Scott Rothstein Victims Entitled to $188m

More than 200 Victims of Scott Rothstein's Ponzi Scheme Are Entitled to $188 Million, but the Best They Can Probably
 Hope for Is Pennies on the Dollar.

By Peter Franceschina
Sun-Sentinel
August 3, 2010

Federal prosecutors have determined that there are at least 218 victims of Scott Rothstein's massive investment fraud scheme who are entitled to $188 million in restitution.

U.S. District Judge James Cohn has said he hopes to finalize the restitution process by the end of this month.

Prosecutors determined 97 potential victims are not entitled to the amounts they claimed, either because they are not entitled to restitution under federal law or failed to provide sufficient documentation of their claims.

An additional 116 possible victims could not be found. Some of them did not complete restitution paperwork or declined to participate in the restitution process, prosecutors said in their report. Prosecutors are still reviewing roughly a dozen claims.

Rothstein, 48, is serving a 50-year prison sentence after pleading guilty to racketeering, money laundering and fraud.

The assets seized from Rothstein -- homes, luxury cars, yachts, cash, and jewelry -- are not worth near the $188 million restitution figure, so victims will probably get pennies on the dollar. For example, Rothstein's cars and yachts sold for $5.8 million in June, and prosecutors are no longer pursuing four of his Fort Lauderdale homes because they were heavily mortgaged.

The restitution figure could climb much higher. Prosecutors noted there is $128 million in disputed or partially disputed claims, many of those requiring more documentation. The claimants are not listed by name, only by identification number.

Included among the victims are clients of the Rothstein Rosenfeldt Adler law firm who had money in the firm's trust accounts that was stolen. Prosecutors did not say how many clients lost money, but more than three dozen of them are seeking priority restitution in the criminal case.

``In calculating the recommended amount of pecuniary loss to be awarded as restitution to the investor-victims, the government has employed the `cash-in/cash-out method,' whereby the total amount invested by a victim during the scheme is reduced by the amount which the victim received as payments during the scheme, thus yielding a net loss to the victim as the determined restitution amount,'' prosecutors wrote in their report.

The judge will hold hearings before entering final restitution payments to the victims. People who have disputed claims will have a chance to make their case before Cohn. Prosecutors did not say how much they have available to repay the victims.

Feds Don't Trust Trustee With $1 Million
 of Crookedest Lawyer Ever's Money Anymore

By John Pacenti
Daily Business Review
New York Lawyer
July 29, 2010

MIAMI - A longtime court-appointed trustee and receiver entrusted with $1 million earmarked for the victims of ex-lawyer Scott Rothstein’s mammoth fraud is refusing to return the money and is the subject of a federal investigation, sources told the Daily Business Review.

The money was donated by the law firm chairman in his heyday as a Broward County power broker to Holy Cross Hospital in Fort Lauderdale. As part of the recovery effort for fraud victims, federal authorities and bankruptcy attorneys for the defunct Rothstein Rosenfeldt Adler demanded the money back, along with millions of dollars in other charitable and political donations made by Rothstein and his law firm.

The hospital returned the money in November shortly after Rothstein’s $1.2 billion fraud collapsed. A source said the money was wired by the hospital directly to an account controlled by Marika Tolz, who was working under a contract with the U.S. Marshals Service.

The federal law enforcement agency, which is responsible for assets seized in criminal cases, hired her to safeguard the Holy Cross money until it could be disbursed and to oversee real estate seized from Rothstein after reports that one of his properties was burglarized and another was infested with mold.

The U.S. trustee’s office discovered the $1 million discrepancy in May and asked Tolz to resign from its rotating panel of trustees assigned to bankruptcy cases. The Daily Business Review reported in May that Tolz had resigned from her cases after discrepancies were discovered, but investigators and the the U.S. trustee’s office have remained tight-lipped about the case.

The U.S. Marshals Service asked Tolz for the Rothstein money but didn’t receive it and ended her status as an independent contractor in mid-June.

Tolz, a Hollywood real estate agent, could not be reached for comment. She has retained Miami defense attorney Ben Kuehne.

Tolz is under federal investigation for the missing $1 million and other financial irregularities found by the U.S. trustee’s office, sources said. Investigators are reviewing reports Tolz submitted as a trustee to see if they match up with accounting records in her office, another source said. They also are focusing on accounting discrepancies in two cases where she served as a receiver appointed by judges in Broward and Miami-Dade circuit courts.

Tolz has served as a court-appointed trustee and receiver in federal and state courts for 23 years. But the $1 million charitable donation is the center of the Tolz investigation. Court records in Rothstein’s criminal case show Holy Cross returned the money.

Christine Walker Moncrieffe, hospital spokeswoman, issued a statement saying it "properly returned the full amount of the Rothstein Foundation donation and interest in accordance with instructions it was given."

The hospital declined further comment and referred inquiries to the Marshals in Miami. A Miami spokesman referred calls to the agency in Washington, which did not respond to a request for an interview.

Under Justice Department guidelines and office policy, "we can neither confirm nor deny the existence of any investigation and hence have no comment to offer you," said Alicia Valle, spokeswoman for the U.S. attorney’s office.

Officials with the U.S. Marshals Service and the U.S. trustee program would not comment.

Kuehne would not comment on whether Tolz diverted the hospital money for personal use.

He said Tolz is a longtime receiver with a good reputation. But he also said, "Economic times are difficult in the real estate industry, the area in which she specialized, and she, like many others, is working hard to resolve problems arising from a plummeting real estate market."

A check of property and court records in Miami-Dade and Broward counties don’t show any red flags that Tolz was in financial straits, but she did business on many fronts.

The missing money could bolster arguments by attorneys for the law firm’s bankruptcy trustee that federal prosecutors are in over their heads in the task of retrieving and distributing recovered Rothstein assets. So far, U.S. District Judge James Cohn, who sentenced Rothstein to 50 years in prison, has sided with the prosecutors in the struggle over who will handle the distribution of the remaining assets to fraud victims.

In an unusual twist, a source confirmed Tolz was carjacked, stabbed and abandoned in Hollywood the same week she resigned. Hollywood police have not released a report but said the attack is being investigated.

Jeffrey Sonn, a Fort Lauderdale attorney who filed the involuntary bankruptcy petition against Rothstein’s law firm, praised the U.S. trustee’s office for discovering financial irregularities in Tolz’s books.

"It’s pretty sensational," Sonn said. "It’s just as big of a letdown as the Lew Freeman case."

Freeman, a Miami lawyer and accountant, was a go-to receiver for many federal and state judges. He was sentenced last week to 10 years in prison for misappropriating $2.6 million in court-supervised funds and manipulating at least $6 million in accounts he administered.

In another case, Miami Beach lawyer Alan Tempkins voluntarily gave up his license after he was confronted by The Florida Bar with evidence he misappropriated $380,000 from a fund for a physically and mentally disabled teenager to buy condominiums.

Ponzi Schemer Scott Rothstein Gets 50-year Sentence

By Jay Weaver
The Miami Herald
June 9, 2010

Scott Rothstein, South Florida Ponzi schemer extraordinaire, received a 50-year prison sentence Wednesday after a hearing in federal court in Fort Lauderdale.

U.S. District Judge James Cohn, an Alabama native appointed by President George W. Bush, gave the disbarred lawyer more than what prosecutors requested for his crime as the mastermind of South Florida's biggest financial fraud.

``I am truly and deeply sorry for what I have done,'' Rothstein said, addressing the court wearing cuffs on his wrists and ankles. ``I don't expect your forgiveness.''

He apologized to investors he stole from, to his law firm colleagues, to his firm's clients, to the court system, fellow lawyers, to charities.

Rothstein, convicted of running a $1.2 billion investment scam, had said he deserved no more than 30 years because he pleaded guilty, spilled his guts to the feds and starred in an FBI sting that took down a reputed Italian Mafia figure.

In his sentencing, Judge Cohn called Rothstein's investment scam a `tsunami'' that he created through his law firm, his political connections, his charities and ultimately, by forging the signatures of judges in a legal case between auto magnate Ed Morse and an interior decorator.

Rothstein ``created an appearance of legitimacy,'' Cohn said. ``We all know it was all a facade, a fraud.''

Cohn was particularly disturbed by Rothstein's forging of documents in the Morse case, which cost the tycoon $57 million, stolen by Rothstein.

``He forged these court orders to perpetuate the Ponzi scheme. There can be no conduct more reviled than a lawyer perpetrating a fraud on the court.''

Federal prosecutors had sought a sentence of 40 years for the 47-year-old Rothstein, who is expected to enter a federal witness protection program. Prosecutors advocated a significantly lower sentence than the maximum -- 100 years -- because Rothstein pleaded guilty and helped them make a case against other employees in his law firm and recover assets for fraud victims.

``This rags-to-riches-to-jail saga is a humbling reminder of what can happen when greed and ambition run amok,'' said U.S. Attorney Wifredo Ferrer. ``Rothstein manipulated and abused the trust of all whom he knew -- his friends, family, business partners, legal colleagues, political figures, and even charitable organizations -- to enhance his reputation, standing, and power in the community.

``Today's sentence punishes the defendant for his thievery, and hopefully brings some sense of justice to the victims of this massive fraud.''

``While our investigation continues, this chapter in the Rothstein saga is coming to a close with important lessons for all to learn,'' said John Gillies, special agent in Charge of the FBI Miami division. ``For those that are entrusted with other people's money: do the right thing. For those that entrust people with their money: don't be fooled by the promise of unrealistic returns. The common element for both is greed -- don't let it get the best of you.''

Rothstein will go down in South Florida history as a one-man wrecking ball who destroyed his own 70-attorney law firm, Rothstein Rosenfeldt Adler, and used it to prop himself up as a flashy player among wealthy investors, society types, trendy entrepreneurs and prominent politicians -- including Gov. Charlie Crist.

Rothstein's fictitious financial empire crumbled over Halloween weekend when dozens of investors began clamoring for millions they had invested in his ``confidential settlements'' of purported employment discrimination and sexual harassment cases. Rothstein, born into working-class Bronx, N.Y., family, had fled to Morocco in a chartered jet with $16 million.

Last week, he wrote in a 12-page letter to the judge that he contemplated suicide, but stopped himself because it ``would just be one final act of selfishness.''

``And for the first time in five years, I was completely honest about what I had done and who I was,'' Rothstein wrote Cohn. ``From the moment that I decided to return home, knowing that I would never actually go home again, I have done everything in my power to right the terrible wrongs of my crimes.''

The controversial issue of restitution to Rothstein's victims will not be resolved Wednesday, because authorities are still figuring out how much money there is to distribute, and who should get it.

Attorney Accused of Helping
 Crookedest Lawyer Ever Funnel Cash

By John Pacenti
Daily Business Review
New York Lawyer
April 8, 2010

MIAMI - Attorney Steven Lippman helped his former boss, jailed Ponzi scammer Scott Rothstein, arrange fraudulent transfers while collecting millions of dollars in bonuses, loans and personal expenses, a bankruptcy lawyer claimed in court Wednesday.

The allegations came from attorney Charles Lichtman, who is representing the court-appointed trustee picking through the ruins of Rothstein’s former Fort Lauderdale firm — Rothstein Rosenfeldt Adler — to recover money for creditors. Rothstein is awaiting sentencing after pleading guilty to coordinating a $1.2 billion fraud.

Some of the money Lippman received from the law firm went to political candidates and personal purchases, Lichtman said.

An attorney for Lippman told U.S. Bankruptcy Judge Raymond Ray that his client did not breach any fiduciary duty and was just following Rothstein’s instructions.

"Mr. Lippman at best was a conduit," his attorney, Patrick Scott of GrayRobinson in Fort Lauderdale, told Ray.

Scott said none of the money funneled into an old account set up by Lippman’s previous firm ended up in his client’s pocket.

Ray quickly denied Lippman’s motion to dismiss the lawsuit brought by Herbert Stettin, the trustee managing what is left of the firm’s finances. Stettin hasn’t been shy about going after former RRA lawyers or even the government to retrieve money.

Of $8.9 million in RRA loans to Lippman, he has not paid back $2.2 million that went to third parties, said Lichtman, a Berger Singerman attorney representing Stettin.

After the hearing, Lichtman said some of the unreturned money went to investors in Rothstein’s Ponzi scheme.

Lippman also used some of the money he received from the firm to donate "hundreds of thousands of dollars" to political campaigns in 2008 in his name and his wife’s name, Lichtman told the judge.

Lippman received $3.1 million above his base salary and was reimbursed for $930,000 on a private credit card for purchases made by his wife, Marcy, and himself, including membership at the Weston Country Club and furniture.

Lippman did not respond to a call for comment by deadline.

Scott said there was no specific "intent to defraud" allegation in a Feb. 11 complaint filed by Stettin against Lippman, accusing him of working hand-in-hand with Rothstein.

Lichtman got up from his seat and interrupted Scott to show him language in the complaint.

"You might want to correct yourself," Lichtman said.

"I would not," Scott retorted.

Lichtman said Lippman’s motion to dismiss was specious.

"We don’t even think it’s a close call," he said.

What exactly Lippman and his wife knew about Rothstein’s fraud remains largely unknown. News media were barred from Marcy Lippman’s deposition with bankruptcy attorneys last week, and the transcript remains sealed under court order.

Steve Lippman’s deposition is scheduled Friday. He has said he will not invoke his Fifth Amendment right against self-incrimination. News media have also been barred from Lippman’s deposition at his request.

In a second hearing Wednesday, Ray denied a motion to reconsider his order requiring two former RRA partners to surrender their logons to an outside computer file storage system.

The files are administered by Burbank, Calif.-based Qtask, also one of Rothstein’s investments. Former RRA attorney Robert C. Buschel of Fort Lauderdale’s Buschel & Gibbons argued for the company that it should not have to turn over anyone’s logon for privacy reasons.

He said the bankruptcy attorneys could get access to pertinent files without accessing personal information, but Lichtman quoted William Shakespeare’s "Hamlet," saying, "Doth protest too much."

Ray wants the information in 10 days and warned, "If I have to enforce my order, I will do so."

Stettin attorney Paul Singerman said firm assets started at $956,000 and have grown to $3.86 million.

In Cleanup of Crookedest Lawyer Ever's Mess
Trustee Says G-Men Playing Dirty

By Jordana Mishory
Daily Business Review
New York Lawyer
April 1, 2010

MIAMI - The bankruptcy trustee for defunct law firm Rothstein Rosenfeldt Adler contends the government has once again overstepped its bounds by trying to control additional assets that belonged to convicted fraudster Scott Rothstein.

On Monday, the U.S. Attorney’s Office filed a motion seeking a protective order be entered to preserve new assets, including four Rothstein Rosenfeldt Adler bank accounts at TD Bank containing almost $120,000 and "all property, other than ‘funds’" voluntarily turned over to the government since news broke in late October that Rothstein was running a settlement scheme out of his law firm.

But trustee Herbert Stettin argued that the government could not lay claim to assets that don’t belong to Rothstein and were not included for forfeiture in the original information, calling the motion "particularly egregious."

"This court should not allow such a blatant manipulation and misuse of the forfeiture statutes," wrote Stettin’s attorney, Paul Singerman, in a motion filed Tuesday with U.S. District Judge James Cohn.

Cohn is presiding over Rothstein’s criminal case.

In January, Rothstein pled guilty to orchestrating a $1.2 billion Ponzi scheme. After the scheme was discovered his law firm collapsed and was thrust into bankruptcy court.

Rothstein is scheduled to be sentenced in May.

Singerman wrote in the motion that the government cannot enjoin bank accounts that do not belong to Rothstein. Because they were RRA bank accounts, they are now part of the bankruptcy estate, he claimed.

Singerman added that it was also "most troubling" that the government has failed to disclose how it intends to handle third-party claims to the assets.

"The government has deliberately and without justification refused to follow the statutory procedures for forfeiture," Singerman wrote. "Taking a position full of contradictions, the government seeks to use the forfeiture statutes to maintain control over property but refuses to confirm that such property will ever be subject to a formal forfeiture process."

The government and the trustee have been butting heads since early December, when Cohn issued an order to preserve all of Rothstein’s assets. It’s Stettin’s role as court-appointed trustee to round up any assets he can locate to pay law firm creditors, including former clients, those who invested in settlements guaranteed by the law firm, and vendors with unpaid bills.

Cohn also rejected an attempt by the trustee to hold a joint status conference with him and U.S. Bankruptcy Judge Raymond Ray. Instead, he instructed prosecutors and the trustee to resolve their differences, and determine whether there are non-investor client funds in firm bank accounts under the prior protective order that could be released to the trustee.

In a separate motion filed Tuesday, prosecutors stated that there may be some funds belonging to RRA clients, but the money in the accounts "have a nexus to defendant Rothstein’s crimes of conviction and are therefore forfeitable."

Convicted Lawyer Scott Rothstein's Second-in-Command
at His Defunct Law Firm Is Expected to Be Charged
with Money-laundering Conspiracy.

