how such belief testimony on personal opinion, confirmed in large part by Trustee Alan Goldberg, could be a basis for a credibility ruling against Lawrence on the fee payment issue. In reality, a few weeks later not only did Bear Stearns use a subterfuge to funnel funds to Alan Goldberg but it orchestrated, along with Berger Singerman, a "frame up" of Lawrence by claiming he was concealing funds in an escrow account unilaterally set up by the Philadelphia Stock Exchange (PSE) to escrow funds from the sale of a seat on the PSE in 1987, which escrow funds were to go to the prevalent

party in the pending NASD arbitration which obviously was Bear Stearns. The "frame up" scheme was simple. After the 1987 crash Bear Stearns had the PSE place the proceeds of a seat sale from a partnership Lawrence was involved in, the Capital Growth Group, into escrow pending the results of the NASD arbitration. Attached as Exhibit E are the exchanges between Storch & Brenner and the PSE that document the basis for the escrow account and Lawrences unsuccessful efforts to free up those escrow funds before the arbitration was over. Berger Singerman and Bear Stearns, at first, expected the PSE to play along with a frame up by first forcing Lawrence, under threat of prosecution, to sign a worthless "release" of the escrow account. Simultaneously, Bear Stearns, which by 1997 was entitled to the escrow funds, never signed either a release to the PSE or claimed the funds. The intent was, if the PSE went along with this obvious scheme, to prosecute Lawrence for "concealing" estate assets. When the Philadelphia Stock exchange refused to release the funds based on Lawrence's release alone obviously because the funds belonged to Bear Stearns, Berger Singerman then moved for "turnover" of the Bear Stearns escrow funds. Bear Stearns played along by not making its own unassailable claim to the funds which would have thwarted turnover since Lawrence had no valid claim to the funds. Thereby, Bear Stearns funneled funds to Alan Goldberg while preserving the fiction that Lawrence had lied when he testified he believed Bear Stearns would pay the Goldbergs expenses. The successful fallback scheme to frame up Lawrence, through turnover of funds belonging to Bear Stearns, played a key role in the later discharge discovery orders credibility rulings against Lawrence and funds due Bear Stearns were converted into Lawrence's funds to prosecute him for concealing estate property.

10

Even worse, long before Lawrence was cited as a liar in the discharge order, for believing Bear Stearns would pay Goldberg's expenses, secret trial proceedings were well underway. In May 1998, private investigator, William Riley, who was being paid by Bear Stearns (confirming Lawrences truthful testimony) and was presented as being hired under secret court order by Alan Goldberg to create a second secret frame up: by falsely claiming, along with Berger Singerman attorney James Fierberg (who submitted his own perjured affidavit [CP#1426] offthe-docket and years later unsealed), that Lawrence was obstructing justice by witness intimidation. However, strangely, Berger Singerman did not either depose those witnesses or report those sworn serious accusations to the US attorney's office, as required. In reality, it was William Riley and James Fierberg who were obstructing justice by trying to influence witnesses and because of the risk of being found out, never contacted the USAO. It was later disclosed that private investigator William Riley was well-qualified on the subject of witness intimidation. The Palm Beach Police accused him of trying to intimidate the child witnesses of the notorious Jeffery Epstein, who through no small coincidence was a former Bear Stearns insider and had extensive dealings with Bear Stearns during the CMO hedge fund scandal (Exhibit F). Mr. Epstein, a notorious pedophile who attracted world-wide attention with his exploitation of underage victims and his bragging of his purchasing of European minors as sex slaves, found a well qualified expert to carry out witness intimidation in Mr. Riley, according the Palm Beach Police, id. Mr. Epstein was the subject of several articles concerning his favored treatment by US prosecutors (Exhibit G). Strangely, Epstein was supposed to be a cooperating witness in the prosecution of Bear Stearns insiders in the Bear Stearns Cayman Islands Hedge Fund scandal but instead received special treatment and only spent less than two years in jail, a

11

special deal that raised a national uproar. Riley's billing statements have never been produced and are presumed to be destroyed and there is no record in Alan Goldberg's accounts of any payments from bankruptcy estate accounts to Mr. Riley, confirming he was paid by Bear Stearns and showing that long before the first credibility ruling was used against Lawrence in the discharge order, Bear Stearns had already been paying trustee Goldberg's expenses, as testified to by Lawrence. It was no accident that once Bear Stearns took control of this bankruptcy case, it became a magnet for apparent fraudsters like Mr. Riley and Mr. Fierberg 2. There have been, so far disclosed, only three principal secret witnesses against Lawrence (and no witnesses in public proceedings 3), Mr. Fierberg, Mr. Riley and Mr. Juval Aviv, a thoroughly discredited selfproclaimed Israeli mossad assassin, who, because of his false representations assumed control of and directed the USAO phone surveillance of Lawrence and his attorneys and then passed the results and other law enforcement materials on to Bear Stearns. Mr. Aviv has extensive experience with criminal investigations. He was indicted and the subject of criminal Case No. 95-cr-00386-LLS in the Southern Dist. New York; and has reported relationships with mob connected and convicted Congressman James Traficant, Lyndon LaRouche, and an accused mysterious cult. Mr. Aviv, from at least January 2000 on, was secretly working for Bear Stearns while conducting his illegal communications surveillance of Lawrence, his attorneys, and many others 4. Avivs relationship with Bear Stearns was never
2

Mr. Fierberg played a critical role in the theft, for Bear Stearns, of extensive law enforcement materials, including the results of the illegal phone surveillance of Lawrence, his attorney, his friends, and his family. Michael Budwick, Trustee co-counsel, in June 2005, testified that he knew of no evidence that Lawrence was concealing any assets and later stated he was unaware of the secret proceedings and the illegal wiretapping. Aviv also, in sworn affidavits, acknowledged stealing account information from various banks.

12

disclosed 5. Aviv was the subject of an extensive, investigative article in the New York Village Voice written by the well-respected investigative journalist, Chris Thomson, (Exhibit H). It disclosed: In 1989, following the Pan Am 103 bombing that killed 270 people in Lockerbie, Scotland, airline officials hired Aviv to investigate the incident. His reportalleging that the bombing was a CIA gun- and drug-smuggling operation gone terribly wrongwas leaked to the press, reportedly by Aviv himself. News outlets like Time, NBC, ABC, and Barron's picked up the story. But as more skeptical journalists began to examine Aviv's report, Pan Am officials suddenly dropped their plans to use it as a defense, and the media outlets that had run Aviv's allegations squirmed under the scrutiny. A Brooklyn federal magistrate later found Aviv's report to be utterly without merit.... " This guy's full of ****," says Larry Johnson, who served in the CIA and as a deputy director in the State Department's Office of Counterterrorism. "What's true is, yes, he has a security and corporate-intelligence firm, and he's big at playing up the Israeli mystique. If you say it with a foreign accent, you're good to go." Aviv, these senior counterterrorism officials insist, is no terrorism expert; instead, he's a liar who's been spreading falsehoods about his rsum and his prowess as an investigator. But even Aviv's most virulent critics express astonishment at what he's been accused of doing lately. Court documents allege that in 2003, Aviv signed an intelligence contract with the NXIVM Corporation, an Albany-based company that offers seminars in achieving personal and business goals, and whose devotees include heirs to some of the richest fortunes in America and Mexico. In the last few years, former members of NXIVM have come forward to claim that the company is in fact a predatory personal-growth cult that subjects its members to intensive brainwashing and requires them to swear their lives to its leader, an accused pyramid-scheme operator and self-styled genius named Keith Raniere. According to court papers, NXIVM hired Aviv to dig up dirt on someone that Raniere considered an enemy: New Jerseybased cult expert Rick Ross, a controversial figure himself who is also a frequent guest on television news programs... Juval Aviv: trusted Fox News terrorism expert, or a fraudulent tale teller willing to hire himself out to a thuggish cult leader? It's a question that is at the heart of three lawsuits in two jurisdictions, with as many twists and turns as an espionage potboiler."

Aviv submitted a false retention affidavit to conceal his relationship with Bear Stearns. Other false affidavits, in conjunction with retention applications, were also submitted by various individuals involved in this case to conceal their unlawful relationships with Bear Stearns.

13

By the time the first credibility ruling was used against Lawrence in the discharge order, Bear Stearns had paid Goldberg's entire expenses retroactive to the onset of the case, thereby confirming that Lawrence's testimony was not only accurate but was falsely used discredit him in the later discharge sanction order 6. The second credibility ruling against Lawrence came quickly in the case when he testified on a matter of law, which was that he believed that he had an attorney client privilege when he communicated with an attorney who was ultimately hired to represent his ailing 91 year-old mother who died a few months later. That strange and improper credibility ruling on testimony about a matter of law came after two attorneys testified that they had advised Lawrence he had an attorney client privilege with respect to communications with his mother's ultimate attorney and that was all Lawrence briefly testified to. Much later, Lawrence, while representing himself, successfully argued that in fact an attorney client privilege existed between himself and the estate of his late mother. See order [CP#1981].

Those two inaccurate credibility rulings, particularly by the time of the discharge order was written, were used to great effect in that order to prove Lawrence had no credibility and

In re Lawrence 227 BR 907, FN7 (SD Fla. Bankr. 1998) Berger Singerman wrote: In his March 25, 1998 Order, Chief Judge Cristol found the testimony of both the Debtor and his counsel at the hearing to be not credible and not believable. That referenced orders credibility finding, based on Lawrences brief testimony about his belief Bear Stearns would be paying Goldbergs expenses, was explained as: the Trustee's direct testimony on the absence of any compensation agreements were unrebutted. This Court is convinced that no compensation agreement ever existed between the Trustee or the Trustee's counsel and Bear, Stearns or any other third party. However, by that time Bear Stearns had an unassailable claim to the escrowed PSE seat proceeds because it prevailed in the arbitration. So Bear Stearns deliberately waived its valuable asset (the escrow account) and defaulted it to Goldberg. Goldberg, under normal circumstances, would never have pursued a baseless turnover claim to the 10 year old escrow account belonging to Bear Stearns after Lawrence had already failed in his attempts to claim those funds before the arbitration ended unless there was prearrangement with Bear Stearns to not claim the funds itself. The PSE refused to release the funds even with a worthless release signed by Lawrence but without a release from Bear Stearns. So a court order was needed to get the funds when all Bear Stearns had to do was sign a release.

14

the lack thereof was then extended to his other truthful testimony to impeach his testimony and confirm he lied. Essential to obtaining those fictitious credibility findings was the successful barring of all witnesses supporting Lawrence at the discovery hearing. Moreover, because of the perjured testimony by William Riley and James Fierberg at the earlier May 1998 secret hearing, Lawrence's "credibility" was irretrievably prejudice in a manner he could never defend against nor even use on appeal because she was not told of those fictitious accusations or of the witnesses secretly presented against him and which had such a damaging effect on his "credibility". The fictitious findings did not stop there. Lawrence was falsely found to have lied when he truthfully testified charities were a default beneficiary in the trust, 227 BR at 913 (see Exhibit I for the trust terms) 7. Berger Singerman also created the fictitious finding that Lawrence "never disclosed" the existence of the trust. In fact, it was Lawrence's disclosure of the trust, not only directly to Bear Stearns but on his tax returns that led Bear Stearns to begin its initial lawsuit. Lawrence had established the trust after the Options Clearing Corp. and Chicago Board Options Exchange conducted an investigation and determined that Bear Stearns had swindled Lawrence using nonexistent trades and laundered the proceeds through secret accounts. So the implication that Lawrence had any intention of "defrauding" Bear Stearns was a complete fabrication and distortion of what really occurred.

Another fictitious finding found that Lawrence purportedly lied in the proceeding before Judge King (Case No. 93-6489-CIV-KING), in which proceeding Judge King ruled that the trust,

Because the entire Trust was part of the record, quizzing Lawrence about its written terms, for purposes of credibility, was an improper memory test.

15

which was a defendant and participating in that proceeding, had to be directly sued before a judgment against its assets could be issued (Exhibit J). Berger Singerman's fictitious finding was that Lawrence, in the King proceeding, swore he was never in contact with the Lawrence Family Trust Trustee. Not only was that a preposterous accusation but Lawrence could only be sanctioned by Judge King for that purported lie since it occurred in another case. In reality, Lawrence had only previously stated he had not been in contact with the trustee during a limited period in time, testimony that Berger Singerman completely misrepresented. Lawrence was also found to be a liar because he would not "confess" to having, as a principal purpose in setting up the trust, to shield assets from Bear Stearns when Lawrence had specifically delayed setting up the trust until after the Options Clearing Corp. and Chicago Board Options Exchange conducted a thorough investigation and disclosed how Bear Stearns had defrauded Lawrence's companies and laundered the stolen funds through secret accounts. In short, not only had Lawrence lawfully established the trust and fully disclosed it but he funded the trust only after the embezzlement by Bear Stearns had been exposed. The real scandal was not that Lawrence had lawfully set up a fully disclosed trust but instead how easily Bear Stearns could commit a huge fraud with no risk of prosecution. Bear Stearns went on to ever-increasing frauds, ultimately culminating in the great CMO scandal and the swindling the US taxpayer at of $30 billion in 2008. For years before the 2008 Bear Stearns taxpayer swindle, Lawrence repeatedly called for an investigation into the theft by Bear Stearns senior managers of the protected law enforcement material, but those pleas fell on deaf ears while Bear Stearns was carrying out its major role in the great financial collapse of this century.

16

Had Bear Stearns and others been investigated and prosecuted, even as late as 2007, Bear Stearns never would have obtained the $30 billion in taxpayer funds it swindled by selling the government the worthless securities in its offshore Cayman Island Hedge funds 8. Nor would the USAO have lost its case against the Bear Stearns Hedge Fund Managers because senior managers Mark Lehman and Daniel Taub were plainly implicated in the thefts and would have provided compelling support, in exchange for leniency from draconian sentences, in the hedge fund manager case. So Bear Stearns, by retaining Berger Singerman, was protected from prosecution for the theft of law enforcement materials and phone surveillance under Title III, and related bribery and money laundering charges concerning the sham loan agreement between Bear Stearns and Alan Goldberg that is still not accounted for anywhere in the preposterous financial statements filed yearly by Alan Goldberg. Instead, Bear Stearns and Berger Singerman compromised the USAO by installing Juval Aviv to control its phone surveillance efforts and to steal law enforcement material for Bear Stearns to such a degree that their prosecution became virtually impossible because of the scandalous implications, embarrassment and threat of exposure of what was occurring. WHEREFORE, Debtor Stephan J. Lawrence, requests the Court to issue an order 1. Reversing the travel ban order based on lack of jurisdiction; 2. compelling the attendance of the witnesses and production of documents requested

in this Motion; and

3. granting whatever other relief is appropriate.

Bear Stearns was only a medium sized firm and the too big to fail argument never applied to it. Just weeks later, the much larger Lehman Brother collapse occurred, with no bailout.

17

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing was mailed to Paul Avron, Berger Singerman, 200 S. Biscayne Blvd., Suite 1000, Miami FL 33131, and the Office of the U.S. Trustee, 51 S.W. 1st Ave., Miami FL 33130 on December 20, 2012.

________________________________ Stephan J. Lawrence 19500 Turnberry Way, #23 A Aventura, FL 33180

18

Web of Debt - Credit Default Swaps: Derivative Disaster Du Jour

unmht://.unmht/file.5/C:/__Legal-All/Press/Bear Stearns Articles and Inf...

