I wouldn't put too much belief that JW can recoup any of the Paul money for Paul or his stockholders,etc, but the Feds may well have Paul dancing to another jig as this thing unravels in his other stock dealings, taxes, off shore accounts, etc..... Not too many FEC violations are really dealt with harshly, but we will see.

Clintons' Fall Guy May Turn the Tables (Peter Paul)

Insight ^ | 10/16/03 | Paul M. Rodriguez



Posted on 10/16/2003 8:59 PM CDT by JeanS



Peter F. Paul, the flamboyant Hollywood entrepreneur who says Hillary Rodham Clinton has hidden almost $2 million of in-kind contributions he made to her campaign in 2000, is back from Brazil and promising to raise a ruckus about the New York senator as he fights bizarre securities and bank-fraud charges on which he's been indicted. Aaron Tonken, a political operative in Hollywood and a former protégé of Paul under indictment for a variety of alleged sharp deals with the rich and famous, also is promising to tell everything he knows about behind-the-scenes shenanigans of Clinton and many others.



Meanwhile, the Securities and Exchange Commission (SEC) and the IRS have embarked on extensive civil and criminal probes involving a cast of Damon Runyon characters and securities, tax and bank frauds that appear to center on a now-bankrupt company called Stan Lee Media Inc. (SLM). That company is in turn at the epicenter of charges brought against Stephen and Jonathan Gordon, Paul and at least two stockbrokers/advisers and alleged mob figures who helped to perpetrate government-alleged frauds that were used to finance political fund raising for Hillary and Bill Clinton.



Professionals at the Justice Department in Washington, along with prosecutors in the Eastern District of New York and the Western District of California (Los Angeles), also are pursuing ongoing investigations stemming from their probes of Paul, the Gordons and others. At least that's what government officials tell Insight when asked about the status of this battery of criminal cases triggered by the Paul et al. indictments issued almost three years ago.



First a recap: Paul and the Gordons were alleged in the indictments to have bilked SLM, Merrill Lynch, U.S. Bank and others out of millions of dollars by floating checks on margin accounts holding SLM stocks for various personal perfidies, with which he says he financed the Clinton fund raising. According to prosecutors, as much as $25 million was stolen or otherwise looted.



Paul, who was in Brazil at the time of his indictment and convinced that the Clintons were out to wreck his credibility lest he become a whistle-blower, decided to fight the charges from South America. Through a series of manipulations he soon was locked up in squalid and dangerous Brazilian jails until extradited recently to Brooklyn, N.Y. The Gordons stayed in California, fought the charges and were convicted this spring of (much) lesser offenses than initially charged. They are appealing. Others indicted in allegedly related schemes have yet to stand trial despite the passage of years.



Tonken was indicted earlier this year on unrelated charges of bilking mostly rich-and-famous types through mail fraud tied to charity events he led as a result of having worked closely with the Clintons and top Democrats in earlier political battles. He claims he has dirt to dish about a number of related high-fliers, including Hillary Clinton and financial supporters of her campaign. Prosecutors are reported to be listening.



Paul charges that the indictments which have kept him in danger in some of Brazil's worst jails were obtained on little evidence as political retribution for his whistle-blowing in early 2001 about the failure of Hillary Clinton and her campaign to report his huge contributions. Stephen Gordon, who was executive vice president of SLM, confirms the in-kind donations to Hillary but side-steps political aspects raised by Paul. Gordon says he can't understand why he was prosecuted for allegedly manipulating the stock of SLM as part of a cash-flow problem even as prosecutors ignored those more senior at SLM and at Merrill Lynch whom he says followed the same procedures and worse - procedures he insists were researched carefully and found to be legal by company lawyers and accountants.



All of these defendants - Paul, the Gordon brothers and Tonken - have raised significant questions and issues concerning monies passed through the once promising SLM Internet company on the one hand, and alleged Clinton connections and abuse of prosecutorial discretion on the other. Despite the hype and rhetoric of prosecutors when these indictments were issued in late summer 2001, except for conviction of the Gordons on the much-reduced charges, little has occurred in the intervening years.



