Posted on 09/16/2002 11:24:39 AM PDT by Stand Watch Listen
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What do Bill and Hillary Clinton, alleged mobsters, Stan Lee, presidential pardons, federal indictments for fraud, the Democratic Party and Hollywood luminaries such as Barbra Streisand, John Travolta, Cher and Diana Ross have in common?
The answer is a man charged with robbing Peter to pay Paul through an elaborate scheme of alleged securities and bank fraud that involve the creator of Spiderman and the X-Men comic superheros, securities firms such as Merrill Lynch and Spear Leeds & Kellogg, political heavyweights David Rosen, Aaron Tonken and Terry McAuliffe.
Now, the 54-year-old Peter Paul, aka Eric Becker, aka Solomon Posnack, who claims to have been Sen. Hillary Clinton's (D-N.Y.) single largest donor, sits in a prison in São Paulo, Brazil. Paul is awaiting extradition to the United States, he has said in interviews with Insight, to defend himself against two multicount federal indictments and at least one class-action lawsuit brought by shareholders of now-bankrupt Stan Lee Media Inc. (SLM).
As the New York Post reported in April, Paul has been in negotiations with Department of Justice (DOJ) officials about a possible plea deal. Insight has confirmed that DOJ sent investigators to Brazil to speak with Paul and that his lawyers in Washington and New York are in contact with senior prosecutors who sources say are conducting a high-level inquiry into possible money-laundering and campaign-law violations.
What ties all this together is Paul himself and his attempts during the summer of 2000 to wheel and deal in the rarified atmosphere of Washington politics. He says he entered the fund-raising business to promote and protect the company he cofounded with legendary comic-book-hero creator Stan Lee. His goal was to get outgoing President Clinton interested in joining the board of SLM.
To do this, according to Paul, he was courted and then snookered by Democratic Party bigwigs into playing host to and paying for increasingly expensive political events, luncheons, dinners — and then a star-studded Hollywood tribute to Bill Clinton in August 2000 that was twinned with a massive fund-raising drive for Hillary Clinton's senatorial bid in New York.
All in all, based on volumes of bank ledgers, canceled checks and securities margin-account statements reviewed by Insight, Paul spent nearly $2 million to entice political heavyweights to promote SLM. This included at least one luncheon at Spago's, the trendy Hollywood restaurant where he played host to Hillary Clinton.
To pay for such extravaganzas, Paul tapped into margin accounts he held at Merrill Lynch that were collateralized by about 3 million shares of SLM stock he had acquired as a cofounder of the company, an Internet startup that promoted and distributed new products by pop-culture artist Lee.
As with countless other startups in the go-go Clinton era, hype generated interest that attracted some of the brightest and wealthiest to SLM. Banks and securities dealers such as Merrill Lynch and Spear, Leeds & Kellogg eagerly embraced the venture. Now, of course, after the bursting of the tech bubble and exposure of corporate scandals involving Enron, WorldCom, Global Crossing and others, fingers are pointing among officers and directors of boards, banks, securities firms and accounting companies.
No doubt it appears to shareholders that those caught up in this debacle are saying that it's everyone's fault except that of the millionaires and former millionaires who ran these companies or were supposed to scrutinize and ensure responsible finance. Not only the company managers but the securities firms through which billions of dollars flowed, often through margin accounts pumped up with stock that quickly became worthless, have drawn investor ire and fallen under intense scrutiny.
Questions being asked include: where were the controls, who was in charge and didn't anybody examine the books? These also are questions that entrepreneurs such as Paul are raising about their own lost companies and legal peril.
"Why should I get the short end of the stick while people who were officers of Stan Lee Media, the board of directors, the supervisors at Merrill Lynch and the accountants get off scot-free?" Paul asks. There were no answers when Insight asked these questions to learn how Paul could have been allowed to conduct affairs virtually single-handed that, according to prosecutors, led to the collapse of SLM and a class-action shareholder lawsuit.
Interestingly enough, in none of the documents produced by federal prosecutors in statements or indictments, or in the shareholder class-action case, is there any mention of Paul's significant political activities, including the expenditure of the nearly $2 million to play host to and fund events on behalf of the Democratic Party, President Clinton and Hillary Clinton's Senate campaign. Nor is there so much as a hint of Paul's claim that he was offered a pardon for past crimes in return for political donations.
