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The Money Board

'Ponzi' lawyer gets 100 years in huge scam

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Posts: 27402

01/29/10 03:50:25

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'Ponzi' lawyer gets 100 years in huge scam

Januari 28, 2010 – www.upi.com

FORT LAUDERDALE - Former Florida attorney Scott Rothstein, facing up to 100 years in prison for a huge investment scam, may seek time off by helping nab cohorts, officials say.

Rothstein, 47, pleaded guilty Wednesday in Fort Lauderdale federal court to five counts of racketeering, fraud and money laundering in a so-called $1.2 billion "Ponzi" scheme. He is set to be sentenced May 6 for what officials say the largest such scam in South Florida history.

The disbarred lawyer hopes to trim down his sentence significantly, The Miami Herald said Thursday, if he plays a key role in the ongoing probe of others in his bankrupt Fort Lauderdale law firm who prosecutors say may have benefited from the scheme.

Rothstein, who returned voluntarily from Morocco after the scandal broke and detailed his part in the alleged scheme, named others involved, according to sources familiar with the investigation.

He also identified hundreds of homes, cars, jewelry, watches, businesses, bank accounts and other personal assets bought with the tainted proceeds. The value of items seized so far run as high as $100 million.

A Ponzi scheme pays investors premiums from their own investments, or those of subsequent investors, but earns no profit.

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The Money Board

Scott Rothstein

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01/29/10 03:50:43

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Scott Rothstein

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E-mails reveal desperate final days of Rothstein's Ponzi scheme

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02/01/10 06:50:36

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E-mails reveal desperate final days of Rothstein's Ponzi scheme

By Peter Franceschina - Sun-Sentinel Staff Writer - January 31, 2010 - www.palmbeachpost.com/

As Scott Rothstein was hiding in Morocco from anxious investors last October, he exchanged a series of desperate e-mails with a financial adviser as his $1.2 billion fraud scheme was blowing up.

The e-mail exchange with Michael Szafranski, a Miami-Dade financial adviser who also funneled investors to Rothstein, provides a glimpse into Rothstein's frantic, final Ponzi days as investors sought payments that were not forthcoming.

The e-mails, included as part of a court filing Thursday in a lawsuit against Rothstein and other defendants, begin on the day Rothstein fled Fort Lauderdale. They contain misspellings and abbreviations.

At 12:43 p.m. Tuesday, Oct. 27, Szafranski sent an e-mail to Rothstein with the subject line "George Levin" — a Fort Lauderdale businessman who invested $775 million with Rothstein through his Banyon funds, according to bankruptcy records.

"Just called me

First time ever

That means he annoyed," Szafranski wrote.

Then at 4:36 p.m. Szafranski sent Rothstein another e-mail that set Rothstein off: "Barrie is close to calling Spinoza."

The e-mail exchange apparently refers to Philadelphia money manager Barry Bekkedam and a former TD Bank executive, Frank Spinosa.

Bekkedam helped structure some of the investments with Rothstein, according to investment documents, and his clients reportedly lost $30 million when the Ponzi scheme collapsed. Spinosa handled Rothstein's investor trust accounts and was fired from the bank in the fall.

"If he calls spinoza I will crush him.....he can not call him," Rothstein shot back a few minutes later.

Szafranski had an office in the same downtown Fort Lauderdale high-rise that housed Rothstein's law firm. He replied within two minutes: "I'm walking up the man wants his 5mm! Tell him [w]hen he can have it."

That Tuesday night, Rothstein boarded a chartered Gulfstream jet for Morocco. He told some associates he was going to London to meet new investors.

Szafranski's attorney, Christopher Berga, said in a statement to the Sun Sentinel that "the e-mails, read from beginning to end, show the truth: that Szafranski was another victim of Rothstein's deception until the very end."

Two days after Rothstein left the country, there was a flurry of e-mails, beginning at 8:06 a.m. "Need that letter asap. Melly needs it to keep his partners at bay," Szafranski wrote, an apparent reference to Mel Lifshitz, a former New York securities lawyer.

"At bay??? I am in the s--- rescuing everyone......

I need chill

I did not cause this.

I will get letter when I can log on.

Been back in with funders since 3 am your time.