Home

Order Here

Blog

Public Banking

Articles by the Author

Interviews

Model-Economy Wiki

CREDIT DEFAULT SWAPS: DERIVATIVE DISASTER DU JOUR

Ellen Brown, April 10th, 2008
http://www.webofdebt.com/articles/derivative-disaster.php Post your comments here

When the smartest guys in the room designed their credit default swaps, they forgot to ask one thing what if the parties on the other side of the bet don't have the money to pay up? Credit default swaps (CDS) are insurance-like contracts that are sold as protection against default on loans, but CDS are not ordinary insurance. Insurance companies are regulated by the government, with reserve requirements, statutory limits, and examiners routinely showing up to check the books to make sure the money is there to cover potential claims. CDS are private bets, and the Federal Reserve from the time of Alan Greenspan has insisted that regulators keep hands off. The sacrosanct free market would supposedly regulate itself. The problem with that approach is that regulations are just rules. If there are no rules, the players can cheat; and cheat they have, with a gambler's addiction. In December 2007, the Bank for International Settlements reported derivative trades tallying in at $681 trillion ten times the gross domestic product of all the countries in the world combined. Somebody is obviously bluffing about the money being brought to the game, and that realization has made for some very jittery markets. "Derivatives" are complex bank creations that are very hard to understand, but the basic idea is that you can insure an investment you want to go up by betting it will go down. The simplest form of derivative is a short sale: you can place a bet that some asset you own will go down, so that you are covered whichever way the asset moves. Credit default swaps are the most widely traded form of credit derivative. They are bets between two parties on whether or not a company will default on its bonds. In a typical default swap, the "protection buyer" gets a large payoff if the company defaults within a certain period of time, while the "protection seller" collects periodic payments for assuming the risk of default. CDS thus resemble insurance policies, but there is no requirement to actually hold any asset or suffer any loss, so CDS are widely used just to speculate on market changes. In one blogger's example, a hedge fund wanting to increase its profits could sit back and collect $320,000 a year in premiums just for selling "protection" on a risky BBB junk bond. The premiums are "free" money free until the bond actually goes into default, when the hedge fund could be on the hook for $100 million in claims. And there's the catch: what if the hedge fund doesn't have the $100 million? The fund's corporate shell or limited partnership is put into bankruptcy, but that hardly helps the "protection buyers" who thought they were covered. To the extent that CDS are being sold as "insurance," they are looking more like insurance fraud; and that fact has particularly hit home with the ratings downgrades of the "monoline" insurers and the recent collapse of Bear Stearns, a leading Wall Street investment brokerage. The monolines are so-called because they are allowed to insure only one industry, the bond industry. Monoline bond insurers are the biggest protection writers for CDS, and Bear Stearns was the twelfth largest counterparty to credit default swap trades in 2006.1 These players have been major protection sellers in a massive web of credit default swaps, and when the "protection" goes, the whole fragile derivative pyramid will go with it. The collapse of the derivative monster thus appears to be both imminent and inevitable, but that fact need not be cause for despair. The $681 trillion derivatives trade is the last supersized bubble in a 300-year Ponzi scheme, one that has now taken over the entire monetary system. The nation's wealth has been drained into private vaults, leaving scarcity in its wake. It is a corrupt system, and change is long overdue. Major crises are major opportunities for change.

1 of 4

12/20/2012 12:04 AM

Web of Debt - Credit Default Swaps: Derivative Disaster Du Jour

unmht://.unmht/file.5/C:/__Legal-All/Press/Bear Stearns Articles and Inf...

The Ponzi scheme that has gone bad is not just another misguided investment strategy. It is at the very heart of the banking business, the thing that has propped it up over the course of three centuries. A Ponzi scheme is a form of pyramid scheme in which new investors must continually be sucked in at the bottom to support the investors at the top. In this case, new borrowers must continually be sucked in to support the creditors at the top. The Wall Street Ponzi scheme is built on "fractional reserve" lending, which allows banks to create "credit" (or "debt") with accounting entries. Banks are now allowed to lend from 10 to 30 times their "reserves," essentially counterfeiting the money they lend. Over 97 percent of the U.S. money supply (M3) has been created by banks in this way.2 The problem is that banks create only the principal and not the interest necessary to pay back their loans, so new borrowers must continually be found to take out new loans just to create enough "money" (or "credit") to service the old loans composing the money supply. The scramble to find new debtors has now gone on for over 300 years ever since the founding of the Bank of England in 1694 until the whole world has become mired in debt to the bankers' private money monopoly. The Ponzi scheme has finally reached its mathematical limits: we are "all borrowed up." When the banks ran out of creditworthy borrowers, they had to turn to uncreditworthy "subprime" borrowers; and to avoid losses from default, they moved these risky mortgages off their books by bundling them into "securities" and selling them to investors. To induce investors to buy, these securities were then "insured" with credit default swaps. But the housing bubble itself was another Ponzi scheme, and eventually there were no more borrowers to be sucked in at the bottom who could afford the ever-inflating home prices. When the subprime borrowers quit paying, the investors quit buying mortgage-backed securities. The banks were then left holding their own suspect paper; and without triple-A ratings, there is little chance that buyers for this "junk" will be found. The crisis is not, however, in the economy itself, which is fundamentally sound or would be with a proper credit system to oil the wheels of production. The crisis is in the banking system, which can no longer cover up the shell game it has played for three centuries with other people's money.

The latest jolt to the massive derivatives edifice came with the collapse of Bear Stearns on March 16, 2008. Bear Stearns helped fuel the explosive growth in the credit derivative market, where banks, hedge funds and other investors have engaged in $45 trillion worth of bets on the credit-worthiness of companies and countries. Before it collapsed, Bear was the counterparty to $13 trillion in derivative trades. On March 14, 2008, Bear's ratings were downgraded by Moody's, a major rating agency; and on March 16, the brokerage was bought by JPMorgan for pennies on the dollar, a token buyout designed to avoid the legal complications of bankruptcy. The deal was backed by a $29 billion "non-recourse" loan from the Federal Reserve. "Non-recourse" meant that the Fed got only Bear's shaky paper assets as collateral. If those proved to be worthless, JPM was off the hook. It was an unprecedented move, of questionable legality; but it was said to be justified because, as one headline put it, "Fed's Rescue of Bear Halted Derivatives Chernobyl." The notion either that Bear was "rescued" or that the Chernobyl was halted, however, was grossly misleading. The CEOs managed to salvage their enormous bonuses, but it was a "bailout" only for JPM and Bear's creditors. For the shareholders, it was a wipeout. Their stock initially dropped from $156 to $2, and 30 percent of it was held by the employees. Another big chunk was held by the pension funds of teachers and other public servants. The share price was later raised to $10 a share in response to shareholder outrage, but the shareholders were still essentially wiped out; and the fact that one Wall Street bank had to be fed to the lions to rescue the others hardly inspires a feeling of confidence. Neutron bombs are not so easily contained. The Bear Stearns hit from the derivatives iceberg followed an earlier one in January, when global markets took their worst tumble since September 11, 2001. Commentators were asking if this was "the big one" a 1929-style crash; and it probably would have been if deft market manipulations had not swiftly covered over the approaching catastrophe. The precipitous drop was blamed on the threat of downgrades in the ratings of two major monoline insurers, Ambac and MBIA, followed by a $7.2 billion loss in derivative trades by Societe Generale, France's secondlargest bank. Like Bear Stearns, the monolines serve as counterparties in a web of credit default swaps, and a downgrade in their ratings would jeopardize the whole shaky derivatives edifice. Without the monoline insurers' traiple-A seal, billions of dollars worth of triple-A investments would revert to junk bonds. Many institutional investors (pension funds, municipal governments and the like) have a fiduciary duty to invest in only the "safest"

2 of 4

12/20/2012 12:04 AM

Web of Debt - Credit Default Swaps: Derivative Disaster Du Jour

unmht://.unmht/file.5/C:/__Legal-All/Press/Bear Stearns Articles and Inf...

triple-A bonds. Downgraded bonds therefore get dumped on the market, jeopardizing the banks that are still holding billions of dollars worth of these bonds. The downgrade of Ambac in January signaled a simultaneous downgrade of bonds from over 100,000 municipalities and institutions, totaling more than $500 billion.3 Institutional investors have lost a good deal of money in all this, but the real calamity is to the banks. The institutional investors that formerly bought mortgage-backed bonds stopped buying them in 2007, when the housing market slumped. But the big investment houses that were selling them have billions' worth left on their books, and it is these banks that particularly stand to lose as the derivative Chernobyl implodes.4

Now that some highly leveraged banks and hedge funds have had to lay their cards on the table and expose their worthless hands, these avid free marketers are crying out for government intervention to save them from monumental losses, while preserving the monumental gains raked in when their bluff was still good. In response to their pleas, the men behind the curtain have scrambled to devise various bailout schemes; but the schemes have been bandaids at best. To bail out a $681 trillion derivative scheme with taxpayer money is obviously impossible. As Michael Panzer observed on SeekingAlpha.com: As the slow-motion train wreck in our financial system continues to unfold, there are going to be plenty of ill-conceived rescue attempts and dubious turnaround plans, as well as propagandizing, dissembling and scheming by banks, regulators and politicians. This is all happening in an effort to try and buy time or to figure out how the losses can be dumped onto the lap of some patsy (e.g., the taxpayer). The idea seems to be to keep the violins playing while the Big Money Boys slip into the mist and man the lifeboats. As was pointed out in a blog called "Jesse's Caf Americain" concerning the bailout of Ambac: It seems that the real heart of the problem is that AMBAC was being used as a "cover" by the banks which originated these bundles of mortgages to get their mispriced ratings. Now that the mortgages are failing and the banks are stuck with them, AMBAC cannot possibly pay, they cannot cover the debt. And the banks don't wish to mark these CDOs [collateralized debt obligations] to market [downgrade them to their real market value] because they are probably at best worth 60 cents on the dollar, but are being held by the banks on balance at roughly par. That's a 40 percent haircut on enough debt to sink every bank involved in this situation . . . . Indeed for all intents and purposes if marked to market banks are now insolvent. So, the banks will provide capital to AMBAC . . . [but] it's just a game of passing money around. . . . So why are the banks engaging in this charade? This looks like an attempt to extend the payouts on a vast Ponzi scheme gone bad that is starting to collapse . . . .5 The banks will therefore no doubt be looking for one bailout after another from the only pocket deeper than their own, the U.S. government's. But if the federal government acquiesces, it too could be dragged into the voracious debt cyclone of the mortgage mess. The federal government's triple A rating is already in jeopardy, due to its gargantuan $9 trillion debt. Before the government agrees to bail out the banks, it should insist on some adequate quid pro quo. In England, the government agreed to bail out bankrupt mortgage bank Northern Rock, but only in return for the bank's stock. On March 31, 2008, The London Daily Telegraph reported that Federal Reserve strategists were eyeing the nationalizations that saved Norway, Sweden and Finland from a banking crisis from 1991 to 1993. In Norway, according to one Norwegian adviser, "The law was amended so that we could take 100 percent control of any bank where its equity had fallen below zero."6 If their assets were "marked to market," some major Wall Street banks could already be in that category.

Nationalization has traditionally had a bad name in the United States, but it could be an attractive alternative for the American people and our representative government as well. Turning bankrupt Wall Street banks into public institutions might allow the government to get out of the debt cyclone by undoing what got us into it. Instead of robbing Peter to pay Paul, flapping around in a sea of debt trying to stay afloat by creating more debt, the government could address the problem at its source: it could restore the right to create money to Congress, the public

3 of 4

12/20/2012 12:04 AM

Web of Debt - Credit Default Swaps: Derivative Disaster Du Jour

unmht://.unmht/file.5/C:/__Legal-All/Press/Bear Stearns Articles and Inf...

body to which that solemn duty was delegated under the Constitution. The most brilliant banking model in our national history was established in the first half of the eighteenth century, in Benjamin Franklin's home province of Pennsylvania. The local government created its own bank, which issued money and lent it to farmers at a modest interest. The provincial government created enough extra money to cover the interest not created in the original loans, spending it into the economy on public services. The bank was publicly owned, and the bankers it employed were public servants. T he interest generated on its loans was sufficient to fund the government without taxes; and because the newly issued money came back to the government, the result was not inflationary.7 The Pennsylvania banking scheme was a sensible and highly workable system that was a product of American ingenuity but that never got a chance to prove itself after the colonies became a nation. It was an ironic twist, since according to Benjamin Franklin and others, restoring the power to create their own currency was a chief reason the colonists fought for independence. The bankers' money-creating machine has had two centuries of empirical testing and has proven to be a failure. It is time the sovereign right to create money is taken from a private banking elite and restored to the American people to whom it properly belongs. ___________________ 1 "Credit Swap Worries Go Mainstream," nakedcapitalism.com (February 17, 2008); Aline van Duyn, "CDS Sector Weighs Bear Stearns Backlash," Financial Times (London) (March 16, 2008).
2

See Ellen Brown, "Dollar Deception: How Banks Secretly Create Money," webofdebt.com/articles (July 3, 2008). "Monoline Insurance," Wikipedia. Jane Wells, "Ambac and MBIA: Bonds, Jane's Bonds," CNBC (February 4, 2008). "Saving AMBAC, the Homeowners, or the Banks?", Jesse's Caf Americain (February 25, 2008). Ambrose Evans-Pritchard, "Fed Eyes Nordic-style Nationalisation of US Banks," International Business Editor (March 31, 2008). See Ellen Brown, Web of Debt (Third Millennium Press, 2008), chapter 3.

3 4 5 6

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include the bestselling Nature's Pharmacy, co-authored with Dr. Lynne Walker, which has sold 285,000 copies. Her websites are www.webofdebt.com and www.ellenbrown.com.

Home | Also by Ellen Brown | Links | Contact Us | Order Now

Site by Phoenix Development. Copyright 2007 Ellen Brown. All Rights Reserved.

4 of 4

12/20/2012 12:04 AM

17:=4 FROM COLE CORETTE

kERLITYN

TO

1212935:S58e

H.U .2

Home Address 11 Island Avenue Apt. #1204 Miami Beach, FL

33139

VITAE

Mr.

Leon Pomerance

Senior Vice President - Drexel Burnham Lambert, Inc. Founding Director - Chicago Board Options Exchange Chairman - Chicago Board Options Exchange (1973 - 1976) Founder and President - Options Division Sedurities Industry Association Founding Chairman - National Association of Securities Dealers National Option Committee Creator of options Course - New York Institute of Finance Pomerance Prize - created by the Chicago Board Options Exchange in his honor - a cash award is given annually to a graduate student doing original research in options. Arbitration Panel - New York Stock Exchange and National Association of Securities Dealers 1982 was Mr. Pomerance's 50th year on Wall Street Retired March 1, 1988

NOV-3U-1990 17: 35 FROM COLE CORETTE ABRLITYN

TO

12129353588

P.03

Background
The Pomefohoe Prize for Excellence in the Area of Options Resedfch was established Decemoe. 1976 in reco9nIton of Leon Porheronce's irnfreosuroble COntribUtiOn tO t*. creation and development of the Chicago Soora Options Exchange. One of the wolbs foremost outhorities on 00, 10r5 S. Mt POrneOnCe served since Peon1drv.1472 on the fOundihg Bacro of Directors ono from jonvoty,1474 to December. 1Q76 as itS ChaInnon

Award
An Qwaro of S1. J) in cash will be given onnuo!ly ay the Choopo Board Options Excnonde
for rite most autstoncitng cornoietea stuay on :re market fcc elChOnce-tracSeal crotions

Topic
he stvc;./ must hove as its subject the market fry exchonae-tradea actions Studies suorritte,p fpf the awcro troy deo' With any csceCt of t!" ..e market for exchonge-'tobest options in :ne fljtvre. the exchange Moy onncunce C SpeCifIC ootons tesedt9 - aac gve.n for which the ct,woro wtit
-

COLE CORETTE

ABRUTYN

TO

12129:5:588

P.04

Eligibility
t\Arr,bet 5 of th?. 000e9mie dne fin-n -'i'l cornr -nunify, and ,7",!he .r119/e3teC1 idrvidtjc 15 ofe , tEscthivr? ,7:ans,aefal ,ry-, a sl s jav iriv,id .o st_ibrnIt oOli iior and stu44,:es cc

ff-v? n-lockef fin( exCnOnqc. 40de..7./ Ci1Of ,Onii 5 1, ):.".95 rriOy Of Or)? le , th Inatviavol; who ofe eror_t,foyeesC roetTit:;.,Fis of fhe ot - g? ?..t-:!-Yri 2 Exchf:3fge , ofe f-torninees of rn.q..rnt4 Cvq0nric,31cen5 arc? not Optio In ed,Ititicri, 51 ,,Khe.s which hove been r,utolished Or1e 0 Decernte , . 1Q7' are 1'0 1 efigt 19

Review
SluCres suhrhilleC, tOr thi? ("wCro will 17,: A,E,...&s,Jalc,, 17)y !he Porrierchce Prize r:e,view comrn t nee ,ci Ths.Cammlite. ewill cons. 5tf rnernb.e.r cet the ocaaen-w: cornrl,unitv wotlexperitse inIhe . . ,s
-

fieltJ of ocqlOhs end rn ,:?rnbefs of the

Exchange

Deadline
Apr,haolions cr0 subrn , ssions for the wore)
teceivej y SePlembef

30. 17.;'80

Announcement
4

tc

ihe tcs.c.iolent (74 Ile 0,,,ord w ill be onnbunceb in December. 1980 ubseavgrd en./C1 OwOrds will be OnnrrAinCerect at !hot time. Dates t

Publication
, A' :tS discealic..t 11

oistott.,.