By Jay Weaver and Amy Sherman
Miami Herald
March 3, 2010

Scott Rothstein's right-hand woman at his Fort Lauderdale law firm -- chief operating officer Debra Villegas -- is expected within the next week to be charged with conspiring to launder money from his massive investment racket.

That would make her the first alleged co-conspirator named in Rothstein's $1.2 billion Ponzi scheme, the largest financial fraud in South Florida history.

Prosecutors are expected to charge Villegas, 42, with scheming with Rothstein to siphon money from his investors. The funds were used to buy her a house in Weston and to make large political donations in her name, according to sources familiar with the case.

Villegas is expected to plead guilty to the money-laundering conspiracy charge, which carries a sentence of up to 10 years in prison, and to cooperate with the ongoing federal investigation. Her lawyer, Paul Lazarus, declined to comment Wednesday.

Other former employees of the bankrupt 70-attorney Rothstein Rosenfeldt Adler law firm are also expected to face charges in coming weeks, the sources said.

Among those under scrutiny: name partners Stuart Rosenfeldt and Russell Adler; another senior partner, Steven Lippman; chief financial officer Irene Stay; and general counsel David Boden. Attorneys for those ex-RRA employees have denied that their clients did anything wrong.

Rothstein, 47, pleaded guilty in January to five charges of conspiracy, racketeering, money-laundering and wire fraud for bilking wealthy investors over the past four years by selling them fabricated legal settlements with promises of lucrative returns. He could be sent to prison for up to 100 years at his sentencing in May.

Villegas rose from being a paralegal with no college degree to serving as the top operating officer at Rothstein's firm, where he described her to colleagues as his second-in-command. Rothstein paid her more than $120,000 a year.

Villegas had been a curious figure at the law firm even before Rothstein's scheme crashed in late October. Her best friend, RRA lawyer Melissa Britt Lewis, was slain in March 2008. Villegas' estranged husband, Tony Villegas, a train conductor, was charged and is being held at the Broward County jail.

One month after the slaying, Rothstein bought Villegas the 2,600-square-foot Weston home for $475,000, court records show. Using a corporation called WAWW4 for the purchase, he deeded the property to her for $100 last July. WAWW4 stood for What a Wonderful World.

In October, just days before RRA imploded, Villegas took out a $100,000 mortgage on the home at 380 Carrington Dr., court records show. Federal prosecutors have moved to seize the Weston property and other Rothstein assets, saying they were purchased with proceeds from the Ponzi scheme.

Villegas was among several law firm employees who gave substantial contributions to state and federal politicians at Rothstein's direction. Prosecutors have said Rothstein's bundling of donations was tied to employee bonuses.

Campaign finance records show Villegas donated more than $43,000 to the McCain-Palin 2008 presidential ticket, the Rudy Giuliani GOP primary run for president that year, Gov. Charlie Crist's bid for the Republican U.S. Senate nomination, as well as the campaigns of former Florida Sen. Mel Martinez and Sen. Arlen Specter, D-Pa.

Villegas has not spoken publicly since news of Rothstein's scam surfaced over Halloween weekend after he fled to Morocco. But she was recognized as one of Rothstein's closest confidantes.

Villegas first worked with Rothstein in the 1990s, when the Nova Southeastern University law graduate had his own firm specializing in labor and employment litigation. Villegas followed him to another firm, Phillips, Eisinger, Koss, Rothstein & Rosenfeldt, where they both worked from 1999 to 2001. The next year, Villegas followed Rothstein yet again when he left to establish a firm with Rosenfeldt.

Court records from her divorce petition filed in 2007 show she was earning $124,635 a year as RRA's chief operating officer.

At RRA, her office was inside Rothstein's secured inner sanctum behind a locked door, where visitors had to announce themselves through an intercom. When federal agents raided the law firm in November, they took records from Villegas' office.

E-mails that Rothstein wrote to his staff last year show that Villegas was part of the circle that protected him.

In one e-mail in October, he reminded the firm's lawyers that Villegas was his ``second in command.''

``MAKE NO MISTAKE ABOUT IT. SHE IS . . . AND SHE ONLY ANSWERS TO ME. NO ONE ELSE. END OF STORY . . . I AM SO ANGRY THAT I AM HAVING TO WRITE THIS EMAIL.''

Villegas also had a close financial relationship with Rothstein. Court records from the divorce case show that he paid for her couch and bedroom set, along with her two water bikes. Records also show that her employer -- though it doesn't identify who -- gave her a Rolex watch and a Brietling watch. Rothstein was a fan of luxury
watches.

Lawyer for Crookedest Attorney
Ever Lived Rent-Free for More Than a Year

By Jordana Mishory
Daily Business Review
New York Lawyer
February 17, 2010

MIAMI - The defense attorney for convicted fraudster and disbarred attorney Scott Rothstein said Tuesday that he was paid a $350,000 salary and lived for free in a waterfront Fort Lauderdale home owned by his employer.

Berger Singerman attorney Charles Lichtman, representing the bankruptcy trustee for the defunct Rothstein Rosenfeldt Adler, questioned former RRA attorney Marc Nurik in the latest deposition trying to trace money that moved through the firm before Rothstein’s $1.2 billion fraud collapsed.

Nurik said, "Scott as a friend allowed me to live in his house with the understanding" that he eventually would pay rent.

Lichtman asked Nurik when he understood he would start paying rent and inquired if it would be when Rothstein faced charges.

"Let’s not be facetious here. We’ve been doing so well," Nurik replied.

Nurik, who left the firm to defend Rothstein, lived for free in one of several homes owned by his boss from July 2008 to last October when investors started clamoring for missed payments on phony settlement financing. Nurik said he now pays about $2,500 per month to rent a three-bedroom, 3,000-square-foot house with a mold problem at 2316 Castilla Isle.

When Lichtman asked if the rent was part of his income, Nurik said no. Fellow RRA attorney David Boden was living next door in another waterfront home owned by Rothstein, but Nurik said he didn’t know if Boden had to pay rent. The Rothstein homes were seized as part of the fraud probe. Rothstein is awaiting sentencing on federal charges, and Nurik said he gave his $50,000 retainer to Kim Rothstein’s attorney to hold.

Lichtman reviewed Nurik’s work history, which included about eight years at Ruden McClosky, including two years on the firm’s management committee. Nurik left Genovese Joblove & Battista, which coincidentally is serving as the bankruptcy trustee’s co-counsel, to join Rothstein’s firm in October 2007.

Lichtman explored Nurik’s knowledge of law firm management, economics and compensation.

When asked if he agreed lawyers get paid for their time, Nurik said, "I agree lawyers sometimes get paid by time." He said compensation also can be based on "the value you provide to the firm — if for example you’re a former judge or a well-known politician or you have a significant reputation in your field of endeavor."

Lichtman asked, "Is this your spiel about the Rothstein firm?"

Nurik said it wasn’t.

Rothstein hired ex-judges and former Broward County Sheriff Ken Jenne after he served a federal sentence for public corruption. Federal prosecutors charged Rothstein immersed himself in political and celebrity circles in part to feed demand for his fraud.

Nurik said he held an honorary title of shareholder but did not share in firm profits. He said he didn’t know what RRA employees were paid except for a few lawyers he helped bring to the firm.

Nurik said he was promised a $50,000 signing bonus, but he didn’t know if it counted as a loan. The trustee is trying to recover money listed on law firm books as loans to its attorneys. Nurik previously disputed a claim he owes $190,000 on a loan from the firm.

Lichtman asked if Nurik ever saw the firm’s financial statements.

"I never asked, and I wouldn’t have expected to get any. Scott made it clear he and Stuart (Rosenfeldt) ran the firm," Nurik said.

Rothstein and Rosenfeldt were the firm’s only shareholders, but Rosenfeldt said Rothstein never shared the firm’s books with him.

Nurik said State Farm paid $100,000 to settle after Nurik broke his hip in a hit-and-run accident. He was being paid in installments, and the final payment was made last Oct. 30, right before Rothstein’s fraud was uncovered. RRA partner Russ Adler represented him.

Asked if he got anything else of value from the firm, Nurik said he received a pair of RRA cufflinks that were not to his taste.

When Lichtman asked if he received a car, Nurik responded, "I wish.

Bankruptcy Lawyers: Rothstein Partners
 Made ``Fraudulent'' Transactions

By Jay Weaver and Amy Sherman
The Miami Herald
February 11, 2010

Everything Must Go: Feds Throw Yard Sale
With Lawyer Behind Billion Dollar Ripoff's Stuff

By John Pacenti
Daily Business Review
New York Lawyer
January 22, 2010

MIAMI - The top-dollar bait Scott Rothstein allegedly used to lure would-be investors into his web of fraud now populates a warehouse in Tamarac. There are the sports memorabilia, politically inspired dolls and showy leather furniture.

But the standout items must be the numerous photographs of the one-time power broker with an arm around one politician after another.

Slideshow: Rothstein memorabilia

Here is Rothstein with Gov. Charlie Crist, U.S. Sen. John McCain. Gov. Arnold Schwarzenegger and many others. The photos are the ones Rothstein pointed to when would-be investors had questions about his alleged $1.2 billion Ponzi scheme.

Now the disbarred attorney sits in an unadorned jail cell on racketeering, conspiracy and fraud charges, ready to plead guilty in federal court next week.

Prized possessions from his opulent office at the defunct Rothstein Rosenfeldt Adler will be in other hands by then, set to go on auction Saturday. The items are ready for bids at AMC Furniture Outlet in Tamarac. All were confiscated by the federal government.

A crowd of 350 is expected to pony up a $500 deposit each to place bids.

Greeting visitors at the front door of the warehouse during a preview Thursday was an RRA poster, a photograph of Rothstein with some of the firm’s top lawyers, all dressed in expensive suits with their arms crossed or in their pockets. One observer wondered how many would end up in prison.

The advertisement read: "Welcome to our house." Along the bottom of the poster was the questionable motto: "Passion. Integrity. Commitment."

On the west wall of the warehouse, photos of Rothstein and his political connections were on display, including the triptych photograph of the perpetually tanned Crist blowing out his birthday cake candles with Rothstein’s help.

"Just about every politico from Washington to Miami is represented here," said Benny Fisher of Fisher Auction in Pompano Beach, who will be taking bids. "The memorabilia adorned his private suite. They were on the wall. I took them down personally. I don’t know what other purpose they would be except for the public display of the influential nature of his associations."

AMC chief executive Michael J. Grimme said his company also helped liquidate some of furniture from fraud suspect R. Allen Stanford’s South Florida offices.

He is in a Texas jail on fraud charges for allegedly running a $7 billion Ponzi scheme in the United States, Caribbean and Latin America based on certificates of deposits.

Rothstein is accused of scamming investors through a phony structured settlement side business at his law firm.

"They had their different angles to their approach. In the case of Scott, the memorabilia is huge," Grimme said. "To get to his office, you had to walk down a long hallway that was packed with what we have on the walls now."

Bay Harbor Islands attorney Alan Sakowitz said this week that Rothstein tried to woo him to invest in what Rothstein said was a no-risk enterprise that would return up to 207 percent. Sakowitz said Rothstein insisted on showing off his photos and memorabilia.

"I started asking him questions, and he was such a professional at being a scammer. He won’t talk to you until you walk around his office," Sakowitz said. "So you walk around the office and you see he is under the Good Housekeeping Seal of Approval. He has got the governor’s picture up there."

Crist and other candidates have returned campaign contributions made by Rothstein and the firm, but they can’t take back the fact that they endorsed him with a click of the camera.

Sakowitz saw one photo of Schwarzenegger in a plush red robe. Rothstein told him, "‘Oh Alan, let me tell you the story. It’s a great story. He’s my friend. He’s wearing the robe.’ Every picture, every award had a story," Sakowitz said.

He said he went to the FBI in September after Rothstein refused to answer questions about his investment practices and Sakowitz started adding up the numbers.

Now that photo of robe-wearing Schwarzenegger is up for auction. "Since I look so great in this bathrobe I wanted to give you one, too," the inscription says.

For bidders, there is just about something for everyone. When you push the lapel on a doll of President Richard Nixon, it says several famous phrases, such as, "Therefore, I shall resign the presidency effective at noon tomorrow." Another doll has President George W. Bush dressed in his "Mission Accomplished" fighter pilot jacket.

There also is plush furniture from a private cigar lounge at RRA that was named after murdered partner Melissa Britt Lewis and Rothstein’s desk with numerous electronic gadgets, such as pop-up computer screens. On the sports side, there are a signed Shaquille O’Neal basketball shoe and Dwyane Wade jersey.

There were plenty of humidors, one holding an expensive Opus X cigar, still somewhat fresh.

There are no estimates of how much the RRA items would fetch.

Rothstein’s criminal defense attorney and former partner, Marc Nurik, claimed the photos were the personal property of his client and shouldn’t be sold. He filed a motion Thursday to exclude photos of Rothstein’s wife, Kim, and a hearing is set on the question today.

Fisher said he is not surprised by the interest in the scandal-tainted Rothstein auction. He said a signed photograph of Al Capone will fetch more money than a signed document by President George Washington.

"Those pieces from the infamous, the bad guys in the public persona, are worth more in dollar value to collectors than the historical memorabilia of this country," he said. "I think that seems to be a symbol of what drives our country."

The Lyin' King: Insurer Says Crooked Lawyer's
Life Isn't Worth What He Claimed

By Jordana Mishory
Daily Business Review
New York Lawyer
January 13, 2010

MIAMI - Scott Rothstein’s life insurance carrier can file a default judgment to cancel the alleged fraudster’s $14.8 million policy, a Miami federal judge has ruled.

U.S. District Judge Adalberto Jordan ruled Friday that Massachusetts Mutual Life Insurance can file a motion for default judgment against Rothstein by Jan. 22 because he did not respond after being served while in custody Dec. 4.

Massachusetts Mutual sued Rothstein the day after he was arrested for allegedly orchestrating a $1.2 billion Ponzi scheme from his opulent Fort Lauderdale law office. The Springfield, Mass.-based insurer claimed Rothstein lied on his insurance application by saying he earned $8 million annually as the head of Rothstein Rosenfeldt Adler and had a net worth of at least $12 million.

The insurance policy would have paid 60 percent to Rothstein’s wife, Kimberly, 10 percent each to Rothstein’s parents and 20 percent to his sister, according to a document attached to the complaint.

"Those representations by Rothstein and his agents, including his accountant, were false," company attorney John Meagher, a Shutts & Bowen partner in Miami, said in the lawsuit. "Instead of actually working as a trial attorney and earning legitimate income, Rothstein since at least 2005 was operating a Ponzi scheme out of his law firm to defraud investors of approximately $1.2 billion."

Massachusetts Mutual’s allegations track reports by federal prosecutors and investigators before his arrest.

Meagher did not respond to a request for comment by deadline.

The company said it never would have issued the policy if Rothstein provided honest information. It also asked to deposit Rothstein’s premium payments in a court registry, noting it had received requests from three creditors for the money. U.S. District Judge James Cohn, who is expected to take a guilty plea from Rothstein later this month, has essentially frozen his assets.

Rothstein has been charged with fraud, money laundering and conspiracy for allegedly selling shares in non-existent structured settlements to clients and others.

Rothstein's Firm Employees
May Have `Criminal Culpability' in Scandal

By Jay Weaver and Amy Sherman
The Miami Herald
January 9, 2010
 

Some employees in Scott Rothstein's now-bankrupt law firm apparently played criminal roles in his $1 billion-plus investment racket, a federal prosecutor says.

Assistant U.S. Attorney Lawrence LaVecchio said in a new court filing that ``other employees'' in the former Fort Lauderdale firm ``do have apparent criminal culpability'' in the biggest investment scheme in South Florida history. He did not identify the employees.

The allegation suggests that certain lawyers and officers in the closed 70-attorney firm may be charged in the federal conspiracy case, which was filed against Rothstein alone in early December. Rothstein, now disbarred, plans to plead guilty later this month.

The prosecutor cited the allegation in response to a judge's question about whether Rothstein's lawyer, Marc Nurik, has possible conflicts of interest. Nurik worked at the Las Olas Boulevard firm before resigning in October to represent Rothstein.

On Wednesday, Rothstein, 47, told U.S. District Judge James Cohn that he will plead guilty to five racketeering conspiracy, fraud and money laundering charges on Jan. 27. Among the allegations: He used his former firm -- Rothstein Rosenfeldt Adler -- in the Ponzi scheme to sell fabricated legal settlements to wealthy investors.

But before then, the judge will hold a hearing next Wednesday on Nurik's representation of Rothstein, exploring ``potential'' conflicts.

In his filing, LaVecchio said that Rothstein's attorney is not under criminal investigation, noting that Nurik is ``neither a target nor a subject'' in the continuing probe.

But LaVecchio pointed out that Nurik's representation could pose ``potential'' conflicts because he once worked with other lawyers at the firm and could be called as a witness for Rothstein -- raising a central question about defending him.