Love u

Me," Rothstein replied.

Lifshitz apparently was threatening legal action.

Szafranski responded, "I don't wanna pressure u but if melly does what his partners want him to do then there a[re] bigger prbs. Plz call him.

Also I am debating whether to make any disclosures to my little ppl bc they will freak if pmts are late so I am scrambling for a loan.

Love you. Can't wait to see you.

Mikeyyy"

Szafranski later sent, at Rothstein's request, a summary showing the hundreds of millions of dollars invested with Rothstein by various groups and how much they were paid back. Szafranski had pooled investors of his own and wrote to Rothstein that he was in trouble: "they will destroy me if I lose them $$, begging you."

The two men spent Thursday and Friday coming up with strategies to stave off investors, and trying to figure out how much money was owed. "Make it simple for these idiots," Rothstein instructed. "These idiots and I are not speaking same language."

Szafranski urged Rothstein to call "Ira," an apparent reference to Miami investment adviser Ira Sochet, who put in $147 million.

Rothstein said he was going to personally pay $2.5 million to one investment group, "so they have no loss…so barrie shuts up."

Szafranski had a different idea: "Hmmmm hold. Off. He will t[e]ll ira. I'd rather you pay me off part of it to get me through any rough patch. Besides barrie will not settle so no point."

"F--- him," Rothstein responded.

Early Friday morning, Szafranski asked Rothstein for a loan to make scheduled payments to his investors: "I don't want to have to give them the explanation and they will freak if payments are not sent. i will repay you or the oper acct when we resume but I need this..... i don't want my clients to go crazy over such a small dollar a[m]t."

Rothstein told him he would handle it, and Szafranski replied:

"Thank u soo much scott.

Where are you. I am so worried.

I want u back here. It is so hard for me knowing ur in a living hell.

Tell me u closed ur deal and ur coming back today."

At 6 p.m. Friday, Szafranski wrote the last of the e-mails contained in the court filing, "I have spoken to melly. He is planning on meeting with florida counsel on sunday and going into court on monday morning. He will be going after you, the firm. Everything. I was not able to dissuade him."

He went on to explain that if Rothstein could produce $37 million he could buy a "few weeks," and that Levin was considering buying out other investors: "banyon is open to taking everyone out."

"Please make this happen or we are all done."

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Rothstein's wife wants the Fort Lauderdale attorney's pre-Ponzi assets

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02/04/10 04:42:48

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Rothstein's wife wants the Fort Lauderdale attorney's pre-Ponzi assets

By Brittany Wallman - The Sun Sentinel – February 3, 2010 -www.palmbeachpost.com

Kim Rothstein, wife of Ponzi schemer Scott Rothstein, will seek half of whatever assets they owned before the illegal investment scam began, her lawyer Scott Saidel said. Though they wed well into the Rothstein Ponzi, Saidel said he "gifted' some assets to her that he'd acquired before that.

"She does have a claim to anything pre-Ponzi,' he said last week.

To answer some of your questions (and insults), Rothstein married Kimberly Ann Hill in October 1993, and the two divorced in December 2003. He married Kimberly Ann Wendell on Jan. 26, 2008. The feds say the Ponzi scheme got its start in 2005 or earlier.

Kim Rothstein came into the relationship in debt. She won't be in debt when the dust settles on this case, Saidel predicted. In fact, she'll likely have an amount that "to the common person' would not be "an insignificant amount,' he said.

"I imagine Kim will land on her feet,' he said. "She'll get a job and she'll work and she'll get her life back in order.'

Saidel said his client, whom he also has considered a friend for a few years, through their mutual pal Stacie Weissman, was allowed to keep her wedding ring but had to give up most of the rest of her jewelry to the feds. No matter, he said.

"Kim is looking forward to being plain old Kim again. She was always concerned that the trappings were owning her.'

Did she really use the services recently of an eyelash-extension business that comes to your door? Not that Saidel knows of, he said, responding to a report from Rothstein's neighborhood.

"I'm unaware of it,' he said of the mobile hair-extension service. "It sounds absurd to me.'

Who is paying Saidel? No one, right now. Ditto for Joe Alu, the bodyguard. Saidel wasn't sure if the public relations team that Kim Rothstein had in tow last week were being paid, either.

