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Case 1:19-cv-03377 Document 1-8 Filed 04/16/19 Page 11 of 16
http://www.vanityfair.com/news/2003/03/jeffrey-epstein-200303

One of Epstein’s first assignments for Hoffenberg was to mastermind doomed bids to take over
Pan American World Airways in 1987 and Emery Air Freight Corp. in 1988. Hoffenberg
claimed in a 1993 hearing before a grand jury in Illinois that Epstein came up with the idea of
financing these bids through Towers’s acquisition of two ailing Illinois insurance companies,
Associated Life and United Fire. “He was hired by us to work on the securities side of the
insurance companies and Towers Financial, supposedly to make a profit for us and for the
companies,” Hoffenberg reportedly told the grand jury. He also alleged that Epstein was the
“technician,” executing the schemes, although, having no broker’s license, he had to rely on
others to make the trades. Much of Hoffenberg’s subsequent testimony in his criminal case has
proven to be false, and Epstein has claimed he was merely asked how the bids could be
accomplished and has said he had nothing to do with the financing of them. Yet Richard Allen,
the former treasurer of United Fire, recalls seeing Epstein two or three times at the company. He
and another executive say they had direct dealing with Epstein over the finances. And in his
deposition of 1989, Epstein stated that he was the one who executed “all” Hoffenberg’s
instructions to buy and sell the stock. He called it “making the orders.” He could not recall
whether he had chosen the brokers used.

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.

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