Paul Takes the Fall? Accused of Securities and Bank Fraud, Colorful Hollywood Promoter Peter Paul Says He Was Targeted as the Bad Guy at Stan Lee Media Inc. to Protect, among Others, Bill and Hillary Clinton and the Fund-Raisers of the Democratic Party. (Cover Story)

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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 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? …