ChICoo kY3Ifj ,!cf e nix 4,2ef rf cc.17,r.=.sf

reserves the right to publish ona

ttlp 51t}triY

Ot

SUmmOry Of Or exceffofSrfOrn

the SlUdY 10 the ExCh0t )Qe rhPrrtefship arc, of her interestedc.tivicluols

Past Awards
-

pecte.5,74

1eet.e9., tje s Iversitv Tests of Mork& Effioiend:y of the Chloog0

Board Options Exchorve.

tvlorK

C>utrenein U Ityrsity

c.01,timir.) at Er.,, keie- , Option Pacing A Simplifiedpt0Och,

C."`I P.: -/*? - Idlorso 1 ilvels , fy Pu t - Can Pority and Market Efficiency.

rft-leSVS r7c...b?41

TOTAL P.n4

STATEMENT BY THE OPTIONS cLzARTNG conrommIN ' AND ciacAao BDA ,D OPTIONS EXCHAN04,'INC.
Pompano-Windy City Partnere, Ltd. ("Pompe6") was a 14 market maker pursuant to Emc Rula 1503.1(a)(6),' 17 CFR 1240.150.1006), and cleared through The Optioni s Clearing Corporation ("OCC") Clearing Member Bear Stearns. I Secause of Pompano's market maker status, its potations were identifiable at 0CC by the ACronyms of Pompano's traders. Pompailo"s' . option oontraots were maintained by Boar Stearns, under the .acronyms of Pompano's traders, at OCC in a combined market makers' account pursuant to OCC By-Laws, Article VI, Section 3(c). 2. OCC has determined that no tradesli offsei or closed out the options petitions, that were in the Pompano aocoUnts on October, 23, 1987. 6 4. . The rules and by-laws of 0CC and ME prov;.deifor the assignment of exercise. notices for index options, including the type traded by Pompano. In accordance with those roes and bylawss, exorcize rioticep may be assigned to market MakOra who lire writers of listed options. A market maker options Writer only becomes obligltod pursuant to an exercise assignmiant in the following wayt -,

a. occ assigns an exorcise notice to !a Clearing Member by the market maker's acronym in respect o the short positions maintained in the Clearing Member's combined market makere 0 account; and
b, Upon receiving notice of the assignment, the Clearing Member settles directly with OCC in respoct of the assigned options Contract) and
el The Clearing Member both notifies t$e assigned market maker of the assignment and settles directly with the market maker, making the appropriate adjustments to' the market maker's account taintaited at the Clearing Member.
.

4, CCC has determined that there wore no ass 11. gnments of exercise notices to the Pompano acronyms subsequent to the close of business on October 22, 1987. c5OE (as it pertains to trades The term "trade" means a transaction for value.

2/

The applicable 000 and CO rules, by - laws, arid; procedures BZ specify the technical procedures for the easignment bt exercise notices. The steps enumerated describe the general proCodure under OCC

- 2 on Ca0E) and CDC have also determined that no tradOs occurred through the Pompano acronyms subsequent to the close of business
on October 22o 1087. :4, 4.04,/ f ino options AfligligarpiAm4 posithne were carried in the hear stearne combined Market maker account with OCC under the Pompano acronyms, and Ocp therefore could not have assicrned exercise notices to that Bear Stearns account Under the Pompano acronyms.

O. Atter the expiration date options betome valueless. If attar the expiration date, the market maker options 'writer has not become obligated by assignment of an exercise notice as described in 13 above, the market maker options wrIter cannot

thereafter become so obligated,

Dated February 28, X989

yt anoy R. Crossman First Vice.-President and

General counsel Chicego Board options Exchange, Inc.

By Don L. Horn to senior Vice-Preside General counsel

The Options Clearing

corporation

JAN-17-10 MON 19:50 COLE CORETTEgrABRUTYN

P.02

Law ()Hi co

E CORE 1 '1 E & ABRWYN

A rrtdessiona I Corporation

Memorandum

To: From:
Date:

2100-1 Mark A. Cymrot C4f4( January 17, 1989 Lawrence v. Bear Stearns

Subject:

I had a telephone conversation today with Paul Dengel to follow up on our settlement discussions.
We agreed that the discussions could not be used by either party as an admission. We said that he understood the information would "enter into our collective memories" and might provide a "road map" for discovery, but they would not be the basis of a question at a deposition or some other similar use. Based on prior conversations, our discussions have been proceeding on the basis that he would make representations to us about facts (i.e. the first step). If we felt that those representations provided a basis to settle, then he would provide evidence which could be admitted in a court proceeding to support the representations (i.e. the second step.) We had previously discussed three questions: 1. What role did 0CC have in the transfer of the Pompano accounts to Bear Stearns; 2. What knowledge did 0CC and CBOE have concerning the actions BS were taking with respect to the Pompano accounts; 3. What is CBOE's interpretation of its arbitration rules, particularly Sec. 18.1(d). We previously had questioned Mr. Dengel on the basis for his assertion that OCC could rely upon instructions from clearing members. He pointed to the following authority for his position and said: 1. Combined Market-Maker Agreement which says (according to Mr. Dengel) that the Clearing Corporation is authorized to rely on notices by the clearing member or other persons. This includes notices to transfer accounts.

JAN-17-10

MON

19:50

COLE

CORETTE&AERUTYN

P.03

-22. By-Laws - Art. 6 - Sections 12(f) and 13(f) set forth the conditions under which long and short positions can be closed In substance, short positions remain in force until out. transferred to another account at a clearing member or another clearing member. Under 0CC rules, transfers of positions can be authorized by the clearing member. The OCC does not examine whether the transfer is in violation of any contract or rules that apply between the clearing member and its customer. From the OCC's point of view, the positions are the property of the clearing member. 0CC does not have to be aware of or deal with anyone other than the clearing member otherwise it cannot operate. Art. 6 - Sec. 9(c) - provides indirect authority, 3. Dengel says. It says the registered owner is the clearing member. 4. Art. 6 - Sec. 3(c)(iv) - gives the clearing corporation authority to close a market-maker account without giving notice. This section applies only between the OCC and the market-maker, It does not apply to BS's obligations. Dengel says that OCC only has to deal with the clearing member and not with the market-maker. An instruction which is contrary to the agreement between the clearing member and the market-maker is not the business of the OCC. The OCC can rely upon the instructions of the clearing member and would not know what other agreements applied to the transaction. I pointed out that an action which is otherwise lawful may become unlawful if the person knows that the action is part of a scheme to defraud. In other words, if 0CC carried out instructions while knowing that BS was defrauding Pompano, OCC would have participated in the fraud. Mr. Dengel said that he was aware of that theory. He said that he had checked with those who he thinks should have known of the problem if anyone at 0CC knew - the people who assessed risk at OCC. 1. He said that no one to his knowledge had information about BS's problem with Pompano or its other market makers during the week of October 19-26. 2. He said 0CC was looking at position risk - which clearing members would have problems if the market went the wrong way. BS did not show up on these status reviews. 3. The people he spoke with said that they had no conversations with BS about its own positions or the positions of the market makers.

Tic:N-17-10 MON

COLE CORETTE&ABRUTYt4

- 04

-3He said that if we decided to proceed to the second step of the discussion that he would have to prove these facts to us and provide names and documents. On the question of what happened to the Pompano positions, he said that the positions moved as follows: 1. The positions originally were in a BS combined marketmaker account. This account held the positions of all BS market-makers but the positions could be identified by account. 2. OCC received instructions to transfer about 20 different accounts in BS combined market-maker account to a BS market-maker account where the accounts could not be separately identified. The people at OCC who perform this function would not know which accounts were being transferred unless they checked the acronym. 3. Several days later, OCC received instructions from BS to transfer the accounts from the BS market-maker account to a BS proprietary account. He said that he had the information as to how BS closed the Pompano positions. It took some time for OCC to track what happened once the positions were transferred out of the first account. In the first account, the Pompano positions were separately identified. After the transfer, OCC personnel had to trace what occurred. Mr. Dengel said he considered it part of the second step of the negotiations for him to tell us what happened to the positions. I asked him who was overseeing the market going to hell and what did they know about the Pompano situation. He said that the CBOE was not the DEA for BS and therefore was not monitoring BS's capital during the crash. It was too busy trying to keep up with those it was responsible for. Mr. Dengel said that he talked to the CBOE financial compliance office which said that he had had no contact with BS during the week of 10/19 to 26. He said that the CBOE reviews the transactions of its members. This review is done through a "focus report". This is a historical review and was the lowest priority during the crisis. The CBOE will, review whether a member traded while in deficit which is against the rules. But this review will be made long after the fact.

,T ,,, N-17-10

MON

19:2

COLE

CORETTE&ABRUTYN

P.05

-4He said no one at CBOE was dealing with the Pompano situation during the crisis. They learned of the Pompano close out in the papers. They also were not following BS problems with its other market-makers. Mr. Den el said that CBOE and 0CC were willinto re resent yRp_zomethsact,ts?nthatBStooL thatthedidnotar cinta}g cinthe nawcsojrlts1.dnotrati Por nataryti neafter l the fact. He said that b exercisininstructions from BS 0CC

dial not approve or ratifK BS' actions.

On the issue of arbitration, CBOE says that Sec. 18.1(d) is not a substantive provision. It reserves the members right to proceed in federal court if the member otherwise has the right to proceed in federal court.

By virtue of being a CBOE member, Pompano did not waive its rights to proceed in federal court for securities law claims.
I told Mr. Dengel that we would analyze what he had said and get back to him.

cc: Steve Lawrence Roger Colaizzi

NEW YORK STATE ATTORNEY GENERAL DENNIS C. VACCO

REPORT ON MICRO-CAP STOCK FRAUD

BUREAU OF INVESTOR PROTECTION AND SECURITIES (DECEMBER 1997

CLEARING HOUSE PRACTICES

"We Clear Everything For Everybody" "Throw Our Weight Around." -- Bear Stearns Advertisements''' .

mall brokerage firms "clear" their transactions (i.e., process their trades and other paperwork) through a "clearing house."' Many of the investor complaints received by the Attorney General's Office cite the clearing firms as accountable as either accomplices in the fraud by their brokerage firm or as

Diana B. Henriques, Peter Truell, Should a Clearinghouse Be Its Broker's Keeper?, N.Y. TIMES (April 23, 1997), D.1.
102

The small firms that clear through a clearing house are called "introducing brokers." Customers receive trade confirmations and account statements directly from the clearing firm. The introducing broker is freed from maintaining back office staff and is permitted to operate with very slim net capital requirements (i.e., cash reserves). Public customers pay ticket charges to the clearing house, which are usually highly profitable because the introducing firms' customers usually trade only with each other in an artificial market dominated and controlled by the introducing broker.
103
ATTORNEY GENERAL'S REPORT ON MICRO-CAP STOCK FRAUD - 70 -

knowing lubricants that handled their business and as such, responsible.' The most frequent and inexplicable complaint is the refusal by clearing firms to halt unauthorized trades in customer accounts. These investors usually only receive a "Dear John" letter referring the investor back to the introducing, micro-cap broker (who, most likely has already been unresponsive to the investor) and to the boiler plate contained in their new account form that purports to set forth that the clearing firm is not responsible for anything and need not take instructions from the owner of the account. Some investors even believe, mistakenly, that the clearing firm itself is, in actuality, their brokerage firm. This misapprehension is often planted by the brokers of the introducing firm who, in their scripted "spiel," emphasize their relationship to the clearing firm while omitting their own less-prestigious firm. For example, a Stratton broker stated, "You may not know the name of my firm, but we're backed up by some of the best firms on Wall Street -- like Bear Stearns." 15 Similarly, in the Bear Steams approved welcome letter that was sent to customers of A.R. Baron & Co., Inc. ("Baron") in July, 1995, the public was told that Bear Stearns has $5.8 billion in capital, has been in business since 1923, and provides clearing clients with "$25 million insurance protection" for their accounts and that Baron was "confident that this relationship will provide you with a deep feeling of security." Unquestionably, firms providing clearing services realize that they lend prestige to their introducing brokers and, indeed, frequently promote this aspect of their service. 106 As detailed in this report, this luster fades when the actual conduct

104 Federal law no longer permits a private litigant's claim of aiding and abetting liability under 10b or Rule 10b-5 of the Securities Act. Central Bank of Denver v. First Interstate Bank of Denver, 114 S.Ct. 1439 (1994).

Susan Antilla, Did Bear Stearns Let Wolf Bite Unwary Investors?, NEW YORK OBSERVER (Feb. 17, 1997). After years of scrutiny Stratton was expelled from the securities industry by the NASDR (see Chapter 10, ENFORCEMENT
105

ACTIONS, infra).

Gretchen Morgenson, Wall Street Sleeze: Bear Stearns & the Bucket Shops, FORBES (Feb.4, 1997) [hereinafter Wall Street Sleeze] (Bear Stearns is selling "respectability;" it presently clears for "15 brokerages that are, if not full-fledged (continued...)
106 ATTORNEY GENERAL'S REPORT ON MICRO-CAP STOCK FRAUD - 71 -

of the clearing firms is examined. By contrast, the emerging, best practice is to avoid lending the name of the major firm to the activities of the introducing broker. Hence, Donaldson, Lufkin & Jenrette, Inc. (Pershing), Merrill Lynch (Broadcourt Capital Corp.) and Prudential Securities (Wexford) offer clearing services via dissimilarly named subsidiaries. Yet clearing firms claim that since they are not violating any law and claim to have no affirmative duty to inquire about the complaints they receive concerning introducing brokers, they bear no responsibility for them. Bear Stearns -- a leader in providing clearing services to micro-cap introducing brokers, for example, has repeatedly stated that, "clearing brokers have no legal responsibilities to introducing-brokers' customers." 17 Further, Bear Stearns asserts that, "The relatively small number of introducing firms that have experienced problems should not taint the clearing business itself." 10s This response, however, should not be satisfactory to securities regulators, legislators and certainly not to the thousands upon thousands of investors who are defrauded out of billions of dollars each year.' Indeed, Bear Stearns is '(...continued) bucket shops, close to it.")
107 Bear Stearns, "Comments on the Role And Obligations of Clearing And Introducing Brokers in Securities Markets," September 10, 1997, p. 13 (Submission to the NYSE).

Letter from Bear Stearns Executive Committee to Forbes Magazine (February 11, 1997) [hereinafter Forbes Response].
108

The clearing brokers' claim of virtual immunity should be regarded with suspicion. They maintain that this outcome follows from SEC approval of changes in NYSE Rules 382 and 405 effected in 1982. 24 SEC Docket 964, 1982 WL 32196 (SEC). It seems doubtful, however, that the two-paragraph SEC release is entitled to the scope of exculpative relief that is sought to be attributed to this action or that this was the intent of the SEC approved changes. Indeed, the release actually warns clearing brokers to "carefully weigh the capital and the other regulatory and practical consequences of the assumption of the functions detailed" in the amended rules. See also Matter of D.H. Blair & Co., Inc., 44 SEC 320 (1970), holding that it was both reasonable and in the public interest to impose an (continued...)
109
ATTORNEY GENERAL'S REPORT ON MICRO-CAP STOCK FRAUD - 72 -

currently named as a defendant in numerous lawsuits and arbitrations that allege that it was providing more than "a simple, albeit necessary accounting function"' to the bucket shops that it cleared: 11 While it is beyond the scope of this report to assess the conduct of Bear Stearns or other clearing brokers in specific cases now before the courts, it is necessary to examine the public policy implications of such alleged conduct. Indeed, Mark Griffin of NASAA has stated that, lift seems to me that clearing firms have some responsibility, even if they're not obligated right now, to look at misconduct or in some way exercise some supervision. ,,112

Dimensions of the Problem

A growing series of lawsuits and pending regulatory inquiries attest to the increasing perception that the conduct of clearing brokers is a prime contributor to the explosion in micro-cap stock fraud. As demonstrated by the following instances alleging or inferring misconduct by clearing firms, increased regulatory scrutiny of clearing firms is amply justified.

J.B. Oxford Search Warrant

J. B. Oxford ("Oxford") is a licensed broker-dealer based in Beverly Hills, California that provides clearing for penny stock firms. Irving Kott, a convicted Canadian securities swindler, has long been identified as the unregistered control 109( .continued)
obligation of inquiry and prompt action upon a clearing broker to terminate any participation in activity violative of securities laws.
11

Carlson v. Bear Stearns & Co., Inc., 906 F.2d 315, 317 (7th Cir. 1990).

11 ' Bear Stearns is also the plaintiff in a lawsuit, counter-suing the lawyers that have filed suits against them. Bear claims that they may not base their lawsuits on the information that they obtain from their roles in the A.R. Baron bankruptcy court proceedings. SECURITIES WEEK (July 28, 1997), p. 4.

