Banking On Andy Cuomo
The American Spectator
Jan, 1999 SAM DEALEY & JAMES RING ADAMS
Not for commercial use. Solely to be fairly used for the educational purposes
of research and open discussion.
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Part 2
THE WITNESS FORMERLY
KNOWN AS BLUTRICH
Another New York investor in Oceanmark was Michael Blutrich, a name partner in
Cuomo's firm. In 1996 Blutrich was exposed as a target in one of the
largest-ever FBI fraud probes, and in November 1998 was convicted on 22 counts
of racketeering, fraud, and money-laundering. In that scam, Blutrich and others
plotted with the then-chairman of the Orlando, Florida-based National Heritage
Life Insurance Company to loot some $237 million from the company through
inside loans and sham real-estate deals.
In 1990 the Blutrich group approached Heritage and offered to invest $4
million. There was just one problem: They only had a million. So the investors
illegally "borrowed" the rest from an escrow account at Blutrich's firm. Soon
after, a $3-million advance for "future commissions" was drawn from the
insurance company by the Blutrich group and deposited into the firm's escrow
account. The investors bought land near the Catskills in New York, then billed
Heritage for millions more than they had paid.
Another sham loan involved a Bronx land parcel owned by 4305 Associates, a
two-person corporation formed in 1988 and named for the parcel's street
address. Blutrich was vice-president and 50-percent shareholder; Lucille
Falcone, president and equal shareholder. Blutrich persuaded a cohort to pose
as a real-estate appraiser, who valued the property at $2,346,000. It was
actually worth only $700,000. Heritage made a $1.5 million loan, a large chunk
of which found its way into Blutrich's pockets.
Predictably, Heritage soon found itself in financial straits, and its directors
became uneasy for their shareholders, 26,000 (75 percent) of whom were elderly.
Two years later, the insurance company collapsed, a $440-million debacle. The
Blutrich group, meanwhile, had walked away with $93 million in laundered money,
and sunk over two and a half times that much in bad deals. By July 1996,
Heritage's chairman pled guilty to the scam and received eight years in prison
in exchange for his cooperation. Blutrich, along with several associates, was
indicted the following month and has since begun to cooperate with the FBI. One
of the loans that federal agents are investigating was a piddling $300,000 to
underwrite Scores, a New York strip club which the Feds charge became a racket
for the Gambino crime family.
In exchange for testifying and helping the FBI, Blutrich recently entered the
federal Witness Protection Program--and a substantially discounted lifestyle.
In court documents, one of Blutrich's former associates, Shalom Weiss, charges
that during the heyday of the scam Blutrich dropped $50,000 per week
"supporting a lavish lifestyle and expensive habits." The lavishness included a
Porsche, a yacht, and a $12,000 wristwatch, all of which he gave up as part of
his plea agreement.
Blutrich's expensive tastes included a passion for boys' basketball. According
to Weiss, "much of Blutrich's ill-gotten gains were spent supporting or
covering up" pedophilia. "He exploited the young boys he raped and molested. He
beguiled the parents of the boys whose basketball teams he coached so he could
meet his prurient need." In 1994, after a two-year sting, Blutrich was charged
with multiple counts of sexual assault on a minor (to which he secured a
sweetheart plea-bargain), and a story in the December 1998 Penthouse quotes an
anonymous partner in Blutrich's law firm saying, "Everyone knew what Michael
was doing with these young boys. On more than one occasion a mother of one of
these boys would come up to the office screaming and complaining about what
Blutrich was doing." According to the story, several sources "close to the
situation" said Cuomo left the firm in 1988 in part because of Blutrich's
behavior. A former partner of Cuomo's disputes this, however. "That's a total
lie. No one had knowledge that [Blutrich] was involved in any of this s--t,"
says the source, who wishes to remain anonymous.