"She's got very, very limited resources,' he said. The feds are allowing her to remain in the Rothstein home and pay some bills and the mortgage, because she helped "maximize' the real estate Rothstein owns, collecting rents and putting the money in a trust account, Saidel said.

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Reputed mobster pleads not guilty in Scott Rothstein-related case

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03/25/10 23:54:39

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Reputed mobster pleads not guilty in Scott Rothstein-related case

BY JAY WEAVER - jweaver@MiamiHerald.com – March 25, 2010 - http://www.miamiherald.com/

A reputed Italian Mafioso stung by a notorious Ponzi schemer pleaded not guilty Thursday in Fort Lauderdale federal court to charges of obstruction of justice and money laundering.

Roberto Settineri, 41, the target of an FBI undercover operation starring now-convicted lawyer Scott Rothstein, will remain in custody, but he plans to challenge the prosecution's move to keep him behind bars until trial.

Settineri's detention hearing for Thursday was canceled and no date has been set. He was arrested March 10, and he is being held on a $250,000 bond at the Broward County Jail.

Miami attorney Jeffrey Weiner, who represents Settineri, declined to comment about his client's alleged connection to the Rothstein case.

FBI agents arrested Italian-born Settineri, a naturalized U.S. citizen who works as a Miami Beach wine wholesaler, in connection with Rothstein's $1.2 billion investment scam. Federal authorities also accuse him of being connected to the Mafia's Gambino and Colombo crime families in New York and South Florida.

At the same time, Italian National Police officers flew to Miami and revealed charges accusing Settineri of belonging to the Sicilian Mafia and participating in a slew of violent crimes.

Rothstein, who came to know Settineri through a Broward security company the Fort Lauderdale lawyer hired for protection, allegedly talked Settineri into shredding documents and laundering $79,000 in November from Rothstein's Ponzi scheme, according to an indictment. Rothstein wore a wire to record their conversations for federal agents.

Rothstein, 47, who pleaded guilty to racketeering and other charges in January, faces up to 100 years in prison at his sentencing in May. But he may end up spending less time behind bars; the feds plan to put him in prison under the witness protection program for helping ``sting'' Settineri.

Italian authorities charged Settineri along with 19 other people on charges that include extortion, drug trafficking and attempted murder.

In January, Miami Beach police also arrested Settineri, a father of three who lives in a Brickell Key condo, on an aggravated assault charge, a third-degree felony.

As he was eating al fresco at Soprano Cafe on Lincoln Road, Settineri opened his leather jacket to flash a handgun at a private security officer and threatened to kill him, a police report says.

According to the report, Settineri admitted having a ``heated argument'' with the security officer but denied ``threatening him with any type of gun.''

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Investment Adviser Agrees to Surrender $6 Million in Rothstein Case

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07/16/10 04:09:51

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Investment Adviser Agrees to Surrender $6 Million in Rothstein Case

Daily Business Review - July 16, 2010 - http://www.law.com

The bankruptcy trustee for the defunct Rothstein Rosenfeldt Adler law firm has reached settlements with an investment adviser for $6 million and with a former RRA attorney for $700,000.

The $6 million comes from an investment adviser who acknowledges being a conduit for money transfers but denies any knowledge of Scott Rothstein's $1.2 billion Ponzi scheme.

Michael Szafranski, his wife and his Surfside, Fla., investment firm, Onyx Options Consultants, agreed to surrender 86 percent of the couple's assets, including a 3,979-square-foot Bal Harbour, Fla., home purchased last September, weeks before Rothstein's $1.2 billion Ponzi scheme imploded, the agreement said. The settlement was filed with the court Wednesday.

Szafranski, who allegedly served as the independent verifier for Rothstein's phony lawsuit settlements, also agreed to a $32.5 million judgment, which equals an asset freeze ordered by U.S. Bankruptcy Judge Raymond Ray.

Szafranski owes the first payment of $4.7 million within two days of court approval and the balance in two years with the trustee holding the Bal Harbour house as collateral. The first chunk of money includes $2.5 million in a checking account.

The $700,000 agreement with attorney Steven Lippman and his wife Marcy represents "a substantial portion of their non-exempt assets," and the trustee already has the money in hand, according to the settlement notice filed Thursday.

