CONFIRMED: Treasurer of this pro-Trump PAC is notorious Ponzi schemer Steven Hoffenberg, convicted of a $460M fraud.

[Weird Tolkienish Figure]

Hoffenberg Confesses to Ponzi Scheme
By DIANA B. HENRIQUES
Published: April 21, 1995
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Correction Appended
Steven Hoffenberg, one of the brashest figures on the New York business scene, pleaded guilty yesterday to criminal conspiracy and fraud charges in connection with a $460 million scheme that was described by prosecutors as one of the largest financial swindles in history.

Mr. Hoffenberg was ashen and hollow-cheeked -- in contrast with his robust appearance at court hearings last year -- as his lawyer, Jeffrey Hoffman, told Judge Robert Sweet of the Federal District Court in Manhattan that a confession was being offered "to spare Mr. Hoffenberg the trauma, embarrassment and expense of a trial."

A few moments later, Mr. Hoffenberg softly repeated "guilty" in response to each of five criminal charges filed against him: one count of conspiring to commit securities fraud in the operation of his flagship company, the Towers Financial Corporation; one count of conspiring to obstruct justice by directing employees to lie to the Securities and Exchange Commission; two counts of mail fraud in connection with the Towers operation and a separate scheme to defraud two small Illinois insurers, and one count of tax evasion.

By pleading guilty, Mr. Hoffenberg admitted to being the ringleader of one of the largest so-called Ponzi schemes on record, having sold more than $460 million in fraudulent notes and bonds to investors and having used some of the money he collected from later investors to pay interest owed to earlier investors. The rest of the money was used to run The New York Post briefly and to support a Potemkin-village financial empire with inflated revenues and fictitious profits that made it appear to be a major health care financing company

Mr. Hoffenberg appeared yesterday to be deflecting the blame. He contended that the accountants he used at Towers "issued false financial statements with the cooperation of the Towers people -- and myself." Then, he said, he and others knowingly used those false statements to sell bonds and notes to investors. No criminal charges have been filed against any of the accounting firms employed by Towers.

When the S.E.C. subpoenaed Towers employees as part of its investigation, Mr. Hoffenberg said, he and his lawyers "instructed them on what they were going to say in continuing these false statements." He added, "I, myself, did that, and the attorneys were aware of that."

His chief securities lawyer at that time was Ira Sorkin, former regional admininstrator of the S.E.C. in New York. Mr. Sorkin could not be reached for comment yesterday, but when Mr. Hoffenberg raised similar allegations last year, Mr. Sorkin said the accusation was "totally baseless and would be proven to be so."

Although Mr. Hoffenberg faces a potential prison term of 25 years, under Federal sentencing guidelines his sentence would more likely be from 7 to 10 years. But he could receive a more lenient sentence if he succeeds in forcing the Government to give him credit for cooperating with the investigation into his own financial affairs.

Mr. Hoffenberg agreed to plead guilty in September 1993, in exchange for Government support for a more lenient sentence. The Government retracted that agreement in February 1994 after Federal prosecutors accused Mr. Hoffenberg of lying and violating other terms of the deal. On Feb. 17, 1994, Mr. Hoffenberg was arrested and charged in the case, almost exactly a year after he was first sued by the S.E.C. in February 1993.

Judge Sweet has scheduled a hearing for the week of May 22 to hear Mr. Hoffenberg's arguments that he is still entitled to leniency in sentencing. No sentencing date has been set.

Towers had attracted regulatory attention as early as 1988, when it reached an out-of-court settlement of S.E.C. civil charges that it sold unregistered securities. But Mr. Hoffenberg attracted little public notice until January 1993, when he made an offer to rescue The New York Post, which was about to close because its then-owner, Peter Kalikow, was in personal bankruptcy.

At the time, Mr. Hoffenberg showed all the common currency of wealth: a corporate jet, a limousine, an expensive yacht, a Long Island estate and a Manhattan apartment. His offer to save the newspaper was applauded by political leaders and by The Post's employees and creditors.

From the start, Mr. Hoffenberg's boasts of wealth seemed dubious. His supposedly vast financial holding company was audited by a single accountant, and the audit's footnotes showed that he had already violated the terms of his bond contracts. Moreover, accounting experts were critical of his method of evaluating the company's assets. The assets were basically the unpaid bills of an assortment of health care facilities, purchased at a discount, that he supposedly expected to collect.

But even after the S.E.C. had accused him of being a swindler, Mr. Hoffenberg relished his celebrity role as a New York publisher, wearing his pink press pass over his silk ties and personally directing his newspaper's coverage of his own regulatory troubles. In court, his lawyers cited his rescue mission at The Post in opposing the S.E.C.'s plea that his assets be frozen to protect defrauded investors.

When the S.E.C. obtained a court order blocking Mr. Hoffenberg's access to the money he needed to finance the newspaper acquisition, he was forced into a stormy partnership with Abraham Hirschfeld, a New York businessman. The collapse of that alliance paved the way for The Post's acquisition by Rupert Murdoch's News Corporation, its present owner.

Towers Financial filed for bankruptcy in March 1993, and Mr. Hoffenberg has settled the civil cases filed by the S.E.C. and by lawyers representing Towers investors and creditors. In those cases, he has agreed to pay about $60 million to the S.E.C. and $500 million to the investors. So far, only about $5.5 million has been collected for distribution to defrauded investors.

Photo: Steven Hoffenberg, right, the New York financier, leaving the Federal District Court in lower Manhattan yesterday after pleading guilty to criminal conspiracy and fraud charges stemming from what prosecutors called a $460 million Ponzi scheme. He left the court with his lawyer, Jeffrey Hoffman. (Chester Higgins Jr./The New York Times)

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