``As a former employee of RRA . . . Mr. Nurik has, at a minimum, professional relationships with other employees of RRA who do have apparent criminal culpability in the case, which could conceivably interfere with the undivided loyalty that Mr. Nurik owes to the defendant,'' LaVecchio wrote in the filing.

``Secondly, because Mr. Nurik was an employee at RRA, he may personally be in the position to provide exculpatory evidence on the defendant's behalf, which would be prohibited if Mr. Nurik persisted in his representation of the defendant,'' the prosecutor wrote.

LaVecchio proposed that Rothstein could resolve those conflicts for his lawyer by simply waiving them at next Wednesday's hearing. In effect, it would protect the pending plea agreement, which could send Rothstein to prison for 30 years to life.

Nurik said he has no conflicts and that Rothstein will indicate that to the judge Wednesday.

``Everybody knows that my first and foremost allegiance is to my client, and likewise it's clear that I have no exculpatory information,'' Nurik said.

According to sources familiar with the Rothstein investigation, other lawyers and officers in the now-defunct firm are under scrutiny. Among them: the law firm's former name partners Stuart Rosenfeldt and Russell Adler, along with Debra Villegas, chief operating officer, Irene Stay, chief financial officer, and David Boden, general counsel.

Their attorneys denied any wrongdoing.

Lawyer Bruce Lehr, representing Rosenfeldt, has repeatedly said his client -- who co-owned the firm with Rothstein -- did nothing wrong.

``If Rothstein has been telling the truth to the government, then Rosenfeldt has nothing to fear,'' Lehr said.

Adler's lawyer, Fred Haddad, said: ``I don't think Mr. Adler has done anything wrong or been complicit in any criminal activity. He has no knowledge of any criminal activity.''

Boden also did nothing criminal, said his attorney David Vinikoor. ``To me, it suggests they are not talking about Boden,'' he said, adding that he initiated a meeting for Boden with the FBI and federal prosecutors.

Stay's attorney, Brian Tannebaum, said: ``I don't believe she has any criminal culpability.''

Lawyer Paul Lazarus, asked if Villegas participated in any criminal activity, said: ``I have no idea. I would think it might refer to some of the other attorneys.''

Lawyer Set to Plead Guilty in $1.2 Billion Fraud

By Jordana Mishory
Daily Business Review
New York Lawyer
January 7, 2010

MIAMI - Disbarred Fort Lauderdale attorney Scott Rothstein, who is preparing to plead guilty to engineering a $1.2 billion fraud at his former law firm, didn’t deal with all of the victims who have come forward claiming losses, his attorney said today.

The remarks by defense attorney Marc Nurik, a former colleague at Rothstein Rosenfeldt Adler, lends credence to suspicions that feeder funds and others were pivotal in expanding an alleged fraud dating back to 2005. Court papers have referred to alleged co-conspirators without identifying any of them, and Rothstein is the only one to face criminal charges so far.

"Scott Rothstein dealt with only a very limited number of people. He is surprised at the amount of people who actually claimed to be investors," Nurik said outside court after telling a federal judge that his client intends to plead guilty to federal charges rather than go to trial.

"He’s going to accept responsibility for his actions and do whatever he can to make sure that legitimate investors are made as whole as possible," Nurik said. He called legitimate investors those "who were acting appropriately or unaware of any of the issues involved and were not taking advantage of other investors."

Banyon Investment Fund, listed as the lead creditor in the law firm’s bankruptcy, has been excluded from the creditors committee and is suspected of serving as a feeder fund for the alleged fraud.

Nurik said he has served as the intermediary with federal investigators, and Rothstein has not had face-to-face contact with the government. As the middleman, Nurik said he has not told the government about any alleged co-conspirators, saying Rothstein’s cooperation is limited to his own involvement. He has surrendered $60 million to $100 million in property for distribution to victims, Nurik said.

A decision on Rothstein’s plans was needed with a trial date set for Monday. A plea was seen as likely before the announcement because the former head of Rothstein Rosenfeldt Adler was charged by criminal information and waived his right to have a grand jury consider charges against him.

A hearing on a plea change is set Jan. 27 before U.S. District Judge James Cohn. A hearing also is set next Wednesday for Rothstein to waive all conflicts, primarily since Nurik was a former employee.

Nurik said a plea agreement is being finalized.

Assistant U.S. Attorney Lawrence LaVecchio said the two sides need two or three weeks to work out the details and notify victims. The judge allowed prosecutors to contact victims they know about and set up a Web site to reach out to others who have not been identified yet. Federal law requires victims to be given a chance to weigh in on sentencing.

Rothstein’s high-flying world of political fund-raising and philanthropy came crashing down Halloween weekend when investors started complaining about missed payments while he was on a mysterious trip to Morocco.

Rothstein returned in style on a private jet as more and more investors came forward demanding returns on structured settlements, but the FBI concluded shortly after swooping in to seize law firm records that the entire venture was a sham. Others at the 70-lawyer firm proclaimed ignorance of the settlement financing side business even though people who received investment pitches produced correspondence on law firm letterhead.

Recipients of the labor and employment lawyer’s campaign and charitable largesse hastily returned checks, investors forced the firm into involuntary bankruptcy, and criminal charges against Rothstein and civil suits targeting the firm’s banks and insurers quickly followed.

Rothstein is charged with racketeering, money laundering, fraud and conspiracy.

People claiming losses range from the family of auto magnate Ed Morse to Miami securities brokerage owner Ira Sochet.

Rothstein has been jailed since his arrest. His collections of homes, boats, exotic luxury cars, watches and other jewelry are in government hands. The firm’s assets are up for sale Jan. 23, including photographs that lined Rothstein’s high-security office retreat depicting him with Gov. Charlie Crist, U.S. Sen. John McCain and others.

Complaint Seeks $4m from Lawyer in Scott Rothstein Firm

A Complaint Filed in the Bankruptcy Case Involving Scott Rothstein's Former Law Firm Tries to Reclaim Nearly $4 Million
from Attorney Steven Lippman, Who Had Worked at the Firm.

By Amy Sherman
The Miami Herald
December 30. 2009

Bankruptcy attorneys seeking to recoup money from Scott Rothstein's defunct law firm filed a complaint Tuesday in an attempt to get back almost $1 million in expenses paid to an attorney for everything from his country club charges to charitable contributions.

The federal complaint, filed in Fort Lauderdale, also seeks to recover more than $2.5 million in loans and more than $400,000 in bonuses from the law firm to attorney Steven Lippman.

Lippman's attorney, Bruce Zimet, said Tuesday that his client did nothing wrong.

``Lippman did not receive one cent of any improper money,'' said Zimet. ``Every cent he got he earned legitimately.''

Rothstein was arrested Dec. 1 and charged with a series of offenses related to what prosecutors said was a $1.2 billion Ponzi scheme that brought down the Rothstein Rosenfeldt Adler law firm. The disbarred Fort Lauderdale attorney remains in federal detention in Miami.

Berger Singerman, the firm of bankruptcy attorneys working on behalf of trustee Herbert Stettin, filed the complaint. It alleges that from 2006 to 2009, Lippman ``submitted Expense Reports to RRA seeking repayment of personal expenses for items which included furniture for his home, his Weston Hills Country Club charges, personal travel, clothing, sports tickets, charitable contributions, personal meals, general household items and other such items (``Personal Expense Payments''), all of which were charged to Lippman and his wife's American Express credit card.''

The expenses amounted to more than $930,000.

Lippman, a commercial litigation attorney, also received more than $8.9 million in loans from the law firm. He would deposit checks into an account which Rothstein referred to as the ``Nest Egg Account'' and later Lippman would write a check out of the account back to the law firm -- for a lesser amount than he had just received.

The net amount of the loans minus repayments was about $2.5 million.

Lippman also received almost $440,000 in bonuses for 2008 and the first 10 months of this year.

``We believe the bonuses were exorbitant and not in line with what fair and reasonable compensation would have been based on services provided,'' said Charles Lichtman, an attorney with Berger Singerman.

Zimet said Lippman's expenses were paid as part of his agreement with the law firm. As for the bonuses, Zimet said, Lippman earned much more money for the law firm than he received in compensation. Zimet also disputed Stettin's characterizing some figures as loans, but declined to be specific.

The complaint does not seek to recoup Lippman's salary, which was about $660,000 during the first 10 months of this year.

Shortly after Rothstein's law firm imploded over Halloween weekend, Lippman and a few other attorneys were scooped up by the Rice Pugatch Robinson & Schiller law firm in Fort Lauderdale.

Arthur Rice, a name partner in the firm, said in an e-mail Tuesday night that he had not yet read the complaint.

``Having said that I know Steve Lippman and he is a man of integrity and until we are shown competent evidence to the contrary he will remain a valued member of our firm. I and other members of our firm have considerable experience in fraud recovery work and it is our collective experience that in cases such as this things are not always what they appear to be.''

Zimet, a former federal prosecutor who is now a criminal-defense attorney, said Lippman has not been interviewed by federal authorities.

``He is available to speak with them at any time,'' he said.

Lichtman said he expects to file similar complaints against other former employees of the law firm.

``We are carefully looking at all payments made to those who RRA held out as partners to assure that all payments are proper,'' Lichtman said.

The Naughty List: Firm That Fronted for Ponzi Scheme
Channeled Millions to Politicians

By John Pacenti and Jordana Mishory
Daily Business Review
New York Lawyer
December 23, 2009

MIAMI - Former Miami U.S. Attorney Guy Lewis said running illegal campaign contributions through employees, relatives, even paid strangers is practically standard operating procedure in some South Florida elections.

Lewis, a name partner with Miami’s Lewis Tein, said while in office he saw what are commonly called "pass-throughs" in "virtually every context you can imagine." But he said it often involved small donations from mom-and-pop businesses.

It was nothing like what federal investigators are looking into at fallen attorney Scott Rothstein’s defunct Fort Lauderdale law firm.

"I do think it’s a different animal. We are clearly not talking about $100, $200 or even $500 dollar contributions," Lewis said. "We are playing in a different ballpark here."

Like in everything else he did, Rothstein set the bar high, funneling about $2 million to federal and state campaigns and political action committees since 2005, mostly associated with Republicans such as U.S. Sen. John McCain’s presidential campaign and Gov. Charlie Crist, a personal friend.

The money allegedly emanated from a $1.2 billion Ponzi scheme run from Rothstein’s office under the guise of investment opportunities in lawsuit settlements. Attorneys and staffers at Rothstein Rosenfeldt Adler then were reimbursed through bonuses, prosecutors say.

The "conduct was designed to conceal the true source of the contribution and to illegally circumvent campaign finance laws,’’ according to the federal charges against Rothstein.

Politicians who received money from people at Rothstein’s firm have been scrambling to give back thousands of dollars to a court-appointed receiver who is collecting money to repay Rothstein’s alleged victims.

Prosecutors and lawyers familiar with pass-throughs said the bonus or reimbursement is often higher than the actual donation to cover taxes. But the liability of the straw donors may be limited because prosecutors must prove they had knowing intent to break campaign finance laws.

A coincidence or a wink-and-a-nod does not suffice in court.

If the past is any indicator, legal experts say authorities will focus on the mastermind behind illegal donations and not as much on the conduits, and Rothstein already is in jail on other charges.

"Generally, the workers are innocent. They are just doing what their bosses are telling them to do," Miami criminal defense attorney Richard Sharpstein said. "The employees write a check for $500 for candidate Joe Smith, and the employee gets it back in a bonus at the end of the year."

Robert Jarvis, who teaches ethics and constitutional law at Nova Southeastern University, agreed Rothstein would be the main target if illegal campaign contributions were funneled through the firm.

"The prosecutors don’t spend their time going after the cutout. They go after people who fed them the money," Jarvis said. "While they technically have a liability, I don’t think they have anything to worry about."

He said the typical defense of straw donors is they feared losing their jobs if they didn’t make the political donation. As a result, it’s hard to prove criminal intent on the part of donors.

However, repeated donations may be enough to prove intent.

At Rothstein’s firm, some individual donations in the 2008 election cycle climbed into five and six figures.

Federal donation records also show a precipitous increase in donations from RRA after Rothstein’s fraud allegedly began in 2005. The Daily Business Review used data compiled by CampaignMoney.org, a nonprofit, nonpartisan Web site that compiles information on individual donations from the Federal Election Commission.

Lewis said it would be hard to believe RRA lawyers didn’t know what they were doing was wrong.

"I have a hard time swallowing the story that I give a campaign $10,000 and 48 hours later I get a $10,000 bonus," he said. "That doesn’t pass the smell test."

Acting U.S. Attorney Jeffrey Sloman made it clear after Rothstein was arrested Dec. 1 that willful ignorance will not be tolerated as a defense.

But Sharpstein said campaign law violations often are add-on charges rather than standalone offenses.

If RRA attorneys participated in pass-throughs and avoid prosecution, they could still be in trouble with The Florida Bar. Bar president Jesse Diner said if pass-throughs occurred at RRA, "the conduct would be questionable regarding the ethics aspect of that."

Diner said the sizable jumps in donations "certainly would raise some flags, and it is certainly something that needs to be investigated."

He said any recommended discipline would depend on whether pass-throughs were repeated or a one-time occurrence.

Tony Alfieri, director of the Center for Ethics and Public Service at the University of Miami School of Law, said whether lawyers at RRA could be held liable for accepting money in exchange for campaign contributions depends on what a reasonably prudent lawyer should have known.

"The Rothstein firm lawyers cannot behave as what we would call shut-eyed sentries," he said.

Alfieri said they had a duty to inquire about where any reimbursement money was coming from and whether it was legal.

"If they knew or more likely should have known that the contributions and underlying transactions involved either criminal acts or conduct that involved dishonesty, fraud or deceit, then they are not only professionally liable but very likely civilly and criminally liable as well," he said.

It may be hard for some RRA attorneys to explain their sudden generosity to politicians. Federal records show an increase in contributions by a select group of RRA attorneys starting around 2005 when investigators say Rothstein started his fraudulent scheme. State records follow the same track as a number of RRA attorneys and staff suddenly became political players.

One such staffer was Debra Villegas. The chief operating officer gave $2,000 in 2006 to President George W. Bush’s political action committee. In the 2008 election cycle, she made 10 donations totaling $34,000, and those were just for federal campaigns.

"All of a sudden she becomes politically active? I would say that is a cause for concern," said Mark Seiden, a former federal prosecutor who runs his own criminal defense firm in Miami.

Rothstein purchased a $400,000 Weston house for Villegas.

But she wasn’t alone in sudden political funding.

The other attorneys on the firm’s nameplate, Stuart Rosenfeldt and Russell Adler, poured thousands into campaigns and political action committees in 2008 after donating a relative pittance in previous election cycles.

A number of other RRA attorneys also made large donations in the 2008 election cycles when most RRA donations went to McCain. One of the most prolific contributors was Steven Lippman, who donated $120,000 on the federal level for 2008 elections after giving only $4,200 in 2006. His wife, Marcy, a homemaker, ponied up $104,600 for federal races in 2008 compared with $4,200 in 2006, according to CampaignMoney.org.

Adler’s federal donations went up from $4,800 in 2006 to $83,400 in 2008, according to CampaignMoney.org data. His wife, Katie, donated $80,100 last year after giving only $4,800 in the 2006 cycle.

Efforts to reach the RRA contributors or their lawyers were unsuccessful.

Rothstein attorney Marc Nurik said he had no comment. His client’s federal donations shot up from $7,700 in the 2006 election to $139,000 in the 2008 cycle, according to CampaignMoney.org.

Seiden said he doesn’t recall many prosecutions on the federal level for campaign pass-throughs.

"Typically the one they are looking for is the guy who is the employer, not the employee. What they do is offer a deal with the employee," he said.

One federal defendant on illegal donations was Filipino businessman Mark Jimenez, who was charged in 2002 with funneling money through employees to the Clinton campaign and other candidates.

He was charged with corporate fraud and tax evasion for using corporate money to reimburse employees for illegal donations. Donors were employees of Future Tech International, a Miami computer parts distribution business partly owned by Jimenez. He pleaded guilty to tax evasion and was sentenced to more than two years in prison.

Miami-Dade State Attorney Katherine Fernandez Rundle said her office has prosecuted campaign pass-throughs on the state level.

"I don’t know if it’s good or bad, but we have sort of become the experts. We have a number of prosecutions, and a number of people have gone to jail," she said.

Nilo Juri, a perennial Hialeah candidate, was sent to prison for four years in January for reimbursing people with cash for campaign contributions, among other crimes.

"There is nothing more fundamental to our democracy than the election process," Rundle said. "I think it’s the arrogance and boldness of getting someone elected to a position of power that overcomes their sense of what is right."

She said she hasn’t focused just on the electioneering ringleaders and has prosecuted straw donors, some of whom took kickbacks for their donations.

