South Florida Sun-Sentinel (Sunday)
Analysis: For 30 years, Epstein slipped away at every turn. 3A
At the beginning, middle and end of his career, Jeffrey Epstein faced a reckoning with his misdeeds. At every stage, he managed to avoid the efforts of prosecutors and victims to confront him with his financial chicanery and sexual abuses. On Saturday, he apparently chose to end his life rather than face what he had done.
Epstein’s death by hanging in his cell in a New York jail appears to be a macabre final escape in a long series of evasions by a fabulously wealthy financier and convicted sex offender who used his private jet and Palm Beach parties to lure presidents and plutocrats into his orbit.
Equal parts charismatic and devious, he was a Wall Street washout with a knack for numbers and, according to those who worked with him, a mind set on deceit. From his beginnings as a college dropout who scored a job as a math teacher at a Manhattan prep school to his career as a millionaire adviser to some of the nation’s top corporate executives and politicians, Epstein acted as if the rules of life did not apply to him.
A decade ago, he avoided a long prison sentence even after police and prosecutors amassed an enormous array of evidence showing that he regularly abused girls at his Palm Beach mansion and on a Caribbean island that he’d bought. In that case, as at several pivotal points throughout his life, Epstein avoided the law by deploying some of the nation’s most famous lawyers and leaning on friendships with
powerful figures in politics, business and academia.
Epstein’s ability to slip away even when those around him are held to account reaches back to well before he’d accumulated any fortune. Epstein, who died at 66, reported to federal authorities recently that he was worth $559 million, but some of his associates contend he had much more than that hidden overseas; others wonder whether he had anything close to that sum. Whatever the truth, he worked to build the impression that he was wealthy and influential, helping him connect with powerful people who for many years defended his character when rumors emerged that he was abusing women and girls.
The story of Epstein’s first great escape is a tale of financial wizardry and brazen criminality, in which hundreds of thousands of Americans lost their retirement money, their life’s savings, on an investment intended to enrich only its creators.
“That money would have been my real retirement,” said Veriena Braune, a
91-year-old retired teacher in Granbury, Texas, who invested all of her savings —
$112,000 — in bonds that a young Epstein sold for his partner, Steven Hoffenberg. She lost every penny of the money.
“Somebody should know: that Epstein did a number on a little teacher in Texas,” Braune said.
Hoffenberg, who headed up the investment scheme and spent 18 years in prison because of it, said in an interview with The Washington Post this week that Epstein was “the architect of the scam.” Federal prosecutors agreed. Yet Epstein was never charged. His name, initially included in prosecutors’ descriptions of the scheme, quickly vanished from the record.
“I thought Jeffrey was the best hustler on two feet,” Hoffenberg said. “Talent, charisma, genius, criminal mastermind. We had a thing that could make a lot of money. We called it Ponzi.”
Hoffenberg pleaded guilty in 1995 to mail fraud, obstruction of justice and tax evasion in two scams — one designed to misuse the assets of two Illinois insurance companies and the other fleecing more than
$460 million from about
200,000 investors who bought notes and bonds from Hoffenberg’s Towers Financial Corp.
“Last year, I got a call at home from no less than Steven Hoffenberg,” said Marvin Gerber, another victim of the scam and a tour operator on Long Island who lost about $250,000 that he’d invested in promissory notes that Epstein and Hoffenberg were selling. “He said he sat in jail for years trying to figure out how he was going to get the money to give back to the people who lost it. He said he was going to try to get it from the guy who absconded with the money — Epstein. But of course, I got nothing. From the very start, I was screwed.”
Last year, two of the victims in the scam filed suit against Epstein seeking the return of their original investments. Two months later, they dropped their suit.
Epstein’s career in finance started at Bear Stearns, the investment banking firm that hired him away from his job teaching math at the tony Dalton School. (It may have helped that he came to Bear Stearns after having tutored the son of the firm’s chairman.) He quickly rose to become a limited partner but left the company suddenly in 1981. Epstein later testified in a Securities and Exchange Commission investigation that some people at the firm thought his departure had to do with “an illicit affair with a secretary,” but Epstein said he had been questioned by his bosses about an improper loan he’d made to a friend to buy stock.
He spent the next few years on his own, trying to build a money management practice known as J. Epstein & Co. In 1987, he met Hoffenberg.
In the late ’80s, Hoffenberg was, by his own account, a schemer. “I was always under investigation,” he said. From afar, he seemed successful — he briefly owned the New York Post, and he rented a floor in Trump Tower (“Donald’s crowd was my crowd,” Hoffenberg said). But much of Hoffenberg’s career involved schemes to separate investors from their money. He figured Epstein had the smarts to help him do that on a much bigger scale.
Hoffenberg said he was introduced to Epstein by Douglas Leese, a British arms dealer. “The guy’s a genius,” Hoffenberg said Leese told him. “He’s great at selling securities. And he has no moral compass.” Leese did not respond to messages seeking comment.
Between about 1987 and
1993, Epstein worked for Hoffenberg, who paid him
$25,000 a month and gave him a $2 million loan in 1988 that Epstein would never have to pay back, according to court documents.
Hoffenberg’s firm, Towers Financial, started out as a collection agency, buying bills that were owed to other firms and collecting as much of the unpaid debts as it could. In 1986, after adding business units in finance and leasing, Towers reported nearly 1,200 employees and nationwide sales of $95 million.
Hoffenberg — like Epstein a Brooklyn native who never finished college — was on his way to acquiring many of the trappings of New York’s financial elite, including chauffeured luxury cars, speedboats and a 72-foot yacht.
But in 1987, Towers began constructing one of the largest frauds in history. The scheme began when Towers acquired the parent of two insurance companies, Associated Life Insurance and United Fire. Then, Towers launched a takeover attempt against Pan Am, the once-proud but then-struggling airline.
To boost its chances, Towers told the SEC that it had an expert on its team: Epstein. Towers called him “a financial adviser who has been familiar with Pan Am for approximately six years” and was now advising Towers.
What neither regulators nor Pan Am knew was that, as Hoffenberg admitted later in court, Towers had begun devising a classic Ponzi scheme, named for a swindler who defrauded investors by moving money back and forth to create the false impression that profit was being made.
After acquiring the insurance companies, Towers began siphoning funds from them to make its bid for Pan Am look viable. Hoffenberg and Epstein also began pulling out hundreds of thousands of dollars for themselves, court documents show. Hoffenberg issued more than 50 checks from the insurance companies to pay his stepdaughter’s tuition, expenses on his private plane and monthly $25,000 checks to Epstein.
“I advanced money to Epstein perpetually because I thought this thing could work,” Hoffenberg said. “He could sell anything. People loved him.”
The Washington Post’s Sarah Ellison contributed to this report.