While the indictments allege that all of Paul's companies and activities were part of a conspiracy to defraud SLM, not a single event or financial transaction involving his voluminous political gift-giving is mentioned. Neither is there mention of audit-control failures at SLM or possibly Merrill Lynch, for example, to catch the alleged illegal activities. Former SLM officers have said Paul snookered them, while Merrill Lynch reportedly was surprised by the fraud because of misbehavior by a now-fired (and indicted) employee. The stories in the aftermath, in short, are similar to those being told again and again throughout the world of the former go-go promoters when asked where the money went.
To Paul and his lawyers this doesn't make any sense. "Everybody I know knew what I was doing to promote Stan Lee Media," Paul said in an interview. "And Merrill Lynch was the securities firm that held all the stock, so they would know better than anyone else whether it was valuable enough to allow margin accounts."
It was through these accounts that Paul paid for the June, July and August 2000 political events he hosted — events publically linked to him in media reports at the time and in personal letters of appreciation from the Clintons and others who called upon him for financial favors. But by late autumn of that year, despite carefully having consulted company lawyers and other financial professionals to make sure that whatever he did with SLM and his stock holdings were legal (or so he thought), his life as a mogul and political maven began to unravel.
As with so many other dot-coms, the stock of SLM had begun to tumble in the fourth quarter of 2000. Margin accounts Paul had used to pay for the political events now were being called to cover other advances he says he used to help keep SLM afloat by paying for daily operations. The company had generated tens of millions of dollars in investment capital but had next to no revenues coming from its business ventures still in development. Money for payroll, office expenses and the like had begun to dry up. As the economy began to tremble investors were asking questions about the promised gold hyped by Paul and SLM executives, including Ken Williams, who had been brought in as chief executive officer (CEO) from a Sony entertainment division.
By early 2001, SLM was bankrupt, and Paul and others were under investigation by the FBI. Indictments were handed up in June 2001 alleging securities manipulations, bank fraud and assorted financial irregularities. Curiously, the indictments were issued only after Paul had gone to federal prosecutors and offered to assist a crime task force in New Jersey that was leading an investigation into SLM and various business associates.
Like so many other Internet companies, the story would have ended there — just another tale of men and women who thought they had become rich in the fast-paced world of high technology, only to see everything collapse under the weight of their own dreams, poor financial oversight and insufficient revenues.
Except that Paul decided to fight city hall by bringing attention to alleged improprieties by highly placed others whom he believed the media had ignored, allowing prosecutors to target him and avoid political fallout. One of those protected, he says, is Sen. Clinton, along with her husband and the fund-raising minions fluttering about them in the Democratic Party. Oh yes, and some interesting behind-the-scenes financing of SLM.
A May 30 federal search warrant to seize a variety of documents stored by Paul in a California warehouse, say his lawyers, confirms most all of his claims that generally fall into two categories: 1) He was set up to take the fall for activities by former business associates; and 2) He contributed nearly $2 million to Hillary Clinton's Senate campaign, which she failed to report to the Federal Election Commission (FEC) despite being told by him of his in-kind contributions.
Insight began its investigation following that FBI search of Paul's storage facility nearly a year after he was indicted. According to DOJ and law-enforcement sources, the warrant is part of a probe based on proffers Paul has made to government agents about a variety of allegations of wrongdoing, including involvement by Sen. Clinton and Democratic Party operatives. One portion of the warrant reads: "Items to be Seized. … d. Records relating to New York Senate 2000, the Hollywood Gala Salute to President William Jefferson Clinton, the Federal Election Commission, David Rosen and Aaron Tonken."
A longtime family friend says of Paul in retrospect: "He was a Hollywood promoter who got outhustled by people who were smarter than he was — Washington politicians." A former business partner, asking not to be identified for fear of prosecution, says, "Paul wanted Bill [Clinton] to serve as roving ambassador for Stan Lee Media and was willing to sacrifice just about anything to pave the way." A former federal prosecutor who knew Paul long ago says, "I'm sorry to hear he's in trouble again, but I guess I'm not surprised. He led a colorful life."
Tomorrow: Part Two
Paul M. Rodriguez is the managing editor of Insight magazine.
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Geez...good thing y'all can't see my face turning red, LOL!
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