But to make a case against straw donors, Rundle said prosecutors must prove they knew they were being used to circumvent campaign financing laws.

Former Hialeah City Council member Vanessa Bravo was forced to resign in 2005 after pleading guilty for providing indirect contributions to a local campaign in the name of friends and others. She was placed on probation for a year.

In Rothstein’s hometown, Broward County State Attorney Michael Satz is prosecuting former sheriff’s candidate Shahrukh Dhanji for allegedly funneling money into his campaign coffers. The Coconut Creek businessman was charged with violating the limits of campaign contributions and falsifying public records.

It remains to be seen if RRA attorneys will be on the hook for illegal political donations, but Lewis said the news about Rothstein and his firm seems to get worse every day, which provides a cautionary tale to other South Florida lawyer contributors.

"This is not what law firms do, and for good reason," Lewis said

Feds Pursuing More Lawyers, Campaign
Violation Links in Rothstein Ponzi Case

By Jay Weaver, Amy Sherman and Marc Caputo
The Miami Herald
December 19, 2009

Lawyer Steven Lippman and his homemaker wife, Marcy, hadn't donated much to politicians before 2006 -- just $500 to former U.S. Sen. Bob Graham, the Florida Democrat. But their generosity exploded after Lippman joined Scott Rothstein's law firm in Fort Lauderdale.

Over the next four years, the Plantation couple contributed about $247,000 to Gov. Charlie Crist's campaign for the U.S. Senate, the McCain-Palin presidential ticket and other politicians. The GOP redistributed some of the Lippmans' donations to Republican political committees in 2008 battleground states such as Pennsylvania, Ohio and Colorado.

Lippmann is among 30 lawyers in Rothstein's now-defunct firm -- along with 15 other employees, spouses and relatives -- who made about $2.2 million in state and federal campaign contributions as Rothstein executed his Ponzi scheme from 2005 to 2009, public records show.

Nearly 40 percent of that money went to the McCain-Palin 2008 campaign, which then passed along some of it to GOP political committees around the nation.

Now Lippman and others in Rothstein's 70-lawyer firm -- Rothstein Rosenfeldt Adler -- have come under the scrutiny of federal investigators, according to sources familiar with the probe. They're examining Rothstein's use of money from his $1.2 billion Ponzi scheme to pay firm salaries and give huge bonuses to senior attorneys on the condition that they donate generously to his favorite politicians.

When Rothstein was arrested earlier this month on federal racketeering charges, prosecutors alleged that he instructed employees who received bonuses to make ``large'' political donations in their names ``to conceal the true source of the contribution and to illegally circumvent campaign finance laws.''

The largest chunk of contributions, about $1.2 million, came from Rothstein and his wife, Kimberly, who held fundraisers for McCain, Crist and other politicians at their waterfront home.

Partner Stuart Rosenfeldt, who owned the law firm with Rothstein, and wife, Susanne, donated about $306,000 -- to McCain, Crist, Florida Senate President Jeff Atwater and others. Rosenfeldt also contributed $150,000 to committees supporting both major candidates in last year's Broward Sheriff's race.

The third named partner, Russell Adler, and wife, Katie, gave about $185,000 to state and federal politicians. Among them: former New York Mayor Rudy Giuliani for his presidential bid and later McCain, when he became the Republican nominee for the White House.

One employee who was close to Rothstein, chief operating officer Debra Villegas, donated about $46,000 to the campaigns of McCain, Giuliani, Crist and GOP committees in Florida. Last year, Rothstein bought a $400,000 house for Villegas in Weston.

Adler, Lippman and Villegas declined to comment or could not be reached. Rothstein's attorney, Marc Nurik, declined to discuss the political donations.

Rosenfeldt referred questions to his attorney, Bruce Lehr. ``My client only gave campaign donations based upon his own ideology,'' Lehr said.

The racketeering charges against Rothstein allege that the firm's donations to politicians and campaign committees were largely illegal because they were funded with money from the now-disbarred lawyer's massive sale of fabricated legal settlements to wealthy investors.

Agents for the FBI and IRS are examining campaign records, payroll statements and other documents to determine how Rothstein used his investment scam to fund the firm's overhead and political donations, according to sources familiar with the probe.

Legal experts said lawyers at RRA may not have known, as they contend, about Rothstein's Ponzi scheme, but that such a lack of awareness wouldn't excuse them as lawyers from asking tough questions of their boss -- the firm's managing partner -- when he required that they make campaign donations as a condition of receiving bonuses.

``That should have been a tipoff that they were violating campaign finance laws,'' said Nova Southeastern University law professor Robert Jarvis, who teaches ethics and constitutional law.

``Even if they didn't know anything about the Ponzi scheme, they certainly knew this was wrong, and they have real exposure'' to charges of fraud, money-laundering, making false statements and tax evasion, Jarvis said. ``It's a very difficult case to defend against.''

Federal prosecutors in Miami won convictions in recent years against three top executives of the engineering consulting firm PBS&J on charges of running a scheme to subvert campaign finance laws.

Prosecutors charged that the company's executives committed fraud and made false statements to the Federal Election Commission by illegally reimbursing employees for political contributions to get around campaign finance laws that limit or prohibit corporate contributions.

``Fraudulent activity occurred in federal campaigns across the nation'' and ``affected campaigns for numerous state offices,'' prosecutors said in court filings in 2008. Former U.S. Sen Mel Martinez, a Florida Republican, and former U.S. Sen. Max Cleland, a Georgia Democrat, were identified as having received illegal contributions from PBS&J executives.

Many candidates have returned donations from Rothstein and now say they will return those linked to his firm's lawyers, as well.

On Friday, Crist told The Miami Herald that he would return all contributions from 35 lawyers and employees in Rothstein's law firm -- about $76,250. He had previously returned about $9,600 from Rothstein and his wife.

Florida Chief Financial Officer Alex Sink, a Democrat running for governor, announced Friday that she plans to give back money from firm lawyers amounting to at least $7,025.

In November, she had already returned $6,000 from Rothstein, his wife and companies.

At Rothstein's old firm, political fundraising was commonplace because the managing partner sought to ingratiate himself with Crist and other GOP heavyweights. Rothstein also hired former politicians, judges and lobbyists.

That Rothstein hosted fundraisers at his home -- including one for Sink -- was not unusual. Prominent lawyers hold fundraisers for politicians and give them money all the time.

But Rothstein's firm stood out because of the large amount of money donated by some of its top attorneys.

Grant Smith, along with his wife, Eliza, for example, gave about $37,000 to state and federal candidates, including Crist. Smith, who declined to comment, worked for many years as a lobbyist at the politically connected Tripp Scott law firm and is a son of former Congressman Larry Smith.

``Any donation that Grant gave was strictly in adherence with the law,'' said his attorney, Neal Sonnett. ``I know that Grant advised Scott and others that anybody who gave donations had to give their own money and they couldn't be reimbursed or given in someone else's name.''

Sonnett said he has told federal prosecutors that Smith will cooperate, noting that he expects them to ask about Rothstein's fundraising activities.

Attorney Gary Farmer, who joined Rothstein's firm about one year ago after winning a big whistle-blower case against a pharmaceutical giant, and his wife, Stacey, gave about $37,000 to state and federal candidates this year.

Farmer said Rothstein asked him to make political donations -- including to Crist. But Farmer, a Democrat who said he sometimes gives to Republicans if they're strong on judicial issues, said he would have given to Crist anyway.

``I sure as hell didn't get any bonuses for giving to Charlie,'' Farmer said. ``I can tell you the feds will never come out and say I got a bonus. I didn't get a single bonus the entire 11 months I was at RRA.''

Farmer said he met with federal authorities a couple of weeks ago. He said they questioned him about whether Rothstein pressured him to make donations but asked ``more about the investment stuff.''

Fort Lauderdale Police Chief's Ties
to Scott Rothstein Questioned

By Brittany Wallman
Sun Sentinel
December 16, 2009

Fort Lauderdale police officers should never again be allowed to guard a private residence on a permanent, 24-hour basis as they did for Ponzi scheme suspect Scott Rothstein, the mayor said Tuesday, advising that he will seek a ban to protect the city from another ``black eye.''

Mayor Jack Seiler's pronouncement is a turnabout for the city, which until now has steadfastly defended its April decision to let top police supervisors, undercover officers and the police spokesman guard Rothstein's home on Isla Bahia Drive.

The city has been forced to defend the integrity of the police department as information continues to come to light showing a particularly close relationship between Scott Rothstein and the Fort Lauderdale Police Department -- and Chief Frank Adderley in particular.

Officials acknowledge the department's image was scorched by its close ties to Rothstein, a man later accused of running South Florida's largest investment rip-off.

Adderley defended himself and his department in an interview two weeks ago, saying he always paid his way when he socialized with Rothstein, attended Miami Dolphins games with him or ate at Rothstein's restaurant. He also said he was cooperating with federal agents investigating Rothstein, and voluntarily called them a few weeks ago to offer information.

But Adderley now refuses to answer new allegations that he flew on a private jet to a Miami Dolphins-New York Jets game with Rothstein last year. He did not respond to a text message and telephone message about it from tHe Sun Sentinel on Thursday. CBS4 aired the allegation Monday night without comment from Adderley.

Tuesday, Adderley continued to avoid the question. He did not answer when he was asked as he stepped into a closed-door union negotiation meeting. After the two-hour meeting, he exited through a back door.

City officials said they were disturbed and concerned by the growing number of links emerging between Rothstein and the chief. Last week, photos surfaced of Adderley standing inches from Rothstein at a crash involving a friend of Rothstein's. The city on Thursday opened an official investigation.

Adderley has not explained his presence, and refused to release to The Sun Sentinel any records of his cellphone communications with Rothstein.

Vice Mayor Bruce Roberts, the former chief of police who promoted Adderley through the ranks, said he would seek to have an outside agency, such as the Florida Department of Law Enforcement, investigate the crash and whether Adderley influenced the accident investigation.

Adderley said two weeks ago that he had no way of knowing about Rothstein's financial life and that he had not heard the rampant rumors and questions about Rothstein's sudden wealth.

Rothstein long had ties with local law enforcement. He represented police unions and officers in legal trouble before he launched into the social scene in a big way, contributing millions of dollars to charitable causes as he built his profile.

Roberts said the Adderley-Rothstein friendship had created a ``public relations nightmare that will have to be dealt with.''

Seiler said that even though the off-duty work at Rothstein's house was legal, it isn't proper. He alerted the police union that he would seek changes to the rules.

``It gives the appearance of a personal bodyguard, and that is entirely improper,'' Seiler said in an interview Tuesday.

Rothstein is in jail pending trial on federal charges of racketeering and fraud.

Baby Steps: Before Allegedly Running Billion Dollar Scam,
Lawyer Lied and Got Fired for It

By Julie Kay
Daily Business Review
New York Lawyer
December 15, 2009

MIAMI - Before starting the Rothstein Rosenfeldt Adler law firm, accused swindler Scott Rothstein was kicked out of a law firm for lying to a client about filing court documents, the Review has learned.

Rothstein and Stuart Rosenfeldt worked for the law firm Phillips Eisinger Koss Rosenfeldt & Rothstein in Hollywood before launching their own firm in February 2002. Rosenfeldt worked there for eight years and Rothstein for nearly three.

Gary Phillips, former managing partner of the Hollywood firm, said he and his partners asked Rothstein to leave after learning he had lied to a client about filing a complaint and an emergency motion for injunctive relief. The client called Phillips to discuss the motions.

"I went to look at the file and found there was no file," Phillips said. "He told the client he had already filed these motions. We were very upset. I pushed to get rid of [Rothstein] after that."

Phillips wound up taking over the case and filing the motions himself, and asked Rothstein to leave "within a short period," he said. Phillips said he did not report Rothstein to The Florida Bar because he concluded the issue "was not grievable."

Rothstein ended up leaving with Rosenfeldt and about seven associates who were part of his plaintiff employment practice. The departures came with a confidential settlement that Phillips did not disclose.

Rothstein was arrested Dec. 1 and remains in federal custody after investors accused him of skipping payments on settlement financing arranged through law firm accounts. The FBI concluded the financing was a $1.2 billion scam.

Rothstein attorney Marc Nurik did not respond to phone and e-mail messages by deadline.

Rosenfeldt acknowledged that he and Rothstein were asked to leave the firm but said he does not recall the reason why. He said the attorneys already were planning to leave and had secured office space in downtown Fort Lauderdale with the Stiles Corp.

"I was in trial when Scott called me and said, ‘They asked me to leave, but ha-ha-ha we’re leaving already,’ " Rosenfeldt said Friday. "It was so long ago."

Phillips of Phillips Cantor & Berlowitz said he considers Rosenfeldt an "ethical guy who became starstruck over Scott. Scott was everything Stuart wasn’t."

Still, Phillips insists Rosenfeldt knew about the "issues" he had with Rothstein.

Rosenfeldt responded: "If I was aware, I didn’t remember it later. What can I say?"

Phillips recalled Rothstein as "a bright guy with a good legal mind."

"He could have been a good lawyer, but he didn’t want to practice law," Phillips said. "He wanted to become a bon vivant."

Despite the incident, Phillips said, "I never would have thought Scott would become one of the biggest criminals in South Florida history."

Dennis Eisinger, who co-headed Rothstein’s former firm, is not so sure.

"Scott’s communication skills were so good he could talk a rock into investing with him," Eisinger said, adding he was unaware of Rothstein’s being involved in selling investments at the time. "He was very, very smooth."

Eisinger also doubts Rosenfeldt was "complicit."

"He was a very nice guy but so unsophisticated with financial matters," Eisinger said. "I can believe he had no knowledge of the investments."

Rothstein’s lawyer, Nurik, has said investors will be repaid. Federal prosecutors have seized tens of millions of dollars’ worth of houses, boats, cars, bank accounts and jewelry from Rothstein, who voluntarily surrendered his law license when the investments collapsed.

Senior Miami-Dade Circuit Judge Herb Stettin, bankruptcy trustee for Rothstein Rosenfeldt Adler, is overseeing the wind-down of the firm. Legal experts say that process is likely to take about two years.

Much of Scott Rothstein's Ponzi Funds
Tied Up in Collection of Businesses

By Jim Wyss
The Miami Herald
December 12, 2009

Jailed lawyer Scott Rothstein collected companies like he collected exotic cars, fancy watches and powerful politicians.

By the time his alleged $1.2 billion Ponzi scheme collapsed last month, court documents show he had a stake in more than 100 corporations and businesses. Most were low-profile investment vehicles, with names like 2133 IP and CI27, designed for expediency and to obscure assets. Others were shares in trendy restaurants, flashy vodka companies and beachside hotels that echoed his lavish lifestyle.

Now, as investigators pick through the wreckage of Rothstein's empire on behalf of the investors he allegedly duped, many of his business partners are also facing scrutiny.

Rothstein's law firm, Rothstein Rosenfeldt Adler, is already in bankruptcy. But the U.S. government, which charged Rothstein with racketeering, is also laying claim to funds he funnelled into side businesses, saying his ``financial ability to acquire the [companies] did not exist prior to the execution of the `Ponzi' scheme.'' Now, the business owners cannot sell or transfer the property without the court's permission.

Most of those touched by the scandal have disappeared behind a phalanx of lawyers. Some of his business partners are also close friends; others are suspected of being conspirators; some claim they are victims.

And some say they are accidental players in the Rothstein drama.

``We have never met the guy,'' said Andre Weliky, the owner and manager of Boca Car Wash on 1299 Federal Highway in Boca Raton. In business since January, Weliky said Rothstein, apparently, became his landlord when the property he leases changed hands earlier this year. The U.S. government has asked the courts to seize the rent money derived from the operation.

Weliky said the news had not slowed his busy car wash, but that he found the media glare disconcerting.

``We're just a small, family-owned business,'' he said. ``Be kind.''

In other cases, Rothstein's ties ran much deeper.

According to court documents, Rothstein held equity stakes in Renato Watches of Sunrise and the Sea Club Resort in Fort Lauderdale. State records list Ovadia Levy as the chairman of the watch company and his father, Shimon Levy, as the president of the hotel.

Media reports say the younger Levy and Rothstein were fast friends, often seen dining together at Bova Prime, the upscale restaurant at the foot of Rothstein's law firm on 401 E. Las Olas Blvd., in Fort Lauderdale. Bova was also one of Rothstein's business interests.

But both Levys are also among Rothstein's top-20 creditors and claim they are owed $40.7 million, according to court documents. Lawyers for the Levys did not return phone calls, nor did officers at Renato Watches and the Sea Club.

But Daniel Mink, the CEO of Renato Watches and the brother-in-law of Ovadia Levy, previously told The Miami Herald that Rothstein bought into the company in 2008.

``We were friends of his in the community,'' Mink said last month, prior to Rothstein's arrest. ``A lot of people were investing with him. It seemed very legitimate . . . Our family is definitely a victim.''

Mink, who also goes by Minkowitz, is also listed as a Rothstein creditor and is claiming he is owed $6.5 million, according to court documents.

