The company, founded in the early 1970s in downtown Manhattan and incorporated in Delaware, was a debt collection agency that paid a penny on the dollar for loans that sellers viewed as worthless, focusing on debts that people owed to hospitals, banks, and phone companies. Steven Hoffenberg was its founder, CEO, President, and Chairman. Hoffenberg hired Jeffrey Epstein in 1987 to help with the Towers Financial Corporation. Hoffenberg set Epstein up in offices in the Villard Houses in Manhattan, and paid him $25,000 per month for his consulting work. They unsuccessfully tried to take over Pan Am in a corporate raid with Towers Financial as their raiding vessel. Their bid failed, in part because of the 1988 terroristbombing of Pan Am Flight 103 over Lockerbie, which ultimately contributed to the airline's bankruptcy. A similar unsuccessful bid in 1988 was made to take over Emery Air Freight Corp. Between 1988 and 1993, Towers Financial raised over $400 million by selling bonds and promissory notes to investors, luring them in using false financial statements. Hoffenberg and his associates then used the money they had raised to pay operating costs, repay earlier investors, and to pay themselves. Hoffenberg began using Towers Financial funds to pay for a lavish lifestyle that included a Locust Valley, Long Island mansion, homes on Sutton Place in Manhattan and in Florida, and a number of cars and planes. The Ponzi scheme was the largest financial fraud in American history prior to Bernie Madoff's being uncovered. In February 1993, the Securities and Exchange Commission charged that the company, while fraudulently reporting a profit of $13 million for the four years ended June 30, 1991, actually lost $137 million. In March 1993, Towers Financial filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. Hoffenberg pleaded guilty in April 1995 to five criminal charges, cheating thousands of investors out of $462 million, surrendered to the FBI in Manhattan, and was arraigned and released on bail. He was sentenced in 1997 by federal judge Robert W. Sweet to 20 years in prison, and was released in 2013, after serving 18 years. He was also sentenced to pay restitution of $462 million and a $1 million fine. Towers Financial executives Mitchell Brater and Michael Rosoff were handed prison sentences of seven to nine years, and Rosoff was disbarred. Epstein was not charged. In July 2019, Hoffenberg claimed that Epstein was his “uncharged co-conspirator” in the Ponzi scheme.