Michael Siconolfi, Heat Rises on Wall Street 'Clearing' Operations, WALL ST. J. (June 17, 1997), CI.
112
ATTORNEY GENERAL'S REPORT ON MICRO-CAP STOCK FRAUD - 73 -

Forbes (02/24/97) Wall Street sleaze

Page 1 of 10

Why did prestigious Bear, Stearns et cozy with so many discredited bucket shops?

Sleazy doings on Wall Street

By Gretchen Morgenson AN OBSCURE New York City br kerage firm, A.R. Baron & Co., slipped into bankrup cy last July. Brokerage is not the right word. It as a bucket shop. Baron was in trouble with regulato s from the moment it opened its doors four years earlie . When it closed, its customers were on the hook for oughly $22 million. Its owner, a 31-year-old e omaniacal fellow named Andrew Bressman, has file for bankruptcy. The N.Y. County district attorney's office has convened a grand jury on the A.R. aron affair. Just another boiler-room blowup? ese outfits come and go, and not much has changed ince the days when Robert Brennan and Denver-based eyer Blinder ravaged and raped small investors. ut this debacle was different. In failing, Baron laid bare a corner of the securities industry that is rarely see but is hugely profitable: processing trades for of er firms. This involves clearing customer tra es, processing securities transactions and other pa erwork, and providing capital necessary for sm ller broker/dealers to conduct their business. A major layer in the clearing business is the prestigious, publicly traded brokerage giant Bear, Stearns & C . Inc. Guess who cleared for Baron? Bear, Steams S curities Corp., its clearing subsidiary. And guess wh figures prominently in the story? Randolp Pace, a notorious bucket-shop operator of the past, w o has been the subject of numerous regulatory act' ns during his short career in the securities business. Pa e co-owned Rooney, Pace Inc. in the 1980s. Processing of securities transaction until 1968, when, amid growing tr exchanges began closing down on clerks could sort out the mountains file://C: \MYDOCU-1\BSLITI-1\5904114A.HTM was little noticed ing, stock ednesdays so of tickets 2/27/98

Forbes (02/24/97) Wall Street sleaze representing customer orders. Vol e had simply grown too fast for the then-primiti e systems to handle. A number of famous old firms we t underGoodbody & Co., among others. Computers a d vast infusions of capital eventually solved the probl m. Because expensive computer syste s are required, the clearing business has become conc ntrated in fewer hands. Most large brokerage firms d banks, such as Merrill Lynch, Smith Barney, Cha e and J.P. Morgan, still clear their own customers' tra s, but many others do not. Since 1983 the number of learing firms has declinedfrom 1,200 to 780wh le the number of broker/dealers (also called introdu ing brokers) has risen from 3,500 to 5,000. Big n es in clearing are Pershing, a division of Donaldson, Lufkin & Jenrette; Correspondent Services Corp., a s bsidiary of PaineWebber Inc.; and Prudential ecurities. Bear, Stearns' clearing subsidiary i 2,100 customers, up from 725 in 1 this business that it claims to handl York Stock Exchange's volume. Its generate more than 100,000 trades ago its daily trades averaged 33,00 clearing clients are small OTC mar hedge funds and money managers solvent and well respected. But the As it turns out, Bear, Stearns clears like Baron. a big player, with 87. It is so big in 12% of the New clearing customers very day. A decade . Most of Bear's etmaker firms, good customers, there was Baron. for other outfits

Page 2 of 10

Officials at Bear, Stearns declined o be interviewed for this story. Company spokesper on Hannah Burns says: "Clearing is a very, very props ietary business for us, and we don't want the public owing about it." A strange comment. Doesn't the pu lic have a right to know how its trades are handled? learing is much more than a routine process of mat hing the seller of a security with the corresponding bu er. A clearing firm also ponies up significant capital t each of its introducing brokers, allowing them to do business on a relatively small deposit, usually a inimum of $250,000. However, if a customer ails to pay, it is the introducing broker who gets stuck, of the clearing firm. Nor is the clearing firm on th hook if brokers at one of the introducing firms engag in unauthorized trading or other securities' laws vio ations. In short, the clearing firm shares in the profits b t takes none of the

file://C: \MYDOCU-1\BSLITI--1\5904114A.HTM

2/27/98

Forbes (02/24/97) Wall Street sleaze regulatory heat. A clearing firm's chief vulnerabilit is if one of its broker/dealers fails and winds up o ed more by customers than what it has in cash. In most cases that risk is modest if the clearing firm peeps a watchful eye on its customers' dealings. One veteran of the clearing busine s says: "A clearing firm looks at its customers' numbe s every day. The first time trouble shows its head, y u stop it immediately." Clearing firms can t rminate their agreements with customers at any ime, but they usually give the firm a grace perio of a month or two to fmd a new home. The risk of a firm's failing is, how er, far outweighed by the financial rewards of the clea ing business. First there's the introducing broker's dep sit paid to the clearing firm, which can use the m ney interest-free. Then there are the fees a clearing f levies on every transaction an introducing firm ma escalled a "ticket charge"of anywhere from $10 to $30 per trade. The clearing firm also charges interest typically 1% a monthof customer debit balance carried on the clearing firm's books. The interest eter starts ticking the day a trade is done. This is whe e the real money in clearing is made. Clearing firms li e Bear, Stearns also have free use of customers' credit b lances. Last but not least, clearing firms s h as Bear demand that an introducing broker's listed e uity business trades in NYSE and Amex stocks all be funneled to its trading desks. Other firms woul pay 2 cents or 3 cents a share for this order flow; B ; ar gets it for free. The man running this gold mine at ear, Stearns is Richard Harriton, 61, an imposing d imperious man who came to the firm in 1979. Rep rtedly the son of a Brooklyn bakery- supply salesman Harriton has become a wealthy man as a Bear, S earns senior managing director. He sits on the fi 's Management and Compensation Committee, wh ch decides how many millions of dollars will be p celed out to the company's executives in bonuses e . ch year. Bear is known for its largesse to to employees. Last year, for example, Bear, Stearns Pr sident and Chief Executive James Cayne made $20. million in

Page 3 of 10

file://C: \MYDOCU-1 \BSLITI-1 \ 5904114A .HTM

2/27/98

Forbes (02/24/97) Wall Street sleaze compensation; Chairman Alan (Ac b) Greenberg got $18.9 million; Executive Vice President Warren Spector received $19.5 million. Ha iton's compensation was unspecified in t e proxy and the annual report, but it was no doubt efty. Bear, Steams' financials don't spec fy how much its clearing business brings in. With reason: Why let outsiders in n how lucrative its clearing is? In 1996 Bear produced revenues of $5 billion, on which it earned $496 in" lion. Clearing almost certainly contributed to Bea 's extraordinary resultsup 68% in its most recent quarter, ended December. The firm's stock surged to an alltime high of $31.75. All Wall Street firms have persona sties; Bear's is scrappy and entrepreneurial. Bear ecutives are encouraged to behave as aggressive and enterprising sole proprietors. If they do so successfully, they will get their reward in the form of a bigger bonus. Running one of Bear's biggest profit centers makes Harriton a towering figure there. Hi s contributions to the firm's bottom line make it likely that he is autonomous, left alone to manage his fiefdom. He reportedly has introduced himself to prospective clearing customers by saying: "I rup the most profitable division of Bear, Steams and I'm thle most powerful man on Wall Street in clearing." It is widely assumed that he runs his show without muc input from the top boss, Alan Greenberg. What is so special about Bear, Stea s' clearing work? Harriton knows that what he is sell ng is not just his firm's back-office processing: All c earing firms have sophisticated systems and most ch ge less to perform these services than Bear. What Ha iton is sellingespecially to the small and dubious firmsis respectability. If Bear's famous n e appears on the trade confirmation or monthly stat e m ent as the clearing firm, who can doubt that his mone y is in safe hands? Even before the Baron debacle, sonhe of the biggest Wall Street flameouts had been cle ring customers of Bear, Stearns Securities Corp. One of Bear, Steams' first clearing ustomers was

Page 4 of 10

file ://C: \MYDOCU-1 \BSLITI-1 \5904114A.HTM

2/27/98

Forbes (02/24/97) Wall Street sleaze Rooney, Pace Inc., a notorious sto k manipulator firm shuttered by regulators in 1987. Fo er co-owner, Randolph Pace, is a close friend o Harriton and regularly brings new clearing cust ers to Bear. Another clearing customer in Bear, Stearns' recent past was D. Blech & Co., the investme t firm run by David Blech that specialized in biotechno ogy stock underwritings. D. Blech's failure 1994 reportedly left The crash of A.R. $200 million in investor losses and clearing firm Bear Baron on the hook for $10 million. Bear,Stearns also cleared for Stratt I n Oakmont from 1990 until early 1994, when Bear ounced the firm amid bad press about its boiler-roo tactics. Stratton was effectively shut down by regul tors last month. Right now Bear, Stearns is the clea ing firm for at least 15 brokerages that are, if not full-fl dged bucket shops, close to it. These include Sterling oster, charged last September in a $53 million fraud c mplaint by the NASD for manipulating stock pric s of newly issued stocks; Lew Lieberbaum & Co., of Garden City, N.Y.; Josephthal Lyon & Ross Inc. of Ne York City. Does having Bear as a clearing fi give cachet to smaller firms? Just ask Ian Barry, i vestment manager of Fiduciary Management Services developers of Grand Bahama Island. In July 199' , Barry learned that the broker handling his client's $2 illion account was moving its back-office business fro Denver-based Hanifen, Imhoff to industry giant ear, Stearns. "I felt we were in excellent hands," says any, from his office in Bermuda. "Bear, Stearns as a household name."
:

Page 5 of 10

A global reputation was important o Barry because Fiduciary Management's broker, chard Simone, had recently left Alex Brown & Sons f. r a brokerage firm Barry did not knowA.R. Baron Co. Although Barry trusted Simone, he also says e felt comfortable with Simone's shift to Baron becau e of the Bear, Stearns connection. Barry didn't rest easy for long. Im ediately after Baron announced its new clearing arrange ent with Bear, Stearns, Barry began receiving con irmations of trades in Fiduciary's account that he had ever authorized Simone to do, stocks that bore no r lation to the

file://C: \MYDOCU-1\BSLITI-1\5904114A.HTM

2/27/98

Forbes (02/24/97) Wall Street sleaze conservative securities Barry gene lly dealt in.

Page 6 of 10

Unable to get these $2 million trad s reversed by Simone, or A.R. Baron's owner, A drew Bressman, Barry went to Bear, Stearns for hel in canceling the unauthorized trades. Even though any notified Bear of the unauthorized trading within en days, as required by New York State law, Bear, Stea s moved not one inch to rescind the trades. Bear ad Ised Barry to take it up with Baron, claiming to be "jus the clearing firm." Barry never got satisfaction from out, Barry was one of many Baron victimized by the unauthorized tra the Securities & Exchange Commi first days A.R. Baron had engaged practice abuses, including rampant trading in customer accounts, and practices involving stocks that it aron. As it turned ustomers mg. According to sion, since its very egregious sales unauthorized busive sales derwrote.

In industry parlance, Baron was a rm that employed a "no net sales" policy. That meant aron's brokers would allow their clients to sell a p sition in one of their so-called house stocks only if another of the firm's clients placed orders to buy the sh es. In short, a Baron stock couldn't drop because e broker wouldn't permit trades at lower prices. This ad the effect of propping up Baron's special stocks for a while at least. As Barry discovered, Fiduciary's $ to buy shares in a Baron house sto Pharmaceuticalthat somebody el selling. When the firm went b Fiduciary Management was left wi million in losses. million was used Cypros e was likely pt months later, around $2.6

Fiduciary Management, in suing B ar, is represented by Lewis Lowenfels, a highly resp cted securities lawyer in New York City whose itings have been cited by the U.S. Supreme Court. S ys Lowenfels: "The Fiduciary Management case oes to the heart of the legal responsibilities of clearin firms in relation to introducing brokers." In other wor s, in keeping Baron alive for almost a year, Bear, Stea s enabled the firm to harm investors with its fraudule t sales practices. As a result, Bear was perhaps more th just a clearing

firm.
Bear, Stearns disavows responsibil ty for Fiduciary's

file://C: \MYDOCU--1 \BSLITI--1 \5904114A.HTM

2/27/98

Forbes (02/24/97) Wall Street sleaze losses, even though the firm was n tified of the unauthorized trades almost immed ately after they were placed. Bear itself lost money in the Baro mess; it is identified in Baron filings as a cre itor of the firm in the amount of $2.3 million. Oddly, Bear has not filed a claim with the bankruptcy court, p rhaps trying to minimize its link to the disaster. Why would Bear, Stearns risk its r putation by dealing for a firm like Baron? On July 17, 995, for example, A.R. Baron settled a case with the ASD, agreeing to pay the regulator $1 5 million in f es and restitution; Baron's principal, Bressman, paid 35,000 to settle charges that he and the firm execut d trades for customers at unfair and unreasona le prices. Three days after this public shaming, Be , Stearns agreed to begin clearing for Baron. Until the firm fmally failed in July 1996, Baron's capital position several times fell b low the minimum required by regulators. This means Baron could not conduct business until it put up mo e capital. On several occasions Baron simply cl sed its doors. But Bressman & Company would alwa s manage to rustle up the necessary capital somewher . At a crucial point in the fall of 1995, Bear put up $1. million of its own capital to float Baron back up to m nimum levels. All the while, Bear was receiving c stomer complaints from folks like Ian Barry. Bear co inued to clear for Baron as SEC and NASD regulato s were at Baron auditing and investigating continu ly throughout 1995. Finally, Baron was bleeding oney: During the month of October 1995, for examp e, Baron had $5 million in losses and unpaid-for tra es. Bear continued to clear. The question of why Bear was inv ived with Baron gets even more curious when you iscover that Bear had cleared for Baron once before, 1992. Bear ended its clearing relationship with Baro that summer during an underwriting that Baron had in t e worksCypros Pharmaceutical. Harriton told Baro to look around for another clearing firm because Bear was afraid the Cypros deal would unwind and en up with a stock

Page 7 of 10

Bear, Stearns' only comment to Forbes' allegations was: "Pending litigation prevents us from commenting."

file://C AMYDOCU-1 \BSLITI-1\5904114A.HTM

2/27/98

Forbes (02/24/97) Wall Street sleaze trading below the offering price. short, Bear was worried Baron could not support t e shares in the aftermarket. Baron found another learing firm, Adler Coleman. Unfortunately for Baron, Adler Co eman went bankrupt in 1995, so once again B ron needed a clearing firm. It landed at Hanifen, Imhoff for roughly three months, but was kicked out. Why did Bear now open its doors t. Baron? The question is especially compelling hen you realize that because of the nature of Baron's b siness, Bear wasn't really making all that much money on its clearing business. Remember the variety of ways a ci aring firm makes money. The most profitable is ch mg interest on the firm's customer debitstypically result of stocks bought on margin. But Baron had o customer debitsit was a firm, as many buc et shops are, that specialized in stocks that are not m rginable. Baron's customers had no margin positions Neither did Baron's clients typicall have credits in their accountscash resulting fro a liquidated stock position. Another interesting fact: Harriton's number-two man on the operations side at Bear, Ste. s Securities Corp., Peter Murphy, wanted to .w Baron out. Murphy was overruled by Harriton Why would Harriton deal with a cl arly disreputable bucket shop? Was it as a favor to Morris and Ab aham Wolfson, sons of New York real estate magn to Zev Wolfsondeveloper of One State Street Plaz ? Morris Wolfson has sizable accounts at Bear, Stea s. He was also a big player in Baron's house stocks. An Wolfson Investment had bought $400,000 orth of A.R. Baron's privately issued convertible preferr d stock. As a special client of Baron he would b entitled to allotments of hot issues before the uckers were invited in. Bressman told people that the Wol sons asked Harriton to take on Baron as a clearing firm gain. Bressman file ://C: \MYDOCU - 1 \BSLITI-1\5904114A.HTM

Page 8 of 10

2/27/98

Forbes (02/24/97) Wall Street sleaze told people that Harriton asked the Wolfsons if the family would guarantee the firm. e family declined, but Harriton took Baron back an ay.
Morris Wolfson, 38, is infamous a co-owner of a

Page 9 of 10

Harlem apartment building that co lapsed in 1994, killing three people. Wolfson was of found liable for the deaths. But Wolfson was not Harriton's on firm. After taking Baron back into fold, Harriton introduced Bressm barred manipulator Randolph Pace cleared for Rooney, Pace before it in 1987. Pace didn't return a report seeking comment. Harriton apparently isn't discrimin to picking friends. Baron's preside Bressman, has also been chummy Bressman has dined often with the director, taking him to New York games, where Bressman's front ro his guests rub shoulders with celeb director Spike Lee. A person intimately familiar with at Bear, Steams tells Forbes that m involved. The source insisted on st clearly knowledgeable about the si Here, according to the source, is w bucket shop that clears through Be underwriting in the works. On the trading, as many units or shares as generate a $100,000 profit are plac nominee account at another broker account is an account that carries a source charges that Harriton was trades of this sort. A. R. Baron was not the only slea through Bear, Steams. Another Be customer is Sterling Foster, the pe the NASD sued for $53 million in A company that Sterling Foster br year, called Embryo Development L. Harriton, 31, as its chief fmanci to be Richard's son. y tie to the Baron e Bear, Steams to Harriton's pal, Bear, recall, ent out of business r's phone call ting when it comes t, Andrew ith Harriton. ear managing icks basketball seats let him and ities like film e clearing business re than favors were ict anonymity but is uation. at happens: A has a hot ay the stock begins e needed to d in a so-called ge firm. A nominee fictitious name. Our e beneficiary of outfit to clear r, Steams clearing y-stock outfit that fraud case last fall. ght public last orp., lists Matthew 1 officer. He is said

file://C: \MYDOCU-1\BSLITI-1\5904114A.HTM

2/27/98

Forbes (02/24/97) Wall Street sleaze

Page 10 of 10

The last hot stock underwriting sponsored by A.R. Baron came on Aug. 9, 1995: 1.8 million shares at $5 in a company called PaperClip Imaging Software, Inc. Like most hot Baron issues, PaperClip rose on its first day of trading, to almost $8. Those in on the offering who sold before the close of trading reaped handsome gains. Normally, with this kind of offering, the first allotments go to favored customers and insiders. But with PaperClip, large numbers of the shares were assigned not to the clients who had been promised them, but to overseas entitiessuspected to be nominee accounts. The presumption is that Baron insiders and their friends were the real owners. An obvious manipulation, PaperClip is now trading at less than 50 cents. Forbes gave Bear, Stearns plenty of time to respond to our allegations. Bear, Stearns' only comment was: "Pending litigation prevents us from commenting." The whole situation stinks.