In addition, authorities have seized $1 million in a Moroccan bank account held in the name of Steve Caputi. Caputi and Rothstein were partners in a Hollywood nightclub called Cafe Iguana Pines. Calls to the business were not returned.

Attorney Bill Scherer, who represents investors who lost almost $100 million to Rothstein's alleged scam, said the business interests are legitimate targets.

``We are looking at the details of every single one of these companies,'' Scherer said. ``We want to know how much [Rothstein] invested and what his involvement with these companies was.''

One Rothstein investment was Edify, a health and welfare benefits consulting firm that shared the same office tower with Rothstein's law firm.

In July 2008, one of Rothstein's investment vehicles, WAWW9, agreed to buy up to a 20 percent stake in the firm, said company lawyer Michael Kreitzer. But by August of this year, WAWW9 -- which sources say stands for What a Wonderful World -- had quit making the payments, the contract was considered in default and all of his shares reverted back to the company's remaining partners, Kreitzer said.

Edify maintains that the government's claim is subject to the underlying agreement that WAWW9 had with Edify.

The ``payments stopped being made long before any of the Rothstein issues came to light,'' Kreitzer said.

Other firms were more guarded. At Gibraltar Private Bank & Trust -- one of two banks where Rothstein held a stake -- a spokesman said the institution would set aside Rothstein's 5 percent ownership and will ``continue to safeguard these shares until it receives further instructions from federal authorities.''

While many of Rothstein's investments seem to be thriving businesses, others appear to be struggling.

Ristorante Bova, the Boca Raton location of the Bova restaurant chain, closed about a month ago, neighbors said. Calls to the restaurant were not returned.

Russell Mix, the CEO of Qtask, a software development company in Burbank, Calif., told The Sun Sentinel that Rothstein's AAMM Holdings had invested $7 million in the firm, but those funds are gone. ``None of us have money to give back,'' Mix told the paper. Calls to Qtask were not returned.

In other cases, it may take investigators time to untangle Rothstein's investments

Rothstein's corporation WAWW4 had an equity interest in Cart Shield USA, a Palm Beach Gardens company that holds a patent application for a shopping-cart sanitization system, according to court and government documents. Control of Cart Shield -- now called C.S. USA -- was transferred to the law firm of Zebersky and Payne Nov. 19, just days before Rothstein's Dec. 1 arrest. The law firm did not return a call seeking comment.

Then there is Africat Equity IG Decide. Rothstein had an equity stake in the company and had loaned it money, according to court documents. But a public records search for the entity came up dry. Calls to area firms with similar names also failed to produce results.

In the end, the truth about some of Rothstein's business dealings may be as elusive as the massive returns he promised investors.

Scott Rothstein Paid Himself $35 Million Last Year

By Amy Sherman
Miami Herald
December 5, 2009

Scott Rothstein paid himself $35 million last year

Scott Rothstein's Fort Lauderdale law firm paid exorbitant salaries to its top attorneys last year -- including $35.7 million to the now-disgraced lawyer -- but their paychecks nose-dived dramatically this year.

A filing by bankruptcy attorneys for the now defunct Rothstein Rosenfeldt Adler law firm shows salaries paid to top attorneys in 2008 and through Halloween of this year.

In rounded figures:

• Rothstein, CEO: $35.7 million in 2008, $10.5 million through Halloween.

• Stuart Rosenfeldt, president: $6 million in 2008, $850,000 through Halloween.

• Russell Adler, vice president: $890,000 in 2008, $850,000 through Halloween.

• Grant Smith, assistant managing shareholder: $335,000 in 2008, $330,000 in 2009.

• David Boden, general counsel: $640,000 in 2008, $380,000 through Halloween.

The Chapter 11 summary filed by Berger Singerman does not explain why the law firm officers' salaries dropped dramatically.

The numbers are listed in a document that summarizes the financial affairs of the law firm, that is now winding down in light of criminal charges accusing Rothstein of running a $1 billion Ponzi scheme financed by investors and his law clients' trust accounts.

Army of Lawyers Picking over Remains of Rothstein Law Firm

What Assets Remain? Who Gets Paid First? These Are
Among the Many Questionsthat Lawyers Dealing with Scott Rothstein's Former Law Firm Are Trying to Answer.

By Julie Kay
Miami Herald
December 5, 2009

``It's a race to the assets,'' said Friedrich Blasé of New York-based Kerma Partners, law firm management consultants. ``It's going to be very dissatisfying for all who are owed money. The employees who weren't paid are going to be screwed. The investors are screwed, but they always had risk. Everyone will come out poorly.''

Firm Founder Arrested in Billion Dollar Ponzi Scam

By Jordana Mishory and John Pacenti
Daily Business Review
New York Lawyer
December 2, 2009

MIAMI - Whether it was facilitating his $1.2 billion Ponzi scheme, forging judge’s signatures on bogus documents or hiding political contributions, federal prosecutors said Tuesday that the one-time power-wielding attorney had plenty of help perpetrating arguably the biggest scam in Florida history.

In a 34-page criminal information filed Tuesday, the U.S. Attorney’s Office indicated that Rothstein’s arrest in the morning hours may not be the last in the case. He had plenty of help targeting his friends and clients of his firm, prosecutors said.

The document is peppered with the notation "co-conspirators" among the numerous allegations levied against Rothstein. It confirms that the investigators are looking hard at the fallen attorney’s political contributions to an array of candidates, including Rothstein’s good friend, Florida Gov. Charlie Crist.

Acting U.S. Attorney Jeffrey Sloman and top federal officials promised Tuesday that the investigation is far from over.

"We are looking at all aspects of this case," he said.

The criminal information charges Rothstein with racketeering conspiracy, money laundering, and mail and wire fraud. It contends he ran the Ponzi scheme out of the Fort Lauderdale office of his now-defunct law firm, Rothstein Rosenfeldt Adler, as well as other locations.

The government does not identify the co-conspirators and Sloman refused to elaborate at a Tuesday afternoon news conference.

Rothstein pleaded not guilty Tuesday — four weeks after returning to Fort Lauderdale after fleeing to Morocco as investors started to raise questions about his investment business. A conviction on all charges could result in 100 years behind bars. The case is assigned to U.S. District Judge James I. Cohn.

The government confirmed through its filing that RRA employees accepted large work-related bonuses shortly after being instructed to make large campaign contributions to political candidates.

"Such conduct was designed to conceal the true sources of the contribution and to illegally circumvent campaign finance laws," according to the filing signed by Sloman and three assistant U.S. attorneys.

Prosecutors say Rothstein also used his many corporations to launder illegal funds generated from the Ponzi scheme in order to make political contributions.

Co-conspirators engaged in helping solicit potential investors through misstating facts and falsely assuring them that the funds existed to pay returns on these investments, prosecutors say. The co-conspirators also created and transferred funds between a number of accounts at different financial institutions.

Wearing a faded designer T-shirt and blue jeans, Rothstein appeared nonchalant as he stood in handcuffs and leg restraints before U.S. Magistrate Robin Rosenbaum, who ordered him held without bail because he is a flight risk.

Assistant U.S. Attorney Paul Schwartz said in court that Rothstein wired $16 million to an account in Morocco before fleeing there on a chartered jet with $400,000 to $500,000 in cash.

Schwartz declared the forging of documents with the names of federal judges "goes to the heart of our justice system."

Walking into court, Rothstein pointed at a reporter-packed gallery and later swiveled in his chair surveying the audience that came to observe his first court appearance.

Jeffrey Sonn, an attorney with Sonn & Erez who represents several investors and firm clients allegedly fleeced by Rothstein, said the one-time power broker appeared to be in a surreal state. "It was like watching a megalomaniac come to grips that he is going to jail," said Sonn, who observed Rothstein’s first appearance in court.

It did seem he was resigned to his fate. Rothstein waived his right to a grand jury indictment and to contesting detention.

At a Miami press conference, Sloman said Rothstein was shockingly brazen in his crimes by forging judges’ names and bilking his own clients.

"That is a height of chutzpah," Sloman said. "This is one of a small handful of cases in which a law firm has been named as a RICO [racketeering] enterprise."

The government contends Rothstein took millions in investor money in a scheme that focused on the sale of fabricated confidential settlements of whistle-blower and harassment legal disputes made by lawyers at Rothstein Rosenfeldt Adler.

Rothstein told investors he "rigorously screened" agreements and used the Internet and toll-free telephone numbers to attract cases. He ensured investors that the accounts were "verified on a regular basis."

The government claimed Tuesday that it was all smoke and mirrors. Rothstein created and maintained fictitious banking statements that falsely reflected funds held and fake wire transfers.

Rothstein also sought investors to finance loans for firm clients, the government filing claims.

The government also noted he forged judicial signatures as part of a scheme to fleece family friend and auto magnate Ed Morse out of $57 million — funds that went into paying the multiyear Ponzi scheme.

Rothstein presented Morse a forged court order allegedly signed by a federal district judge saying he won a $23 million judgment. Rothstein allegedly told Morse he needed to post bonds of $57 million in order to obtain the money, which had been transferred to the Cayman Islands in order to avoid payment.

Rothstein, who was permanently disbarred by the Florida Supreme Court last week, also created a false order by a U.S. magistrate judge to avoid repaying the money to Morse.

Rothstein and his co-conspirators used the money to enrich themselves, as well as help run the law firm, prosecutors said. He also lavished gifts including "exotic cars, jewelry boats, loans, cash and bonuses" to firm members as part of a plan to generate worker loyalty and enhance the firm’s prestige.

The money was also donated to charities and used to pay police departments for security.

"Ponzi scheme funds were also used to provide gratuities to high ranking members of police agencies in order to curry favor with such police personnel and to deflect law enforcement scrutiny of the activities of RRA and defendant Rothstein," government papers say.

The government contends Rothstein continued to bulk up the law firm and used it to legitimize the credibility of the scheme.

As for himself, Rothstein lived like a king. He bought expensive properties, fast cars, jewelry, cash and his ownership interest in a number of companies, including the posh Versace Mansion in South Beach.

"This case is a glaring example of greed run amok," Sloman said. "Now the mansions, the Ferraris, the yachts, the law firm, his friends are all gone. He sought to buy power and influence at the expense of his clients and instead has potentially bought himself a lengthy prison sentence."

Rothstein was arrested in the early morning hours by agents who took him to FBI headquarters in North Miami Beach. The arrest comes almost a month after the Ponzi scheme Rothstein had allegedly been running since 2005 began to unravel. His law firm removed him as CEO before it was thrust into Chapter 11 bankruptcy.

Creditors filed suits against him seeking their money back. A group of investors claiming losses of $100 million also claimed in a lawsuit that TD Bank and its local officials were part of the scheme. TD Bank has denied the allegations.

The circumstances of Rothstein’s arrest indicate he is cooperating with authorities, white-collar criminal defense attorneys say.

Miami attorney Richard Sharpstein of Jorden Burt said the only time a defendant tends to waive a right to a grand jury presentment is when an agreement with prosecutors has been reached.

"There’s either a deal, a plea negotiation ongoing or some kind of negotiation," Sharpstein said of the waiver. He also said the fact that Nurik didn’t contest detention indicates that cooperation.

Sharpstein said Rothstein could be helping point the finger at others who were involved in the scheme, and showing where funds were kept to help compensate victims.

"All roads lead to Scott’s lengthy incarceration and obvious cooperation, because he has no other choice at this point," Sharpstein said. He said the size of the Ponzi scheme is "off the charts" when it comes to sentencing guidelines, and Rothstein would be facing maximums across the board.

Former acting U.S. Attorney Guy Lewis said Rothstein will most likely be facing a life sentence.

"It’s likely that Scott will be carried out [of prison] in a box," said Lewis of the Lewis Tein law firm in Miami. He said a judge probably won’t find much sympathy in an attorney at the center of a mammoth Ponzi scheme.

"There is one single sole opportunity for him to mitigate his sentence and that is cooperation," Lewis said.

He said a charge by way of information instead of indictment usually indicates a negotiated settlement.

Nurik has denied that a deal is in place.

Lewis and Sharpstein hypothesized that the government didn’t want Rothstein or Nurik to talk about cooperation while the investigation is under way.

Nurik told reporters outside the Fort Lauderdale courthouse that his client was calm and accepting his fate well.

"Scott is a strong individual, and he is taking it like a man," Nurik said. But he acknowledged Rothstein’s mental state is "not good" and that he feels "very remorseful." He also told reporters that the actual loss to investors was less than $500 million. "Legitimate investors," he added, would receive their money back. He did not elaborate on how.

Rothstein `Fraud' Funded Campaign Donations

By Jay Weaver, Amy Sherman and Marc Caputo
Miami Herald
December 1, 2009

A Month after the Scott Rothstein Scandal Broke, Prosecutors Charged Him with Masterminding South Florida's Biggest Financial Fraud in Memory. More than $2 Million of the Stolen Money Was Donated to Politicians and Parties.

According to the racketeering charges, prosecutors sought to recover campaign donations made by Rothstein himself to Crist ($9,600), Sink ($6,000) and the state GOP ($145,000). All three voluntarily returned the money to the U.S. government, prosecutors said.

Rothstein law partner Stuart Rosenfeldt gave $150,000 to political committees to support Republican Broward Sheriff Al Lamberti and Democratic challenger Scott Israel last year. On Tuesday, Rosenfeldt said that came from his money, but he declined to say whether Rothstein directed him to make the contributions.

``I'm not going to comment on that stuff,'' Rosenfeldt said. ``Scott ran the place like a rooster. I don't think it's prudent to answer. It was my money.''

The RICO conspiracy case portrays Rothstein as a skillful manipulator who duped sophisticated investors into buying more than $1 billion in fabricated legal settlements. He's accused of laundering their money through his business ventures and 70-attorney law firm, as well as expensive waterfront holdings and a fleet of foreign cars.

``This case is a glaring example of greed run amok,'' Acting U.S. Attorney Jeffrey Sloman said at a news conference Tuesday. ``He sought to buy power and influence at the expense of his clients, and instead has potentially bought himself a lengthy prison sentence.''

The Fort Lauderdale attorney -- who agreed to be disbarred for stealing from his law firm's trust accounts -- now will paint a fuller picture of his and his alleged co-conspirators' roles to a federal grand jury. Among those under scrutiny: Rothstein's inner circle at the law firm and officers at Toronto Dominion Bank, where he kept investor trust accounts.

``The investigation is far from over,'' said John Gillies, the FBI's Miami chief, whose office has run the probe with the Internal Revenue Service.

Earlier Tuesday, U.S. Magistrate Judge Robin Rosenbaum ordered Rothstein jailed pending trial, citing a risk of flight because he had fled to Morocco in late October. As the scheme was imploding, Rothstein wired $16 million to Casablanca and took $400,000 to $500,000 with him in cash, Assistant U.S. Attorney Paul Schwartz said during the hearing.

Money from the scheme also went to hire Fort Lauderdale police officers to provide security for the law firm and Rothstein's home, and to ``provide gratuities'' to high-ranking law officers ``to curry favor with such police personnel and to deflect law enforcement scrutiny,'' according to the charges. No officers were named.

Outside the courthouse, Rothstein's attorney, Marc Nurik, reiterated previous public promises that his client would strive to reimburse investors who placed their trust in what turned out to be fabricated legal settlements.

``He's going to try to do the right thing,'' Nurik said.

Herald/Times staff writer Lee Logan contributed to this report.

Attorneys React to Rothstein Arrest

Rothstein’s Attorney, Marc Nurik Addressed the Media Following the Not Guilty Plea and the U.s. Attorney Held a Press Conference to Discuss the Case.

By: Jay Weaver and Amy Sherman
Miami Herald
November 30, 2009-

Scott Rothstein, the flashy Fort Lauderdale attorney who authorities say ran a $1 billion investment scam while acting like a philanthropic tycoon, is expected to be arrested Tuesday on a federal racketeering charge, sources familiar with the case said.

Rothstein, who had fled to Morocco in late October but returned in early November, is expected to appear at a magistrate hearing to face the RICO conspiracy charge at the federal courthouse in Fort Lauderdale.

While under federal watch in November, Rothstein cooperated with prosecutors and provided them with details of his Ponzi scheme, involving the sale of fabricated legal settlements to wealthy investors.FBI and IRS agents also raided his Fort Lauderdale law office and seized his waterfront home and other assets.

Rothstein could not be reached for comment, and his attorney, Marc Nurik, declined to say anything about his client's imminent arrest.

``Scott intends to see that all legitimate investors get paid back,'' Nurik said late Monday. ``Exactly how that's going to be done remains to be seen. He is sincere in his intent.''

Rothstein, 47, is likely to plead guilty soon while he is in custody. The U.S. attorney's office, meanwhile, will convene a grand jury to consider criminal charges against Rothstein's alleged co-conspirators -- including possibly former employees of his now-defunct firm.

