Steven Hoffenberg, a financial swindler who was behind one of the largest Ponzi schemes in U.S. history, defrauding investors of more than $450 million, was found dead Aug. 23 at his home in Derby, Conn. He was 77.
Mr. Hoffenberg may not have carried the infamous name recognition of major financial fraudsters such as Bernie Madoff or the rise-and-fall arbitragers like Ivan Boesky. But, for a time in the late 1980s and early ’90s, Mr. Hoffenberg was as big and brash as any in New York’s wild-ride years.
Mr. Hoffenberg’s operation was an array of interconnected companies falsely portrayed as a deep-pocket corporate parent and used to lure investors with promises of high returns. The inner circle included Mr. Hoffenberg’s main partner Jeffrey Epstein, who was accused of sex trafficking decades later before an apparent jail cell suicide in 2019.
For years, the money flowed. Mr. Hoffenberg traveled by private jet, had a Long Island mansion and a townhouse on Manhattan’s posh Sutton Place with a chauffeured limousine on standby.
He made an unsuccessful play to buy now-defunct Pan American World Airways in 1987, was briefly owner of the New York Post in 1993 after saving it from bankruptcy and launched a women’s focused newspaper, Her New York, that folded in early 1994 even as the Securities and Exchange Commission was closing in.
“Whatever money could buy, Steven Hoffenberg had,” a New York Times profile observed at the time.
It all unraveled quickly in 1994. Mr. Hoffenberg was charged by U.S. prosecutors in connection with “one of the largest Ponzi schemes in history” — a tally of more than 200,000 victims stretching from Midwestern pensioners to a Catholic church in his native Brooklyn. Mr. Hoffenberg pleaded guilty and in 1997 was sentenced to 20 years in federal prison.
Mr. Hoffenberg decided not to directly implicate Epstein in the proceedings. But after Mr. Hoffenberg’s release from prison in 2013, he took aim at his former protege. In a 2016 lawsuit that was later dropped, Mr. Hoffenberg called Epstein the “architect” of the scheme and argued that he should help repay some of the court-ordered $463 million in restitution.
Epstein was found hanged in his cell in 2019 at a Manhattan detention facility after his arrest on sex trafficking charges, including allegedly abusing teenage girls. He had pleaded not guilty. In June, Epstein’s accomplice Ghislaine Maxwell was sentenced to 20 years in prison after being convicted of helping Epstein groom and abuse the girls.
Mr. Hoffenberg, meanwhile, had tried to rebuild his post-prison life as a purported born-again Christian, sometimes offering to help victims of his scheme try to pry money from Epstein.
“There’s so much going through my mind about me and Epstein,” he told NPR in 2019. “It’s a lifetime of errors. How do you correct a lifetime of errors?”
Building a Ponzi
Steven Jude Hoffenberg was born in Brooklyn on Jan. 12, 1945, with twin brother Martin. By Mr. Hoffenberg’s own admission, he grew up with an eye for a quick buck. He enrolled in City College of New York but dropped out before getting a degree.
He reportedly pleaded guilty in 1971 to attempted second-degree larceny for trying to steal a diamond ring in New York. Mr. Hoffenberg at first denied the media reports but later testified in a civil trial that he had once been “involved in a theft.” He liked to call his early run-ins with the law “my little blemishes.”
According to Mr. Hoffenberg’s accounts, he started out with $2,000 to create a business that plied the ragged edges of New York retail. He gained a reputation in the “bust-out” trade, taking over a failing business and buying goods on credit to sell for cash — leaving the suppliers unpaid.
In the early 1970s, he founded Towers Financial Corp., a debt-collection agency that bought — at pennies to the dollar — outstanding bills owed to hospitals, banks and other companies. It would become the center of a business web built for the Ponzi scheme, a shell game that draws in investors with false promises of big returns.
It began in 1987 when Towers acquired the parent of two insurance companies, Associated Life Insurance and United Fire. It gave Mr. Hoffenberg cash flow — and the opportunity to begin inflating the financial health of Towers as a health-care conglomerate.
About this time, Mr. Hoffenberg said he was introduced to the former Bear Sterns trader Epstein through British arms dealer Douglas Leese. “The guy’s a genius” at selling securities, Hoffenberg said Leese told him. But Leese warned: “He has no moral compass.”
Beginning in 1988, Towers began selling more than $270 million worth of promissory notes, offering returns of up to 16 percent. The target was often investors of modest means: retirees, people with disabilities or on fixed incomes. Also scammed was a “significant portion of the population” of Cape Verde, an archipelago off the African mainland, according to a 2013 court petition.
Mr. Hoffenberg and Epstein used the business as personal cash machines, pulling out hundreds of thousands of dollars for themselves, court documents showed. Mr. Hoffenberg wrote checks to pay expenses on his private plane and monthly $25,000 checks to Epstein.
The looting of the two insurers left 4,000 Illinois customers out $9 million that had been set aside to cover medical bills. In Ohio, 2,200 customers lost about $1.8 million, prosecutors said.
“I thought Jeffrey was the best hustler on two feet,” Mr. Hoffenberg said in a 2019 interview with The Washington Post. “Talent, charisma, genius, criminal mastermind. We had a thing that could make a lot of money. We called it Ponzi.”
They failed in a hostile takeover of Pan Am, one of the world’s premier airlines before it shut down in 1991. The pair also fell short in a bid to acquire Emery Air Freight in 1988.
In 1993, Mr. Hoffenberg pulled the New York Post from bankruptcy, taking control of everything but the paper’s real estate. He wore a sweatshirt emblazoned with the front-page New York Post headline “Hoffenberg saves the Post” when he surrendered to the FBI in 1996.
“I’m here for the glory,” he told New York Post columnist Mike McAlary after gaining control of the newspaper. “I want to have a voice in New York City. I’ve made millions. Now I want to have some excitement.”
It came apart after just three months amid a staff revolt over layoffs and Mr. Hoffenberg’s mismanagement. The paper went to real estate magnate Abe Hirschfeld before being reacquired by Rupert Murdoch.
Mr. Hoffenberg wasn’t done with the New York newspaper world, though. In late 1993, he launched Her New York, a newspaper intended to appeal to professional women. It folded after four months and five editors.
At the time, Mr. Hoffenberg’s personal assets were frozen by a court after the SEC opened investigations into allegations that Towers Financial was cheating investors through “grossly exaggerated” financial statements.
One investor, Anthony Mattos of Hanford, Calif., told the New York Times that he gave Towers Financial $43,000 of his retirement savings from 24 years at a tire company. “I thought I would have more time when I retired,” he said, “but I guess not.”
Mr. Hoffenberg is survived by a daughter, Haley Hasho, with former fiancee Mary Hasho. Complete information on survivors was not immediately available.
In recent years, Mr. Hoffenberg portrayed himself as pained about the scams and bringing along Epstein.
“I deeply regret that I met Jeffrey Epstein who is somebody that has haunted me for over 30 years,” he said in the 2020 documentary “Filthy Rich.” “Without me, he wouldn’t be the billionaire he is today and these poor girls would not be raped.”
