Operation Stolen Dreams

Operation Stolen Dream

Last evening while relaxing on my couch reading Elie Wiesel’s Night, I received a phone call from a very concerned young man.  Adam is a real estate professional who had just been indicted for mortgage fraud.

Adam, I learned through our ten-minute call, was one of 22 executives indicted for his alleged role in a property-flipping scheme. Allow me to clarify how the government feels about those who participate in property flipping schemes. William “Bill” Cotter, Acting Special Agent in Charge of the Internal Revenue Service-Criminal Investigation in San Antonio issued the following quote as the indictments were unsealed:

“These types of crimes create a significant loss of tax revenue, drive buyers into foreclosure, leave lenders burdened with bad loans and neighborhoods with abandoned and deteriorating properties. IRS CI is committed to pursuing individuals who create such havoc.”

Sadly, Adam, is clinging to many of the same denials that I once clung to: I didn’t set out to do anything wrong; everyone knew about it; it wasn’t my idea; and so forth. Unfortunately the justice system doesn’t factor in intent when indicting anyone they believe perpetuates crimes against society.

I didn’t set out to do anything wrong either, but it didn’t change the end result: I helped my client, Keith Gilabert, lose millions of dollars from unsuspecting investors, then helped him lie about it. Kenneth Sorosky (my former senior partner at UBS) and I tried to convince ourselves that it was ok to facilitate a Ponzi scheme because everyone at UBS knew that Gilabert had not only lost millions, but we also knew that he borrowed money from new investors to pay back earlier investors. We just convinced ourselves that it wasn’t our responsibility to shut it down.   And of course it was not my idea to start a hedge fund, but it doesn’t change my role—a role that helped turn investors into victims; a role that caused pain and shame for those that love and support me; a role that stripped me of one million dollars and worse—my reputation. I deserved to be sanctioned heavily, and I was. I may sound like a broken record, but disregarding ethical precepts and cutting corners necessitates preparation to endure the wrath of an unforgiving criminal justice system.

The journey for Adam (and the others indicted) in what the government is calling “Operation Stolen Dreams” will be long and arduous. It is supposed to be. In white-collar crime, it’s one strike and you’re out! But with hard work, he can come through the journey as a better man.

I can’t guarantee it, but I’d bet that a handful of these defendants are already living like the ostrich with their heads buried in the sand, hoping that if they do nothing somehow this will all go away. I once thought that too. Some are probably cooperating—smart! Some will take the case to trial, and probably lose. Some are hiring prison consultants, trying to get an idea of what they can expect.  Others are afraid to come clean to their lawyers, convincing themselves that they are not really criminals.  The prison terms will be all over the board, and those terms will absolutely be determined by how they respond today, tomorrow, and so on.

Adam is not yet ready to come to terms with what is transpiring. He insisted (during our conversation) that he was innocent and believes he will win at trial. I hope he’s right.

It troubles me when I hear others profess that the “banks” cannot be victims, because they are the real perpetrators. How does wrongdoing from another executive or even a company excuse individual wrongdoing?

I wished Adam well, and told him that I would be available for a modest fee— not if, but when he calls again. I just hope he doesn’t wait too long, because 21 of his former colleagues are sitting at home wondering if they should be the first to cut a deal.

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