Prosecutors are using the Racketeer Influenced and Corrupt Organizations Act to charge Rothstein and possibly others. The conspiracy law was passed by Congress to battle the Mafia and others involved in criminal enterprises. Rothstein, who was disbarred last week by the Florida Supreme Court, is accused of mail, wire and bank fraud, along with money laundering. He faces at least 20 yearsin prison and forfeitureof tens of millions ofdollars in illegal profits.

Rothstein's life in the fast lane -- befriending high-profile figures from Gov. Charlie Crist to NFL Hall of Famer Dan Marino -- crashed spectacularly over the Halloween weekend, when his investors first suspected that the lawyer may have stolen hundreds of millions of dollars from them. The trail of wreckage is long -- including Holy Cross Hospital's returning a $1 million gift from Rothstein's charitable foundation.

Rothstein, a once obscure employment lawyer, opened his law firm with partner Stuart Rosenfeldt in 2002.

Over the span of six years, Rothstein's net worth soared from about $160,000 to tens of millions of dollars -- including opulent homes, a fleet of foreign sports cars, dazzling watches, a stake in the former Versace mansion in South Beach and a restaurant group called Bova, court records show.

With the wealth and philanthropy came well-oiled connections in all the right places. Rothstein was able to use his charisma and contacts in the Broward County society scene and business community to lure wealthy friends and patrons to invest with him.

Among them: George G. Levin, a wealthy Fort Lauderdale investor with Wall Street connections who thought Rothstein's confidential legal-settlement deals were a sure thing. Levin invested as much as $125 million of his own money -- and hundreds of millions more from other investors -- through his group of Banyon hedge funds.

As the fund's managing partner, Levin personally guaranteed initial investors an 18 percent return up-front to woo them -- and told them they could expect to make 30 percent or more on the legal-settlement payouts. In his pitch, Levin called it an ``ultra low-risk, high-yield'' investment strategy.

Levin became Rothstein's rocket-booster, taking his little-known investment business to dizzying heights -- though no one has accused Levin of conspiring with Rothstein to dupe investors.

Here's how authorities say Rothstein's scheme worked: Investors would make an up-front payment at a discount to a plaintiff in a lawsuit who was expecting a series of settlement payments from the defendant over months or years.

The investors would later receive the full settlement amount at a hefty profit.

But it was all a scam. Federal prosecutors said there were no plaintiffs, no defendants, no lawsuits.

In a 2008 prospectus for investors -- who were required to put up a minimum of $1 million each -- Levin said Rothstein was offering a slice of a ``largely untapped market'' in settlements in multimillion-dollar employment and sexual harassment lawsuits. Their value, Levin said, was in their secrecy, suggesting a defendant would pay a premium for a plaintiff's silence.

``Confidentiality standards must be ultra-high,'' Levin told investors in March 2008.

By that time, Levin and his partners had invested about $100 million in purported settlements with Rothstein. A year later, Levin said his fund had funneled $656 million to Rothstein, ostensibly to buy settlements worth $1.1 billion, records show.

The scale of the scheme continued to build. Over the summer, Levin's pitch lured another $100 million from other investors.

In October alone, $235 million washed through Rothstein's accounts at Toronto Dominion from various investors, according to Fort Lauderdale attorney William Scherer. Scherer sued Rothstein, TD Bank, Levin and others on behalf of various investment groups seeking to recover more than $100 million.

When Rothstein's scheme collapsed in late October, investors scrambled to reach the lawyer for answers, but he had left for Morocco. Frantic investors reached out to his law firm, seeking the whereabouts of overdue payments.

Many people, including Rothstein's law partners, speculated that he would not return to Fort Lauderdale. Rothstein had e-mailed a few, sayinghe was considering suicide.

But he did return -- Rothstein-style -- in a privately chartered Gulfstream jet.

Scott Rothstein Officially Disbarred

By Amy Sherman and Jay Weaver
Miami Herald
November 27, 2009

Fort Lauderdale attorney Scott Rothstein, who is under federal investigation in a $1 billion Ponzi scheme, just lost his law license.

The Florida Supreme Court disbarred Rothstein on Wednesday. The high court provided no details in its one-page order.

Rothstein, 47, had voluntarily submitted paperwork to the Florida Bar to surrender his law license earlier this month after news broke of his alleged fleecing of investors in his legal-settlement deals.

The Florida Bar, which was investigating his alleged theft of client trust accounts, accepted Rothstein's offer last week, but his disbarment only became official with the state Supreme Court's action.

Rothstein could not be reached for comment. His lawyer, Marc Nurik, has said Rothstein consented to disbarment ``because he thinks it's the right thing to do.''

The Florida Bar also has removed Rothstein from a grievance committee that considers ethics and other complaints against lawyers.

Earlier this week, Gov. Charlie Crist suspended Rothstein from the Fourth District Court of Appeal Judicial Nominating Commission. Crist appointed Rothstein on Aug. 25, 2008, and four days later the lawyer gave $140,000 to the Republican Party of Florida.

Meanwhile, the Florida Bar has opened investigations into four attorneys at Rothstein's now-defunct Fort Lauderdale law firm.

The attorneys are Stuart Rosenfeldt, cofounder and co-owner of the Rothstein Rosenfeldt Adler law firm in Fort Lauderdale; Russell Adler; David Boden and Grant Smith, said bar spokesman Francine Walker.

The bar opened files on the attorneys around the same time it announced earlier this month that Rothstein had voluntarily surrendered his law license.

The investigation into Boden -- who is not licensed as an attorney in Florida -- is focused on whether he practiced law at the firm or worked as an administrator. He is licensed in New York.

Boden's New York bar renewal was due by Nov. 2, but he had not done so as of Nov. 24, according to the New York State Office of Court Administration.

The Florida Bar does not confirm the nature of its investigations, which could take several months. Lawyers are eligible to practice law while the investigations are under way.

The four attorneys could not be reached or declined to comment.

``An investigation is exactly that,'' said Bruce Lehr, attorney for Rosenfeldt. ``If there are findings, we will have something to talk about then.''

Smith has fully cooperated with the bar, including participating in a 90-minute interview Monday, said his attorney, Neal Sonnett.

``The bar has an obligation to look into any allegations of trust account errors or misuse,'' said Sonnett, who said he told the U.S. attorney's office that Smith is willing to meet with them. ``Grant has done absolutely nothing wrong.''

Smith, who was promoted in October to assistant managing shareholder, had signatory authority on some law firm accounts. He is the only remaining lawyer at the firm and is assisting the trustee, Herbert Stettin, who is untangling the finances and winding down affairs at the law firm.

Rothstein returned from Morocco in early November to face the federal investigation after his alleged Ponzi scheme unraveled and his politically-connected Fort Lauderdale law firm collapsed.

The 70-attorney law firm is now in bankruptcy court, and lawyers have fled for other jobs.

Fort Lauderdale Investment Firm
Faces Scrutiny in Scott Rothstein Probe

By Jay Weaver and Scott Hiaasen
Miami Herald
November 25, 2009

George Levin, a wealthy Fort Lauderdale investor with Wall Street connections, thought Scott Rothstein's confidential legal-settlement deals were a sure thing.

So much so that Levin invested as much as $125 million of his own money, and hundreds of millions more from other investors through his group of Banyon hedge funds.

As the fund's managing partner, Levin personally guaranteed initial investors an 18 percent return upfront to woo them -- and he told them they could expect to make 30 percent or more on the legal-settlement payouts. In his pitch, Levin called it an ``ultra low risk, high yield'' investment strategy.

Levin would become Rothstein's rocket-booster, taking his little-known investment business to dizzying heights -- though no one has accused him of conspiring with the Fort Lauderdale lawyer to dupe investors.

Here's how Rothstein's scheme worked: Investors would make an upfront payment at a discount to a plaintiff in a lawsuit who was expecting a series of ``structured'' settlement payments from the defendant over months or years. The investors would later receive the full settlement amount at a hefty profit.

But it was all a scam. Federal prosecutors said there were no plaintiffs, no defendants, no lawsuits.

Now Rothstein, 47, is under federal criminal investigation for running an alleged Ponzi scheme that could exceed $1 billion, and Levin and his Banyon Investment Fund will likely face scrutiny from the U.S. Securities and Exchange Commission, according to sources. The SEC is expected to examine whether Levin and Banyon sold unregistered securities or misled investors.

Levin has remained behind the scenes since the Rothstein scandal broke in late October. But a spokesman for his group of Banyon funds has sought to portray him as a ``victim'' who was just as shocked as every other investor who trusted Rothstein.

``Scott Rothstein was a gifted liar who befriended many well-known people in Florida, including Gov. Charlie Crist and Dan Marino,'' said Banyon's spokesman, Jesse Derris. ``He used these people as stage props for his investment scheme. The idea that George provided the sole business credibility to Rothstein is a fallacy.''

But in an April 2009 prospectus for potential investors, Levin took credit for helping ``ramp up'' Rothstein's once small investment business to a $75 million-a-month juggernaut in just two years.

Levin's Banyon funds not only fed Rothstein's voracious appetite for capital but enabled the once-obscure lawyer to live like a tycoon, with more than a dozen homes, 21 cars and an 87-foot yacht. Levin, who was often seen at Rothstein's political and charitable fundraisers, lent the lawyer a respectability among investors that he would have never been able to attain on his own.

By the same token, Levin's financial strategy depended on Rothstein. He warned investors that the fund needed a steady flow of plaintiffs supplied by Rothstein -- plaintiffs that turned out to be illusions.

Now Levin is facing financial peril: In addition to his personal guarantees to other investors, his fund borrowed as much as $200 million at one point to finance investments, records show. And Levin apparently kept rolling his own profits back into the investment, never taking out what he had put in before the whole thing collapsed last month.

Last week, Levin's confidant -- Banyon's Chief Operating Officer Frank J. Prevé -- was named as a defendant in a $100 million lawsuit filed by bilked investors accusing Prevé of conspiring with Rothstein.

The 147-page civil complaint describes Prevé as one of seven Rothstein co-conspirators -- along with Toronto Dominion Bank, where Banyon and other investors' money was deposited in trust accounts.

The suit accuses Prevé of falsely claiming that Banyon had invested more than $8 million to induce another group, Razorback Funding LLC, into committing $32 million to a settlement deal.

Prevé sent a Razorback fund manager a copy of an Oct. 1 e-mail from Rothstein purporting to confirm Banyon's transfer of $8 million into a TD bank account.

But Prevé never put the $8 million in the bank, said William Scherer, the lawyer who filed the suit against Rothstein and TD Bank. ``He lied to us,'' he said. ``He cheated us.''

Four weeks after that transaction, the scheme fell apart, Rothstein jetted off to Morocco, and his law firm faced bankruptcy.

Banyon's spokesman, Derris, said Scherer's allegations against Prevé and the hedge fund are ``totally false,'' without elaborating. Prevé could not be reached for comment.

In a letter to Banyon lenders and investors this week, Levin attacked the suit's naming Prevé as a Rothstein co-conspirator.

``The allegation that Mr. Prevé had an office at the Rothstein law firm, or that he may have helped the Rothstein firm to mislead potential investors is a total lie. Period.''

Scherer said he is preparing to add Levin and the Banyon Investment Fund as defendants to his lawsuit.

In Levin, Rothstein found a partner with both wealth and a history of success.

Levin, 69, made his first fortune in the retail industry in Philadelphia in the 1960s, making enough to retire to Florida at age 32.

Levin then expanded his reach into a variety of businesses: real-estate investments around Florida, hotels in Atlantic City and Palm Beach, a timber farm in North Carolina, a yacht builder in Japan. In the mid-1990s, he helped salvage a Massachusetts computer company from bankruptcy and sold it to the software giant Oracle.

There have been missteps. In 1999, federal prosecutors charged one Levin company, Classic Motor Carriages, with fraud for misleading potential buyers of ``kit cars.'' Though neither Levin nor any employees were personally charged with wrongdoing, the company pleaded guilty to wire fraud and agreed to pay $2.5 million in restitution.

In a discloser to investors, Levin said he was unaware of the fraud at the time, and he set up a separate company to repay customer claims.

But that was nothing compared to his calamitous partnership with Rothstein, which took root in late 2006.

In a prospectus for investors -- who were required to put up a minimum of $1 million -- Levin said Rothstein was offering a slice of a ``largely untapped market'' in settlements in multimillion-dollar employment and sexual harassment lawsuits. Their value, Levin said, was in their secrecy, suggesting a defendant would pay a premium for a plaintiff's silence.

It was the element of secrecy that kept the scheme alive. Levin told investors that, if details of a lawsuit leaked, a defendant could then sue the plaintiff for even more money than the settlement's worth -- wiping away investors' profits. So, to maintain secrecy, the investors could never know the names of the plaintiffs or defendants in the lawsuit settlements they thought they were financing.

``Confidentiality standards must be ultra high,'' Levin told investors in March 2008.

By that time, Levin and his partners had invested about $100 million in purported settlements with Rothstein. A year later, Levin said his fund had funneled some $656 million to Rothstein, ostensibly to buy settlements worth $1.1 billion, records show.

The scale of the scheme continued to build. Over the summer, Levin's pitch lured another $100 million from other investors. In October alone, $235 million washed through Rothstein's accounts at TD Bank from various investors, Scherer believes.

But then investors started demanding their money, and the scheme quickly unraveled.

``If Levin had pulled his money out earlier, it would have collapsed a long time ago,'' Scherer said.

Feds: Ponzi Paid Salaries at Law Firm

With Scott Rothstein's Law Firm Running in the Red, the Fort Lauderdale Attorney Covered the Difference by Diverting Money from His Bogus Investment Scheme, Authorities Said.

By Jay Weaver and Scott Hiaasen
Miami Herald
November 24, 2009

Attorney Scott Rothstein tapped into millions of dollars from his massive investment scam to cover payroll costs at his expanding Fort Lauderdale law firm, federal authorities said in court records released Monday.

Rothstein's law firm generated revenue of $8 million in one recent year, yet his 70-lawyer firm had a payroll of $18 million, prosecutors said. Rothstein, who owned half of Rothstein Rosenfeldt Adler, used investors' money from his Ponzi scheme to make up the shortfall, they said.

The allegations were revealed in an amended forfeiture complaint against dozens of Rothstein's real estate properties, foreign cars, restaurants and other assets -- including $12 million in the lawyer's bank account in Morocco, along with millions more donated to political campaigns and charitable funds.

``Funds used to acquire the [Rothstein] assets came from the `Ponzi' scheme and not from legitimate RRA funds,'' Assistant U.S. Attorney Alison W. Lehr wrote in the amended forfeiture action.

Rothstein, 47, fled to Morocco in late October with the collapse of his investment fund, which was built on bogus legal settlements sold to wealthy investors. After his return to South Florida in early November, FBI and IRS agents began seizing his assets and raiding his law firm. He has not been charged with a crime.

The civil forfeiture is based on money-laundering allegations that Rothstein amassed his fortune by defrauding investors, prosecutors said. Investors bought shares in his fabricated confidential settlements from employment-discrimination and other civil cases during the past four years -- investments that promised returns of up to 40 percent.

The FBI said the total investment sales could top $1 billion.

Rothstein's partner, Stuart Rosenfeldt, who owned the other half of the now-defunct law firm, has said he was unaware of Rothstein's Ponzi scheme and the firm's finances, saying his partner was fully responsible. Rosenfeldt could not be reached for comment Monday.

Rothstein's attorney, Marc Nurik, declined to comment.

According to the forfeiture action, the U.S. government now wants to seize 15 parcels of South Florida real estate -- adding seven to the original list. Also seized were 20 cars -- including three Ferraris, three Corvettes, two Rolls-Royces, a limousine and a $1.5 million Bugatti sports car -- plus an 87-foot yacht, four personal watercraft, 304 pieces of jewelry, a guitar collection, $80,000 in American Express gift cards and $272,000 in cash.

The government is also seeking the equity Rothstein has in about 21 different companies in which he invested, including restaurants, a mortgage company, a sports agency, two banks and a biofuel company.

Rothstein also had an overseas account with Bank Populaire in Morocco, where he had $12 million. Federal authorities are trying to seize an additional $2 million held in the same bank under the name Ahnick Khalid and a $1 million account held by Steve Caputi, owner of the Cafe Iguana nightclub in Pembroke Pines.

Another $1.3 million is held in four accounts at Gibraltar Bank. And Rothstein had a separate investment account holding $1.2 million.

Finally, the government is seeking more than $160,000 in political contributions and charitable donations of $800,000 to the Joe DiMaggio Children's Hospital in Hollywood and $1 million to Holy Cross Hospital in Fort Lauderdale.

Holy Cross officials announced last week that the hospital would return the $1 million gift, which was to have been used for a new women's center with the name of Rothstein's charitable foundation engraved over the entrance to the lobby.

Juice Scam' Victim: I Was Lured into Scott Rothstein Deal

By Amy Sherman and Jay Weaver
Miami Herald
November 20, 2009

Call this Scott Rothstein's pineapple-juice scam.

