Ex-Justice Dept. Official Fined in Fraud

A federal judge has ordered Lewis Allen Rivlin, a former Justice Department attorney, to pay about $6.5 million for defrauding investors, including an Ecuadorean charity for underprivileged girls.

Ruling in a civil case brought by the Securities and Exchange Commission in 1999, U.S. District Judge Royce Lamberth said Thursday that Rivlin violated federal securities laws in 1997-98 by selling $6.2 million worth of phony securities to four groups of investors.

The SEC made the ruling public Tuesday.

Lamberth ordered Rivlin to pay nearly $5.2 million in compensation to investors and nearly $1.4 million in interest. So far, the SEC has recovered $873,000 from other defendants in the scheme, of which $650,000 was returned to the Ecuadorean charity. The charity, which runs a school for girls in Quito, Ecuador’s capital, invested its $1-million endowment in the scheme.

Rivlin said he plans to file motions challenging the judge’s ruling and to appeal it if necessary. In an interview, he denied any wrongdoing and maintained the Ecuadorean charity’s money was stolen by a Greek financier sued by the SEC for allegedly receiving $1.7 million in investors’ money from the scheme.

Rivlin and his associates were said to have portrayed their investment program as a pooling of money to buy so-called prime bank notes and resell them at a profit to big Wall Street brokerages. In his order, Lamberth said the investment program was “a complete scam” and none of the investors’ money was ever used in it.

Rivlin said Tuesday that he can prove that transactions did occur.

Such “prime bank” schemes are a growing area of fraud in which ordinary investors--especially seniors--have lost millions of dollars, according to securities regulators. The schemes promise high, risk-free returns on debt notes said to be guaranteed by the world’s biggest banks. Promoters often claim that only big corporations and wealthy individuals know about “prime bank” notes.

In June 1999, Alfred Huascar Velarde, a former law partner of Rivlin, agreed to settle the SEC’s allegations that he aided the scheme. Velarde, who neither admitted to nor denied the allegations, paid a $20,000 civil fine.

Rivlin, a Harvard Law School graduate, worked at the Justice Department before starting his own law firm in the 1970s. His clients included some major U.S. companies.

He was married to Alice Rivlin, a former Federal Reserve vice chairwoman, until 1977, when they divorced. Alice Rivlin now heads the District of Columbia’s financial control board.

According to Lamberth’s findings, Lewis Rivlin was having financial difficulties by 1997. His firm had trouble paying rent and once had to borrow money from the mother of one of its partners.