However, since Insight began investigating the Paul/SLM/Clinton connection a year ago [see "Paul Takes the Fall?" Oct. 1-14, 2002], this magazine has obtained volumes of internal SLM records that reveal secret stock transactions and activities by and through offshore companies that either are not referenced in the various indictments prosecutors secured or do not show up in required SEC filings for public companies. Newly obtained documents also show previously hidden deals among top SLM executives that involve insider stock deals, loans and conversion of restricted "144" stocks - unregistered stocks given to insiders - that law-enforcement sources allege show major violations of banking and securities laws not previously disclosed by prosecutors.



According to sources, a key reason for failure by prosecutors to pursue other potential crimes in these cases stems from political concern that to do so would require tracking Paul's claim that his indictments were a Clinton-inspired vendetta to keep him quiet about huge unreported donations to Hillary's campaign that broke the company. That Paul's legal troubles were initiated by a political vendetta is denied by federal officials who nonetheless concede privately that they have steered clear of his significant contributions to Hillary Clinton. Indeed, based on voluminous records obtained by Insight - including canceled checks, bank ledgers and margin-account statements and invoices - there is no doubt Paul funded numerous high-profile and well-reported political events for Hillary Clinton as well as a Hollywood tribute gala for President Bill Clinton.



To meet the increasing demands that he underwrite high-profile luncheons, dinners and galas to raise ever more money for the Clintons, according to Paul he began to borrow ever more heavily against margin accounts that held SLM stock he had received and assigned to shell companies he had created. These are the very shell companies that prosecutors have claimed were used solely for personal gain to defraud stockholders and corporate executives of SLM, as well as financial institutions that handled the checks and managed the margin accounts.



Contrary to claims made in the indictments of Paul and others, however, internal SLM documents - including e-mails, corporate minutes and stock-assignment and transfer records - show SLM executives should have been aware of intricate activities that prosecutors claim Paul et al. orchestrated secretly for nefarious purposes and contrary to corporate interests.



Moreover, documents and interviews further show that many of the activities Paul et al. allegedly engaged in were familiar corporate practice for others at or associated with SLM. This includes apparent efforts to reduce taxes by moving stocks to offshore companies, converting restricted stocks for quick sales and giving stocks to companies that later would lend monies back to SLM. These were reported in SEC filings as private investors without revealing details of the deals.



At the time that Paul paid nearly $2 million worth of bills for Clinton events, SLM was riding high in the tech industry and its stock was stable. However, late in 2000 the value of the stock began to sink on unusual sales from so-called private investors. This prompted the SEC to launch a probe which caused a run and plunge of SLM stocks that led to bankruptcy. Prosecutors claim that it was Paul et al. who orchestrated secretly the demise of the company with a pump-and-dump scheme, though apparently ignoring other insiders who sources say actually did the deals.



"Something stinks," a lawyer for Paul says. It boils down to a theory that exposing the allegedly extended wrongdoing at SLM would require prosecutors to delve into activities by the Clintons and top Democratic political operatives who used SLM as a private piggy bank. Not to mention possible exposure of a confidential informant used by the FBI in unrelated Mafia-type stings, sources confirm. It is a theme about which Vanity Fair reported earlier this year.



One such snarly issue into which prosecutors are accused of not wanting to delve involves demands made on SLM to transfer at least $100,000 worth of company stock as part of an alleged quid pro quo between the Clintons and Paul to enlist Bill Clinton to promote the company after he left the White House. Until recently, Insight could not confirm the alleged demands. However, following up on a Los Angeles Times report this summer, Insight now has obtained internal communications from the Hillary Rodham Clinton for U.S. Senate Committee Inc., the political entity she used to raise funds for her campaign in 2000. These documents, above, appear to confirm the allegations that SLM stock-transfer demands were made and paid.



For example, copies of faxes identified as coming from David Rosen, the national finance director for Hillary Clinton's political organization, do indeed instruct the delivery of $100,000 worth of SLM stock to the Working Families Party in New York state. This was a political-action group that threw support to Clinton's 2000 bid for the U.S. Senate.



