EFTA Document EFTA01361580

Page 13 The Talented Mr. Epstein; Lately, Jeffrey Epstein's high-ying style has been drawing oohs and aahs: the bachelor nancier lives in New York's largest private residence, claims to take only billionaires as clients, and ies celebrities including Bill Clinton and Kevin Spacey on his Boeing 727. But pierce his air of mystery and the picture changes. VICKY WARD explores Epstein's investment career, his ties to retail magnate Leslie Wexner, and his complicated past Vanity Fair March 2003 To win approval from the Illinois insurance regulators for Towers's acquisition of the companies, Hoffenberg promised to inject $3 million of new capital into them. In fact, in his grand jury testimony Hoffenberg claimed that he, his chief operating officer, Mitchell Brater, and Epstein came up with a scheme to steal $3 million of the insurance companies' bonds to buy Pan Am and Emery stock. "Jeffrey Epstein and Mitch Brater arranged the various brokerage accounts for the bonds to be placed with in New York, and I think one in Chicago, Rodman & Renshaw," Hoffenberg reportedly said. Then, said Hoffenberg, while making it appear as though they were investing the bonds in much safer financial instruments, they used them as collateral to buy the stock. "Epstein was the person in charge of the transactions, and Mitchell Brater was assisting him with it in coordination on behalf of the insurance companies' money," Hoffenberg claimed at the time. At one point, according to Hoffenberg, a broker forged the documents necessary for a $1.8 million check to be written on insurance-company funds. The check was used to buy more stock in the takeover targets. Meanwhile, in order to throw the insurance regulators off, the $1.8 million was reported as being safely invested in a money-market account. United Fire's former chief financial officer Daniel Payton confirms part of Hoffenberg's account. He says he recalls making one or two telephone calls to Epstein (at Hoffenberg's direction) about the missing bonds. "He said, 'Oh, yeah, they still exist.' But we found out later that he had sold those assets ... leveraged them ... (and) used some margin account to take some positions in ... Emery and Pan Am," says Payton. Epstein's extraordinary creativity was, according to Hoffenberg, responsible for the purchase by the insurance companies of a $500,000 bond, with no money down. "Epstein created a great scheme to purchase a $500,000 treasury bond that would not be shown ... (as) margined or collateralized," he reportedly told the grand jury. "It looked like it was free and clear but it actually wasn't," he said. Epstein has denied he ever had any dealings with anyone from the insurance companies. But Richard Allen says he recalls talking to Epstein at Hoffenberg's direction and telling him it was urgent they retrieve the missing bonds for a state examination. According to Allen, Epstein said, 'We'll get them back." He had "kind of a flippant attitude," says Allen. 'They never came back." Epstein, according to Hoffenberg, also came up with a scheme to manipulate the price of Emery Freight stock in an attempt to minimize the losses that occurred when Hoffenberg's bid went wrong and the share price began to fall. This was alleged to have involved multiple clients' accounts controlled by Epstein. Eventually, in 1991, insurance regulators in Illinois sued Hoffenberg. He settled the case, and Epstein, who was only a paid consultant, was never deposed or accused of any wrongdoing. Barry Gross, the attorney who was handling the suit for the regulators, says of Epstein, "He was very elusive... It was hard to really track him down. There were a substantial number of checks for significant dollars that were paid to him, I remember... He Al3R Research Profile modified 418 200? For internal use only CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0050783 CONFIDENTIAL SDNY_GM_00196967 EFTA01361580