200,000 Towers Ivestors Restitution Victims in Pension Funds, Mutual Funds, The Country of Cape Verde, Banks, Corporate Employee Pensions Unions, Churches and Individual Investors in Towerss Financial v. United States of America

Filing 2

MEMORANDUM AND ORDER: Petitioners and Alan Fraade of the firm of Mintz & Fraade, P.C., are directed to show cause in writing by January 17, 2014, why this action should not be dismissed and sanctions imposed under Rule 11 (b), Fed. R. Civ. P., with petitioners' counsel disqualified from representing petitioners. Mr. Fraade is ordered to immediately serve the respondent with the petition and a copy of this Order. SO ORDERED. (Signed by Judge P. Kevin Castel on 12/18/2013) (ama)

USDSSDNY
DOCUMENT
UNITED STATES DISTRlCT COURT
SOUTHERN DISTRICT OF NEW YORK

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200,000 TOWERS INVESTORS
RESTITUTION VICTIMS IN PENSION
FUNDS, MUTUAL FUNDS, THE COUNTRY
OF CAPE VERDE, CORPORATE
EMPLOYEE PENSION UNIONS,
CHURCHES, AND INDIVIDUAL
INVESTORS IN TOWERS FINANCIAL
CORP. WHO ARE THE BENEFICIARIES OF
STEVEN HOFFENBERG'S JUDGE SWEET
ORDERED $475 MILLION RESTITUTION
THAT IS NOW UNDER TWO BILLION
DOLLARS PLUS ACCRUED INTEREST,
Petitioners,

ELECTRONICALLY FILED
DOC#:
DATE FILED~7J--7?--=73-

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13 Civ. 8563 (PKC)

-againstMEMORANDUM
AND ORDER
UNITED STATES OF AMERlCA BY THE
U.S. PROBATION OFFICE NEW YORK
CITY STAFF BREACH OF THE CRIME
VICTIMS ACT,
Respondent.

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CASTEL, District Judge:
Two hundred thousand victims of Steven Hoffenberg's criminal fraud scheme
relating to Towers Financial Corporation, purportedly represented by Alan P. Fraade, Esq. of the
law firm Mintz & Fraade, P.C., commenced these proceedings.! Their petition names as the sole
respondent the "United States of America by the U.S. Probation Office New York City Staff."
The sole claim is asserted under the Crime Victims' Rights Act ("CVRA"), 18 U.S.C. § 3771,

I Hoffenberg has been convicted of conspiracy to commit securities fraud, 18 U.S.C. § 371, conspiracy to obstruct
SEC proceedings, 18 U.S.C. § 371, maiifraud, 18 U.S.C. §§ l341 & 2, and tax evasion, 21 U.S.C. § 7201. In 1997,
Judge Sweet of this Court sentenced Hoffenberg to 240 months of imprisomnel1t, three years of supervised release,
restitution in the amount of$475,157,340 and a $1 million fine. United States v. Hoffenberg, 94 Cr. 213 (RWS)
(Docket # 149). In an Order dated December 11, 2013, Judge Sweet modified the terms of Hoffenberg's supervised

release to impose, among other restrictions, a prohibition from engaging in direct contact with his victims. (94 Cr.

2l3, Docket # 145.)

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and the petition seeks an order directing the Probation Office of this District "to refrain from any
further obstruction to Mr. Hoffenberg's efforts in collecting and paying his restitution .... "
(Petition at 4.) Specifically, it requests that the Probation Office allow Hoffenberg to renounce
his U.S. citizenship and move to China to set up a business.
Why would the victims of Hoffenberg's frauds be so eager to have him placed
beyond the reach of U.S. authorities? A possible answer is found in the body of the petition and
its annexations, which reveal that the law finn of Mintz & Fraade, P .C., in addition to
representing the victims of Hoffenberg's fraud, also represents Hoffenberg.
For the reasons explained, the petition appears to raise serious questions as to
whether counsel has complied with his professional responsibilities. It also appears that the
petition is fi'ivolous, and fails to state a claim upon which relief can be granted. As explained,
the Court will direct petitioners and their counsel to show cause in writing by January 17,2014,
why this action should not be dismissed and sanctions imposed under Rule II(b), Fed. R. Civ. P.,
and the inherent power of the Court.

1.

The Law Finn of Mintz & Fraade Seeks to Represent Both the Victims of
a Fraud and Its Perpetrator.

Alan Fraade purports to represent 200,000 victims of Hoffenberg's fraud. Judge
Sweet has described Fraade as having "a longstanding relationship with Hoffenberg," and acting
as "Hoffenberg's 'house counsel' at Towers." United States v. Hoffenberg. 908 F. Supp. 1265,

1273 (SD.N.Y. 1995). Indeed, the petition describes Mintz & Fraade as "Mr. Hoffenberg's New
York firm."2 (Petition at 9.)

2 The petition also recounts an incident in November 2013 in which Tara Hewitsoll of Mintz & Fraade was in the
company of Hoffenberg at the time of a scheduled meeting with his probation officer. (Petition at 9.) It annexes a
November 8, 2013 memo from Hewitson to the "Steven Hoffenberg File" with the boldface label "Attorney Work
Product," in which Hewitsoll recounts her efforts to attend the 8:45 a.m. meeting between Hoffenberg and his
probation officer. (Petition Ex. B.)