Feb. 24, 1997 Issue

Back to Top

Forbes Today

Copyright Forbes Inc. 1997

file://C: \MYDOCU-1\BSLITI-1 \5904114A.HTM

2/27/98

BB1kR STEARNS

November 16, 1987 % Mr. Murray Ross Secretary Philadelphia Stock Exchange 1900 Market Street Philadelphia, PA 09103 Re: Pompano - Windy City Sale of Regular Membership with Options Privileges Dear Mr. Ross: We are advised that Pompano - Windy City is the owner of a Regular Membership with Options Privileges in the Philadelphia Stock Exchange. Please be advised that Pompano - Windy City is presently indebted to Bear Stearns in the amount of $18,954,751 attributable to losses in its trading account and $4,223,637 attributable to a non-purpose loan. Because of our creditor status, Bear Stearns hereby puts the Exchange on notice of its claim to the proceeds of the sale of the Pompano - Windy City Membership. Should you require any additional information or documentation with respect to the claim of Bear Stearns, do not hesitate to contact the undersigned. Sincerely yours, BEAR, STEARNS & CO. INC.

William G Managing

Bear. Stearns & Co. Inc.. SS Water Street. New York. New York 10041 (212) 952.5000 Atlanta/Boston/Chicago/Dallas/Los Angeles/New York/San Francisco Amsterdam/GenevaMong Kong/London/Paris

EXHIBIT (>
bkk

Philadelphia Stock Exchange

Philadelphia - London - Hong Kong

Philadelphia Stock Exchange Building 1900 Market Street. Philadelphia. PA 19103 Telephone: 215 496-5214

Office of the Secretary

December 16, 1987

Ms. Beth Bernstein 74 Trinity Place Room 916 New York, NY 10006 Dear Ms. Bernstein: Pursuant to and confirming our telephone conversations of this week, enclosed please find a copy of the claims submitted by Bear, Stearns & Co. Inc. to the Office of the Secretary of the Philadelphia Stock Exchange, Inc. respecting the transfer of legal and equitable title to an Exchange membership formerly held by Andrew Burke/Capital Growth Corp. As I indicated in our telephone conversation, I am prepared to submit these materials to the Arbitration Committee of the Exchange. The proceeds are presently held in escrow by the Office of the Controller of the Exchange. I believe the Arbitration Committee will order the proceeds in question to continue to be held in escrow pending the resolution of the legal proceedings by and between the parties ie. Pompano-Windy City/Capital Growth Corporation vs. Bear, Stearns & Co. Inc. Should you have any questions with respect to this matter, please do not hesitate to contact me directly. Thank you for your understanding and cooperation in this matter. Very truly yours, M rra L. Ross, Esq. Secretary MLR/dsb Enclosures

STORCH & BRENNER

loot Comuscrictrr AvaNtrz, N. W. WASHINGTON, D. C. 20036 (202) 452-0900 TELEX 201250

March 11, 1988

CERTIFIED

Will/am Uchimoto, Esq. General Counsel Philadelphia Stock Exchange, Inc. 1900 Market Street Philadelphia, PA 19103 Dear Mr. Uchimoto: On December 16, 1987, Murray L. Ross, Esq. of your organization wrote to Beth Bernstein concerning proceeds from a sale of a certain Exchange membership. Mr. Ross made reference in that letter to his belief that the Exchange's Arbitration Committee would order certain monies held, presumably pursuant to the Rules of the Board of Governors of your Exchange. However, we are aware of no claim which was referred to that Committee during the transfer. This firm represents the former owners of the Exchange membership in question and, on behalf of our clients, we hereby request an immediate accounting of any funds currently held by the Exchange as well as their immediate release or a more complete explanation of the authority under which the Exchange has been holding these funds for the last several months.

Laurence Storch

EXHIBIT

1 -2- 0
bkk

Philadelphia Stock Exchange po.:aderpho - London - Hong Korg

Philadelphia Stock Exchange Building 1900 Market Street. Philadelphia, PA 19103 Telephone. 215 4965000

Sr[: ;Ai

March 18, 1988 Lawrence Storch Storch & Brenner 1001 Connecticut Avenue, N.W. Washington, D.C. 20036 Dear Mr. Storch: In response to your letter of March 11th to me and to our conversation of March 17th, please find enclosed a letter from our corporate secretary, dated December detailing the disposition of sale of membership referenced in your March 11th letter. follow-up a copy of 16, 1987, proceeds

On December 18, 1987, the Exchange escrowed $78,063.25. As of March 17, 1988, $1,073.37 interest (5% compounded daily) has been credited to the escrow account. We note that your firm and the Exchange agreed that the escrow was the best course of action as Bear, Stearns & Co., Inc. had filed significant claims against the proceeds pursuant to Exchange By-law Article XV, Sec. 15-3. Please also find enclosed a copy of the relevant By-Law provisions. Should you have any further questions, please do not hesitate to call me. Sincerely,

William W. Uchimoto Acting General Counsel WWU/nf

EXHIBIT

33
bkk

STORCH & BRENNER

1001 CONNECTICUT AVENUE, N. W. WASHINGTON, D. C. 20036 (202) 462-0900 TELEX 201250

March 28, 1988

William M. Uchimoto, Esq. Acting General Counsel Philadelphia Stock Exchange 1900 Market Street Philadelphia, Pennsylvania 19103 Dear Mr. Uchimoto: I have just received your letter dated March 18, 1988. I found your assertion, "[w)e note that your firm and the Exchange agreed that the escrow was the best course of action....", absurd. If there is an escrow agreement in effect, I would appreciate your sending me a copy of it. In our view, your administration of these funds has been improper in several respects and your letter of March 18, 1988, in response to my request for an explanation of your client's actions, does nothing more than compound these improprieties. The Exchange's actions on behalf of Bear Stearns & Co., Inc. have not been in accordance with, inter alia, Article XV of the Exchange's own By-laws and, thus, are ultra vires. Implictnyourefctxhangeby-lwrtics,e. is that the Arbitration Committee has reached at least preliminary conclusions as to the Bear Stearns Statement of Claim submitted last year. As our clients are clearly party to the dispute, the status of the arbitration hearings based upon the Bear Stearns Statement of Claim filed is hereby requested. Please regard this letter as yet another demand for immediate payment of the improperly held funds. Please advise me whether you wish me to address future correspondence to you or to Terence Gilheany, Esq. of Cadwallader, Wickersham & Taft.

Laurence Storch Plaintiffs' Counsel

3 z 7 2-40 98'
bkk

EXHIBIT

Private Investigator News and Information Blog Archive Roy Black Says Palm Beach Police Department Report on Jeffrey Epstein Inaccurately Describes the Actions of Private Investig...

Private Investigator News and Information

Home

Page 1

Page 2

search...

28 JUL ROY BLACK SAYS PALM BEACH POLICE DEPARTMENT REPORT ON JEFFREY EPSTEIN INACCURATELY DESCRIBES THE Press Release ACTIONS OF PRIVATE INVESTIGATOR WILLIAM RILEY Thursday July 27, 9:15 pm ET MIAMI, July 27 /PRNewswire/ Responding to inquiries from the media, attorney Roy Black said today that a Palm Beach Police Department report alleging private investigator William Riley represented himself as a police

CATEGORIES

1
ARCHIVES

October 2009 September 2009 August 2009 July 2009 June 2009 May 2009 February 2008 January 2008 December 2007 November 2007 July 2007 June 2007 May 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 May 2006 February 2006 January 2006 December 2005 November 2005 October 2005 July 2005 June 2005 May 2005 April 2005 March 2005 February 2005 January 2005

officer while interviewing a witnesses is inaccurate. We provided the Palm Beach Police Department with Mr. Rileys notes made on the day of the interview that show beyond a doubt that the witness made a false statement to the police about how Mr. Riley represented himself, Mr. Black said. We suspect that it was a police oversight in not correcting the report. Mr. Riley and his partner, Mr. Kiraly, are seasoned investigators who adhere to the highest professional standards and I have every confidence that they conducted themselves appropriately when they interviewed this witness, Mr. Black added. Along with his statement, Mr. Black released the notes (redacted below) taken by Mr. Riley on November 21, 2005 after the witness was interviewed. Yesterday, 11.21.2005, my partner, Steve Kiraly, and I traveled to Orange Park (Jacksonville), Florida, in order to attempt to interview [redacted]. [redacted]. The purpose of having two people present was to act as witnesses as to whatever might have been said by [redacted] during the course of our interview. [redacted] lives with her 18 year old boyfriend, [redacted], and his mother and boyfriend at [redacted]. Upon our arrival at her house we noticed her Jeep Wrangler gone. We then began the process of waiting for her. At about 2:00 PM we observed her boyfriend,[redacted], arrive at the house. We approached him and asked if [redacted] was there. He told us that she had just started a new job at a debt collection agency, that he did not know the name of it or their telephone number, and that she would be home around 6:30 PM. We did not advise him of why we wanted to meet with [redacted]. [redacted] said we were welcome to come back after she got off of work. He also provided her cell telephone number of [redacted]. [redacted] was very cordial and friendly.

http://www.asginvestigations.com/pi-stories/?p=140[12/19/2012 6:13:10 PM]

Jeffrey Epstein: How the Hedge Fund Mogul Pedophile Got Off Easy - Th...

http://www.thedailybeast.com/blogs-and-stories/2011-03-25/jeffrey-epste...

by Conchita Sarnoff & Lee Aitken

March 25, 2011 | 7:17am

Documents obtained by The Daily Beast reveal how pedophile hedge fund mogul Jeffrey Epstein escaped a hefty jail sentence despite overwhelming evidence of sex crimes with dozens of young girls. Conchita Sarnoff and Lee Aitken on how the fear and intimidation experienced by victims during pre-trial proceedings, combined with a ferocious, protracted campaign to undermine the prosecution, culminated in a set of charges that became a virtual slap on the wrist.
It is proving difficult for hedge fund manager and registered sex offender Jeffrey Epstein to avoid the glare of media scrutiny British tabloids most recently cried foul over the shabby royal comportment of Prince Andrew in agreeing to be the guest of an acknowledged pedophile. But the larger mystery surrounding Epstein, who completed a 13-month sentence for soliciting prostitution from a minor in 2010, has remained unsolved: How did the hedge fund mogul manage to finesse the kinds of sex-crime allegations typically associated with a hefty prison sentence?

Gregory P Mango / Splash News / Newscom

For the first time, the U.S. attorney who oversaw the Epstein prosecution in Floridas Southern District is commenting publicly on the case, in a letter released exclusively to The Daily Beast. This letter, along with other correspondence unearthed in our reporting, sheds new light on the no-holds-barred battle waged by Epsteins lawyers to evade the full exercise of prosecutorial power. Some of the most shocking allegations against Epstein surfaced only after the conclusion of an FBI probe, in civil suits brought by his victims: for example, the claim that three 12-year-old French girls were delivered to him as a

1 of 4

3/26/2011 6:40 PM

Jeffrey Epstein: How the Hedge Fund Mogul Pedophile Got Off Easy - Th...

http://www.thedailybeast.com/blogs-and-stories/2011-03-25/jeffrey-epste...

birthday present. But the feds did identify roughly 40 young women, most of them underage at the time, who described being lured to Epsteins Palm Beach home on the pretense of giving a massage for money, then pressured into various sex acts, as well as the Balkan sex slave Epstein allegedly boasted of purchasing from her family when she was just 14. More recently, a big cash payment from Mail on Sunday coaxed one of Epsteins main accusers out of anonymity to describe what she claims were her years as a teenage sex toy. This victim, Virginia Roberts, produced a photo of herself with Prince Andrew in 2001 and reported that Epstein paid her $15,000 to meet the prince. Then 17 years old, she claims that she was abused by Epstein and loaned to his friends from the age of 15. Sex crimes of the kind Roberts alleges took place typically carry a term of 10 to 20 years in federal prison. Yet when all was said and done, Epstein served his scant year-plus-one-month in a private wing of the Palm Beach jail and was granted a 16-hour-per-day free pass to leave the premises for work. A Daily Beast examination into the inner workings of the Epstein defense strategy reveals how the fear and intimidation experienced by victims during pre-trial proceedings, combined with a ferocious, protracted campaign to undermine the prosecution summed up as the best defense is an all-star offense culminated in a set of charges that became a virtual slap on the wrist for the globe-trotting financier.

