Former state Sen. Steve Geller says he thought they were the "good guys with the white hats." But he really should have known better.
In 2003, then-Sen. Geller embraced controversial Fort Lauderdale-based Mutual Benefits Corp., a company that brokered so-called viatical contracts, or life insurance policies at cut-rate prices, often from dying AIDS patients. As a matter of fact, he became one of the firm's best friends.
Geller took the company's campaign contributions and met on multiple occasions with Mutual Benefits owner Joel Steinger and the firm's outside counsel, Michael McNerney. He even helped fraternity brother and former aide Russ Klenet get a job as a lobbyist for Mutual Benefits.
And it was a well-paying gig. The company gave Klenet $20,000 a month and paid $100,000 for the renovation of the house in Parkland he shares with his wife, Broward County Mayor Stacy Ritter. The couple also moored their boat at Steinger's home and vacationed at his house in Maine.
But Geller, who is running for a seat on the Broward County Commission, was dead wrong about the company. Mutual Benefits wasn't the good guy; it was a $1 billion Ponzi scheme that was ripping off investors around the country.
About a dozen people associated with the company have either been sentenced to prison or indicted, including Steinger and McNerney, who were hit with federal fraud and money laundering charges earlier this month. The fallout for Broward County politicians in the debacle may have only just begun.
Geller's involvement with the company is at best embarrassing. Ritter's role, though, may have crossed the legal line. In April 2004, while she was serving as a state representative, she voted for a bill that included an amendment limiting the state's regulatory power over viatical companies. Her husband, Klenet, helped Mutual Benefits engineer the amendment.
The vote came after Mutual Benefits had paid to renovate Ritter's house. It doesn't look good, but I'll let state and federal authorities determine if any laws were broken. When I reached Ritter on her cell, she declined to comment before hanging up.
Ritter's vice mayor on the County Commission also has strong ties to the company. Ken Keechl, who was elected to the commission in 2006, was law partners with the indicted McNerney and worked with him extensively on Mutual Benefits matters. Keechl refuses to discuss his work for them.
The company spent about $75,000 on contributions to candidates and political parties in Tallahassee. Geller received $1,000 from Mutual. As did Republican state Rep. Ellyn Bogdanoff, who probably owes her seat to Mutual Benefits.
In 2004, the company poured a half-million dollars — an obscene amount in a state rep race — into an attack against her opponent, Oliver Parker. She won the seat in Fort Lauderdale by seven votes. One of Bogdanoff's first votes after the election was in favor of the 2004 amendment.
The pattern is clear: Mutual Benefits used the money it ripped off from investors to hijack the Legislature. And Broward County's leadership — if there is such a thing — played right into the fraudulent company's hands.
Geller, though, is sticking to the story that he thought he was helping the good guys.
"No good deed goes unpunished," Geller says of his relationship with Mutual Benefits. "I was trying to help clean up an industry. Do I feel duped? Partially."
The truth is that Geller should have known he was dealing with a crook in Steinger the day he had lunch with him and Klenet. Steinger, after all, was already a felon with a history of regulatory violations. And a cursory internet search of Mutual Benefits would have shown cease-and-desist orders and allegations of fraud reported in several states. Even the State of Florida was trying to crack down on Mutual Benefits at the time.
Klenet said in a 2005 deposition with the Securities and Exchange Commission that the company was at "major war" with Tom Gallagher, who was then the state's chief financial officer. Gallagher wanted to crack down on viatical companies by having them regulated by the Department of Banking and Securities, which would have more power to investigate and punish the companies than the toothless Department of Insurance.
The top company in Gallagher's crosshairs was Mutual Benefits, which was accumulating complaints from hoodwinked investors.
To keep regulators at bay, Klenet helped Mutual Benefits tack on the 2004 amendment that kept viatical companies strictly under the Department of Insurance. The bill passed the Senate and House overwhelmingly.
Geller voted for the bill as well, a move that undermines his contention that his aim in aligning himself with the company was to crack down on viatical companies.
His help in getting Klenet the job with Mutual Benefits is also objectionable. Was Geller in Tallahassee to represent the people or to help his lobbyist friends?
He says he routinely recommended lobbyists to companies but would always give three names so as not to seem to be playing favorites. He says he doesn't remember recommending Klenet or the ensuing lunch with Steinger. "I'm certain I didn't refer just one lobbyist because I never do that," he told me. "I'm sure Russ [Klenet] thanked me when he got the job, and I'm sure he never disclosed to me the fee."
The practice of legislators recommending lobbyists is odious. They are supposed to be agents of the people, not lobbyists for lobbyists. Has Geller given Klenet a lot of work over the years?
"This is probably the only one. There may be one other that I don't remember right now," Geller said. "This is certainly the only big client I know of... Over 20 years, I may have [recommended lobbyists] 20 times, and maybe that resulted in people hired ten times, and this is the only one I recall that Russ got. There may have been a small short-time one that I don't remember."
Klenet and, by extension, Ritter, made a fortune from Geller's recommendation. Here's how Klenet described in the 2005 deposition how he got Steinger to pay for the renovation:
"One day I was sitting and visiting with Joel, who knew I had recently purchased a house and was in the middle of decorating it, and I said to him, 'You know, it wouldn't be so terrible if you picked up some of my renovations in the house.' He said, 'OK, great.' "
The payments for the renovations to Ritter and Klenet's home, curiously, were paid directly to the decorator, identified as "JSD," but Klenet testified in the SEC deposition that they were reported to the IRS.
Even after the Securities and Exchange Commission shut down Mutual Benefits for its fraudulent behavior, Klenet retained ties with Steinger and other company executives. One of those execs was Steven Steiner, who is Steinger's brother, despite the oddly different last name. In 2004, Klenet purchased Life Settlements International, another viatical firm, with the help of nearly $2 million in investments from Steiner and his life partner, Henry Fecker.
Steiner and Steinger were indicted by the feds in January. Klenet sold Life Settlements International for $1.7 million in July. Steiner and Fecker sued Klenet in December for their share of the sale.
The burning question: Was the money that Steiner and Fecker put into Klenet's company ill-gotten gains from Mutual Benefits? And if so, did Klenet know it?
Klenet not only kept associating with the crooks at the company but defended them in the media. In May 2004, he was quoted in the Sun-Sentinel as saying, "No Mutual investor has ever lost a penny." When questioned by SEC lawyers about that pronouncement, Klenet said he was simply being an "advocate" for the company.
That was news to Albert and Mayetta Scartz, 85-year-old retired schoolteachers who spend the winter season in their Tamarac home. They invested about half a million dollars in Mutual Benefits. The company is now in receivership, and the couple hopes to someday see at least a partial return on their investment. They say they were shocked to learn that the company was so crooked.
Albert Scartz says that he met with Keechl's former partner, McNerney, before investing and that the lawyer told him, "Don't worry about a thing." Company officials picked him up in a limousine, took him to lunch, and introduced him to doctors who, it turned out, were doing bogus medical reports on policyholders.
"They treated me royally, but those doctors are now in jail," Albert said. "They showed me everything. Everything was an open book. But it was all a fraud. I don't trust anybody in Florida anymore."
"Seems like if somebody wants to do something crooked," Mayetta added, "Florida is the place to do it."