Lippman helped his former boss arrange fraudulent transfers while collecting millions of dollars in bonuses, loans and personal expenses, trustee's attorney Charles Lichtman of Berger Singerman claimed in April. Lippman's attorney, Patrick Scott of GrayRobinson, argued Lippman did not breach any fiduciary duty and was just following Rothstein's instructions.

The agreements come less than a week after another settlement with a major player in the Fort Lauderdale, Fla., law firm's bankruptcy case. South Florida auto magnate Ed Morse and his family agreed to pay the trustee $30 million on the condition that they would still be allowed to file a bankruptcy claim for losses as investors in Rothstein's fraud and pursue civil claims against third parties.

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Hedge Fund Owner in Rothstein Case Agrees to Surrender Bulk of Assets

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07/24/10 03:47:11

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Hedge Fund Owner in Rothstein Case Agrees to Surrender Bulk of Assets

George Levin to give up 85 percent of properties, businesses

Julie Kay - Daily Business Review - July 26, 2010 - http://www.law.com

Fort Lauderdale, Fla., millionaire George Levin, whose Banyon Investors Fund was the primary feeder fund that funneled about $830 million into Scott Rothstein's Ponzi scheme, has agreed to surrender the bulk of his assets under a bankruptcy settlement.

John Genovese, representing the trustee for the defunct Rothstein Rosenfeldt Adler law firm, announced the settlement in court Friday. It still must be approved by U.S. Bankruptcy Judge Raymond Ray following a hearing to allow any other creditors to dissent.

In what appears to be the largest settlement to date in the case, the former hedge fund manager has agreed to give up most of his 29 properties and business interests.

Under terms of the settlement, Levin, 70, and his wife, Gayla Sue, will keep their primary home, a Fort Lauderdale waterfront home valued at $4.2 million, and $750,000 in jewelry and personal effects.

The value of the 29 assets was not disclosed, but Levin has stated in financial papers he is worth $100 million to $200 million. Since most of the holdings are real estate, Genovese said, "We have no idea what they are worth at this time."

The three-year litigation agreement calls for the law firm's bankruptcy estate to receive the first $5 million from asset sales and 85 percent of anything above that. The Levins would keep 15 percent. The settlement could include a $70 million Banyon insurance policy.

The assets were not detailed in court. But Genovese said they are properties and business interests throughout the state.

The bankruptcy trustee also reached settlements in the last month with South Florida auto magnate and Rothstein investor Ed Morse and his company for $30 million; Michael Szafranski, Rothstein's purported independent verifier of settlements being financed, for $6 million; and former RRA attorney Steven Lippman and his wife, Marcy, for $700,000.

In the 1990s, Levin owned GGL Industries, which did business as Classic Motor Carriages and sold kit cars. Beginning in 2006, Levin established a group of investment companies under the name Banyon. He and his wife also are active in charity and social events, including the recent American Heart Association's Broward County Heart Ball in Hollywood, Fla.

Banyon was the largest Rothstein feeder fund in his $1.2 billion Ponzi offering stakes in settlement financing. Banyon and Levin claimed they were victims of the scheme and the largest creditor.

As the subject of multiple lawsuits, Levin agreed to settle rather than "die the death of a thousand cuts," said Genovese of Genovese Joblove & Battista in Miami.

He said he would file a settlement agreement in bankruptcy court today describing the settlement in more detail, and he expects some creditors to object.

The settlement calls for Ray to enter an order barring any other lawsuits against the Levins.

??Jim Silver, a Fort Lauderdale attorney with Conrad & Scherer, which represents the largest group of creditors, said in court Friday he had no comment on the proposed settlement. Banyon is a defendant in a civil case being pursued by Silver's firm in Broward Circuit Court.

"Before the Levins ever met Scott Rothstein, they were very affluent people," said their attorney, Kenneth Robinson of Rice Pugatch Robinson & Schiller in Fort Lauderdale. "They will be giving up all their assets. We believe this is in the best interests of the creditors."