Fear and intimidation experienced by victims during pre-trial proceedings, combined with a ferocious, protracted campaign to undermine the prosecution, culminated in a set of charges that became a virtual slap on the wrist.
Over the past weeks, I have read much regarding Mr. Jeffrey Epstein, are words opening an extraordinary letter written by R. Alexander Acosta, who served as U.S. Attorney for the Southern District of Florida during Epsteins criminal investigation. Mr. Acosta goes on to detail how, in 2005, a young girl first brought sex-crime allegations to the Palm Beach Police Department, which sought felony charges against Epstein. Subsequently, however, the State Attorney agreed to charge him only with one count of aggravated assault with no intent to commit a felony, Acosta writes. He notes that such a charge would have resulted in no jail time, no registration as a sexual offender, and no responsibility for restitution to Epsteins underage victims. Frustrated by the State Attorneys decision, the police referred the case to the FBI, which handed it to the U.S. Attorney Generals office. After reviewing the charges, federal prosecutors agreed that the state charge was insufficient, Acosta writes. In a script that could have been lifted from Law and Order, his team gave Epstein two choices: plead to more serious state felony chargesor else prepare for a federal felony trial. The next passage is where things really get interesting: What followed was a year-long assault on the prosecution and the prosecutors. Epstein had assembled a world-class legal team, including Alan Dershowitz, Kenneth Starr, and Roy Black (best known for having defended William Kennedy Smith against rape charges in Palm Beach.) One member of the defense team warned me that the offices excess zeal in forcing a good man to serve time in jail might be the subject of a book if we continued, Acosta writes. In his view, excessive zeal more aptly described the

2 of 4

3/26/2011 6:40 PM

Jeffrey Epstein: How the Hedge Fund Mogul Pedophile Got Off Easy - Th...

http://www.thedailybeast.com/blogs-and-stories/2011-03-25/jeffrey-epste...

actions in Epsteins camp: Defense counsel investigated individual prosecutors and their families, seeking to unearth personal issues that might lead to disqualification of members of Acostas team. The defense also often failed to negotiate in good faith. They would obtain concessions as part of a negotiation and agree to proceed, only to change their minds, and appeal the offices position to Washington. Undeterred, Acosta stuck to his position that Epstein must agree to the three criteria he had laid out: jail time, registration as a sex offender, and restitution to victims. Acostas account is supported by a second document obtained by The Daily Beast a five-page letter written by Assistant U.S. Attorney Ann Marie Villafana to another of Epsteins lawyers, Jay Lefkowitz, during the period when both sides were hammering out the eventual plea agreement. The indictment was postponed for more than five months to allow you and Mr. Epsteins other attorneys to make presentations to the office to convince the office not to prosecute, Villafana writes, conjuring the degree of pushback apparently central to the teams strategy. Those presentations were unsuccessful. Villafana also mentions her efforts to insure that Epstein would serve time in a federal prison camp and not a state prison, which would be a far rougher environment, particularly for a child molester. Villafana marshals these facts in the process of strenuously disputing apparent charges of misconduct by the defense: I continued to work with you in a professional manner even after I learned that you had been proceeding in bad faith for several weeks thinking that you would 'fool' our office into letting Mr. Epstein plead to a non-registerable offense. At another point in her letter, Villafana refers to an apparent allegation of self-dealing in the selection of an outside attorney who would represent the 40-odd victims identified in the FBI probe. In a somewhat unusual arrangement, Epstein agreed not to contest his liability in any civil suits brought by these victims and in fact to pay for lawyers to represent them. In her letter, Villafana denies any personal interest in the choice of attorney and goes on to say, your attacks on me and on the victims establish why I wanted to find someone whom I could trust with safeguarding the victims best interests in the face of intense pressure from an unlimited number of highly skilled and well paid attorneys. Responding to a request for comment on Acostas account of events, Roy Black wrote The Daily Beast on Thursday that, I cant reply to a letter I havent receivedI cant give a reasoned response without examining the files and being able to refresh my recollection of events that occurred years ago. Black went on, I do not believe any of the things you mention occurred except for the fact we did exercise our right to appeal to the Department of Justice to determine if a federal crime had been committed. (Other Epstein attorneys contacted by The Daily Beast did not respond. The U.S Attorneys office for the Southern District of Florida had no comment.) Why did Acosta decide to voice his opinions now? In part, he clearly is reacting to ongoing criticism that Epsteins puny punishment did not fit his crimes. Some may feel that the prosecution should have been tougher, Acosta writes. Evidence that has come to light since 2007 may encourage that view. Many victims have since spoken outphysical evidence has since been discovered. Acosta may also have chosen to come forward now because, on Monday, attorneys for a number of those victims filed suit under the Victims Crimes Rights Act to challenge the non-prosecution agreement that ultimately resulted from all the wrangling, claiming that they were not consulted. The U.S. Attorneys office, now led by Wifredo A. Ferrer, has indicated it will file a response to the suit on April 7. In his letter, Acosta also takes issue with the way Epsteins sentence was carried out: Although the terms of

3 of 4

3/26/2011 6:40 PM

Jeffrey Epstein: How the Hedge Fund Mogul Pedophile Got Off Easy - Th...

http://www.thedailybeast.com/blogs-and-stories/2011-03-25/jeffrey-epste...

confinement in a state prison are a matter appropriately left to the State of Floridawithout doubt, the treatment that he received while in state custody undermined the purpose of a jail sentence. Indeed, Epsteins brief confinement likely reinforced a perception that he had merely succumbed to a nuisance suit. Such a gross misapprehension would help account for the apparent ease with which Epstein has rejoined the ranks of a social elite. Katie Couric, Woody Allen, and George Stephanopoulos, among others, attended a dinner party he hosted for Prince Andrew in December, and New York authorities seem to be either unaware or unconcerned that his Upper East Side home is within 1,000 feet of an Episcopal pre-school, in violation of sex-offender laws. Yet a source tells The Daily Beast that Epsteins legal troubles may not be over. It is possible that, as an outgrowth of the 2007 Florida investigation, federal investigators are now looking into allegations of money laundering and other financial misdeeds. Villafana notes at the end of her letter to Lefkowitz: You accuse me of broadening the scope of the investigation without any foundation for doing so by adding charges of money laundering and violations of a money transmitting business to the investigation. Again, I consulted with the Justice Departments Money Laundering Section about my analysis...the duty officer agreed with my analysis. Conchita Sarnoff has developed multimedia communication programs for Fortune 500 companies and has produced three current events debate television programs, The Americas Forum, From Beirut to Kabul, and a segment for The Oppenheimer Report. She is writing a book about child trafficking in America. Lee Aitken is an editor and writer who has worked at Time Inc., the New Yorker, Cond Nast Traveler, and the International Tribune, among others. She lives in Washington, D.C. with her daughter. Like The Daily Beast on Facebook and follow us on Twitter for updates all day long. For inquiries, please contact The Daily Beast at editorial@thedailybeast.com.

URL: http://www.thedailybeast.com/blogs-and-stories/2011-03-25/jeffrey-epstein-how-the-billionaire-pedophile-got-off-easy/p/

4 of 4

3/26/2011 6:40 PM

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

News

Secret Agent Schmuck

The spooky truth behind the media's favorite 'spy'
by Chris Thompson
October 23rd, 2007 8:56 PM

It was a morning a little more than a year ago: A dapper, gray-haired gentleman was discussing his recently published novel with the two hosts of Fox & Friends, the morning show on the Fox News Channel. Anchors Tiki Barber and Kiran Chetry appeared enthralled by the author, Juval Aviv, who said that his book was actually a barely disguised account of the life and alleged 1991 murder of millionaire media tycoon Robert Maxwell. Aviv provided his bona fides: He runs a Madison Avenue corporate-espionage firm named Interfor and had been hired to investigate some aspects of Maxwell's complex finances. But during his investigation, Aviv had discovered explosive truths. Maxwell, Aviv said, had actually been a spy for the Russian, British, and Israeli intelligence agencies, and had paid with his life when his spymasters discovered that he'd doublecrossed them. Aviv claimed to his Fox News hosts that the revelations in his book were so stunning that he'd had to novelize the tale to protect himself. If he'd told the actual truth, he hinted, he'd have been killed. "I couldn't write it as a nonfiction," said the Israeli man in his accented English. "It had to be fiction. I don't think I would have survived the nonfiction version of it." Barber and his co-anchor looked duly impressed. And why not? Here was the real deal, a former Israeli spy who had reportedly spent the 1970s hunting Palestinian radicals around Europe and the Middle East, whose life story was so terrible that he could only allude to it. "You were a top assassin for Mossad, which is Israel's secret service," said Chetry. "In your book, the main character has a situation where he's supposed to knock off 12 leading terrorists and kill them." "Yes," Aviv said. "How realistic is that?" "It's very realistic." Laughing modestly, he added: "I can't talk about it."
http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (1 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

It was just another day in the life of Juval Aviv, an "international security expert" and post-9/11 media celebrity who has parlayed his mysterious past into countless appearances on local and national television. Most famously, Aviv has promoted the idea that he was the lead Mossad assassin tasked with avenging the 1972 massacre of Israeli Olympic athletes in a secret operation that was portrayed in Steven Spielberg's 2005 film Munich. It was Aviv that actor Eric Bana was supposedly playing, though his name in the movie was "Avner." At least that's what Aviv wants people to believe. Aviv has chatted on air with ABC's George Stephanopoulos and CNN's Mary Snow. Bill O'Reilly has consulted Aviv on preparedness and homeland security. Fox business anchor Neil Cavuto has often invited him onto his show Your World with Neil Cavuto to discuss everything from Middle Eastern politics to the latest dispatch from Osama bin Laden. Thanks in part to Aviv's high TV profile, his company Interfor has won some of the most lucrative corporate-espionage contracts in the business. Earlier this summer, for example, Hollinger hired Aviv to trace assets allegedly hidden by the disgraced media tycoon Conrad Black. Life as a former spook is apparently very lucrative. But throughout Aviv's rise as one of New York's biggest corporate spies and as a terrorism expert on television, there have been nagging questions about his legitimacy. Is this guy really who he says he is? Officially, the Israeli government says that Aviv is full of it. According to a 1990 letter from Yigal Carmon, then the Israeli prime minister's counterterrorism adviser, Aviv was never an assassin, let alone the person chosen by Golda Meir to avenge the Munich massacre. "Aviv does not work and has never worked for the Intelligence Community of the State of Israel," Carmon wrote in response to an inquiry from the U.S. government. In fact, Carmon added, the closest that Aviv ever came to intelligence work was as a security official for an El Al office in New York. "His work in that capacity was terminated at the initiative of the employer because of unsuitability resulting from negative character traits," Carmon wrote. "During the course of his work Yuval [sic] Aviv was found to be unreliable and dishonest." Nonetheless, Aviv has built a remarkable career for himself. In
A still from Munich -- Robert ( Mathieu Kassovitz) and Avner (Eric Bana.) Juval Aviv claims that the part played by Bana is actually based on Juval Aviv's real

http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (2 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

life story. 1989, following the Pan Am 103 photo: Universal Studios and Dreamworks LLC bombing that killed 270 people in Lockerbie, Scotland, airline officials hired Aviv to investigate the incident. His reportalleging that the bombing was a CIA gun- and drug-smuggling operation gone terribly wrongwas leaked to the press, reportedly by Aviv himself. News outlets like Time, NBC, ABC, and Barron's picked up the story. But as more skeptical journalists began to examine Aviv's report, Pan Am officials suddenly dropped their plans to use it as a defense, and the media outlets that had run Aviv's allegations squirmed under the scrutiny. A Brooklyn federal magistrate later found Aviv's report to be utterly without merit.

Today, American intelligence officials who were charged with investigating the Pan Am 103 bombing are still furious with Avivand they fume over the fact that national television outlets treat him as anything but a fraud. "This crud, this piece of dirt, went around inventing stories about how this plane got destroyed, because he was paid money to do so," says Vincent Cannistraro, the former chief of operations and analysis at the CIA's Counterterrorism Center. "The man is not worth being in human company, frankly." "This guy's full of shit," says Larry Johnson, who served in the CIA and as a deputy director in the State Department's Office of Counterterrorism. "What's true is, yes, he has a security and corporate-intelligence firm, and he's big at playing up the Israeli mystique. If you say it with a foreign accent, you're good to go." Aviv, these senior counterterrorism officials insist, is no terrorism expert; instead, he's a liar who's been spreading falsehoods about his rsum and his prowess as an investigator. But even Aviv's most virulent critics express astonishment at what he's been accused of doing lately. Court documents allege that in 2003, Aviv signed an intelligence contract with the NXIVM Corporation, an Albany-based company that offers seminars in achieving personal and business goals, and whose devotees include heirs to some of the richest fortunes in America and Mexico. In the last few years, former members of NXIVM have come forward to claim that the company is in fact a predatory personal-growth cult that subjects its members to intensive brainwashing and requires them to swear their lives to its leader, an accused pyramid-scheme operator and self-styled genius named Keith Raniere. According to court papers, NXIVM hired Aviv to dig up dirt on someone that Raniere considered an enemy: New Jerseybased cult expert Rick Ross, a controversial figure himself who is also a frequent guest on television news programs. Ross had been working with people who wanted his help to get family members out of NXIVM, and had been posting damaging news stories about Raniere on his website.
http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (3 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

Ross is now suing NXIVM and Aviv, claiming that over the course of several months, Aviv and Interfor compiled an extensive report on him that included private financial and telephone recordsinformation that Ross says was illegally obtained. Ross complains that he was even the target of an elaborate sting operation orchestrated by Aviv on behalf of NXIVM, which involved trying to lure him onto a ship in the Caribbean. NXIVM and Raniere have denied the allegations and are suing Ross as well, charging him with copyright infringement, misappropriation of trade secrets, and product disparagement. But the Voice has learned that Aviv has done other work for Raniere, an odd figure who requires his followers to refer to him as "Vanguard." The Voice has obtained evidence that Aviv agreed to investigate Raniere's ex-girlfriend, a woman who says she has been systematically harassed, intimidated, and terrorized by members of NXIVM. Juval Aviv: trusted Fox News terrorism expert, or a fraudulent tale teller willing to hire himself out to a thuggish cult leader? It's a question that is at the heart of three lawsuits in two jurisdictions, with as many twists and turns as an espionage potboiler.

Much about Aviv's life remains a mystery, but here's what he's claimed. Born in Israel in 1949, Aviv supposedly became a major in the Israeli Defense Force and joined the Mossad in the late 1960s. After spending a few years doing spook work for Israel, a disillusioned Aviv left the Mossad and was banned from re-entering Israel for a time. So he stayed in New York and drove a cab while he figured out how to put his life back together. In 1979, Aviv founded Interfor, which today says it has 500 employees and 23 offices worldwide. The notion that Aviv was the leader of a Mossad assassination squad that murdered the terrorists responsible for the Munich massacre dates back to the mid-1980s, when Canadian journalist George Jonas wrote Vengeance, a nonfiction account of the killings that later became the template for Spielberg and screenwriter Tony Kushner. Jonas gave the name "Avner" to the person he said he relied on for his account, the person he claimed was the lead assassin of the group. After the book's publication, Aviv claimed that he was in fact the "Avner" character. But Jonas later denied that he and Aviv ever collaborated at all. These days, Aviv is more coy about his Munich claims. Last year, when Aviv was hawking his Robert Maxwell novel, correspondent Andrew Billen of The Times of London asked him if he'd led the Mossad team. "I can't tell you that," Aviv replied. "Let me just tell you one thing. There is no statute of limitation to the events in the book Vengeance and in the movie. It has become a popular thing lately for families of those who were killed to sue Israeli officials and ex-Mossad agents."

http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (4 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

Indeedand if Aviv really were the "Avner" figure portrayed in the movie, one would expect the Mossad to deny that he had been an assassin on its payroll. But investigative reporters and CIA officials have strenuously challenged Aviv's claims since as early as 1992. Producers for the CBS show 60 Minutes, for example, initially considered Aviv a treasure trove of intelligence, and planned to put him on retainer as a consultant for their stories about Pan Am 103 and international terrorism. But after vetting his background, they dropped him as fast as they could. "He comes across as very believable and can cite all kinds of people that he knows," says the 60 Minutes producer who worked with Aviv (and who refused to be identified). "But when you start checking, you find out it's not there." According to Larry Johnson, who worked on counterterrorism for the CIA and the State Department, all it takes to disprove Aviv's claims is to consider that he supposedly worked for the Mossad in the late 1960s and early '70s. But Aviv was born in 1947. In 1972, he was only 25 years old. "Rightthey're gonna put somebody that young and inexperienced to be the lead Mossad assassin? It's bullshit," Johnson tells the Voice. Yossi Melman, an Israeli journalist who specializes in intelligence issues, has written in Haaretz and The Guardian that Aviv was not only never in the Mossad, but he even failed basic training as an Israeli Defense Force commando. When asked to comment, Aviv told the British newspaper The Independent that Melman is angry because Aviv refused to cooperate with him on a book project. Melman promptly called Aviv a liar again. According to Interfor's public-relations director, Stephen Braswell, Aviv has been "traveling" and is unavailable for comment. However, Braswell added, Aviv stands by his claim to have been an Israeli intelligence agent, just as he stands by his investigation of the Pan Am 103 bombing. But it's his work on the Lockerbie affair that has led so many intelligence officials and investigative reporters to denounce him as an unscrupulous fraud. On December 21, 1988, Pan Am 103 was directly over Lockerbie en route to New York when roughly one pound of Semtex explosive detonated in the forward cargo hold. The explosion punched a hole in the fuselage, and shock waves tore the plane apart, killing 259 passengers and crew, including at least four CIA agents. Law-enforcement agencies scrambled to investigate. Meanwhile, families of the victims sued the airline, claiming that Pan Am officials had ignored key security procedures and let the unaccompanied suitcase containing the bomb onto the plane. As Pan Am's lawyers began preparing their defense, they hired Juval Aviv to investigate the bombing. Aviv submitted his report a few months later. It was a masterpiece of boilerplate spy stuff, with unnamed intelligence sources, a secret drugs-for-hostages swap overseen
http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (5 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

by rogue CIA elements, and a multilateral terrorist network that Aviv dubbed the "Interterror Group." According to Aviv's report, a Frankfurt-based CIA group had cut a deal with the Syrian arms and drug smuggler Monzer al-Kassar (for more on Kassar, see the recent Voice story "Busting the Merchant of War," July 24), in which the rogue CIA group would let Kassar ship drugs to America on Frankfurt Pan Am flights in return for his help securing the release of American hostages in Beirut. Kassar also allegedly used his drug profits to finance the shipment of arms to the Nicaraguan contras. Meanwhile, Aviv wrote, Kassar's terrorist friends decided to exploit his access to Pan Am cargo holds to smuggle a bomb on board one of the planes. As the terrorists carried out their operation, West German intelligence agents allegedly warned the rogue CIA group that a bomb was about to be placed on a Pan Am flight. But the group did nothing to stop it. Why? Aviv suggested that a second CIA unit had gotten wise to the drugs-for-hostages deal and was flying back to Washingtonon that very flightto rat out their colleagues and even go to the press, if necessary. The implication was clear: An outlaw group of CIA spooks let the plane be destroyed in order to cover up a vestigial limb of the Iran-contra scandal. Despite the outlandish claims and the lack of named sources, Aviv suggested that his story could play very well in the national media. "From the perspective of journalists," he wrote, "it is publishable speculation." Sure enough, Time magazine published a version of this very story a few months later, headlined "The Untold Story of Pan Am 103." But after a little digging, reporters with the English Sunday paper The Observer claimed that almost all of Aviv's "inside" information about Kassar had been cribbed from a recently published German book about the arms dealer. Aviv, they concluded, "had pieced together known events and facts in a wild conspiracy." (Interfor representatives defended the Pan Am report in an e-mail message to the Voice but didn't go into detail.) Pan Am eventually dropped the Aviv defense and was found liable in federal court for willful misconduct. According to plaintiffs' attorney Jim Kreindler, the Interfor report seriously damaged Pan Am and Aviv personally. "He made up all this nonsense and then leaked it to the press," Kreindler says. Pan Am wasn't the only one embarrassed by Aviv's work. In 1992, Steven Emerson, a former CNN correspondent who specializes in security and terrorism, wrote a detailed Washington Journalism Review account of just how Time, NBC, and ABC had bought into Aviv's story. When told that Aviv now regularly appears on national television as a credible terrorism expert, Emerson was flabbergasted. "It's amazing to see how many times he fooled people," he says. On the other hand, Emerson adds, television news bookers have neither the time nor the procedures to vet the "experts" who show up at their studios: "It's so easy to go on the air and pretend you're something you're not. . . . The trick in television is just to fill up the time."

