Judges sidestep huge Broward County fraud case
January 16, 2009 | South Florida Sun-Sentinel.com
Sun Sentinel Exclusive
by Vanessa Blum
The biggest financial fraud case in Broward County history is proving too hot to handle for several senior federal law enforcement officials and judges, who have removed themselves from having anything to do with it.
Federal prosecutors announced new charges this month in the long-running investigation of Mutual Benefits Corp.--a defunct Fort Lauderdale investment firm whose managers are accused of operating a $1-billion Ponzi scheme.
This week, two federal judges assigned to hear the case stepped aside in quick succession with no explanation, according to public court records.
The back-to-back judicial recusals, unparalleled in recent memory, followed an unusual decision by the two highest-ranking lawyers in the local U.S. Attorney’s Office to have no further involvement in matters related to Mutual Benefits.
Judges and prosecutors generally recuse themselves when they have conflicts of interest, for instance a personal relationship with someone involved or a financial stake in the litigation.
Because of secrecy surrounding the recusals, it is not clear whether the Justice Department officials and federal judges have the same conflict.
Former U.S. Attorney Kendall Coffey said the officials might be stepping aside to avoid “even the appearance of a conflict” in the case.
“Public officers have every right to stand back when conflict concerns arise,” Coffey said.
Mutual Benefits purchased life insurance policies of the terminally ill and elderly and sold shares of the anticipated payouts. From 1994 to 2004, the firm raised more than $1.25 billion from investors worldwide, according to prosecutors.
Prosecutors contend the firm’s senior management cheated investors by downplaying risks and using false projections of how long the insured people would live.
Since 2006, eight former Mutual Benefits employees have pleaded guilty to criminal charges brought under the direction of U.S. Attorney Alex Acosta.
However, in Sept. 2007, the Miami-based Acosta abruptly stepped aside from the ongoing investigation, along with Jeffrey Sloman, his top assistant. Contacted by the Sun Sentinel, neither would explain his reasons.
Justice Department officials then tapped antifraud chief Eric Bustillo to supervise the massive fraud case. Bustillo declined to comment.
Last week, federal prosecutors unsealed an additional 30-page indictment charging Mutual Benefits’ founders and legal advisors with conspiracy, fraud and money laundering.
The case was randomly assigned to U.S. District Judge Marcia Cooke. However, Cooke issued an order Tuesday saying she was stepping aside.
U.S. District Judge Paul Huck, who then received the case, recused himself Thursday. Huck’s order, without giving specifics, cited “a conflict,” though he had presided over earlier criminal matters related to Mutual Benefits.
Steven Larimore, chief administrator for the federal court in South Florida, transferred the case Thursday afternoon to a third jurist, U.S. District Judge Adalberto Jordan.
Those charged in the recent indictment--Joel Steinger, 59; Steven Steiner, 56; Michael McNerney, 60; and Anthony Livoti Jr., 59, all of Fort Lauderdale--pleaded not guilty.
Steinger and Steiner, who are brothers, started Mutual Benefits in 1994. McNerney and Livoti, both prominent Broward attorneys, helped run the business, according to the indictment.
Livoti’s lawyer, Joel Hirschhorn, said the spate of recusals on the bench and in the U.S. Attorney’s Office show “forces at play” at the highest levels of government. Hirschhorn would not elaborate.
“My innocent client is being dragged along for the ride” he said.
Vanessa Blum can be reached at vblum@SunSentinel.com or 954-356-4605.