Hollywood political fundraiser arrested in Mutual Benefits corruption case

The Miami Herald–September 30, 2009

By Jay Weaver

An influential Broward County eye doctor whose boasts about his political connections in Tallahassee fueled a federal corruption investigation into Gov. Charlie Crist’s office was arrested today on fraud charges.

Dr. Alan Mendelsohn, a Hollywood ophthalmologist who has raised millions for Florida politicians, surrendered to FBI agents on charges linked to his alleged efforts to thwart a 2000-05 state investigation into Mutual Benefits Corp., a Fort Lauderdale life insurance company.

An indictment charges Mendelsohn with wire and mail fraud, aiding and abetting wire and mail fraud, and making false statements related to a fraudulent fundraising and lobbying scheme, according to prosecutors.

Mendelsohn raised more than a half-million dollars from Mutual Benefits in 2003 to finance the hiring of a dozen lobbyists and make contributions to lawmakers to stop legislation that would have tightened regulations on the so-called viatical industry. The industry sold life insurance policies of people dying of AIDS and other diseases.

Mendelsohn, 51, is expected to appear in federal court in Fort Lauderdale this morning. His defense lawyer, John Keker of San Francisco, could not be reached for comment.

The investigation was launched by the Justice Department in 2007 after Mutual Benefits’ former chief Joel Steinger told the FBI that he and Mendelsohn had conspired to hinder the state crackdown on the firm, sources familiar with the probe have told The Miami Herald.

Steinger alleged that Crist and others in Crist’s inner circle tried to help him and his top executives in their effort. Those allegations proved untrue, the sources said.

Steinger was trying to negotiate leniency in a separate federal insurance-fraud probe into Mutual Benefits that led to his indictment in late 2008.

Crist was Florida’s attorney general during part of the period in question.

The governor, his former chief of staff, George LeMieux, and his former general counsel, Paul Huck Jr., were earlier cleared of wrongdoing by the Justice Department, according to several sources.

Crist recently picked LeMieux to replace Republican U.S. Sen. Mel Martinez, who resigned.

News of the corruption probe surfaced in late April when U.S. District Judge Adalberto Jordan revealed that six Florida officials had been cleared of wrongdoing related to Mutual Benefits, but that prosecutors were still scrutinizing others. He did not name anyone.

Steinger had told prosecutors in Washington that he had schemed with Mendelsohn to improperly influence state prosecutors and politicians scrutinizing Mutual Benefits from 2000 to 2005, sources said.

Steinger claimed that Mendelsohn portrayed himself as a “rainmaker” who could use his fundraising prowess to help Steinger in Tallahassee.

Over the past decade, Mendelsohn and his political action committees raised about $2 million from Mutual Benefits, doctors and others for state candidates, including Crist’s bid for governor in 2006.

Mutual Benefits gave $525,000 to one of Mendelsohn’s PACs, Alliance for Florida’s Future, in 2003.

Mendelsohn also was the former legislative director for the Florida Society of Ophthalmology, whose PAC raised more than $1 million over the past decade. Campaign finance records show that money from the ophthalmology PAC was transferred to the Alliance for Florida’s Future PAC.

After Steinger turned on Mendelsohn, the ophthalmologist — who had a reputation for boasting of his political connections to GOP lawmakers — tried to help his own defense by working with the FBI starting in the summer of 2007, the sources said.

Mendelsohn claimed that he was able to win over Crist, LeMieux, Huck and others on Steinger’s behalf.

To bolster his claim to the FBI, Mendelsohn made a secretly recorded call to LeMieux at the governor’s office in July 2007. LeMieux, who served as a deputy attorney general under Crist when he was attorney general, had just managed Crist’s successful campaign for governor.

In the call, the doctor spoke about Mutual Benefits and how he had raised hundreds of thousands of dollars for candidates and lobbyists to help the firm’s legal and political efforts in Tallahassee, sources said.

To LeMieux, the call seemed suspicious, as if Mendelsohn were trying to implicate him, the governor and others, sources said. LeMieux alerted Huck, who called the FBI.

Investigators concluded that Mendelsohn’s claims were without basis. No longer a cooperating witness, he found himself the target of the probe, sources said.

Steinger received immunity from Justice Department prosecutor Mary Butler, a former assistant U.S. attorney in Miami, for the information he provided about his own conduct in the corruption case. That means it cannot be used against him in court.

But Steinger was not protected in the underlying insurance fraud case: A federal grand jury indicted him and three others in December on charges of defrauding investors who bought $837 million in life-insurance policies previously held by people dying of AIDS and other illnesses. They have pleaded not guilty.

If Steinger and Mendelsohn indeed had a scheme to influence Florida officials, it apparently met with mixed results: The statewide grand jury indicted Mutual Benefits for racketeering in 2004 and filed 20 criminal cases involving the viatical industry, including against policyholders who lied about their terminal illnesses and brokers who sold their death benefits to investors.

The statewide grand jury also issued a critical report recommending reforms to the Legislature and Department of Insurance.

But the statewide prosecutor’s office never charged Steinger or any other Mutual Benefits employees over the past decade.

Eventually, state prosecutors turned over their records to the U.S. Securities and Exchange Commission, which shut down Mutual Benefits in May 2004 and laid the groundwork for the federal prosecution of the firm’s top executives and others.

Copyright © 2009, South Florida Sun-Sentinel