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 Becket, aka Solomon Posnack, who claims to have been Sen. Hillary Clinton's (D-N.Y.) single largest donor, sits in a prison in Silo 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 fundraising 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."
Paul is a former international lawyer who has represented political leaders from South and Central America and did work for various federal law-enforcement and intelligence agencies--claims INSIGHT was able partially to verify. His record shows two bizarre felony convictions. One apparently involved cocaine he says was planted in his garage. The other involved wire fraud for swindling more than $8 million from Cuban leader Fidel Castro, in what may have been a CIA sting. Strange stuff, but sources say it rings true.
Paul's life story blends intrigue with a Who's Who of movie stars, politicians, mobsters, government informants and leading federal law-enforcement officials. In the last 15 years or so he's been a high-profile Hollywood promoter who discovered Fabio and packaged best-selling books for Muhammad Ali, Tony Curtis and Buzz Aldrin. Just to name a few.
Most who know him now think he's either a crook, a spook, an amiable genius who's gone nuts or all three. But one thing is certain: Paul's life has taken some strange turns. Once out of jail (from which he repeatedly was "furloughed" to work with undercover sting operations that INSIGHT largely was able to confirm), Paul started high-profile and successful development companies in Miami in the 1980s and did charitable works praised by former presidents Ronald Reagan and George H.W. Bush, former chief justice Warren Burger and actors, governors, mayors and other celebrities.
Paul says of his current problems that if found guilty, "I will serve my time like a man. I just don't like the idea of doing it alone. I think others have done much worse and they, too, should be indicted, tried and, if convicted, go to jail along with me."
Those others include former SLM officers and directors and some shadow figures in finance with reputed ties to organized crime whom prosecutors in the Eastern District of New York and the Central District of California did not indict or perhaps were referring to as "unindicted coconspirators" mentioned in the indictments.
Larry Klayman, chairman and general counsel of Judicial Watch, is representing Paul. Klayman tells INSIGHT, "I can't comment on specific matters raised in the indictments because we're in delicate discussions with the Justice Department. But suffice it to say that if Paul can be indicted for these alleged crimes, then others should [be] too."
According to the indictments, however, Paul was the mastermind behind major crimes involving SLM that included manipulation of the price of the stock through fraudulent prospectus reports. He also is accused of having used margin accounts for all of his companies to borrow money illegally on stocks he "knew" were overvalued, in part, because of "bogus" stock recommendations issued by Jeffrey Pittsburgh, a securities analyst who was one of four people indicted with Paul. Pittsburgh stands accused of, effectively, taking bribes to issue false "buy" recommendations.
In addition to Pittsburgh, Stephen Gordon and Charles Kusche were indicted for various schemes, including inflating SLM stocks that then were margined through an alleged check-kiting scam and later sold short to recoup losses. Gordon was an executive vice president of SLM and Kusche was a New York securities dealer. A fourth person, Jonathan Gordon, Steve Gordon's brother who worked at Merrill Lynch as an account representative, is accused of using his position as supervisor over the various margin accounts to hide the alleged illegal activities.
Not to add to his legal woes, but Paul and his lawyers wonder (sometimes loudly) why prosecutors claimed in their indictments that everything he did through his margined accounts was illegal, while they completely ignored his political gift-giving and those who received millions of his alleged ill-gotten gains. This assuredly would include the Democratic Party and Hillary Clinton.
INSIGHT'S review of Hillary Clinton's records filed with the FEC as required by law finds no mention of any direct or in-kind contributions by Paul other than one $2,000 donation that later was returned. This is curious given the substantial financial paperwork obtained by INSIGHT, much of it contained also in an FEC complaint Paul filed but on which the FEC has yet to act.
Pressed about charges against his client and the absence of records on file at the FEC by Clinton's committee, Klayman says, "He made some mistakes and trusted some people he should not have trusted." Paul contends he told federal prosecutors about this and believed he had complied with election law. "And he's cooperating with the Justice Department now on all matters," Klayman adds.
Paul is not specific about any mistakes he may have made but also argues that, if they were criminal in nature, others did the same if not worse. "What's the point of being a CEO or president or a member of the board of a company if you are not held accountable for what happens below your level--no matter who is involved?" Paul asks, pointing out that he served as an outside consultant to SLM and always acted with the knowledge of company officers.
Spokesmen for the Clintons have denied the couple received any monies from Paul, let alone upwards of $2 million during the summer of 2000. In fact, they claim, the only funds even remotely connected to Paul involved about $400,000-$500,000 from SLM to help host the fund-raising event during the Hollywood gala for Bill Clinton and Hillary Clinton's campaign. And even here company spokesmen denied it, and there is no record at the FEC or the Securities and Exchange Commission of any filing from SLM or Stan Lee himself showing they gave any money at all to Hillary Clinton. Clinton spokesmen have denied, or substantially downplayed, that Paul did anything for either Clinton.
Then, INSIGHT asked these worthies, how do you explain the scores of canceled checks, the photographs, the Secret Service logs and the personal notes from Bill, Hillary and even Chelsea Clinton? Or the number of organizers who have confirmed that it was Paul who paid for the Clinton fund-raising extravaganza and was its primary organizer? They have no comment.
Except for a short segment on ABC's 20/20 in July 2001, the mainstream press has relegated Paul's story to brief news clips, if reporting anything at all, concerning a civil lawsuit filed in California that was dismissed without prejudice because he was being held out of the country, and a separate FEC complaint still collecting dust, again because he can't make the case in person.
One reason, no doubt, are the complexities of Paul's accounts of what happened to all that money the Clintons allegedly got and to which records point.
Another is that many of the people involved say they are afraid to talk after seeing what happened to Paul as he tried to work with federal prosecutors and the media to "blow the whistle"--he was indicted and is being held in a filthy Brazilian cell. "That sends a pretty good message to stay away" a friend says, apologizing for being unwilling to be identified.
"There's more to it than what Paul is telling the press" warns a former confidant who sharply rebukes an inquiring reporter asking for details. "Listen, this is total bull **** what Peter is saying about not knowing what was going on with Stan Lee. He didn't do it alone, that's for sure, but ... don't you know it was an organized-crime task force that started the case?" the former colleague asked. "Peter's in deep ****, that's all I can tell you, and I don't want any part of it."
Paul's lawyers would not allow him to answer some of INSIGHT'S questions about such matters. Nevertheless, he says he's undeterred. He's a man on a mission who wants accountability from people he believes ripped off his company, a formal review of prosecutors he thinks feared political retaliation because of his charges involving the failure of the Clintons to report his large contributions and an investigation of federal agents whom he claims are covering up information that may be helpful in this case.
But that's another story in the works.
DOJ and FBI officials have declined to talk about the case or even provide details of what is behind the May 30 search warrant involving millions of dollars allegedly supplied to the Clintons. Former officials at SLM, Merrill Lynch and related companies also have declined to be interviewed.…