Also in court Friday, an attorney for former RRA partner Russell Adler expressed concern about dealing with dual claims to his share of a half-a-million-dollar New York co-op in both Rothstein's criminal forfeiture and the bankruptcy case. Bankruptcy lawyers also are seeking $655,000 in law firm loans to Adler and $580,000 in alleged overpayments.

Adler is not opposed to settling the case with the bankruptcy trustee but first wants assurances that the government won't make him pay a second time, said his attorney, Jason Slatkin of Slatkin & Reynolds in Fort Lauderdale.

"I don't think my client should have to defend himself twice," he said.

He got no relief from Ray.

"You know, you may have to pay twice," the judge said. "This is a very unusual case."

It also was disclosed that Adler's list of 15 to 20 witnesses if the case goes to trial includes Florida Gov. Charlie Crist and California Gov. Arnold Schwarzenegger. Prosecutors charge Rothstein's role as a high-profile political fundraiser helped attract investors to his fraud.

"It goes to good faith," Slatkin said later in an interview. "If these very prominent powerful people were unaware of the Ponzi and accepted political contributions, then it shows that Russell Adler could have been, too."

In the matter of cloud computing firm Qtask, a Web-based task manager used by RRA to keep track of clients and cases, Ray said he plans to appoint his own expert to determine whether the Burbank, Calif.-based company is in contempt of court for failing to turn over attorney passwords and other information.

RRA was a Qtask client, and Rothstein was an investor. Lawyers for bankruptcy trustee Herbert Stettin have been trying to get RRA attorney passwords to explore their offsite records to determine if any attorneys knew of the fraud.

Qtask has argued the information would violate privacy rules and violate attorney-client privilege. Ray held Qtask in contempt June 9 and set a fine of $5,000 a day.

Chuck Lichtman of Berger Singerman in Fort Lauderdale, another attorney for Stettin, said Qtask turned over a batch of documents the night before Friday's hearing.

"There's nothing like a contempt order to get someone's attention," Lichtman said. He said he was looking for information on 40 to 50 former RRA attorneys and would need about two weeks to digest the information.

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Fund manager who fed Rothstein fraud to sell assets in settlement

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07/28/10 02:40:07

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Fund manager who fed Rothstein fraud to sell assets in settlement

By Peter Franceschina - Sun Sentinel - July 27, 2010 - http://www.palmbeachpost.com

The Fort Lauderdale hedge fund manager who was the largest feeder to Ponzi schemer Scott Rothstein has agreed to give up much of his wealth as part of a settlement with bankruptcy attorneys.

The settlement agreement by George Levin and his Banyon investment entities — which funneled $830 million into Rothstein's $1.4 billion investment fraud — was filed late Monday in U.S. Bankruptcy Court.

It does not spell out which assets Levin has agreed to sell and turn over to the trustee for Rothstein's now-bankrupt law firm, but Levin and his wife get to keep their $4.2 million Fort Lauderdale home and roughly $750,000 in personal possessions, according to the agreement.

After an initial payment of $5 million to the bankruptcy estate, the Levins will get to keep 15 percent of the assets sold and the estate will receive the remaining 85 percent, the agreement says. The settlement does not spell out the couple's net worth, but in financial offering memos Levin told potential investors he was personally worth more than $100 million and had extensive real estate holdings.

Levin denied in the settlement that he or his companies had any knowledge that Rothstein was running a fraud.

Also on Monday, the largest group of investors that is suing Rothstein and his alleged co-conspirators filed a third-amended complaint, adding new investors who were allegedly defrauded and new claims of wrongdoing by a number of defendants.

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Rothstein’s victims: 218 people, $188.36M

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08/04/10 04:48:55

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Rothstein’s victims: 218 people, $188.36M

August 2, 2010 - http://www.bizjournals.com

Federal prosecutors have recommended that 218 victims of Scott Rothstein’s Ponzi scheme get $188.36 million back in restitution.
The U.S. Attorney's Office in Miami filed a report and request for restitution late Friday.

The report outlines the following details of the government’s findings:
* 371 responses as a result of the questionnaires, personal interviews and/or response to subpoenas.
* 218 verified victims who should be given back $188.36 million.
* 97 claims from persons seeking restitution in which the government maintains that the individuals are not entitled to the amount of restitution submitted in the claim.
* 116 other potential victims for whom there was no verifiable address, and several attempts to locate those individuals were not successful.
* 12 victims listed as disputed claims whose documentation the government is still reviewing.