Cuomo downplays his relationship with Blutrich. In a letter to TAS, the
secretary's Fort Lauderdale attorneys wrote, "Many years ago, Secretary Cuomo
practiced in a law firm with Mr. Blutrich and participated with many investors,
including Mr. Blutrich, in a tax-credit syndication." In fact, along with
Blutrich and Lucille Falcone, Cuomo was one of three general partners in L&M
Associates, a tax-sheltered oil and gas investment. And although the
partnership began many years ago (September 17, 1986), it was not until January
21, 1997--the day before his Senate confirmation hearing to become housing
secretary--that Cuomo quit doing business with Blutrich and sold his interest
in L&M at a loss. A monthly disbursement check to Cuomo from the venture, a
copy of which TAS has obtained, bears Blutrich's signature, and an accompanying
letter shows that it was mailed in 1995 to Cuomo's HUD address, with "best
personal regards."
Cuomo did not have to sell his stake in L&M to become secretary; he need only
have recused himself from decisions involving the partnership (which he had
done two weeks earlier). That he ultimately did sell seems to suggest he was
troubled by doing business with an accused criminal. Yet Blutrich's fraud case
had been widely reported months earlier, and Cuomo's former business associates
had known about it almost immediately. "After...the firm was raided by the
FBI...a former employee called me," says Cuomo's former partner. "I think that
call, I'm sure, went out all over the city. And that's when I became aware that
the FBI was investigating Michael in connection with Scores and the Mob."
Presumably, it was only the prospect of public scrutiny that prompted Cuomo to
finally withdraw his investment.
BETTER LEFT UNSAID
Less than a month after the ink dried on the second Oceanmark settlement in
November 1996, Andrew Cuomo was nominated for HUD secretary. A month later,
accompanied by his wife Kerry Kennedy (whom he had married in 1990), one of
their two daughters, his mother Matilda, sister Maria, and mother-in-law Ethel
Kennedy, Cuomo sailed through an adulatory confirmation hearing notable only
for what was not brought up: Oceanmark Federal Savings and Loan.
The chairman of the Senate committee charged with confirming Andrew was Alfonse
D'Amato, whose hearty dislike for the Cuomos was well known--and generously
reciprocated--after many years' rivalry in New York politics. D'Amato might
have been expected to turn the hearing into a blood bath, given the ample press
coverage Oceanmark had received in the preceding decade. What's more, Florida's
Connie Mack also sat on the committee. AHUD lawyer confirms that a Florida GOP
official sent committee members a package alerting them to the Oceanmark
imbroglio. Amazingly, however, the thrift never came up.
Senate Banking sources say the oversight had more to do with D'Amato protecting
his own chairmanship than Andrew Cuomo's well-being. There was speculation at
the time that Cuomo might challenge the New York senator in his 1998 campaign,
and that he posed a significant threat. (A Mason-Dixon poll conducted at the
time showed Cuomo edging out D'Amato 41-38 percent.) According to these
sources, it was understood that if D'Amato could protect his seat by
sequestering Cuomo on HUD's top floor, so much the better. "Generally a lot of
people felt there were understandings that obviously they were going to try to
stay out of each other's way," says a senior committee aide.
Another reason that Cuomo's involvement with Oceanmark wasn't mentioned at the
hearing may be that D'Amato had his own not-so-kosher connections to the New
York Group. During the 1980's D'Amato was embroiled in a nasty HUD scandal of
alleged favoritism, back-scratching, and campaign donor quid pro quos.
Goldstein, a heavy D'Amato donor, and seven members of the New York Group
realized a $17-million windfall from a juicy HUD packagepatched together by a
senior HUDofficial, Joseph Monticciolo, and pushed through by D'Amato. Upon
leaving HUD, Monticciolo became the titular head of a Goldstein investment
group that included these New York Group members. Congressional and Justice
probes were launched. Ultimately Monticciolo rolled and said D'Amato asked him
to cover for the senator, but the case could not be made. These eight investors
at one time owned nearly half of the New York Group's shares in Oceanmark,
according to documents from Cuomo's files.