http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (6 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

As the former head of the CIA's Pan Am 103 investigation, Vincent Cannistraro still feels bitter about Aviv's involvement. "I knew people killed on the flight," he says. "And [Aviv] comes around and points the finger at everyone except the people responsible for it. . . . He'll invent anything, create any kind of scenario always referring back to intelligence, because it's murky and no one can check his credentials. That's the kind of person he is. He's an awful persona despicable person." The government apparently agreed: In 1995, the U.S. Attorney's office in Manhattan charged Aviv with wire and mail fraud. The U.S. Attorney's office charged that, in 1991, General Electric had hired Aviv to submit a report on the security of Caribbean vacation sites that G.E. employees planned to visit, and that Aviv falsely claimed to have interviewed five government officials and one FBI agent for his report. However, it was a weak accusation: Aviv was paid only $20,683 for the job, G.E. officials had never complained about his work earlier, and, during the trial, Aviv was able to produce telephone records to refute the main charge. His attorney, Gerald Shargel, argued in court (rather convincingly) that the case was really about the government's lingering anger over Aviv's involvement in the Pan Am matter. "It is an obvious vendetta," Shargel wrote in response to the indictment, "with agents and prosecutors determined to dig and dig into Mr. Aviv's past at whatever expense, and to manipulate and contrive until they can formulate a theory of criminal liability that can be used to discredit Mr. Aviv here and abroad. It is by discrediting him that the government hopes to stamp out the vexatious and powerful public concern over its distasteful involvement in the Lockerbie affair." The jury agreed and acquitted Aviv of all charges. And so Aviv was free to rebuild his reputationa surprisingly easy task, thanks to 9/11, his reputed Mossad history, and the short attention span of television producers. To be fair, Aviv's reputation as an expert in asset recovery and researching overseas accounts has never been disputed. In addition to his novel about Robert Maxwell, he has also written two books on how to protect one's home, family, and business against terrorist attacks and "minimize your exposure to the next catastrophe." But given his taste for the clandestine, it was perhaps inevitable that controversial, even allegedly sinister figures would crave his services. In October 2003, the leaders of NXIVM Corporation sought him out.

It had been a tough month for NXIVM. The Albany Times-Union had been running stories all year detailing the company's compulsive secrecy, its members' dazed expressions, the exorbitant fees for its 10-hour-long self-help "seminars," and the
http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (7 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

demand that initiates bow whenever leader Keith Raniere walked into the room. A lengthy Forbes article depicting NXIVM as a strange, manipulative cult was about to go to press. And the family of Kristin Snyder, who had allegedly committed suicide after fleeing one of NXIVM's 16-day "intensive" courses, was starting to raise a fuss. According to Joseph O'Hara, a local attorney who worked as a liaison between NXIVM and Aviv, Interfor was initially hired to investigate the circumstances surrounding Snyder's death. The Times-Union account of Snyder's last few weeks described a vivacious, confident farm girl whose personality quickly disintegrated after she attended her first 16-day NXIVM session. Her family claimed that she had become an angry, moody insomniac. Snyder told her family that she'd recently learned she had been sexually abused as a child, and that she was morally responsible for the destruction of the Columbia space shuttle. In February 2003, while attending another NXIVM seminar in Alaska, Snyder vanished without a trace; authorities concluded that she paddled a kayak into the middle of a freezing lake and then capsized it. When police discovered Snyder's truck, they found a notebook inside. "I attended a course called Executive Success Programs (a.k.a. Nexium)," Snyder wrote. "I was brainwashed and my emotional center of the brain was killed/turned off. I still have feeling in my external skin, but my internal organs are rotting." According to the accounts by Forbes and newspapers around Albany, NXIVM was founded by Keith Raniere, a self-proclaimed genius who, at 12, allegedly took less than a day to teach himself high-school math. While working as a computer programmer in the late 1980s, Raniere became a devotee of Ayn Rand and soon was convinced that self-interest was the apogee of ethical behavior. Setting up a company called Consumer Buyline, he allegedly hawked memberships in a nonexistent discountconsumer-goods club, wowed crowds with his extraordinary charisma, and promised lucrative commissions for members who recruited more customers into the group. But in 1993, as the company's bills began to stack up, the New York attorney general filed suit, charging that Consumer Byline was just another pyramid scheme designed to sucker membership fees out of unwitting customers. As 24 other attorneys general began investigating the company, Raniere shut it down and agreed to pay $40,000 to make the lawsuit disappear. Asked about the attorney general's charges, NXIVM spokesman Phil Robertson noted that Raniere had never admitted any wrongdoing, and also that he suspected the whole investigation was a conspiracy engineered by Wal-Mart, which felt threatened by Consumer Buyline's low discount prices. "It's just a brilliant idea to save people money, and I think the pinch was felt in Arkansas, and Wal-Mart felt the pinch, and they said, 'Let's collapse this guy.' " Raniere has done considerably better with NXIVM. Originally dubbed Executive Success Programs, the company offers Ayn Randian seminars on personal growth
http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (8 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

and achieving business goals. But critics say that the exhaustive, 10-hour sessions are designed to break down students' personalities and isolate them from family and friends, until they're dependent on NXIVM for their self-esteem and willing to pay good money to get it. NXIVM devotees include some of the richest people in America and Mexico, such as two heirs to the Bronfman/Seagram's fortune, Black Entertainment Television co-founder Sheila Johnson, and the children of former Mexican presidents Carlos Salinas and Vicente Fox. No one has complained about NXIVM more tirelessly than Rick Ross, a New Jersey based "cult deprogrammer" who has spent years compiling information on predatory cults around the country. Ross says he first heard of NXIVM in late 2002, when a family called to complain that their son had gotten involved with a strange new group and had recruited their daughters for the seminars as well. A private eye dug up the pyramid-scheme accusations against Raniere's earlier venture, and one of the daughters gave notes from her NXIVM seminars to Ross, who forwarded them to a few psychiatrists. John Hochman, a UCLA behavioral-psychiatry professor, concluded that NXIVM's curriculum employed classic group mind-control techniques: long seminar hours, isolation from friends and family, redefining English words to fit the ambitions of group leaders, paramilitary rituals (Raniere's followers are forced to wear sashes displaying their rank and to address him as "Vanguard"), and daily contact with group leaders "framed as personal growth." "They claimed that they had a 'breakthrough technology,' " Ross says. "What they really have, in my opinion, is just another large group-awareness training program, very similar to [the personal-growth cult] Landmark Education, with certain aspects that are almost verbatim from the teachings of Scientology." NXIVM's Robertson replies that Ross merely paid Hochman a fee to write the analysis he wanted. "Hochman was paid by Ross or others to create a report," he said. "So he's compromised. It's not a scholarly report; he was paid to come up with a certain production." As for Ross, Robertson claims that he's just a "thug" who incites fear of cults in innocent people to make a buck. "Ross is paid to create cults. That is to say, the more cults, the more opportunities he has to make money deprogramming people. . . . The man's a criminalin my opinion, anyway." Armed with this report, Ross lured his clients' son to a Florida vacation resort and tried to talk him into leaving NXIVM; however, the son refused and later moved to Raniere's Albany headquarters. But the rest of the family got out, and Ross published Hochman's report, along with everything else he could find on NXIVM, on his website. NXIVM's leaders promptly sued him for copyright infringement; the lawsuits and countersuits are stuck in federal court to this day. As part of NXIVM's legal strategy, Juval Aviv was allegedly given a new assignment in 2004: take on Ross as a special project.

http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (9 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

Around November 2004, according to a lawsuit that Ross filed against NXIVM, an Interfor representative called and asked him if he wouldn't mind speaking to a gentleman named Juval Aviv. "He told me that a very old friend of his, an old and dear friendnot just a client, but someone that was a personal friendhad a daughter in NXIVM and wanted to do an intervention to deprogram her," Ross said in a later interview. "And he repeatedly said that the mother was very wealthy, the family was very wealthyas if to impress me, I suppose, or get my interest." Ross agreed to meet the mother and Aviv at Interfor's office on Madison Avenue. Later that month, Ross walked into the lobby and met Aviv for the first time. "I couldn't help but notice that his hand was sweaty when he shook my hand," Ross recalled. "And I thought that he was very nervous. And he seemedhow do I put it? an oily creature." The two men allegedly sat in a conference room with Interfor attorney Anna Moody and a distraught woman who called herself Susan Zuckerman, but who, Ross claims he would later discover, was really a professional actress. "She tells me she's very worried about her daughter," Ross says. "That her daughter is brainwashed, that she's in NXIVM, that she's sold family heirlooms to pay for courses. That her husband is sick over it, that he had to go to pawnshops in Manhattan and find these things and buy them back. That they've had terrible arguments over this, that she's very worried and doesn't know what to do." According to Ross's lawsuit, Moody asked him what he knew about NXIVM. As a tape machine recorded the conversation, Ross spent at least an hour explaining what he'd discovered about the group, Raniere, and the psychological effects of the "seminars." After speaking with Zuckerman, the allegedly grieving mother, Ross agreed to conduct an intervention, but added that he wouldn't have anything to do with physical restraint. The daughter, he insisted, would be free to leave at any time. "Aviv walks me to the elevator, even rides the elevator down to the lobby with me," Ross later recounted. "And then he gushed to me that there would be other cases that we could work on, and that there would be other cults that he would like to go after, and so on. I thought, 'Man, this guy is really nervous.' And he just seemed to go overboard, and he was really solicitous." In April 2005, according to the lawsuit, Ross returned for a second meeting. In a discussion about how such an intervention would work, Ross advised the people assembled that because NXIVM leaders had a habit of constantly interrupting the deprogramming with phone calls and e-mails, it was best to have it take place somewhere isolated. Someone at the meeting suggested a cruise ship in the Caribbean. Ross would later recall that the more the cruise-ship notion was floated, the more excited Aviv and Moody became. They even paid him a $2,500 retainer. But then Ross warned Moody that, as an ethical principle, he would never be alone in the room with the daughter; someone she trustedher mother, or family friend Aviv would always have to be present. Ross claims that Moody appeared crestfallen at the news. A few weeks later, an Interfor representative telephoned Ross and called the
http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (10 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

whole thing off. Meanwhile, NXIVM's consultant, Joseph O'Hara, was growing more and more disturbed at what Aviv and Raniere were planning for Ross. O'Hara ultimately stopped working for NXIVM, and now the company is suing him as well. According to records found in this lawsuit, Interfor faxed O'Hara a "confidential document" on November 23, 2004. The report was, in fact, a dossier that Aviv and Interfor had prepared on Rick Ross, detailing every piece of dirt they could find on him. "Ross' past criminal record, psychiatric history, and financial bankruptcy leaves him extremely vulnerable if all the source information so far indicated checks out," the report read. Interfor tallied every damaging item its investigators could find: Ross saw a shrink as a teenager and was once diagnosed as "hyperkinetic child"; he was arrested for vandalism when he was 10; after a deprogramming incident went bad, he was sued for kidnapping and declared bankruptcy. (Ross had tried to help a woman get her son out of a church that Ross considered a Bible-based cult, but the son, who was over 18, claimed that he'd been held against his will. Oddly, it was the Church of Scientologywhich had no relation to the son's churchthat encouraged him to file the suit against Ross and paid all of his legal costs. That famous case had bizarre repercussions: Eventually, the Church of Scientology won control of the Cult Awareness Network, its longtime enemy, through this case.) But the Ross dossier went much deeper than that. Interfor had also accessed Ross's personal checking account, recorded his financial assets, and even listed all the checks he had written in October 2004right down to the check number and the amount. In addition, Interfor had obtained Ross's telephone records and listed phone calls that he had made from 2002 to 2004. "Some of the material in the report appeared to me to be illegally obtained," O'Hara said in a later interview. (Interfor representative Stephen Braswell refused to discuss this report or anything related to Rick Ross and NXIVM.) The very next day, an alarmed O'Hara penned a note and hand-delivered it to Keith Raniere. "At least some of the information that is contained therein could not have been obtained legally," O'Hara wrote, according to court records. "I was not aware that this review would involve any illegal and potentially criminal activities. . . . It is imperative that you . . . immediately direct Interfor to cease and desist any such activities. . . . This specifically includes, but is not limited to, the 'Sting Operation' that Keith has proposed having Interfor undertake with respect to Mr. Ross." In January 2005, O'Hara quit his job with NXIVM and took boxes of documents with him. A few months later, he gave Interfor's report on Ross to Chet Hardin, a reporter for the Albany alternative newsweekly Metroland. Mere months after his bizarre encounter with Aviv, Ross got a phone call from Hardin, who told him that Interfor had compiled a secret profile of him, complete with his private financial information and phone records. "I thought Chet was nuts," Ross says. "Hardin said to me, 'Well, would you just go pull a statement? Just pull your statement. . . . I went through it with him, and [he] had all kinds of information that was detailed down to the penny deposits, check numbers, everything.' "

http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (11 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

When Ross later called O'Hara, he realized that Interfor had been working for NXIVM all along. Suddenly, it all started to make sense. There was never any Susan Zuckerman, never any daughter she wanted freed from NXIVM's clutches. Aviv, Ross would later claim in a $1 million lawsuit, was just setting him up for something. Those hour-long recorded conversations with Interfor's lawyer were just fishing expeditions to find out what Ross had on the company. The whole time that Aviv was pretending to be a kindly old man looking out for his friend's daughter, he was allegedly snooping through Ross's private life, looking for anything that could hurt him. But what was that cruise all about? Why were they so excited to get him alone in the middle of the Caribbean? According to O'Hara, a young, female NXIVM leader named Kristin Keeffe was supposed to play the role of the daughter. When O'Hara asked what Keeffe planned to do with Ross out on that big boat, she allegedly replied, "We're going to convert him." In the end, no one will probably ever know how Raniere's alleged "sting operation" would end. According to NXIVM spokesman Robertson, company leaders were appalled to learn what Aviv was up to. Robertson also claimed that O'Hara is a corrupt lawyer who is sure to be eventually disbarred and accused him of embezzling $250,000 in NXIVM funds. O'Hara cryptically replied that the matter is the subject of litigation, and that the lawsuit is on the eve of being settled amicably. Robertson says that NXIVM was barely in contact with Aviv, whom O'Hara hired on its behalf for entirely legal investigations. "We knew nothing here about a sting," he said. "We had no participation in any sting. We found out about it afterward. What we saw was, a corrupt attorney hires a corrupt private investigator. . . . We certainly didn't and would notauthorize illegal activities. That was his doing, and I understand that's his nature. He's pretty much a loose cannon." When asked if he regretted hiring Aviv, Robertson replied: "How can you not regret hiring the guy who would pad his hours, he'd fabricate, he'd create stories that he couldn't document, and behind your back he creates fantastic programs like, uh, we later found out he was going to do some kind of insane sting kind of deal. . . . We're certainly not responsible, nor do we condone this type of activity. Aviv did it, there seems to be no doubt. How he did, I don't know. I heard that he was rummaging through garbage." Ross's battle with NXIVM has received publicity elsewhere, but in the course of researching Aviv's past and his involvement with Raniere, the Voice learned that this wasn't the only time the corporate spy was asked to pursue one of Raniere's detractors. Toni Natalie was just a mom with a 10th-grade education, and all she wanted to do was leave Raniere behind her. But according to her and O'Hara, Aviv was hired to go after her as well.
http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (12 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