Coconut Grove businessman Todd Snyder was lured into it just days before the Fort Lauderdale lawyer's Ponzi scheme imploded in late October. Snyder wired a bank more than $2 million to buy a slice of Rothstein's purported $500 million settlement with Dole Food Co.

But Snyder soon learned there would be no fabulous returns. Rothstein had fled to Morocco, leaving him and hundreds of other South Florida investment victims with empty bank accounts.

``I never met Rothstein, I never spoke with him,'' Snyder, 40, told The Miami Herald. ``I didn't even know who he was.''

Rothstein, 47, says he never heard of Snyder, either.

``I keep seeing names on the Internet who were alleged investors of me and I have no idea who they are,'' Rothstein told The Herald on Thursday. ``There are sublayers of people doing very, very bad things to people in my name, so we shall see.''

``Not that I didn't do something wrong, and I'm back here to fix it,'' he said. ``I made a decision to come back from Morocco and do the right thing. I know people are laughing and saying he can't repay these people, and they are wrong.''

Snyder, who on Thursday sued Rothstein, his law firm and Toronto Dominion Bank in federal court, said he hooked up with Rothstein through friend Doug Faulkner, a stock broker whom Snyder had met about a year ago.

Snyder is the owner of Tech-Optics, a Miami company that recycles and sells toner cartridges and does an annual business of more than $30 million, he said.

Snyder said that several months ago, he had invested about $850,000 in stocks with Faulkner, now a broker at Jesup and Lamont. He made about $15,000 in profits, so he trusted Faulkner.

Then, about a month ago, Faulkner brought him a new deal. He explained it at a U2 concert the men attended with their wives.

``He made the pitch there,'' Snyder recounted. ``He said this is a great investment, you've got to invest.''

The deal offered a return of eight percent per month for the following four months. It involved a purported lawsuit against California-based Dole, which Faulkner said had settled for $500 million in the face of accusations that it had overstated the percentage of pineapple in juices it sold to school districts.

A Dole Food spokesman told The Herald that the purported lawsuit settlement was ``a total fabrication.''

Rothstein is under federal investigation for an investment scheme that could reach $1 billion. He has not been charged, but is suspected of fabricating legal settlements and selling them to investors at a discount in return for receiving the full payoffs a few months later.

In Snyder's case, Faulkner told him that Rothstein was a ``high-powered attorney'' and that previous investors had been paid their profits, Snyder recounted.

Snyder said he asked Faulkner lots of questions, and he had answers for all.

``I said, `Why isn't everybody doing this?' He said, `[Rothstein] doesn't allow everyone into this deal.' ''

He also asked: If Rothstein was such a successful lawyer, why would he need other investors instead of just financing the deal himself?

The answer from Faulkner: It would be unethical for Rothstein since he was the lawyer handling the settlement.

``I asked him 10 times, `Is this a Ponzi scheme? Is this a Ponzi scheme?' And he said no,'' Snyder said. ``I talked to my Merrill Lynch broker, and the broker said this is not a legitimate deal. I did it anyway because I trusted [Faulkner].''

Faulkner told Snyder that he had 10 settlement shares to sell -- each for $1.08 million. Faulkner said he would get a commission, though he didn't say how much, and that he himself would invest in one, Snyder recalled.

After thinking about it for a couple of weeks, Snyder decided to buy two. Around Oct. 23, at the direction of the Rothstein Rosenfeldt Adler law firm, Snyder wired $2.16 million into a Toronto Dominion Bank account, according to his suit.

Meanwhile, a law firm employee, Andrew Barnett, wrote a letter on RRA stationery stating: ``This is to confirm that Todd Snyder is a client of the firm and that the funds are being used for a transaction involving Mr. Snyder.'' The letter was filed with the lawsuit.

No agreement was reached between Synder and the law firm regarding how to use the funds. But Faulkner told Snyder he would get a promissory note from Rothstein on Oct. 30 guaranteeing he would get his money back.

By then, Rothstein had flown to Morocco. Snyder never got such a note.

Snyder said he learned the bad news about Rothstein on the morning of Nov. 2, when a friend e-mailed him a news article about the lawyer's Ponzi scheme.

``I looked at it and said, `You've got to be kidding me,' '' Snyder said.

Snyder says his friendship with Faulkner -- and the fact that Faulkner told him that he and his father also were investing in the Dole deal -- convinced him to participate.

``Looking back at it, I can't believe I invested,'' Snyder said.

Snyder said he has since asked Faulkner to show him proof that he, too, invested. But he hasn't shown him any.

Faulkner told The Herald he needed to consult his lawyer before making any comment. ``It's like a nightmare I want to wake up from,'' he said.

Suit Alleges Massive Fraud by
 Scott Rothstein, Td Bank and Others

By Amy Sherman and Jay Weaver
Miami Herald
November 20, 2009

A group of investors who claim they lost more than $100 million in Scott Rothstein's massive investment scam on Friday sued the Fort Lauderdale lawyer, a handful of his law firm's employees and Toronto Dominion Bank in a lawsuit that reads like a racketeering indictment.

The suit alleges that Rothstein conspired with an inner circle at his Las Olas Boulevard firm and with TD Bank employees to dupe investors into believing their investments were lucrative and their trust accounts safe.

The suit accuses Rothstein, 47, and others of fabricating confidential legal settlements to sell to investors, whose money was used to pay off other investors in a ``classic Ponzi scheme.'' But the 147-page complaint, filed by Fort Lauderdale attorney William Scherer, says that Rothstein and those close to him ``did not act alone.''

It claims that Toronto Dominion Bank and a trio of officers, including Fort Lauderdale branch vice president Frank Spinosa, served as a ``critical linchpin legitimizing'' the Rothstein-led ``plot'' to fleece investors.

``Investors were duped by TD Bank employees conspiring with the principal conspirators to manipulate TD Bank's trust account statements and conniving investors with the false sense of security predicated on written assurances that settlement funds existed and would only be released directly to them,'' the suit says.

The bank and Spinosa, who is on leave from his job, denied wrongdoing.

``Through the legal process, the facts will prove that the bank did not conspire with Mr. Rothstein and/or his firm,'' said Toronto Dominion spokeswoman Rebecca Acevedo. ``TD Bank will defend against all such unfounded claims.''

But Scherer said the bank disregarded numerous ``red flags'' -- including Rothstein's moving hundreds of millions of dollars through his law firm's trust accounts at the TD branch in Fort Lauderdale.

Scherer, talking with reporters at a mid-day news conference in front of the Broward County Courthouse, said that Rothstein moved $235 million in and out of the TD branch in October alone.

He also said Rothstein took $16 million to Morocco in late October, when he appeared to be fleeing the country. Rothstein returned in early November to face federal investigators, though he has not been charged by the U.S. attorney's office.

When asked about Rothstein's comments to the media that he plans to make victims whole, Scherer said: ``I think he is trying to work off a life sentence. I think it's a big show.''

But Scherer said he believes Rothstein hid much of the money that he moved out of the TD Bank last month.

``I think we will be able to find it,'' Scherer said. ``He was a prolific spender, but I don't think he spent $230 million in October. I think he hid it.''

Hospital Returns $1m Scott Rothstein Donation

By Amy Sherman and Jay Weaver
Miami Herald
November 19, 2009

Holy Cross Hospital is returning a $1 million donation from attorney Scott Rothstein, who has agreed to surrender his law license in the midst of a federal investigation into a massive Ponzi scheme that authorities suspect him of engineering.

Rothstein's donation was earmarked for an expanded women's center at the Fort Lauderdale hospital, which was going to put his charitable foundation's name on the lobby entrance.

But the scandal over his investment scam, which unraveled in late October as investors alleged Rothstein had stolen hundreds of millions of dollars, compelled the hospital to return his donation, officials said Wednesday.

``In light of the recent allegations involving Scott Rothstein, Holy Cross Hospital has concluded that it should not retain the funds recently gifted to it by the Rothstein Family Foundation,'' the hospital said in a statement.

The donation will be placed in a trust account until hospital officials determine how it should be disbursed. Rothstein's Fort Lauderdale law firm, Rothstein Rosenfeldt Adler, is facing bankruptcy and creditors are lining up to recover their investment losses.

Meanwhile, Rothstein, who has not been charged with a crime, has submitted paperwork to the Florida Bar to surrender his law license.

The Florida Bar, which was investigating his alleged theft of client trust accounts, accepted Rothstein's offer Tuesday, but the action won't be official until the Florida Supreme Court acts on it, bar spokeswoman Francine Walker said.

Rothstein could not be reached for comment. His lawyer, Marc Nurik, said Rothstein consented to disbarment ``because he thinks it's the right thing to do.''

That ends the bar's investigation. The group also has removed Rothstein from a grievance committee.

Walker said even after Rothstein is disbarred, he can remain on the Judicial Nominating Commission -- a group that nominates state court judges -- because all its members do not have to be lawyers.

Gov. Charlie Crist appointed Rothstein to the commission last year. Sterling Ivey, a Crist spokesman, has said that Rothstein will remain on the commission until he resigns or is charged.

Rothstein failed to submit his financial disclosure statement as a commission member. The Florida Commission on Ethics fined him $1,500.

Law Firm Founder at Nexus of
 Huge Scandal Asks to Be Disbarred

By John Pacenti
Daily Business Review
New York Lawyer
November 19, 2009

MIAMI - Besieged Fort Lauderdale, Fla., attorney and political rainmaker Scott Rothstein is now picking his battles -- and trying to stay a lawyer is not one of them. The ousted chairman of Rothstein Rosenfeldt Adler has decided to surrender his law license, submitting a request of permanent disbarment on consent to the Florida Bar.

The bar confirmed Wednesday it accepted Rothstein's request, but it must be approved by the Florida Supreme Court. The upshot is that Rothstein would not have to defend himself against a Bar investigation for breaking any rules regulating Florida attorneys.

"While the case is very complex, it became evident that bar rules may have been violated," Bar president Jesse H. Diner said in a statement Wednesday.

The Bar is monitoring the federal investigation of Rothstein and has been in contact with the court-appointed receiver for the law firm, he said.

"This is a terribly unfortunate and tragic situation," Diner said. "The Florida Bar will continue to investigate any violations of its rules by other attorneys who may have been involved in this case."

Rothstein's attorney, former RRA colleague Marc Nurik, said his client did not want "to waste The Bar's time or the state's money. He felt it was appropriate to give up his law license, and this was the mechanism with which to do it," he said.

The move allows Rothstein to marshal his resources for civil litigation, bankruptcy proceedings and any criminal case. He has not been charged.

The FBI raided the firm's Fort Lauderdale office two weeks ago and said as much as $1 billion may have been invested in a fraudulent side business run by Rothstein. RRA has said millions of dollars is missing from its trust accounts under Rothstein's exclusive control.

Ken Marvin, The Bar's director of lawyer regulation in Tallahassee, said Rothstein would never be able to practice law again in Florida if the Supreme Court approves his request.

Marvin said the e-mailed request included some admissions by Rothstein, but it will not be made public until a hard copy is received by the Florida Supreme Court clerk's office.

"This happens when their hand gets caught in the cookie jar and there's video. It's kind of useless to fight and they want to avoid the costs and aggravation involved," Marvin said. "They figure, 'I'm going to lose my law license anyway. Why am I going to fight?'"

Nurik denied Rothstein's disbarment request contains any specific admissions.

"It's very vanilla," he said. "It doesn't go into specifics or details."

Craig Waters, spokesman for the Supreme Court, said Rothstein's request would have to go through an off-site security check before it reaches the court.

Sterling Ivey, Gov. Charlie Crist's spokesman, did not return a phone call for comment by deadline.

Rothstein donated heavily to the Republican Party and Crist's campaigns for governor and attorney general.

Nurik said Rothstein's wife, Kim, is standing by him.

For Firm Looted by Scam Artist Founder
 Bankruptcy May Be Only Option

By Jordana Mishory and Terry Sheridan
Daily Business Review
New York Lawyer
November 12, 2009

MIAMI - The law firm Scott Rothstein built likely will be dismantled in bankruptcy court, experts say.

Investors who claim they lost more than $1.1 million in a massive Ponzi scheme run by the disgraced attorney filed a petition seeking to force law firm Rothstein Rosenfeldt Adler into bankruptcy and requested a trustee be immediately appointed.

The petition filed late Tuesday said a trustee is necessary to protect the firm’s clients, preserve funds deposited in the firm’s trust and bank accounts, and to "vigorously investigate" the causes of a Ponzi scheme allegedly run out of the firm’s Las Olas office. Attorneys Jeffrey Sonn and John Genovese, who filed the petition, contend that the firm improperly diverted $1.4 million from its trust accounts — which typically are used to hold client funds in escrow — into the firm’s operating accounts.

"We think the bankruptcy laws are better suited to recovering monies that may have been wrongfully transferred to various people," said Sonn, of Sonn & Erez in Fort Lauderdale.

A number of bankruptcy attorneys interviewed by the DBR agree that bankruptcy court is the best venue to attempt to piece together the finances of a law firm that was rocked by controversy when partners, investors and now the federal government accused CEO and managing partner of operating a $500 million Ponzi scheme. A court-appointed receiver reported the firm has less than $300,000. Attorneys and staffers have been asked to work without pay.

"This matter should have proceeded in bankruptcy from the beginning," said Thomas Tew of Tew Cardenas in Miami. Tew is representing one of the firm’s banks, Gibraltar Private Bank & Trust. Rothstein held a 5 percent stake in the institution. The holding is among the assets seized this week from Rothstein by the IRS.

Tew suggested that a separate filing could be brought against Rothstein individually. Tew served as court-appointed inventory attorney in the case of disbarred Miami asbestos attorney Louis Robles, who was sentenced to 15 years for bilking his clients of more than $13 million.

Bankruptcy court also opens the door to recovering money from the alleged Ponzi scheme that may have already been spent by Rothstein or the firm.

Investors who may have received returns from the alleged Ponzi scheme could be forced to return any money they received from Rothstein through so-called clawbacks. Entities that Rothstein formed to purchase homes with any ill-gotten gains could also be brought into the case as creditors go after assets Rothstein owned or that were purchased for others with money from the alleged scheme.

The IRS has already seized homes and other property belonging to Rothstein — including a nearly $6.5 million home and his fancy cars, watches and yachts. They would likely be sold and proceeds added to the pot to compensate any creditors who can successfully claim they were victimized by Rothstein.

Although the Chapter 11 allows for reorganization, the question remains, how do you reorganize a firm that doesn’t have any assets?

"I’m not sure what they have to reorganize," said Broad and Cassel attorney Mark Raymond, who is representing some investors who claim they were fleeced by Rothstein.

But he agreed the case should be in bankruptcy court, saying that it puts all creditors on the same footing. "All victims get their pro rata share of the pie," Raymond said. "I thought this case needed to be in bankruptcy court since the beginning."

Tina Talarchyk of Squire Sanders & Dempsey in West Palm Beach and a former president of the Bankruptcy Bar Association of the Southern District of Florida, suggested that the firm’s assets could include substantial accounts receivable.

And a law firm’s main assets are its lawyers. RRA has been losing lawyers rapidly since the Rothstein scandal erupted last week.

Three attorneys were among the latest to leave, joining Kopelowitz Ostrow in Fort Lauderdale. Others are expected to break out into their own firms or join other companies. Miami attorney Kendall Coffey, a former U.S. attorney retained by the firm to represent its interests around the time Rothstein temporarily left the United States for Morocco, said he and firm attorneys are getting a lot of calls from firms with prospective offers. As lawyers leave, the firm’s future revenue exits with them.

Tew suggests another asset that creditors and victims could target is any malpractice insurance. But that could lead to another legal fight.

"Whether there is coverage or denial of coverage based on claims of fraud, we’ll have to wait and see," Tew said.

In the involuntary bankruptcy petition, investors Roger Wittenberns, Bonnie Barnett and Aran Development claim they are owed $1.1 million that was invested in structured settlements guaranteed by the law firm. Universal Legal, another debtor, filed a claim listing $7,800 for "staffing/recruitment services."

Documents obtained by the DBR indicate that Rothstein and the law firm typically guaranteed the investments made in Rothstein’s alleged Ponzi scheme. That could leave the law firm on the hook for more than $500 million.

Tew raised the possibility that a single trustee may not be sufficient to unravel the mess left behind by Rothstein.

"Will one trustee be sufficient or should someone push Scott into an involuntary Chapter 7 so he has a trustee who will claw back money spent on his toys?" Tew asked.

Marc Nurik, a onetime Rothstein Rosenfeldt Adler attorney who is representing Scott Rothstein, declined to comment on the involuntary bankruptcy petition against RRA except to say "it’s always sad to see things like that happen."

He dismissed the idea of Rothstein filing for personal bankruptcy as part of any effort to repay investors and scoffed at the notion of forcing his client into bankruptcy court.