In a fax dated Aug. 24, 2000 ("in RE: Stock Transfer"), there is a reference to an Aug. 3, 2000, memorandum from Rosen to Steve Gordon at SLM, in which Rosen reveals the brokerage account for the Working Families Party as Morgan Stanley/Dean Wittier, the account number, and its representative, phone number and address in Staten Island, N.Y. Both documents say at the bottom: "Paid for by the Hillary Rodham Clinton for U.S. Senate Committee Inc. Contributions are not tax deductible for federal income-tax purposes."



The Los Angeles Times has reported that neither Working Families nor others would explain the instructions in this document or say whether the authorized stock transfer actually took place. Nor has Insight been able to confirm that the deal was "done" as handwritten on the Aug. 3, 2000, communication. Political operatives tell this magazine that such schemes often have been used by political campaigns to hide movement of funds between and among various like-minded groups that funnel money for campaign expenses without recording it with the Federal Election Commission (FEC) and thus revealing it to the public.



Although federal prosecutors, both in New York City and in Los Angeles, were told of this purported stock-related deal to support Hillary Clinton's run for the U.S. Senate, sources claim the prosecution did not report it either to the FEC or the SEC. Nor did the federal prosecutors publicly mention any of the Paul political schemes on behalf of the Clintons that were run through his various companies - the very same companies the indictments claimed were involved in defrauding the public and other illegal activities.



Nor do Clinton's FEC records, which are voluminous, show: 1) any tangible benefit to the company from the alleged pass-through of SLM stocks or 2) Paul's nearly $2 million of in-kind contributions. The FEC records do show about $400,000 received during the summer of 2000 from SLM, but both SLM executives and Stan Lee reportedly have denied making any such soft-money contribution. In fact, it was Paul who made the donation, sources say. And, in the cache of documents obtained by federal prosecutors Insight has found records showing Paul "reimbursed" at least $100,000 for the Stan Lee/SLM contribution claimed by Hillary's campaign.



FEC sources have told this magazine that while they are aware of Paul's claims - and documents confirming that he provided nearly $2 million for Hillary-related fund-raising events - they have not moved to reconcile the senator's campaign records. "I can't explain it to you," said an FEC source. That same source said the agency was unaware of the stock transfer to the Working Families Party and confirmed there should have been a record of it. "But there's not one we can find."



Sen. Clinton, who has declined all comment about these matters, previously claimed through spokesmen that she barely knew Paul, and had returned a $2,000 donation he made to her campaign in the spring/summer of 2000, denied he was involved in setting up Clinton fund-raisers, denied he gave huge in-kind contributions and denied having anything to do with Paul and SLM in any way (except for that disputed $400,000, of course).



This is curious given the personal notes signed by Hillary, Bill and even Chelsea Clinton thanking Paul for all his work on Mrs. Clinton's fund-raising events back in the summer of 2000. And despite the numerous e-mails and faxes sent by Rosen, Clinton's national finance director, to Paul and Stephen Gordon at SLM demanding the transfer of at least $100,000 worth of SLM stock to the Working Families Party.



Insight is told that prosecutors thus far have not interviewed other top executives at SLM or expanded their probe to include the political contributions to the Clintons, the SEC recently assigned a special team to review all such allegations. But SEC officials have declined public comment on their preliminary investigation, first revealed by the Los Angeles Times.



"Based on what we've learned recently, it certainly appears far more than a simple case of fraud by one or two people," an SEC insider confides to Insight. "My guess is that we'll be picking up the ball and running fast in very short order" to pursue suspected additional wrongdoing. This would include looking into the stock transfers that appear to have been orchestrated by Clinton's national finance director, to the Working Families Party.



Paul M. Rodriguez is the managing editor of Insight magazine.

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View documents showing details of a Hillary Clinton campaign demand for $100,000 in SLM stock.



Read "Paul Takes the Fall?" from the Oct. 1-14, 2002, issue of Insight.