Feds’ corruption probe looks at top Florida officials

(MIAMI HERALD)   The U.S. Justice Department is investigating corruption allegations made by an indicted Fort Lauderdale insurance executive who, in a bid for a favorable plea deal, has named lawyers, lobbyists and fundraisers he claims plotted with him to thwart a state crackdown on him and his industry.

Justice officials have convened a federal grand jury to pursue the claims of former Mutual Benefits Corp. chief Joel Steinger. The wealthy businessman contends that he orchestrated a campaign to stifle a 1999-2000 statewide grand jury probe by attempting to improperly influence public officials, three knowledgeable sources have told The Miami Herald.

One of the officials Steinger named was lawyer Paul Huck Jr., a former deputy to state Attorney General Charlie Crist. But Huck confirmed that he was one of six public officials already cleared of any wrongdoing by the Justice Department’s Public Integrity Section. Huck said authorities have told him that he was “a reputational victim of statements made by a third party.”

Others who remain under scrutiny: several prosecutors and officials who worked under Florida Attorney General Bob Butterworth and his successor, Crist.

From outward appearances, Steinger’s purported scheme wasn’t successful: The statewide grand jury indicted Mutual Benefits for racketeering, filed 20 criminal cases involving the viatical industry, and issued a scathing report recommending reforms to the Florida Legislature and Department of Insurance.

Mutual Benefits was the leader in the viatical industry, which sold life insurance policies of elderly and ailing people at discounted rates to investors, who collected benefits when the insured died.

Word of the corruption investigation by Justice has started to ripple through the state Capitol and South Florida, where speculation is rife about who — if anyone — might face indictment, who is talking to the feds and how high the investigation could reach.

The allegations come a few months after Steinger, his brother Steven Steiner, and lawyers Michael J. McNerney and Anthony Livoti Jr., were indicted in December on charges of defrauding more than 30,000 Mutual Benefits investors of $837 million. They have pleaded not guilty.

Steinger’s attorney in that case, Ed Shohat, brought the allegations to the Justice Department in Washington last year.

”The whole situation is unique,” Shohat said Thursday, declining to discuss the substance of the federal grand jury investigation.

But legal observers said that Steinger — who faces up to 20 years in prison on each of 25 counts — is pursuing a defense strategy like that of one-time Washington super-lobbyist Jack Abramoff.

Abramoff was indicted on federal fraud charges stemming from his purchase of Broward-based SunCruz Casinos — then sought to limit his punishment by cooperating with the Justice Department and naming names in a major Washington corruption probe.

THE CASE SURFACES

News of the latest Justice Department investigation surfaced at the end of April, when a Miami federal judge revealed the existence of the grand jury and cited it as the reason for denying a request from The Miami Herald and Sun Sentinel to disclose about 30 sealed court records in the Steinger fraud case.

U.S. District Judge Adalberto Jordan wrote that Public Integrity officials had indicated that ”six past or present public officials” had already been ”cleared of any wrongdoing” and that other people, including other former and present public officials, remained under grand jury investigation.

Jordan did not reveal any names, titles or locations of the public officials; nor did he characterize the nature of the investigation.

”Disclosure of those names, and the matters being investigated, could have devastating consequences for those persons who have been cleared of any misconduct, as well as for those still under investigation,” Jordan wrote, adding that the grand jury probe was ancillary to the Mutual Benefits fraud investigation.

Jordan stressed that, according to the Public Integrity Section, the six exonerated officials “had no knowledge of, or participation in, any of the alleged wrongdoing.”

Among them: Huck Jr., who was a deputy attorney general in Fort Lauderdale when Mutual Benefits was being prosecuted in Broward by the statewide prosecutor. The post is part of the attorney general’s office. Mutual Benefits pleaded guilty to racketeering charges in 2007. Huck was not the prosecutor on that case.

Huck, who later became Gov. Crist’s general counsel and now is in private practice in Miami, confirmed that he is one of the public officials the judge referred to as being cleared. Huck declined to comment further, saying he does not want to interfere with the probe.

”It’s a real shame when folks in public service have to deal with that, and it makes it that much harder to attract people to go into public service in the first place,” Huck told The Miami Herald.

