Preet Bharara arrests Assemblymember Sheldon Silver's son-in-law on securities fraud charges [UPDATED]

U.S. Attorney  Preet Bharara  delivering a speech about  public corruption  at  New York Law School  in January 2015.   SOURCE :  PHOTO ILLUSTRATION BY PROGRESS QUEENS (INCLUDING A PHOTOGRAPH BY LOUIS FLORES)

U.S. Attorney Preet Bharara delivering a speech about public corruption at New York Law School in January 2015.   SOURCE :  PHOTO ILLUSTRATION BY PROGRESS QUEENS (INCLUDING A PHOTOGRAPH BY LOUIS FLORES)


The son-in-law of Assemblymember Sheldon Silver (D-Lower East Side) was arrested on Monday on securities and wire fraud charges after the U.S. Attorney’s Office for New York’s southern district obtained a sealed complaint signed on Friday.

Marcello Trebitsch, also known by his nickname of Yair, faces allegations of defrauding investors of their investments, the U.S. Attorney’s Office announced in a press release.

Although the U.S. Attorney’s Office did not report the familial relationship between Mr. Trebitsch and Assemblymember Silver, their connection was reported in a report published by Vos Iz Neias.

According to the criminal complaint, which was made public on Monday, Mr. Trebitsch raised $7 million over the course of at least five years from investors, and Mr. Trebitsch used some of the proceeds of that money for his personal benefit, including to pay back investors, essentially running a ponzi scheme.  What monies were invested in accordance with Mr. Trebitsch’s day-trading strategy suffered trading losses, which were kept hidden from investors after Mr. Trebitsch reportedly created false financial documents.

The investment funds were supposed to have been managed by a firm, Allese Capital LLC, which Mr. Trebitsch co-owned with his wife, who was a certified public accountant.  The complaint didn’t identify Mr. Trebitsch’s wife by name, but she was identified by Vos Iz Neias as Michelle Trebitsch, Assemblymember Silver’s daughter.  However, the complaint does state that Mr. Trebitsch’s wife was a managing partner for the investment management firm, and she also maintained their accounting records. 

The complaint against Mr. Trebitsch further noted that a major Wall Street bank acted as a prime broker for Allese Capital LLC, but the complaint did not specifically identify the name of a prime broker ; however, the complaint stated that Allese Capital LLC maintained an account with JPMorgan Chase Bank.

If JPMorgan Chase Bank turns out to be the Wall Street bank that cleared trades for Allese Capital LLC, this would mark the second ponzi scheme that a customer of the bank has operated.  In 2014, the same U.S. Attorney's Office that is now prosecuting the case against Mr. Trebitsch imposed a $1,7 billion fine against JPMorgan Chase Bank over its role in failing to alert authorities about the ponzi scheme being operated by Bernie Madoff.  Although Mr. Madoff's firm was its own broker-dealer, the firm had an account with JPMorgan Chase Bank.  As part of the Madoff settlement, JPMorgan Chase Bank agreed to a deferred prosecution agreement, accepting overhauls in its operations to  prevent money laundering.*

A spokesperson for the U.S. Attorney's Office declined to comment for this article about the status of JPMorgan Chase Bank's deferred prosecution agreement given the charges against Allese Capital LLC. 

The investigation leading to Mr. Trebitsch’s arrest was made possible by assistance from the Federal Bureau of Investigation, or the FBI, the U.S. Attorney’s Office said, in part, in its statement.  The FBI participated in court-authorized searches of the office of Allese Capital LLC and of the Trebitsch residence, where evidence was found that showed, amongst other things, the “purported value of the investments” owned by the investors.

“Investing in securities entails certain risks, but should not include the risk of being defrauded by one’s investment manager.  Investment fraud is a high priority for this Office.  I want to thank the FBI for working with us to protect investors and their money,” U.S. Attorney Preet Bharara said in the statement.

It was worth noting that the statement about the arrest concluded with, “The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.”

On the same day when federal prosecutors had obtained the sealed complaint against Mr. Trebitsch, U.S. Attorney Bharara was admonished by a justice from a federal court in his own jurisdiction for having made public comments critical of public corruption in connection with a seperate criminal corruption case against Assemblymember Silver.

