As he was picking up bagels before a deposition in a divorce case, Russ Klenet got a strange tap on his shoulder.
Klenet is the husband of Broward County Mayor Stacy Ritter and a lobbyist for a host of cities, including Sunrise, Lauderhill, and Pompano Beach. He turned around in the Einstein Bros. Bagels shop on the 17th Street Causeway in Fort Lauderdale and saw what he later described as a "ghost."It was Joel Steinger, his old boss, the con man and convicted felon who'd once renovated the Parkland home Klenet shares with Ritter. The man who once paid Klenet $20,000 a month to lobby for the fraudulent company Mutual Benefits Corp.
"It was like karma," Klenet recounted a few hours later at a deposition on August 24, 2007. "I was coming to this thing today, had not physically laid eyes on or talked to him in that long, and there he was."
Karma? The attorney questioning Klenet seemed incredulous. After all, Klenet was being deposed in Steinger's divorce case, and the fact that they had chatted that very morning looked suspicious. But the lobbyist stuck to his claim that the divorce wasn't mentioned during his 15-minute chat with Steinger at Einstein's. "Didn't think it was appropriate," Klenet told Miami attorney Donald J. Hayden, who was representing Steinger's ex-wife, Diana.
The encounter — and Klenet's dubious explanation about it — encapsulates the puzzling and mysterious relationship between the mayor's husband and the longtime fraud artist. Klenet and Ritter both downplay their connection to Steinger. The mayor says that Steinger gave her the "creeps" and that her husband lobbied for Mutual Benefits merely for a quick paycheck.
But court records portray a deep personal and business bond between the two men that involved a shared company in New York and millions of dollars.
The truth about Klenet's dealings with Steinger could dictate the outcome of an ongoing criminal investigation of Mutual Benefits. Several sources have confirmed that the Federal Bureau of Investigation is investigating Klenet and Ritter, who voted on bills that benefited Steinger's company while she served in the state Legislature and her husband was on the Mutual Benefits payroll.
It's clear that Klenet played a key role for Steinger in Tallahassee and was paid handsomely for his work — $20,000 a month plus the home renovation. He helped to put together a dream team of lobbyists for Mutual Benefits that included heavyweights like former Deputy Attorney General Peter Antonacci, onetime Florida Republican Party chief Will McKinley, and Alan Mendelsohn, a key GOP fundraiser and adviser to Gov. Charlie Crist.
Together, they managed to manipulate the Legislature into passing bills that protected Mutual Benefits from state regulators even as the company was being banned in other states, subjected to an audit in Florida, and public agencies were receiving complaints that it was a Ponzi scheme. The company was in the viatical business — brokering the purchase of life insurance policies, mostly from dying AIDS patients — and raised more than a billion dollars. The company defrauded investors, according to the feds, and Steinger and several of his cronies siphoned millions off into outside accounts.
The key to the company's undue influence in the Legislature was the millions that Steinger, who was convicted of fraud in 1981 for a boiler-room scam, threw into campaign contributions. Klenet admitted in sworn testimony that he directed that money to politicians throughout the state.
But Klenet's involvement with Steinger didn't end when the Securities and Exchange Commission shut down Mutual Benefits in 2004. Steinger, who was forbidden from conducting business, then tapped Klenet to be the frontman for his next viatical company, Life Settlements International (LSI), which was run out of New York City.
A source close to Steinger says that Klenet wasn't his first choice to lead the new company. The source says he initially wanted to install then-Senate Minority Leader Steve Geller as the owner. Geller was a close friend of Steinger's who introduced him to Klenet.
"Steinger was going to put Steven Geller in as head of that company, but he changed his mind and put Klenet on there instead," says the source, who has firsthand knowledge of the business and requested anonymity. "He felt Geller better served him in Florida."
Geller, who is now running for a seat on the Broward County Commission, admits that he advocated for Steinger and Mutual Benefits in Tallahassee, but only because he thought Steinger was a "good guy." He admitted to me that he was approached about having an unspecified role in the new company but said it never got to the "serious discussion stage."
"Did I know Joel? Absolutely," he said. "But Joel knew a lot of people. He knew the cabinet members; he knew a lot of legislators."
In the 2007 deposition, Klenet explained that he took on the role with the new company in part because he had no criminal record and could avoid scrutiny that former Mutual officials could not. The plan was for the company to broker insurance policies for international investors so LSI could skirt the same SEC rules that had caused the downfall of Mutual.
"We thought there might have been at that point quite frankly an opening in the world," Klenet said during the 2007 deposition. "You know, Mutual was the largest life settlement company in the world, and they were no longer doing business, so somebody needed to do business."
Klenet tried to downplay Steinger's role in his new company. But court records indicate that Steinger pulled the strings behind the scenes, even after the SEC forbade him from engaging in the viatical business.
