How Bear Stearns and Bankruptcy Insiders Laundered Millions ... Without Funds Ever Touching the Bankruptcy Estate

In my earlier posts (with more to follow), I began to show how Bear Stearns, using various bankruptcy insiders and a local bankruptcy court, had installed a self-proclaimed Israeli "assassin" cum secret agent, Juval Aviv (who had been previously indicted and prosecuted by the US Government), to "supervise" the local US Attorney's Office in extensive illegal, secret wiretapping of myself, my attorneys, my friends, my family and reporters I communicated with.

In 2006, I obtained the confession by Paul S. Singerman, of Berger Singerman,  that protected law enforcement materials, including the results of the wiretapping, were then secretly funneled to Bear Stearns for their own private use. Bear Stearns was involved in extensive civil litigation in Florida state and federal courts with myself and my family. Anthony Pelicano — the infamous Hollywood P.I. who, similarly, was conducting wiretapping to get information for civil court cases — received 15 years in federal prison for these very actions.

The communications surveillance occurred throughout pending appeals in federal court and ongoing proceedings in Florida state court. It was done without notice — either before, during and after the (still ongoing?) surveillance — to myself, my attorneys, all reviewing courts, and the many other victims. This was completely hidden until late 2004, when the district court ordered the bankruptcy court to disgorge its extensive sealed and off-the-docket court record. Some of that record still remains concealed, despite the order.

To pay Berger Singerman and the extensive crew of secret "officers of the court" (complete with a "black bag" crew) — who were ostensibly retained by trustee Alan Goldberg — a scheme was orchestrated: Bear Stearns would pay the millions in fees, using a phantom "loan." In that way, Bear Stearns superficially protected itself and its agents from investigations into illegal activities, under the rubric of being "officers of the court."

The phantom "loan" funds never passed through any bankruptcy estate accounts or were reflected on any estate financial statements.

Since Bear Stearns paid the secret officers of the court directly, there were no traces in the bankruptcy court record (sealed or public) of their fee payment applications or fee approval orders. Also, the US Trustee was never served with any retention documents for the secret hirees and the key billing records of secret hirees still remain hidden, including those of Juval Aviv and P.I. William Riley.

Even the disclosed billing statements for the "public" hirees, e.g., Berger Singerman attorneys and attorney Michael Budwick, contain no reference to what took place during the secret hearings, or in England. Those statements never disclosed that fees were billed for illegally passing law enforcement tapes and other protected law enforcement materials to Bear Stearns senior managing directors, Mark Lehman and Daniel Taub.

Two of the key documents evidencing this scheme are: 1) the unsigned accounting statement for the bankruptcy estate filed yearly, and 2) the sham "loan" agreement:

This is one of the sham "Independent Estate Property Record and Report" accounting statements that was filed yearly:

Sham bankruptcy estate balance sheet filed by Paul Singerman of Berger Singerman for Alan Goldberg in October 2009.

Never, during a long career as an financial analyst on wall street, have I seen a filing more fraudulent than the above filing. Some reasons for this conclusion are:

— There is no signature or other identification of who actually prepared the accounting report. The only accountant the estate had, was employed for only a few days, early in the bankruptcy case. The accounting firm then immediately left the case ... without issuing any reports. No explanation was given for its removal.

— There is no entry for any part of the sham "loan" purportedly made by Bear Stearns to the estate to pay fees and expenses ... which totaled about $5 million dollars. The statement is a clear admission that no debt was ever owed to Bear Stearns — showing the "loan" agreement was a sham.

— The estate is valued at $20 million dollars. However, it provides no explanation how that value was arrived at. This is a fraudulent valuation since the estate had no asset value for several reasons:

First, Federal District Judge Lawrence King, during earlier litigation with Bear Stearns, ruled in 1996 that the trust had to be directly sued under Federal and Florida law. After that order was issued, Bear Stearns impleaded the trust as a defendant in 1997. So, Florida law was already being applied to the trust and that law required the trust be sued directly. Judge Herbert Stettin (the trustee of the Scott Rothstein bankruptcy estate) represented the trust in federal court.

Because the bankruptcy trustee, Alan Goldberg, refused to sue the trust, the estate's only asset was a worthless claim.

What had occurred in the bankruptcy was that a single line "finding" of estate property was inserted at the end of a discovery sanction order (written entirely by Berger Singerman) that was issued in a bankruptcy discharge objection proceeding held under 11 U.S.C. § 727. Liability in a discharge objection proceeding is legally impossible because the only matter at stake in such proceeding is the denial of a bankruptcy discharge.