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No explanation is furnished as to how the same Mintz & Fraade attorneys,
consistent with their professional responsibilities, could represent both the convicted perpetrator
ofa fraud and his victims. See Rule 1.7 ofthe New York Rules of Professional Conduct. Rule
1.7(a)(I) provides that "a lawyer shall not represent a client if a reasonable lawyer would
conclude that ... the representation will involve the lawyer in representing differing interests."
Rule 1.7(b) sets f011h certain exceptions to Rule 1.7(a), but makes clear that in no circumstance
mayan attorney concurrently represent two or more clients when the representation "involve[s1
the assertion of a claim by one client against another client represented by the lawyer in the same
litigation or other proceeding before a tribunal." Rule 1. 7(b)(3). In seeking $2 billion in
restitution from Hoffenberg to 200,000 purported victims, it appears that the attorneys of Mintz
& Fraade represent "differing interests."

II.

It Appears that the Petition Is Frivolous, and Fails to State a Claim Upon
Which Relief Can Be Granted.

It also appears that the petition fails to plausibly state a claim upon which relief

can be granted. The petition is brought pursuant to the CVRA, which does not provide for a
private right of action.

See,~,

Cunningham v. United States Dep't of Justice, _ F. Supp. 2d

_,2013 WL 4446795, at *9 (D.D.C. Aug. 21, 2013) ("No judicial relief may be had under
CVRA because that statute does not allow a private party to sue for enforcement."); Upton v.
Fakhoury, 2011 WL 3703364, at * 1 (E.D. Cal. Aug. 23, 2011) ("no independent right of action
was created by" the CVRA). The petition invokes no other basis for relief or for exercising
federal jurisdiction. On this basis alone, it appears that the petition should be dismissed as
frivolous.
Even if petitioners had a right of action under the CVRA, their claim seeks to
modify the terms of a criminal sentence lawfully imposed upon non-party Hoffenberg by another

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judge of this Court in an entirely separate criminal action. According to the petition, Hoffenberg
and all 200,000 of his purported victims believe that their interests would be served if
Hoffenberg is permitted to expand his "account collections" business in China and renounce his

u.s. citizenship?

(Petition at 16.) The petition's "200,000 victims" recite frustrations that

Hoffenberg has encountered while on supervised released, including difficulties receiving
pennission to visit his terminally ill wife in Pennsylvania and denial of permission to take notes
during his meetings with probation officers. 4 (Petition at 10-15.) The petition asserts that a nonparty "multi-billionaire" named Jeffrey Epstein can "easily" provide for restitution through his
"over one hundred billion dollar hedge fund" that was fonned with Hoffenberg's assistance.
(Petition at 13-14.)
The current proceeding has not been brought as a putative class action. The
petition makes no reference to Rule 23, Fed. R. Civ. P., or to a class of similarly situated persons.
Implicitly, counsel purports to directly represent approximately 200,000 individuals who
invested in Towers Financial. (Petition at 1.) As explained in the petition, these 200,000
individuals include mutual funds, pension funds and a significant portion of the population of the
country of Cape Verde. (Petition at 3.) The petition identifies only one petitioner, however: an
individual named Rey Marques, whose "Emergency Retainer Agreement" with Mintz & Fraade
is annexed to the petition. (Petition at 3 & Ex. A.) Marques claims to have "been a witness to
the obstruction by the United States Government which is alleged herein .... " (Petition at 3.)
Remarkably, the Mintz & Fraade retainer agreement with Marques states, "We hereby advise

According to the petition, Hoffenberg also has filed an application with Judge Sweet that seeks permission "to
leave the United States permanently to live and work in China}" where he hopes "to renounce his U.S. citizenship."
~Petition at 16.)
Judge Sweet's order of December II now permits Hoffenberg "to travel to Philadelphia, PA, for the purpose of
contacting his wife in the hospital ...." (94 Cr. 213 Docket # 149.)
3

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you that we are not aware of any conflicts with respect to our representation of you pursuant to
this Retainer Agreement." (Petition Ex. A)
The petition appears in several respects to be a frivolous pleading filed in
violation of Rule ll(b). Rule 11 (c)(3) provides that "[o]n its own, the court may order an
attorney, law firm, or party to show cause why conduct specifically described in [an] order has
not violated Rule ll(b)." On the face ofthe petition, such an order to show cause is wananted
here.
CONCLUSION
Petitioners and Alan Fraade of the finn of Mintz & Fraade, P.C., are directed to
show cause in writing by January 17, 2014, why this action should not be dismissed and
sanctions imposed under Rule 11 (b), Fed. R. Civ. P., with petitioners' counsel disqualified from
representing petitioners.
Mr. Fraade is ordered to immediately serve the respondent with the petition and a
copy ofthis Order.
SO ORDERED.

YP.Kevin Castel
United States District Judge
New York, New York
December 18, 2013