Huck’s father, U.S. District Judge Paul Huck, recused himself from the Steinger fraud case after it was assigned to him. Another federal judge, Marcia Cooke, who once worked in the administration of Gov. Jeb Bush, also recused herself from the case. It ended up with Jordan.

Former U.S. Attorney R. Alexander Acosta, who recently left the post to become the dean of Florida International University’s law school, and his successor, Acting U.S. Attorney Jeffrey Sloman, also recused themselves from supervising the Steinger fraud case.

They declined to comment. According to sources, they chose to recuse themselves so there would not be any appearance of a conflict, as the Justice Department in Washington investigated Steinger’s corruption allegations while the U.S. attorney’s office in Miami prosecuted the Mutual Benefits fraud case.

Shohat took the allegations to the Justice Department, working with the FBI. The corruption investigation is headed by Mary Butler, a former federal prosecutor in Miami and now a senior trial attorney at Justice.

Eric Bustillo, chief of the Economic Crimes Section at the Miami U.S. attorney’s office, is overseeing the Steinger fraud prosecution. The case is set for trial in Miami in February 2011.

2 PROBES; 1 EXPOSED

The parallel corruption probe has stirred more intrigue than the fraud prosecution because so little is known about it. There’s not much mystery about the alleged racketeering conspiracy. At least nine people connected with Mutual Benefits have already pleaded guilty. Most are cooperating with federal prosecutors in the fraud case.

A one-time leader in the controversial viatical industry, Mutual Benefits bought life insurance policies of AIDS patients and the elderly and sold them at discounted prices to investors, who stood to collect benefits when the insured died.

But prosecutors in Steinger’s pending fraud case allege Mutual Benefits was a Ponzi scheme, using money from recent investors to pay premiums on older policies — until the Securities and Exchange Commission shut down the firm in 2004.

The following year, Joel Steinger and another brother, Leslie Steinger, now deceased, along with Mutual Benefits President Peter Lombardi, agreed to pay $25 million to settle federal civil charges from the SEC.

On the state side, Mutual Benefit’s troubles with authorities began earlier, in the late ’90s, when elderly people and investors started complaining to the Florida attorney general’s office about the viatical insurance industry. The statewide prosecutor’s office issued its critical report in February 2000.

”Our investigation revealed what law enforcement officials, insurance regulators and industry observers have been saying for some time: Fraud in the viatical settlement industry is rampant,” stated the report, overseen by prosecutor Melanie Ann Hines.

The statewide grand jury recommended remedies to the Florida Legislature, Department of Insurance and the life insurance industry. The statewide prosecutor also filed 20 criminal cases against life-settlement providers around the state, including Mutual Benefits in 2004.

Florida’s Legislature, however, seemed reluctant to rein in Mutual Benefits or the viatical industry.

In Tallahassee, a key behind-the-scenes player on Steinger’s behalf was Dr. Alan Mendelsohn of Hollywood, who doubled as a formidable fundraiser for Republican lawmakers.

THE LOBBY CONNECTION

Mendelsohn helped Steinger and his company, which hired a dozen lobbyists, to pass a law in 2004 to ensure that viatical sales would be regulated as an insurance product rather than as a security, which meant less scrutiny of the industry and disclosure to investors.

But shortly after the legislation passed, the SEC shut down Mutual Benefits and, the following year, the Legislature reversed itself.

Now Mendelsohn’s supporting role in the viatical legislative fight has come under the scrutiny of the Justice Department investigators who are examining Steinger’s corruption claims.

Over more than a decade, Mendelsohn, his family and political action committee, Ophthalmology PAC, raised more than $700,000 for state candidates and political causes, records show. The total amount of money Mendelsohn helped raise is even higher, considering he was a top fundraiser for powerful Florida Medical Association.

Amid the federal corruption probe, Mendelsohn announced he was giving up his prodigious fundraising activities for Republican lawmakers. Friends say he wants to spend more time with his family. Sources say he has been contacted by federal authorities about the investigation.

Asked if he had spoken to federal investigators or was under investigation himself, the Hollywood ophthalmologist said: “No comment.”

http://www.miamiherald.com/news/southflorida/v-fullstory/story/1125505.html

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