In addition, during the secret bankruptcy hearings, Berger Singerman disclosed that Goldberg was suing, in England, the same trustees who were already represented by Judge Stettin in federal court before Judge King. This confirmed that the only estate "asset" was a claim of indeterminate value in England since Goldberg refused to sue in the U.S.

The hidden bankruptcy court transcripts further disclosed that Goldberg was seeking a Mareva Injuction in the England litigation. An English Mareva Injunction is a pre-judgment injunction issued while a claim is litigated. A few months earlier, the U.S. Supreme Court, in Grupo Mexicano de Desarrollo, SA v. Alliance Bond Fund, Inc., 527 US 308 (1999), had ruled that Mareva Injunctions (pre-judgment injunctions) were not permitted in U.S. Courts. Berger Singerman, thereby, secretly admitted that all they had was a claim and not a judgment against either myself or the trust.

Goldberg lost his ligation in England, so the value of his "asset" ... was zero. This confirmed that I was in prison to pay a judgment debt that never existed; and that Berger Singerman withheld critical information from myself, my attorneys, and reviewing courts throughout my appeals.

This is the phantom loan agreement between Goldberg and Bear Stearns, dated mid June 1998:
the still-used sham 1998 Bear Stearns-Goldberg finance agreement

One reason the $5 million in payments made by Bear Stearns were not listed on the bankruptcy estate accounting report is that even such a debt could give rise to criminal charges as fraudulent fee claims against the bankruptcy estate, for the theft of law enforcement materials.

Moreover, since none of the secret officers of the court submitted bills for approval, no orders for submitted bills were issued, and no service was made on the U.S. Trustee's Office (required by law to review all bills), the Bear Stearns fee payments were not an estate debt.

Also, even though the loan agreement claims it was reached in mid June, Bear Stearns had already secretly funneled funds to Goldberg's ostensible professionals before that date. See this post.

The "professionals," who received fee payments from Bear Stearns, fall into two categories. First were Goldberg's publicly disclosed professionals, e.g., Berger Singerman attorneys, attorney Michael Budwick.

Mr. Budwick, co-counsel with Berger Singerman, has stated in court filings that he never knew of the secret hearings or the communications surveillance.

The second group were those "professionals," who were ostensibly hired by Goldberg under "seal." This second group included Juval Aviv, P.I. William Riley, Coudert Brothers, and others.

The latter (secretly hired) group all had backdated (nunc pro tunc) individual "sealed" applications filed, and at the related "retention" hearings still undisclosed "results" were reported without the presence of a court reporter.

None of these sealed retentions were lawful because: none of the applications were served on the U.S. Trustee's Office, so they could not be reviewed, as required by law; none of the secret hirees filed their bills, even under seal, (the single exception being Coudert Brothers, which filed bills years later  — but Coudert didn't seek approval for payments to it by Bear Stearns and its bills listed Bear Stearns as its client); none of the secret hirees sought or received approval for bill payments. These missing prerequisites to legitimacy invalidated employment by Goldberg and instead the group was employed by Bear Stearns, which paid them.

The "public" group never submitted or released bills that described their actions taken "under seal," even after the record was unsealed.

A Letter to The Editor - South Florida Business Journal To Correct Errors

This post is a copy of a letter to the editor at the South Florida Business Journal to correct some errors in a story originally published on my case. It is self-explanatory and corrects substantial factual errors that keep showing up in reports.

Editor,

South Florida Business Journal

Sir:

In searching your website I found several articles on my case that, unfortunately, continue to pop up during Google searches, which is the reason for this letter.

The key article you published was in December 2007 titled: “20-year fight over millions in offshore money isn't over yet”

Because I believe there are serious inaccuracies in the article I would like to have published the following response as either a response to the article or a comment to the article:

“I am the principal, Stephan J. Lawrence, of the article you published titled: “20-year fight over millions in offshore money isn't over yet”.

I am writing this comment in response to its significant inaccuracies and omissions. Unfortunately, I did not have an opportunity to speak with the author before its publication and have no doubt misinformation was provided to the author, which I seek to correct, as stated below.

First, for the full history of this bizarre case of the longest civil contempt sanction in US federal court history please visit my blog. It significantly differs in scope and tenor than that presented in the article. For a condensed history follow this link to my Petition for Writ of Certiorari filed with the United States Supreme Court.

Here are a few brief responses to some of the factual errors or omissions in the article.

—         The 1993 and 1995 litigation details with Bear Stearns, omits the key ruling that Federal District Judge Lawrence King made in his 1996 order: that  Bear Stearns could not sue me as a proxy for the trust, since the trust had to be directly sued under Florida law. After that order, Bear Stearns impleaded the trust as a defendant in 1997. So, Florida law was already being applied to the trust ... and that law required the trust be sued directly.