Federal prosecutors have clashed with the trustee in the bankruptcy of Rothstein’s former law firm, Rothstein Rosenfeldt Adler, over the best method of reimbursing victims. U.S. District Judge James I. Cohn, who presides over the criminal case, has declined repeated requests to release non-bank account assets to the bankruptcy trustee, Herbert Stettin.

According to the new report, victims were divided into two categories: investors who lost money in the Ponzi scheme and RRA clients whose money was being held in trust accounts that were pilfered during the course of the Ponzi scheme.

Prosecutors said the government used a “cash-in/cash-out method,” whereby the total amount invested by a victim during the scheme is reduced by the amount that the victim received as payments during the scheme.

A list of victims and restitution amounts is attached to the report, but it uses code numbers and not names. The amounts range from $340 to $42.39 million.

A hearing to decide on restitution is set for Aug. 30 before Cohn.

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Ponzi scheme helper given house arrest

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08/29/10 01:27:48

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Ponzi scheme helper given house arrest

August 28, 2010 - http://www.upi.com

FORT LAUDERDALE, Fla. - One of three men accused of helping Florida Ponzi scheme operator Scott Rothstein has been sentenced to 10 months house arrest, court papers say.

Rothstein, now serving a 50 year prison sentence for operating a massive investment fraud that lost investors $1.4 billion, helped authorities set up a sting operation that led to the arrests of Enrique Ros, Daniel Dromerhauser and Roberto Settineri.

The three were arrested on obstruction of justice charges related to their agreements to help Rothstein destroy evidence and launder money.

Ros, who pleaded guilty, was given a lenient sentence by Judge James Cohn Friday, the South Florida Sun-Sentinel reported.

In placing him under house arrest for 10 months, the judge told Ros: "You've done what you could to right the wrong and that's a very important step."

Ros, who was facing a possible 16-month prison term, was also given three years probation and ordered to perform 500 hours of community service.

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Enrique Ros - Daniel Dromerhauser - Roberto Settineri

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08/29/10 01:28:39

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Enrique Ros - Daniel Dromerhauser - Roberto Settineri

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Rothstein Ordered to Repay $363 Million to Victims

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08/30/10 09:53:01

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Rothstein Ordered to Repay $363 Million to Victims

August 30, 2010 - http://www.businessweek.com

Scott Rothstein, the former South Florida lawyer serving 50 years in prison for a $1.2 billion Ponzi scheme, was ordered by a U.S. judge to repay $363 million to his victims.

U.S. District Judge James Cohn imposed the restitution order on Rothstein, 48, at a hearing where prosecutors said they have recovered from $50 million to $60 million in assets for 320 investors and clients who lost money in his scam.

Cohn is seeking to divide cash and the proceeds of homes, jewelry, a yacht and Rothstein’s interests in businesses seized after his arrest last November. He later pleaded guilty to fraud and conspiracy charges, admitting the Ponzi scheme financed his lavish lifestyle, bankrolled his firm and bought political influence.

“I wish we’d been able to seize sufficient funds so that we would be able to restitute all of the victims,” Assistant U.S. Attorney Lawrence LaVecchio told Cohn in federal court in Fort Lauderdale, Florida.

The case is U.S. v. Rothstein, 09-cr-60331, U.S. District Court, Southern District of Florida (Fort Lauderdale).

- Editors: Fred Strasser, Stephen Farr

To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net; Susannah Nesmith in Fort Lauderdale, Florida, at susannahnesmith@yahoo.com.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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Rothstein's Non-Investor Clients Get Restitution Priority

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09/05/10 00:51:29

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Rothstein's Non-Investor Clients Get Restitution Priority - 38 clients to recover most of their RRA losses

John Pacenti - Daily Business Review - August 31, 2010 - http://www.law.com

While most of the victims of lawyer-turned-convicted felon Scott Rothstein will recover pennies on the dollar in his criminal case, about three dozen clients will be made whole, a federal judge ruled Monday.