Comments made by U.S. Attorney Bharara to the public and to the press following Assemblymember Silver’s arrest triggered recent motion practice from Assemblymember Silver’s defense team, in which defendant’s counsel moved to dismiss a grand jury indictment against Assemblymember Silver, arguing that U.S. Attorney Bharara’s public statements had jeopardized the state lawmaker’s rights to receive a fair trial.  In denying the defendant’s motion to throw out the case, the federal justice, Valerie Caproni, wrote an order that stated, in part, that her court did not condone “the media blitz orchestrated by the U.S. Attorney’s Office in the days following Mr. Silver’s arrest.”

On the day of, and in the days following Assemblymember Silver’s arrest on five counts of federal corruption charges, the top federal prosecutor in Manhattan made a series of statements asking an apathetic public to increase their civic participation to fight public corruption. 

After detailing a list of corruption cases against convicted state and municipal lawmakers at a speech at New York Law School on January 23, U.S. Attorney Bharara said, in part, “So, how should all of this make us feel as citizens and as taxpayers ?  And again, as I’ve said before, I think the people of New York should be disappointed.  They should maybe be angry.  When so many of their leaders can be bought for a few thousand dollars, they should think about getting angry.”

For years, government reform activists have fought against corruption or the appearance of corruption that changed term limits in New York City, closed cornerstone community assets, like St. Vincent’s Hospital in the West Village, led to the sale of city real estate that sidestepped Uniform Land Use Review Procedure regulations, or allowed Super PAC’s to coordinate political spending with politicians’ campaign committees.  But these activists had not had, by and large, majority support from voters, who, in recent years, have increasingly stopped casting their votes in elections out of disgust with the rampant political, campaign, and public corruption.

Some government reform activists have blamed this apathy on political parties, which gatekeep the process to select candidates to run for public office.  Still yet other government reform activists have blamed the media, for not fully informing the public about corruption or allegations of corruption.  For example, Andy Newman and Annie Correal, reporters for The New York Times, described former Council Speaker Christine Quinn as having “no major ethical lapses,” even though Ms. Quinn was implicated in a slush fund scandal, had strong-armed the City Council to overturn term limits that had been twice approved by the electorate by voter referenda, and was shown to vote in support of the zone-busting real estate development projects of her major campaign contributors, amongst other ethical lapses.

Whereas, other government reform activists have blamed prosecutors for refusing to investigate and bring charges against public officials, U.S. Attorney Bharara is actually bringing forth cases of public corruption, and now, in a remarkable example of situational irony, the court system has admonished him for asking voters to get more involved to fight corruption in their own government.

With Justice Caproni’s order, U.S. Attorney Bharara narrowly escaped having his case against Assemblymember Silver thrown out of court, but the top federal prosecutor is now experiencing what activists have long complained about :  in order for citizens to make informed decisions and to meaningfully gather to discuss the conduct of their own government, citizens first have to know what their government is doing.  

The First Amendment rights to Freedom of Speech and Freedom of Assembly hinge upon citizens having information about which they can comment, using such to form new thoughts and speech about their own government, and then to meaningfully act on such informed views in gatherings with other citizens.

When, for example, Justice Caproni wrote, in part, in her order that, the “Court finds that it would not be unreasonable for members of the media or the public to interpret some of the U.S. Attorney’s statements – for example, ‘[p]oliticians are supposed to be on the people’s payroll, not on secret retainer to wealthy special interests they do favors for’ – as a commentary on the character or guilt of the Defendant,” she was concerned that, “Remarks that associate the accused with a long line of convicted criminals or a broader pattern or recognized wrongdoing, however, are of concern specifically because they tend to blur the distinction between legitimate public commentary and improper opinion.”

U.S. Attorney Bharara now finds himself in the same predicament facing government reform activists :  When speaking out against public corruption, the system will denounce speech that is critical of both government and corruption as “improper opinion.”

Reference Documents

(*) This article was updated to reflect information about (i) JPMorgan Chase Bank's deferred prosecution agreement signed in 2014 in connection with the ponzi scheme operated by Bernie Madoff and (ii) the decision by the U.S. Attorney's Office not to comment for this article.