Towers Financial Corporation

Towers Financial Corporation was a Manhattan, New York, debt collection agency.[1][2] Between 1988 and 1993, Towers Financial ran a Ponzi scheme that was the largest financial fraud in American history prior to Bernie Madoff's being uncovered.

Towers Financial Corporation
Typedebt collection agency
FateFiled for bankruptcy protection (March 1993)
FoundedEarly 1970s in Delaware
FounderSteven Hoffenberg
Headquarters
New York City
,
United States
Key people
Steven Hoffenberg, Jeffrey Epstein, Mitchell Brater, and Michael Rosoff

History

The company, founded in the early 1970s in downtown Manhattan and incorporated in Delaware, was a debt collection agency that paid a penny on the dollar for loans that sellers viewed as worthless, focusing on debts that people owed to hospitals, banks, and phone companies.[3][4][5][2] Steven Hoffenberg was its founder, CEO, President, and Chairman.[6][7][8][9][10][11]

Jeffrey Epstein

Hoffenberg hired Jeffrey Epstein in 1987 to help with the Towers Financial Corporation.[8][1] Hoffenberg set Epstein up in offices in the Villard Houses in Manhattan, and paid him $25,000 ($56,000 in current dollar terms) per month for his consulting work.[8] They unsuccessfully tried to take over Pan Am in a corporate raid with Towers Financial as their raiding vessel. Their bid failed, in part because of the 1988 terrorist bombing of Pan Am Flight 103 over Lockerbie, which ultimately contributed to the airline's bankruptcy. A similar unsuccessful bid in 1988 was made to take over Emery Air Freight Corp.[8]

Between 1988 and 1993, Towers Financial raised over $400 million by selling bonds and promissory notes to investors, luring them in using false financial statements.[12][13][1] Hoffenberg and his associates then used the money they had raised to pay operating costs, repay earlier investors, and to pay themselves.[1] Hoffenberg began using Towers Financial funds to pay for a lavish lifestyle that included a Locust Valley, Long Island mansion, homes on Sutton Place in Manhattan and in Florida, and a number of cars and planes.[8][14] The Ponzi scheme was the largest financial fraud in American history prior to Bernie Madoff's being uncovered.[1]

In February 1993, the Securities and Exchange Commission charged that the company, while fraudulently reporting a profit of $13 million ($24,000,000 in current dollar terms) for the four years ended June 30, 1991, actually lost $137 million ($257,000,000 in current dollar terms).[12][15][2] In March 1993, Towers Financial filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.[16][12]

Hoffenberg pleaded guilty in April 1995 to five criminal charges, cheating thousands of investors out of $462 million, surrendered to the FBI in Manhattan, and was arraigned and released on bail.[17][18][19][20][21][22][1] He was sentenced in 1997 by federal judge Robert W. Sweet to 20 years in prison, and was released in 2013, after serving 18 years.[23][1][16] He was also sentenced to pay restitution of $462 million ($736,000,000 in current dollar terms) and a $1 million fine.[19]

Towers Financial executives Mitchell Brater (Vice Chairman) and Michael Rosoff (chief legal officer) were handed prison sentences of seven to nine years, and Rosoff was disbarred.[24][15][1] Epstein was not charged.[1][12] In July 2019, Hoffenberg claimed that Epstein was his “uncharged co-conspirator” in the Ponzi scheme.[25]

Hoffenberg stated that he didn't turn in evidence against Epstein, mentioning Epstein "had traction with" The United States Department of Justice, and stated further, "You cannot grasp the magnitude of [Epstein's] controlling effect." [26]

In 2020 Hoffenberg added some corroboration to evidence published in a 2019 book indicating that Epstein was a top-level spy for Mossad.[27][28][29] Over three decades after the Towers Financial scandal and six years after his prison release Hoffenberg suggests an overall intelligence aspect to Epstein. He paints a picture of Epstein's long-term ability to avoid justice, stating this was enabled by being "needed by the CIA or the FBI for intelligence, because he was manipulating the American intelligence for the overseas organizations".[27]

In 2007-08 Epstein faced a serious portfolio of charges on statutory rape and sex trafficking. Although Florida Southern Attorney General Alexander Acosta agreed a Federal Non-Prosecution Agreement, reducing all charges to a single instance of solicitation of a girl under 18.[30] This simultaneously shut down an FBI investigation into more victims and conspiring and associated powerful perpetrators of sex crimes. [31] Hoffenberg references how Acosta stated publicly, “This is an intelligence criminal case, this is not a standalone criminal case.”[27]

Epstein's perceived exemption from justice described by Hoffenberg continues after his death. The 2007-08 Non-Prosecution Agreement was retained on appeal in 2020, effectively for the moment preserving the block and preventing future investigation into circumstances, people and organisations surrounding Epstein in those earlier charges.[32][33] Subsequently, in August 2020 an appeal court en banc review hearing of that decision has been ordered. [34][35]

Whilst Hoffenberg states that he was "double-crossed" by Epstein over the Ponzi scheme, he emphasised he has no "axe to grind" against Epstein but instead a "story to tell ... something to explain" over Epstein, about "his mindset, the profile, how Epstein saw things, and how he played the chess board".[27]

In 2020, a year after his alleged suicide while on detention in a Manhattan prison on new charges of sex trafficking involving minors, Epstein was described as having had a "major role" in the Towers Financial Ponzi scheme. [26] It was reported by journalist Vicky Ward that Epstein was "pivotal" in designing how the scheme worked. [26] In mid-2020 the American documentary mini-series Surviving Jeffrey Epstein claimed that Epstein was "at the absolute centre of the operation". [36]