—         The trust was represented by Judge Herbert Stettin (the current trustee of the Scott Rothstein bankruptcy estate) before Judge King.

—         Goldberg's position was similar to that of Bear Stearns. His two choices were: he could take over Bear Stearns' lawsuit or sue under a similar type bankruptcy avoidance provision. Goldberg did neither. Nowhere in the article is there mention of a judgment ever being entered for liability by either myself or the trust for the trust settlement. Goldberg had declined to sue for liability or to intervene. No such judgment ever existed.

—         The article does not explain how the 'liability' element — the required precursor to execution (turn over) —  was arrived at. In short, what occurred was a single line was inserted into a discovery sanction order that was issued in a bankruptcy discharge objection proceeding under 11 U.S.C. § 727. Liability in a discharge objection proceeding is legally impossible because the only matter at stake in such proceeding is the denial of a bankruptcy discharge. In addition, there is no basis to appeal such a line on the theory that liability had been assigned since liability was never at stake. Indeed, to even attempt to raise such hypothetical future liability in a discharge appeal could be met with sanctions. A basic tenet of bankruptcy is that liability for pre-bankruptcy transfers can only come from actions under both 11 U.S.C. § 550 (to establish who is liable) and under the 'avoidance provisions' of the bankruptcy code (to establish amounts liable for). Both must occur.

—         There was no $20 million margin deficit with Bear Stearns. The margin call given was substantially less and was also vastly inflated. The final arbitration award was for about $16 million plus interest. There is no relationship between a margin call amount and any ultimate debt; most margin calls result in no debt owed after liquidation.

—         The trades Bear Stearns was given credit for, by the NASD arbitration panel, never existed and were backdated. No explanation was given how an award for non-existent trades, using what has come to be called 'flash prices,' could occur ... since it couldn't. The SEC did nothing to prevent this and a fruitful investigation by a single FBI agent, who took and interest, was quickly shut down. The Options Clearing Corp (OCC) and The Chicago Board Options Exchange (CBOE), after much litigation, both later admitted the trades never occurred. The OCC/CBOE admissions are posted here.

—         Florida was not my “new home state.” I became a Florida resident in the early 1980's, long before the 1987 crash. Florida's on line database shows that my main company, Pompano-Windy Partners, Ltd, had myself as its agent along with my home address almost two years before the 1987 crash. I was a Florida resident for years before that date.

—         The statement that Goldberg hired Juval Aviv simply to "track down offshore activities" completely omits the incredible scope of what really occurred, all in secret and away from sight of myself, my attorneys, all reviewing courts, and the public. The unsealed documents and transcripts paint a far different picture. See my 2006 Wiretap and Civil Rights Complaint here. It is simply impossible, in this short response, to describe those events, however, my blog will do so. See also Certiorari Petition.

—         I have posted excerpts from some of the astounding transcripts of the few secret hearings at which a court reporter was present.

—         The bankruptcy record is devoid, except for a single "application" filed secretly in January 2000, of any trace of Aviv's billings statements, applications for payments, orders approving actual payments, or records of payments by Goldberg to Aviv. These are the minimum prerequisites for Aviv having actually been working for Goldberg. Indeed, even the secret"application" for employment by Goldberg was never served on the U.S. Trustee's Office.

—         Your description of my wiretap and civil rights complaint omits the key claims, made under Title 3 (the "Wiretap Act"), for illegal and extensive wiretapping done by Bear Stearns through the theft of law enforcement tapes illegally obtained by Goldberg. The article has no mention of the phone surveillance (fully documented in the sealed record and transcripts), how it was done, or that it forms the foundation of my complaint.

Lastly, it is unfortunate my former attorney, Robert A. Stok, was interviewed without my having a chance to respond. The 1997 discovery sanction order — the single line in which was used to imprison me for over six years and assign an over $40 million dollar liability to me — was appealed by Mr. Stok at my direction. At the hearing resulting in the Order, all of my witnesses (including Judge Stettin) were ejected and I was forbidden to present evidence. Mr. Stok then defaulted my appeal; District Court Judge Donald Middlebrooks ruled the default was "at worst, bad faith ... or at the very least, negligence or indifference." After Mr. Stok defaulted my appeal, Goldberg's attorney, Berger Singerman, prepared a subordination agreement between Mr. Stok's law firm and Bear Stearns, in which Bear Stearns subordinated their prior lien on my homestead in favor of Stok's law firm for no identifiable consideration and Stok's law firm immediately attempted to foreclose on my homestead … using the subordination agreement. There were other serious matters of dispute between myself and Mr. Stok that are beyond the scope of  this limited comment.”