"I don’t know what that’s going to accomplish given the fact that the government has all of his assets tied up. Why would anyone waste their time?" Nurik asked.

Sonn said he and his co-counsel are "exploring all remedies that could help the investors and that may include a [bankruptcy] petition against Scott."

The petition against the firm claims that RRA was the escrow agent for money used in a stock and real estate purchase on behalf of clients of Venezuelan attorneys who joined with the firm in early August. Nearly $1.4 million to close a pending transaction was transferred to the firm’s escrow account on Oct. 29 — two days after Rothstein left the country on a chartered flight to Morocco. But the firm had taken that money, transferred it into its operating account the following day and it was "immediately spent," according to the petition.

Genovese, who represents the Venezuelan investors, said his clients will soon join the case. But his other clients have already seized on their circumstances to make their case for the appointment of a bankruptcy trustee.

The petition notes that the firm had told Broward Circuit Judge Jeffrey Streitfeld that the funds Rothstein had allegedly taken were "unrelated to the direct practice of law" and requested president Stuart Rosenfeldt remain in control of the firm’s operations, ensuring its clients’ interests were protected.

Genovese said it was "urgent" to force the firm into bankruptcy.

"We have a failure to account for monies that arrived after [Rothstein’s] departure, with an acknowledgement the money was spent in the firm," Genovese said. "Do you think it’s urgent for us to do something? I do."

The move to bankruptcy court would halt the receivership and dissolution case the firm filed in state court against its former CEO and managing partner Rothstein nearly two weeks ago. There is a chance court-appointed receiver Herbert Stettin could be out of a job before he builds momentum toward any recovery.

Rosenfeldt Rothstein Adler has 20 days from the filing date to respond to the involuntary bankruptcy petition. The firm can either consent to the bankruptcy filing or contest it.

"To some extent, the principle impact if Judge Stettin agrees to a bankruptcy would be to shift the venue from state to federal court," Coffey said.

But Coffey said he hopes the former Miami-Dade judge remains at the helm. "The interests of everyone concerned would be best served if Judge Stettin remain the captain of the ship," said Coffey, a partner with Coffey Burlington in Miami.

Stettin did not return calls for comment by deadline. His attorney, Paul Singerman of Berger Singerman, did not provide comment by deadline. Rosenfeldt, who was appointed CEO of the firm after Rothstein was ousted, did not return a call for comment.

If the bankruptcy court allows the firm management to remain in control as the "debtor in possession," then Stettin could continue to call the shots. If not, he could be forced to turn over all documents he has amassed on the firm’s finances to a trustee. Singerman has asked U.S. Bankruptcy Judge Raymond Ray to postpone today’s hearing until early next week, Sonn said, adding that he did not oppose the request.

Genovese said the Chapter 11 petition, which is normally filed to enable a firm to reorganize, provides more leeway than a Chapter 7 liquidation would. He said he wants to enable the firm to continue to service its clients and pay its attorneys.

"Those of us involved are lawyers and we know there are clients that need to be represented now and that’s a priority," Genovese said. "You would hope that lawyers there are not so distracted that they can’t continue to service their clients. That would result in more claims against the firm

Alleged Florida Ponzi Scheme Could Top $1 Billion

By: Reuters
November 12, 2009

Federal agents investigating a prominent Florida lawyer suspected of running an elaborate Ponzi scheme said on Thursday the amount involved could exceed $1 billion, and they asked bilked investors to come forward.

At a news conference, investigators from the FBI and the U.S. Internal Revenue Service (IRS) made a public appeal for information from individuals who had invested in a so-called Structured Settlement Investment scheme offered by 47-year-old Fort Lauderdale attorney Scott Rothstein.

Criminal charges have not yet been filed against Rothstein, who lived a luxury lifestyle and helped bankroll local politicians, campaign records show.

But a court document filed this week carried allegations that Rothstein masterminded a scheme in which he sold bogus or nonexistent legal settlements to unsuspecting investors since at least 2005. It said new investor money was used to pay previous investors in the classic Ponzi scheme model.

Monday's filing by the U.S. Attorney for the Southern District of Florida was used to justify the seizure of properties, luxury vehicles and a yacht belonging to Rothstein.

Appealing for cheated investors to come forward with information, John Gillies, Special Agent in Charge of the FBI Miami Division, said the fraud investigation was going to be one of the largest ever seen in South Florida.

"I'll tell you, when it's all said and done, I estimate that this scheme could well exceed $1 billion," he said.

He added he did not think that Rothstein had acted alone: "I do not believe this was a one-man show."

He did not elaborate, and an FBI spokeswoman said the agency could not give details of an ongoing investigation.

"We will not be rushed; we will be thorough and we are far from over," Gillies added.

Rothstein, who returned from a trip to Morocco last week, has not been arrested and could not immediately be reached for comment. "He can run but he can't hide," Gillies said.

Rothstein's lawyer, Marc Nurik, was not immediately available for comment.

Rothstein told a local TV station on Monday he had made "a very serious mistake" and intended to make amends.

"If anyone's lost any money, I'm going to do every single thing in my power to make sure that every single penny is recovered," he said in the interview broadcast by WSVN, speaking with his attorney Nurik at his side.

Rothstein's Fort Lauderdale law firm Rothstein, Rosenfeldt, Adler, PA, in which he was the chief executive officer and managing partner, was placed in receivership last week.

Federal investigators said they were seeking to determine the full extent of the alleged fraud, which has shocked legal, business and political circles in the Southeast U.S. state.

But Florida is no stranger to fraud scandals. The state has been rocked by a number of high-profile Ponzi schemes this year, including fallout from the cases surrounding convicted Wall Street swindler Bernard Madoff and accused Texas financier Allen Stanford.

The settlement ventures allegedly offered to investors by Rothstein involved lucrative whistle-blower and employment discrimination cases. The investors would make up-front cash payments to individuals owed money by the courts to buy the right to collect the full amount of the settlements later.

Slideshow: A Rogue's Gallery of Financial Crime

Scott Rothstein Accused of Separate $57 Million Swindle

By Jay Weaver, Scott Hiaasen and Amy Sherman
The Miami Herald
Nov. 10, 2009

When auto magnate Ed Morse faced a legal tussle with a South Florida interior decorator, Morse turned to his lawyer Scott Rothstein -- and got taken for a ride.

What began as a dispute over a $2 million decorating bill for Morse's new Boca Raton and Maine homes transformed into a $57 million scam, in which Rothstein allegedly ripped off his wealthy clients with an elaborate series of lies, delays and forged court orders, sources familiar with the matter told The Miami Herald.

Ed and Carol Morse -- who were family friends with Rothstein -- sued Boca Raton decorator Jan Jones in 2006 claiming he botched their job. Rothstein told the Morses earlier this year that they had won the breach-of-contract case and that the decorator owed them $23 million, sources said.

It wasn't true. In fact, the Morses lost the case.

Rothstein also produced purported federal court orders signed by a judge, saying the Morses could claim the judgment by seizing a Cayman Islands bank account belonging to the decorator, sources said.

There were no such court orders, nor any fat bank account, court records show.

To confiscate the money, the Fort Lauderdale lawyer allegedly told the Morses they had to post a bond 2 ½ times larger than the judgment, or $57 million, the sources said. The large amount was required as a guarantee in case bank officials confiscated the judgment from the wrong account, Rothstein told them.

So the couple wired the $57 million to Rothstein in installments earlier this year, the sources said. It is not clear whether Rothstein paid any of that money back.

Rothstein's attorney, Marc Nurik, and the Morses' lawyer, Norman D. Tripp, declined to comment.

Rothstein, 47, is under federal investigation for allegedly running a Ponzi scheme that defrauded investors and his law clients of hundreds of millions of dollars. Some investors filed suit Tuesday seeking to force his law firm, Rothstein Rosenfeldt Adler, into involuntary bankruptcy.

IRS and FBI agents are investigating whether Rothstein, under pressure and scrambling to pay insistent investors in recent months, might have used the Morses' millions.

Ed Morse, 88, was also a small investor in Rothstein's separate business venture now under scrutiny by federal prosecutors.

The Morse family's auto empire was founded by Ed and his father in 1946. Today the Ed Morse Automotive Group is run by Morse's son, president and CEO Edward J. ``Ted'' Morse, Jr, 59. The company owns 14 dealerships in Florida and Alabama. It appears Rothstein has been close to the Morse family for several years.

In 2005, the Morse auto company loaned Rothstein $2.73 million, which the attorney used to buy a home in Fort Lauderdale, county records show.

Ted Morse and his wife Patti are on the board of Rothstein's charity, the Rothstein Family Foundation, which Rothstein founded last year.

Rothstein also listed Ted Morse as one of three references in 2007 when he applied to the governor's office for a seat on the Judicial Nominating Commission.

In their 2006 lawsuit in Palm Beach Circuit Court, Ed and Carol Morse accused decorator Jones of inferior work at the two homes they were building.

They contended that Jones provided ``substandard'' furniture and misspent deposits. They also accused Jones of fraud, saying he falsely claimed that he was licensed by the state as an interior designer; in fact, Jones is not licensed.

In response, Jones filed a counterclaim against the Morses, saying they refused to honor their contract by paying him a 30 percent markup on the furniture he bought for them. Jones said he never claimed to the Morses that he was a licensed interior designer.

Jones billed the Morses almost $2 million for his work on both homes, court records show. He could not be reached for comment.

The lawsuit has dragged on for more than three years. For the entire case, Rothstein and his firm have repeatedly blocked efforts by Jones' lawyers to take sworn depositions from the Morses, court records show.

Under orders from Rothstein, the couple didn't appear at mediation hearings, either.

``No one shows for anything,'' Rothstein wrote in a 2006 e-mail to Ed Morse's assistant after she received a subpoena to testify. ``We are not cooperating. Simply, they can pound sand.''

After Jones' lawyer complained to the judge about the delays, Rothstein told the judge that Carol Morse was ``hysterical'' and unable to testify. In June 2008, he said Morse and his wife wanted to settle the dispute in mediation.

Rothstein told Palm Beach Circuit Judge Donald Hafele that he had to attend any settlement meetings because of his special relationship with the Morses. But then Rothstein continued to stall: A back injury delayed one meeting. Rothstein's father's surgery postponed another.

``I am suffering horrific pain,'' he wrote in an e-mail to Jones' lawyer, to cancel one hearing.

In March, lawyers for Jones told the judge they had reached a settlement, with the Morses required to pay the designer. Jones was seeking $800,000.

But more delay followed.

Later, Hafele said he would hold a hearing to find the Morses in contempt of court if they didn't provide signed settlement documents by Oct. 27.

Rothstein left that day for Morocco. He returned last week to face the federal investigation, which has left his law firm in shambles and his investors crying foul.

No criminal charges have been filed, though federal agents have confiscated 44 boxes of records from his law office and on Monday seized his Fort Lauderdale mansion, expensive sports cars and yachts.

On Tuesday, attorneys John Genovese and Jeffrey Sonn filed an involuntary bankruptcy petition on behalf of four creditors who say they lost money through Rothstein's alleged investment scheme: Bonnie Barnett, who lost $500,000; Aran Development, $345,000; Universal Legal, $7,800; and Roger Wittenberns, $300,000, according to the petition.

Barnett was a friend of Rothstein's.

``She thought they were friends,'' Sonn said. ``A lot of investors thought they were friends. They trusted him.''

Stuart Rosenfeldt, now the CEO of Rothstein Rosenfeldt Adler, could not be reached for comment.

Scott Rothstein Accused of Separate $57 Million Swindle

By Jay Weaver, Scott Hiaasen and Amy Sherman
The Miami Herald
Nov. 10, 2009

When auto magnate Ed Morse faced a legal tussle with a South Florida interior decorator, Morse turned to his lawyer Scott Rothstein -- and got taken for a ride.

What began as a dispute over a $2 million decorating bill for Morse's new Boca Raton and Maine homes transformed into a $57 million scam, in which Rothstein allegedly ripped off his wealthy clients with an elaborate series of lies, delays and forged court orders, sources familiar with the matter told The Miami Herald.

Ed and Carol Morse -- who were family friends with Rothstein -- sued Boca Raton decorator Jan Jones in 2006 claiming he botched their job. Rothstein told the Morses earlier this year that they had won the breach-of-contract case and that the decorator owed them $23 million, sources said.

It wasn't true. In fact, the Morses lost the case.

Rothstein also produced purported federal court orders signed by a judge, saying the Morses could claim the judgment by seizing a Cayman Islands bank account belonging to the decorator, sources said.

There were no such court orders, nor any fat bank account, court records show.

To confiscate the money, the Fort Lauderdale lawyer allegedly told the Morses they had to post a bond 2 ½ times larger than the judgment, or $57 million, the sources said. The large amount was required as a guarantee in case bank officials confiscated the judgment from the wrong account, Rothstein told them.

So the couple wired the $57 million to Rothstein in installments earlier this year, the sources said. It is not clear whether Rothstein paid any of that money back.

Rothstein's attorney, Marc Nurik, and the Morses' lawyer, Norman D. Tripp, declined to comment.

Rothstein, 47, is under federal investigation for allegedly running a Ponzi scheme that defrauded investors and his law clients of hundreds of millions of dollars. Some investors filed suit Tuesday seeking to force his law firm, Rothstein Rosenfeldt Adler, into involuntary bankruptcy.

IRS and FBI agents are investigating whether Rothstein, under pressure and scrambling to pay insistent investors in recent months, might have used the Morses' millions.

Ed Morse, 88, was also a small investor in Rothstein's separate business venture now under scrutiny by federal prosecutors.

The Morse family's auto empire was founded by Ed and his father in 1946. Today the Ed Morse Automotive Group is run by Morse's son, president and CEO Edward J. ``Ted'' Morse, Jr, 59. The company owns 14 dealerships in Florida and Alabama. It appears Rothstein has been close to the Morse family for several years.

In 2005, the Morse auto company loaned Rothstein $2.73 million, which the attorney used to buy a home in Fort Lauderdale, county records show.

Ted Morse and his wife Patti are on the board of Rothstein's charity, the Rothstein Family Foundation, which Rothstein founded last year.

Rothstein also listed Ted Morse as one of three references in 2007 when he applied to the governor's office for a seat on the Judicial Nominating Commission.

In their 2006 lawsuit in Palm Beach Circuit Court, Ed and Carol Morse accused decorator Jones of inferior work at the two homes they were building.

They contended that Jones provided ``substandard'' furniture and misspent deposits. They also accused Jones of fraud, saying he falsely claimed that he was licensed by the state as an interior designer; in fact, Jones is not licensed.

In response, Jones filed a counterclaim against the Morses, saying they refused to honor their contract by paying him a 30 percent markup on the furniture he bought for them. Jones said he never claimed to the Morses that he was a licensed interior designer.

Jones billed the Morses almost $2 million for his work on both homes, court records show. He could not be reached for comment.

The lawsuit has dragged on for more than three years. For the entire case, Rothstein and his firm have repeatedly blocked efforts by Jones' lawyers to take sworn depositions from the Morses, court records show.

Under orders from Rothstein, the couple didn't appear at mediation hearings, either.

``No one shows for anything,'' Rothstein wrote in a 2006 e-mail to Ed Morse's assistant after she received a subpoena to testify. ``We are not cooperating. Simply, they can pound sand.''

After Jones' lawyer complained to the judge about the delays, Rothstein told the judge that Carol Morse was ``hysterical'' and unable to testify. In June 2008, he said Morse and his wife wanted to settle the dispute in mediation.

Rothstein told Palm Beach Circuit Judge Donald Hafele that he had to attend any settlement meetings because of his special relationship with the Morses. But then Rothstein continued to stall: A back injury delayed one meeting. Rothstein's father's surgery postponed another.

``I am suffering horrific pain,'' he wrote in an e-mail to Jones' lawyer, to cancel one hearing.

In March, lawyers for Jones told the judge they had reached a settlement, with the Morses required to pay the designer. Jones was seeking $800,000.

But more delay followed.

Later, Hafele said he would hold a hearing to find the Morses in contempt of court if they didn't provide signed settlement documents by Oct. 27.

Rothstein left that day for Morocco. He returned last week to face the federal investigation, which has left his law firm in shambles and his investors crying foul.

No criminal charges have been filed, though federal agents have confiscated 44 boxes of records from his law office and on Monday seized his Fort Lauderdale mansion, expensive sports cars and yachts.

On Tuesday, attorneys John Genovese and Jeffrey Sonn filed an involuntary bankruptcy petition on behalf of four creditors who say they lost money through Rothstein's alleged investment scheme: Bonnie Barnett, who lost $500,000; Aran Development, $345,000; Universal Legal, $7,800; and Roger Wittenberns, $300,000, according to the petition.

Barnett was a friend of Rothstein's.

``She thought they were friends,'' Sonn said. ``A lot of investors thought they were friends. They trusted him.''

Stuart Rosenfeldt, now the CEO of Rothstein Rosenfeldt Adler, could not be reached for comment.