References
  1. Brian Pascus and Mola Lenghi (August 13, 2019). "Jeffrey Epstein worked at financial firm that engaged in massive Ponzi scheme in 1980s and 1990s". CBS News.
  2. Allan Sloan (February 16, 1993). "THE SEC VS. STEVEN HOFFENBERG: A CASE OF LEANING FORTUNES AT TOWERS FINANCIAL?," The Washington Post.
  3. George Garneau (May 4, 2011). "Averting a Crisis". Editor & Publisher Magazine. Retrieved 2020-06-10.
  4. "Towers Financial Corp SEC Registration". sec.report.
  5. Salpukas, Agis (November 9, 1987). "Business People; Suitor Undaunted By Pan Am Doubts". The New York Times.
  6. Steven Jude Hoffenberg. "GUARANTEED COLLECTION CORPORATION'S JOINT VENTURE WITH SOME THREE HUNDRED (300) SMALL COLLECTION AGENCIES; INTRODUCTION INTO THE MR. HOFFENBERG PAST OWNERSHIP OF TOWERS FINANCIAL CORPORATION HEREINAFTER, TFC, WHICH WAS DEPOSITING lk BILLION DOLLARS PER YEAR IN 1992-1993"
  7. "Hoffenberg v. Hoffman & Pollok, 248 F. Supp. 2d 303 (S.D.N.Y. 2003)". Justia Law.
  8. Ward, Vicky (June 27, 2011). "The Talented Mr. Epstein". Vanity Fair. Retrieved 2020-06-10.
  9. Hoffenberg v. US, February 6, 2012.
  10. Alana Goodman and Daniel Halper (2020). A Convenient Death, Penguin Publishing Group.
  11. "Former CEO charged with fraud; Steven Hoffenberg, who..." Baltimore Sun. February 18, 1994.
  12. United States Securities and Exchange Commission (September 17, 1996)."Litigation Release No. 15053 / Accounting and Auditing Enforcement Release No.816; SECURITIES AND EXCHANGE COMMISSION v. MICHAEL ROSOFF," 96 Civ. 7064 (WK) S.D.N.Y.
  13. Stubbings, Dave (May 30, 2020). "Jeffrey Epstein net worth - how pedophile financier made his millions". Mirror.
  15. "SEC Sues Buyer of NY Post For Fraud". AP News. February 8, 1993.
  16. Jim Zarolli (August 14, 2019). "Jeffrey Epstein's Former Business Associate: I Want To Assist Victims". NPR.
  17. "Legal". South Florida Sun-Sentinel. March 6, 1997.
  18. "Financial executive faces fraud charges". Tampa Bay Times. October 6, 2005.
  19. "Hoffenberg sentenced to 20 years: Towers Financial..." Chicago Tribune. March 7, 1997.
  20. Bernstein, Jacob (August 12, 2017). "Trump Tower, a Home for Celebrities and Charlatans". The New York Times.
  21. Soltes, Eugene (December 14, 2016). "The Psychology of White-Collar Criminals". The Atlantic.
  22. Brock Colyar, Kelsey Hurwitz, Charlotte Klein, Ezekiel Kweku, Amy Larocca, Yinka Martins, Adam K. Raymond, Matthew Schneier, Matt Stieb, and James D. Walsh (July 22, 2019). "The High Society That Surrounded Jeffrey Epstein". Intelligencer.CS1 maint: multiple names: authors list (link)
  23. "Towers' Hoffenberg Gets 20 Years in Jail". The Wall Street Journal. March 10, 1997.
  24. "In Re: Michael E. Rosoff," July 6, 2000.
  25. Briquelet, Kate; Conner, Tracy (July 14, 2019). "Ponzi Scheme Victims Say Epstein Swindled Them". Daily Beast.
  26. Tron, Gina (June 3, 2020). "Jeffrey Epstein Allegedly Took Part In Ponzi Scheme Before Creating 'Molestation Pyramid Scheme'". Oxygen True Crime.
  27. Howard, Dylan (December 23, 2019). "Epstein 'Admitted To Me' He Was A Spy:". Medium.com.
  28. Skyhorse Publishing (December 3, 2019). "Jeffrey Epstein Allegedly Took Part In Ponzi Scheme Before Creating 'Molestation Pyramid Scheme'". PR Newswire.
  29. Howard, Dylan; Cronin, Melissa; Robertson, James (December 3, 2019). Epstein: Dead Men Tell No Tales. Skyhorse Publishing, Simon and Schuster.
  30. Robles, Francis; Thrush, Glenn; Qiu, Linda (July 10, 2019). "Examining Acosta's Claims on the Epstein Prosecution". The New York Times.
  31. Brown, Julie K. (November 28, 2018). "How a future Trump Cabinet Member Gave a Serial Sex Abuser the Deal of a Lifetime". Miami Herald.
  32. Pierson, Brendan (April 14, 2020). "Appeals court upholds Jeffrey Epstein's non-prosecution deal". Reuters.
  33. Gerstein, Josh (April 14, 2020). "Appeals Court Sides with Feds on Jeffrey Epstein Deal". Politico.
  34. Keller, Aaron (August 7, 2020). "Circuit Court of Appeals Orders Rehearing in Survivor's Case Involving 'Secret' Jeffrey Epstein Plea Deal". Law and Crime.
  35. Kam, Dara (December 3, 2020). "Court Considers Epstein Deal, Victims' Rights". WPEC CBS12 West Palm Beach.
  36. Bungalow Media & Entertainment, Break Thru Films (August 9, 2020). "Documentary "Surviving Jeffrey Epstein" Episode 1". IMDB article on source documentary.
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