Natalie first met Raniere when he was running Consumers Buyline. She and her husband had sold a bumper crop of commissions, and Raniere allegedly invited them up to Albany for an awards ceremony. According to Natalie, Raniere became attracted to her, offered her intensive counseling to help her quit smoking, and promptly manipulated her into breaking up her marriage. "Before I knew it, he had me convinced that my husband was cheating on me and was having an affair with my nanny," Natalie recalls. "It was all a lie . . . the next thing I knew, I was divorced and living in Albany." Natalie claims that she secretly dated Raniere for a while, but she became unnerved by all the women he kept around him, as well as his odd promises that she would bear his child and that this child would save the world. "So I tried to break it off with him," she says. That's when the stalking started. Raniere's followers, Natalie says, "broke into my house; they would come and ring the doorbell at all hours of the day or night. They would tell me that I had to come with them, that he was dying, that if I didn't stay with him, he was going to die. . . . They tortured meI got down to, I don't know, a hundred pounds." After six months of this, Natalie says she returned to Raniere and dated him until 1999, when she tried to leave him again and open a restaurant in Rochester. And once again, she claims, the torment resumed. "When I finally did leave, they would break into my house and flip pictures upside down, they'd unmake my bed, steal clothes out of my closet. . . . They stole my mail, they shut off my phone, they shut off my electricity. They called me up and asked me if I knew where my son was. . . . They used to stand in front of the restaurant for hours, telling my waitresses, 'You don't understand, she has to come backshe's the chosen one!' " Eventually, Natalie says, the hounding faded away, and she set out to rebuild her life. But last summer, Joseph O'Hara contacted Natalie and faxed her a document that might, he said, be of interest to her. The document, which Natalie provided to the Voice, was a January 14, 2005, invoice from Interfor to O'Hara, in which Aviv and his associates agreed to follow Natalie, spy on her in her house, and dig into her financial records. "Interfor will conduct a discreet, confidential investigation on Toni Natalie," the invoice read. "Interfor will monitor the current activities of Ms. Natalie at her house and certain other residences as discussed. . . . Interfor will conduct an asset investigation of Toni Natalie focusing on current holdings as well as possible fraudulent activity (i.e., using her dead aunt's credit cards)." O'Hara confirms that he sent the invoice to Natalie. Only now, Natalie says, has she been able to discuss this ordeal in detail. "They're scary, scary people," she says of NXIVM. "I can talk about it now, but up until three years ago, I was a babbling idiot. . . . You have no idea. If a door slammed, I'd be stuck on the top of the ceiling." Asked about Natalie's allegations, NXIVM spokesman Robertson says that Aviv was
http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (13 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

merely retained to investigate whether Natalie committed fraud when she filed for bankruptcy in 1999. "I couldn't tell you what Aviv did with this Natalie woman, except that he was certainly not authorized by us to do anything other than to find out if she's committing fraud," he says. As for her claims that Raniere and his associates stalked and terrorized her, Robertson replies that Natalie is a deranged felon who embezzled a fortune and defrauded numerous banks. "She is a habitual thief, and she's a criminal," Robertson says. (The Voice, however, could turn up no evidence that Natalie has ever been charged with a crime.) "She's psychologically damaged. The woman isshe's a classic kind of person who likes to pretend fear where she's really the victimizer. . . . It's ridiculous to suggest, as Toni has, that she was harassed." Then, after denying that Natalie had been the subject of harassment, Robertson emailed the Voice an obsessively detailed 25-page report on her compiled by NXIVM associate Kristin Keeffe (the same woman who was supposed to be on the ship in the Caribbean with Ross), which was the result of an investigation into every aspect of her lifeincluding her family, her husband, and the restaurant chain they operate with 47 endnotes, including references to credit-card statements and lease invoices. Keeffe's report accuses Natalie of no fewer than 260 counts of bank fraud, racketeering, and money laundering. Somehow, Robertson expected that this report almost frightening in its level of detailwould prove that Raniere has put his involvement with Natalie behind him. In 2003, when Raniere levelled these same charges against Natalie at her bankruptcy hearing, Judge Robert Littlefield found the claims to be utterly unsubstantiated. He dismissed the report, saying: "This matter smacks of a jilted fellow's attempt at revenge or retaliation against his former girlfriend." O'Hara, Ross, Aviv, and NXIVM are all still suing each other, and the cases don't seem likely to be resolved any time soon. Natalie fought Raniere over a bankruptcy proceeding for years; now, she said, she just wants it all to go away. In the years since his adventures with NXIVM, Aviv has done very well for himself, snagging contracts with Hollinger and other Fortune 500 companies. Fox News, CNN, and other national news outlets still call and ask his counsel on the latest turn in international affairs. None of them seem to have done much to vet his credentials. Audrey Pass, a booker on Fox 5 News (which regularly interviews Aviv on the air), insists that the station has a proper procedure for researching the backgrounds of their expert guestshowever, she adds, "I'm not going to discuss what those procedures are." CNN spokeswoman Edie Emery also promised that the network's background checks are thorough. "Based on the information that he provided at the time," she says, "we vetted him." Meanwhile, people like investigative reporter Steven Emerson and former CIA official
http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (14 of 15) [12/16/2007 6:24:48 PM]

http://www.villagevoice.com/generic/show_print.php?id=78154...2U9dXBkYXRlJnNlY3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ==

Vincent Cannistraro shake their heads in disbelief. Despite all the accusations of fraud, manipulation, plagiarism, and invasion of privacy over all these years, the gravy train just keeps rolling for Juval Aviv. More by Chris Thompson

No More Scars A notorious boob doc is shut down with finality. The lawsuits, however, are still ballooning Plastic Surgeon to the Scars Brad Jacobs went from shaping Playboy bunnies to defending himself against charges of butchery NIMBY Love Fighting Atlantic Yards takes hard work and . . . wedding vows? The Killing of a Journalist Voice reporter Chris Thompson recalls a fallen colleague and his own days on the run Busting the Merchant of War The Bush administration finally nails a notorious supplier to terroristsafter he spent 30 years hiding in plain sight

http://www.villagevoice.com/generic/show_pr...3Rpb249JmlkPTc4MTU0Jmlzc3VlPTA3NDMmbXNnPQ== (15 of 15) [12/16/2007 6:24:48 PM]

THE LAWRENCE FAMILY 1991 INTER VIVOS TRUST

ORIGINAL SETTLEMENT DATE

JANUARY 8TH, 1991

PLEASE READ IN CONJUNCTION WITH DEED OF APPOINTMENT OF FEBRUARY 7TH, 1991. PROPER LAW : IS LAW OF MAURITIUS. ORIGINAL TRUSTEE:

TARGAFEN LIMITED

THIS DECLARATION OF TRUST is made the eighth thousand nine hundred and ninety-one. BY
TARGAFEN LIMITED

day of January

One

(hereinafter called "the Trustees"). WHEREAS:The property specified in Schedule 1 hereto and described therein as the initial settled property is in the possession of the Trustees who have determined to declare the trusts hereinafter set out, NOW THIS DECLARATION OF TRUST WITNESSETH as follows:1.
INTERPRETATION

(a) In this Deed wherever the context permits the following words and expressions shall have the following meanings:Words and Expressions Beneficiaries Meanings All and any of the persons specified or described in Schedule 2 hereto and such other persons added to the class of Beneficiaries in exercise of the power herein conferred upon the Trustees. charitable No object or purpose wheresoever situate shall be deemed to be charitable unless it would be recognised to be charitable according to the law of Jersey or the lay of England if one of such laws, were the law of the jurisdiction in which such object or purpose shall be situate and a body shall be conclusively deemed to be charitable i f

(d) At the expiration of the Trust Period upon trust as to both capital and income of the Trust Fund for all or such one or more exclusive of the other or others of the Beneficiaries in such shares and proportions if more than one and generally in such manner as the Trustees shall prior to or on the date of such expiration in their absolute discretion determine and in default of and subject to such
determination upon trust for such of the Beneficiaries as shall then be living in equal shares absolutely. (e) Subject to the foregoing trusts upon trust as to both capital and income for such charitable institution or institutions or charitable purpose or purposes and if more than one in such proportions as the Trustees shall in their absolute discretion determine and in default of and subject to such determination for charitable purposes generally. 6.

POWERS OF APPOINTMENT AND ADVANCEMENT Notwithstanding the trusts and provisions hereinbefore declared and contained the Trustees may at any time or times during the Trust Period if in their absolute discretion they shall so think fit:(a) By any deed or deeds revocable during the Trust Period or irrevocable appoint such new or other trusts powers and provisions governed by the law of any part of the world of and concerning the Trust Fund or the income thereof or any part or parts thereof for the benefit of the Beneficiaries or any one or more of them
exclusive of the other or others at such age or time or respective ages or times and in such shares and proportions and subject to such powers of appointment vested in any person or persons and such provisions for maintenance education or advancement or for

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA Case No. 93-6489-CIV-KING POMPANO-WINDY CITY PARTNERS, LTD, EAST WINDY ASSOCIATES, LTD., and STEPHAN J. LAWRENCE, Plaintiffs, vs. BEAR STEARNS & CO., INC., JERRY CANNING, RICHARD HARRITON and WILLIAM GANGI, Defendants, This Honorable accordance cause James with has L. 28 been King, U.S.C. referred United to the
REPORT AND RECOMMENDATIO
7-)

Pa co (21 1.71 un . ' undersigned by- t)* District Judge, in is

NJ CD

r,..

States

636(b).

Under

consideration

Defendant/Counter-Plaintiff Bear Stearns & Co., Inc.'s ("Bear Stearns")

Motion to Set Aside Transfer of Certain Assets and

Appointment of Receiver (D.E. 42). BACKGROUND

On March 14, 1992, an arbitration award was entered in favor of Bear Stearns in the amount of $20,412,115.00 against Stephan Lawrence, Pompano-Windy City Partners, Ltd. and East Wind Associates, Ltd. for trading losses sustained as a result of the October 1987 stock market crash. Final Judgment was entered by the United States Court for the Southern District of New York, confirming the award on February 17, 1993. On or about June 11, 1993, the Judgment was registered in the Southern District of Florida. To date, Lawrence has paid nothing toward satisfying the judgment and claims he is insolvent. Bear Stearns asserts that

Scanned Image - 0:93CV6489 Document 101 page 1 Sun May 23 11:14:34 1999

Lawrence has engaged in several fraudulent transfers designed to place his assets beyond Bear Stearns' reach and has failed to disclose the value and location of other various assets, to wit:11,

an offshore trust established in 1991 with Lawrence's contribution

Bear Stearns now moves to set aside such transfers. In addition, Bear Stearns requests that the said
assets be transferred to a Receiver to be used to provide for the orderly payment of the judgment.
ANALYSIS

Fed.R.Civ.P. 69 governs efforts to enforce a money judgment.

Rule 69 provides that the procedure in

aid of judgment, and in

proceeding on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held, unless there are federal statutes to the contrary. Thus, this Court turns to Florida law for guidance on how to enforce the outstanding judgment.

Under Florida law, supplementary proceedings to enforce a judgment are governed by Florida Statute 56.29. Such proceedings are commenced by the filing of an affidavit in which the judgment creditor shows that the sheriff holds an unsatisfied writ of execution against the judgment debtor which is valid and outstanding. 56.29(1); Regent Bank v. Woodcox, 636 So.2d 885, 886 (Fla. 4th DCA 1994). Bear Stearns has filed such an affidavit. 2

Scanned Image - 0:93CV6499 Document 101 page 2 Sun May 23 11:14:34 1999

Under section 56.29, "a judgment creditor may treat an attempted fraudulent transfer of property to which his debtor had legal title as a nullity and sell said property under execution as though no transfer had been made." Regent Bank, 636 So.2d at 886 (quoting Richard v. McNair, 164 So. 836 (1935)). However, should the judgment creditor seek to affect the rights of any third parties not a party to the original action, those third parties must be impleaded into the proceedings. Manor Grove Land Corp. v. Salkay, 390 So.2d 121 (Fla. 4th DCA 1980) (holding that it was error for the trial court to order that execution could be had against assets of trust to which corporate assets had been transferred to satisfy judgment against corporation). It is well settled that the court has no power to take property transferred to a third party unless the parties have been impleaded into the action, provided with notice, and given an opportunity to answer the judgment creditors' allegations. Machado v. Foreign Trade, Inc., 544 So.2d 1061, 1062 (Fla. 3rd DCA 1989); Juno by the Sea Condominium Apartments, Inc. v. Juno by the Sea North Condominium Ass'n, 419 So.2d 399 (1982); Mission Bay Campland, Inc.. v. Summer Financial Corp., 72 F.R.D. 464 (1976). In the instant case, the property rights of the Lawrence Family Trust and Rivers Edge, Inc. cannot be adjudicated by this Court unless the Trust and the corporation are impleaded as parties and given an opportunity to defend their assets.
Bear

Stearns has not yet moved to implead such third parties. Thus

this Court may not set aside the transfers to such third parties at
3

Scanned Image - 0:93CV6489 Document 101 page 3 Sun May 23 11:14:34 1999

this point in the proceedings.

Bear Stearns has produced insufficient evidence concerning the conveyance of these assets. Although the Court acknowledges that Bear Stearns has undoubtedly been delayed and hindered by Lawrence's failure to disclose and remember the location of various assets, it cannot find from the limited evidence presented that the conveyances were necessarily fraudulent. The Court is hopeful that the presence of the Special Master will aid the parties in fully establishing the record and recommends that Bear Stearns be allowed to refile the instant motion should more evidence in support of its position become available.

RECOMMENDATION

Based on the foregoing, it is hereby RECOMMENDED that Bear Stearns'

Motion to Set Aside Transfer of Certain Assets and

Appointment of Receiver (D.E. 42) be DENIED WITHOUT PREJUDICE.

Pursuant to 28 U.S.C. 636(b)(1)(B) and (C), the parties may serve and file written objections with the Honorable James Lawrence King, United States District Judge, within ten (10) days after being served with a copy of this Report and Recommendation. See
nettles v. Wainwright, 677 F.2d 404 (5th Cir. Unit B 1982).

RESPECTFULLY RECOMMENDED, in Chambers, at Miami, Florida, this

AP day of IP

()OA-

1996.

Scanned Image - 0:93CV6489 Document 101 page 4 Sun May 23 11:14:34 1999

CJ,
cc : Honorable James Lawrence King counsel of record

c_

WILLIAM C. TURNOFF

- -r,

Chief United States Magistrate Judge

Scanned Image - 0:93CV6489 Document 101 page 5 Sun May 23 11:14:34 1999

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

CASE NO. 93-6489-CIV-KING POMPANO-WINDY CITY PARTNERS, LTD., EAST-WINDY ASSOCIATES, LTD. and STEPHEN J. LAWRENCE, Plaintiffs,
V
.

n12-6177-

k777577 CUa

SI P I i 1 996
C L E. Re. v.s. S.D. LA. tA.44;

or

BEAR STEARNS & CO., INC., JERRY CANNING, RICHARD HARRITON and WILLIAM GANGI, Defendants.

ORDER AFFIRMING MAGISTRATE'S REPORT & RECOMMENDATION THIS

CAUSE

comes before the Court on the Report &

Recommendation of United States Magistrate Judge William C. Turnoff filed August 16, 1996. No objections have been filed. The Report recommends that Bear Stearn's Motion to Set Aside Transfer of Certain Assets and Appointment of Receiver be denied without prejudice. The Court concludes that the Report is a thorough and well reasoned recommendation which the Court adopts herein as grounds for denial of Bear Stern's Motion. Accordingly, after a careful review of the record, and the Court being otherwise fully advised, it is ORDERED and ADJUDGED that Defendant Bear Stearn's Motion to Set Aside Transfer of Certain Assets and Appointment of Receiver
be,

Scanned Image - 0:93CV6489 Document 111 page 1 Sun May 23 11:14:36 1999

and the same is hereby, DENIED WITHOUT PREJUDICE. DONE and ORDERED in Chambers at the United States District Courthouse, Federal Justice Building, Miami, Florida, this 10th day of September, 1996.

James Lawrenc King

sited States Dis ict Court

Southern District of Florida

cc: Howard N. Kahn, Esq. Robert A. Stok, Esq.

Scanned Image - 0:93CV6489 Document 111 page 2 Sun May 23 11:14:36 1999