If D'Amato wasn't going to bring up Oceanmark, neither was Cuomo--even if it
meant a material omission on his nomination form. Cuomo will not explain why he
did not list the Oceanmark suit among the court cases in which he had been a
defendant. His HUD lawyers wrote TAS that "The FBI, Department of Justice, and
U.S. Senate (Republican controlled) have all stated that all nomination forms
and procedures were correctly complied with by Mr. Cuomo." But there is no
public record of any such statements. What's more, according to the Office of
Government Ethics, only the Senate Banking committee would have evaluated
Cuomo's questionnaire. Asked why Cuomo did not divulge that he was investigated
by federal banking regulators, HUD lawyers reply with word games. "Mr. Cuomo
was merely a witness in connection with an FHLBB examination of Oceanmark,"
they claim, and consequently not directly the subject of the inquiry.
Young Cuomo is considered one of the Democratic Party's fastest-rising stars.
He has indicated he'd like to play a major role in Al Gore's New York campaign
machine in 2000, and Washington rumor holds that he's a strong contender for
the second spot on a Gore ticket. More recent speculation predicts a possible
run for retiring Senator Daniel Patrick Moynihan's seat in 2000. The GOP
opponent in that race could turn out to be none other than Alfonse D'Amato. If
that's the case, you can bet the bank on one mud ball that neither candidate
will be throwing.
============================
BLUTRICH, MICHAEL D
9/5/95 $1,000.00
NEW YORK, NY 10016
BLUTRICH HERMAN & MILLER -[Contribution]
CLINTON/GORE '96 PRIMARY COMMITTEE INC
1997-07-24 -- Insurance fraud, money laundering.
Insurance fraud and money laundering.
CHARLES R. WILSON, United States Attorney for the Middle
District of Florida, announced today that a federal grand jury
sitting in Orlando returned a 91-count indictment charging
PATRICK C. SMYTHE, age 52, of Alphanetta, Georgia; MICHAEL D.
BLUTRICH, age 47, of New York, New York; individually and
d/b/a Blutrich, Falcone & Miller, d/b/a Blutrich & Miller,
d/b/a Blutrich, Herman & Miller; LYLE K. PFEFFER, age 37, of
New York, New York, SHALOM WEISS, age 43, of Munsey, New York;
RICHARD B. HERMAN, age 40, of White Plains, New York,
individually and d/b/a Law Offices of Richard B. Herman, d/b/a
Blutrich, Herman, and Miller; LPDA ACQUISITIONS, INC.;
NULENDA, INC.; FUTURE DIVERSIFIED PROJECTS, INC.; ACTUAL
FUNDING, INC.; IWUB CORP.; ADOS EQUITIES CORP.; SHEFA, INC.;
SPRITE EQUITIES CORP.; and ISPEP EQUITIES, CORP. with multiple
counts of wire fraud, interstate transportation of property
obtained by fraud, and money laundering. The defendants are
alleged to have engaged in various schemes from April 1992
until July 1997 to defraud National Heritage Life Insurance
Corporation (NHLIC), a wholly-owned subsidiary of LifeCo
Investment Group, Inc. (LifeCo), of money and property, and to
defraud LifeCo and NHLIC, the shareholders of LifeCo and
NHLIC, and the policy holders of NHLIC of their intangible
right of honest services from LifeCo and NHLIC officers,
directors, attorneys, and committee members.
SMYTHE was a former Director, President, Chief Operating
Officer of LifeCo and former Director, Executive Vice
President and Chief Operating Officer of NHLIC. BLUTRICH is
a New York attorney and was former outside counsel for LifeCo
and NHLIC. PFEFFER, a New York businessman, was former
consultant for LifeCo and NHLIC. The indictment alleges that
SMYTHE, BLUTRICH and PFEFFER, under the guise of obtaining or
making purported capital investments totalling approximately
$23,000,000 into LifeCo from LPDA Acquisitions Corp. and
Future Diversified Projects, Inc., companies owned and
controlled by PFEFFER, secretly diverted assets of NHLIC
totalling approximately $47,000,000 to bank accounts of LPDA
and NULENDA at Standard Chartered Bank, New York, New York for
the purpose of establishing lines of credit for LPDA
($15,000,000) and NULENDA ($20,000,000).