The felon's fingerprints were all over the deal, beginning with the money used to purchase LSI at a total cost of $1.65 million. The brunt of the money Klenet used to buy the company, for instance, was traceable to Steinger and Mutual Benefits. Steinger's brother, Steven Steiner, and Steiner's life partner, Henry Fecker, loaned Klenet the original $950,000 payment for the company, all of it coming from ill-begotten Mutual Benefits profits, according to court records.
Klenet still owed $750,000 for the company, an amount that was to be paid in three installments. Steiner and Fecker picked up the first $250,000 installment. They also loaned Klenet another half million for expenses, including an office and apartment in New York where Klenet worked and slept, according to court records and sources.
Those who know Steinger say his little brother, Steiner, did nothing businesswise without his approval. Federal prosecutors indicted both brothers in December on fraud and money-laundering charges.
During the deposition in Steinger's divorce case, attorney Hayden established that Steinger oversaw LSI's efforts and that Klenet used numerous former Mutual employees to staff the new business, including sales agents and executives.
For instance, Klenet hired former Mutual staffer Anita Love to form the company's "anti-money laundering program" to ensure that the company took only clean investments. In the deposition, Klenet slipped and said the company formed a "money laundering program."
"Excuse me a second," interrupted Klenet's attorney, Michael Moskowitz. "You don't mean the company needed a money laundering program."
"Did he say money laundering?" asked Steinger's attorney, Don Hayden.
"Yeah," answered Moskowitz. "I don't want to go from a civil deposition to other matters."
Mutual Benefits had, after all, laundered millions in illicit Colombian drug profits.
Hayden, who works for the large law firm Baker & McKenzie, grilled Klenet mercilessly during the deposition as he tried to track Steinger's finances. To prove the connection, he produced numerous LSI-related documents — policies, emails, brochures — that he'd obtained from Joel Steinger's business file. As Hayden produced his evidence, Klenet was at times almost speechless and other times defensive, saying that his relationship with Steinger was more social than professional and that he was only getting advice.
At one point, he mentioned family visits to Steinger's multimillion-dollar estate on the New River in Fort Lauderdale.
"Nobody told me I couldn't talk to him, and so I would go over and I would say, 'What do you think about this?' " Klenet explained. "I would go to [Steinger's] house and sit there, and we'd sit out in the back patio and swim with the kids and, you know, do those kinds of things and come out dripping wet, and I'd say, 'What do you think about this?' "
In fact, Klenet was close to Steinger, so close that he and his assistant at the time, Aaron Scavron, referred to the con man as "uncle," according to divorce records. He also said at the deposition that Steinger was invited to a 2004 New Year's Eve party at the Ritter-Klenet house in Parkland that he'd paid to renovate.
Hayden found a memo showing that Steinger was to be involved in reviewing policies for LSI. When asked why Steinger would have such a role, Klenet had no answer. "I don't know," he said.
Hayden produced one memo from Klenet to Steinger that was particularly damning. In it, Klenet mentioned the names of LSI employees and wrote Steinger, "I don't know what deal you made with them."
Klenet also wrote about upcoming payments that were due and asked Steinger, "Do we need to think about a bank loan or partner to cover the money?"
Finally, in the last paragraph, Klenet seemed to open his heart to Steinger: "I stay awake at night thinking about these things. Trust me I am not complaining. I can only imagine what juggling you have to go through just to stay alive. I will do everything to make this work."
Klenet again claimed that he was just confiding in a personal friend.
"We were friends," he said. "You know, friends. I mean, we didn't date, but we were good friends."
As the heat piled up on that friend, however, Klenet found others to invest in the company. He said in a deposition that wealthy client Mark Ginsburg invested $1.5 million into LSI. Klenet had represented Ginsburg, a medical lab owner, before the Legislature. His wife, Ritter, also voted on bills that benefited Ginsburg while she served in Tallahassee — another clear conflict of interest.
Klenet and Ginsburg also owned a 63-foot yacht together that they kept for a time at Steinger's Fort Lauderdale estate. Klenet claimed in the deposition that he also raised money from another longtime friend named Stan Adkins.
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When Klenet sold LSI in 2007 for $1.7 million to Cantor Fitzgerald, he claims to have repaid Ginsburg about $800,000 and Adkins about $50,000. He said that another half-million dollars went to customers who had lined up to buy policies overseas and that about $150,000 went to "miscellaneous bills."
He paid nothing back to the original financiers of the operation, Steven Steiner and Henry Fecker. Today, the court-ordered receivership that runs what's left of Mutual Benefits is demanding that Steiner and Fecker return $2 million in Mutual profits. Steiner and Fecker allege in court documents that all that money went to Klenet for the LSI venture. They are suing Klenet in federal court for return of the money.
So in the end, Klenet apparently ripped off Steinger, the man behind LSI from the beginning. And if Steiner and Fecker are successful in their lawsuit, Klenet could go bankrupt.
You might call it karma.