The indictment charges that SMYTHE, BLUTRICH, and PFEFFE
thereafter pledged the $47,000,000 of NHLIC funds to secure
the lines of credit, and then used said lines of credit to
make the $23,000,000 in capital investments into LifeCo, and
diverted the balance to their own use and benefit, or to the
use and benefit of friends and associates, and to corporations
controlled by themselves or their friends and associates.
HERMAN, a New York attorney, is alleged to have assisted
the fraud by transferring $11,000,000 of the proceeds of the
fraudulently-obtained NULENDA line of credit, disguised as a
capital contribution into LifeCo from FUTURE DIVERSIFIED in
exchange for preferred stock of LifeCo. HERMAN is also
charged with money laundering. WEISS, a businessman from
Brooklyn, New York, is alleged to have used corporations he
owned and controlled to assist in the laundering of
approximately $6,300,000 of the NULENDA/FUTURE DIVERSIFIED
funds, and to have directed New York attorney Bernard Shafran
of the law firm of Frenkel & Herskowitz to issue a substantial
portion of said funds to his own use and benefit or to the use
and benefit of business associates of WEISS.
In the Spring of 1994, the Insurance Commissioner for th
State of Delaware was appointed receiver for NHLIC, based upon
a finding that the company's capital was severely impaired.
United States Attorney Charles R. Wilson stated "The
Office of the United States Attorney, Internal Revenue
Service, Federal Bureau of Investigation and United States
Postal Inspection Service have formed a task force to deal
with issues arising from the collapse of National Heritage
Life Insurance Company. The actions of the defendants in this
case put the financial security of over 35,000 policy holders
and annuitants in jeopardy. Our investigation is continuing
and we expect to present many additional matters to the grand
jury for its consideration. The Office of the United States
Attorney will vigorously prosecute all persons who threaten
the safety of financial institutions, including insurance
companies, through theft and fraud."
The charges filed are the result of a continuing joint
investigation conducted by the Internal Revenue
Service/Criminal Investigations Division, the Federal Bureau
of Investigation, and the United States Postal Inspection
Service, into matters related to the collapses of NHLIC. The
case will be prosecuted by Senior Litigation Counsel Judy K.
Hunt and Assistant United States Attorney Thomas W. Turner of
the Orlando Division of the United States Attorney's Office.
To date, three persons have been convicted in this
investigation. In March, 1995, Jay I. Bartz, a former
attorney who practiced at Scottsdale and Parazone, and a
former director of LifeCo, pled guilty to money laundering by
transferring approximately $2,200,000 of funds fraudulently
for NHLIC to an offshore account in the Channel Islands for
the benefit of SMYTHE. On December 14, 1995, Bartz was
sentenced in Federal District Court in Phoenix, Arizona to
five years probation and a $3,000 fine.
On December 2, 1996, DAVID L. DAVIES, was sentenced by
Judge Patricia C. Fawsett, United States District Court Judge,
Orlando, Florida, to 84 months imprisonment, two years
supervised release and ordered to pay back taxes, penalties
and interest totalling $2,163,427, to pay restitution
totalling $10,503,728, and to perform 100 hours community
service, following his guilty plea to three counts of wire
fraud and one count of federal income tax evasion. The
indictment against DAVIES alleged that in September 1990, TRI-
ATLANTIC HOLDINGS, LTD., a Delaware corporation owned and
controlled by DAVIES and others, acquired beneficial ownership
of 52.3% of the common stock of Lifeco and control of NHLIC.
That indictment charged that DAVIES and TRI-ATLANTIC HOLDINGS,
LTD. devised and executed a scheme and artifice to make it
appear that the Lifeco stock was purchased with new capital,
whereas in fact most of the acquisition funds were diverted
from NHLIC under false pretenses. That indictment further
alleged that some of the acquisition funds were embezzled from
another individual. DAVIES was also charged with causing
fraudulent loans in the total amount of $10,400,000 to be
issued to assorted corporations which he secretly controlled,
and to other corporations which then secretly, immediately
forwarded the proceeds to Davies' corporations. |