U.S. District Judge James I. Cohn decided last week that 25 non-investor clients of Rothstein's defunct Fort Lauderdale law firm, Rothstein Rosenfeldt Adler, would receive all or most of the money stolen from the firm's trust accounts. On Monday, he added 13 more clients to the list.

The other 320 claimants will have to split an estimated $50 million to $60 million collected by the government through that sale of seized Rothstein assets such as sports cars, boats and furniture.

Rothstein is serving a 50-year sentence for using fake court orders and trading on his high-profile political and community connections to perpetuate his fraud. Half of his prison earnings also will go to restitution, Cohn ordered.

Assistant U.S. Attorney Lawrence LaVecchio projected the financial recovery for criminal restitution based on how much the government can generate from Rothstein's real estate holdings in a down market. While Rothstein pumped $1.2 billion through his settlement financing scheme, Cohn accepted loss claims of $363 million, which allows for a recovery of 6 to 7 cents on the dollar.

That won't be the case for 38 law firm clients identified by Cohn for full or near-full restitution. All but one were represented pro bono by Farmer Jaffee Weissing Edwards Distos & Lehrman, a Fort Lauderdale law firm of former RRA lawyers founded in the wake of Rothstein's downfall last November.

Attorney Seth Lehrman said he and his partners vowed to fight for their former RRA clients who lost money through trust accounts raided by Rothstein as he cashed out and fled to Morocco.

The diverse group includes former NFL great Warren Sapp, who was owed about $82,000 in a condo contract dispute, and a retired New York couple injured by a drunken driver.

Lehrman said Cohn found reason to differentiate among victims unlike other high-profile cases and give priority to a few. The government argued there should be no priority on claims and mentioned the case of New York attorney Marc Dreier, who is serving a 20-year sentence for fraud.

"Judge Cohn found after hearing argument from all the parties that there was a basis for the claims of non-investor clients who had no dealings with Rothstein from the claims of investors," Lehrman said.

Lehrman's clients include Kenneth and Molly O'Brien, who won a $1.25 million lawsuit after a drunken driver hit their car while they were on their way to the airport. Molly O'Brien suffered two broken femurs and needs therapy.

Another client was William Jaworski, a divorcee with seven children who lost his 18-year-old son in a motorcycle accident. Lehrman also mentioned an 80-year-old client who received a car accident settlement and needs the money stolen by Rothstein to pay her $4,000 monthly nursing home bill.

Cohn said those clients who had been victimized from the outset, whether it be through a personal injury or a wrongful dismissal, should not be penalized again because Rothstein pilfered money in litigation.

"These individuals all suffered losses before they engaged the Rothstein firm," the judge said. He asked when was it normal for law firms to sell financial products of any kind.

Lehrman said the judge understood "investors came to the firm willing to put money at risk."

Other clients left out of Cohn's order was a group of Venezuelans trying to sell a brokerage and real estate and had $1.4 million in escrow at RRA for the deal.

"Ironically, they thought the money would be safer in a U.S. law firm than in a U.S. bank," said Bruce Reinhart, a West Palm Beach attorney representing the Venezuelan group.

Auto magnate Ed Morse's claim for $30 million gets no special treatment. He had money in both Rothstein's law firm and in his investment scam. Even with an offer by Morse attorney Ed Pozzuoli of Tripp Scott to take 20 percent off the top, Cohn said it would decimate the restitution fund.

LaVecchio urged Cohn to not prioritize claims, "to not go down that slippery slope." He agreed victims were just as badly impaired on the investor end, many losing their life savings. He said one young woman turned over her entire 401(k) retirement plan to Rothstein.

"Every one of them has a story like that to tell," LaVecchio said.

Cohn also did not accept arguments from government and investor attorneys that the investors were no different than law firm clients whose trust accounts were raided.

"Most law firms were not in the business to sell financial products," Cohn said. "I see a discernible difference."

Cohn, who has set a Tuesday deadline for deciding restitution issues, also ruled for former Rothstein client Steven Bitton. The fired Plantation municipal employee never learned about the city's $650,000 lawsuit settlement offer. Bitton told the judge there is big difference between victims like himself and those ripped off by Rothstein's Ponzi scheme.

"If you want to invest money, go to Morgan Stanley or Goldman Sachs. This is ridiculous," Bitton said.

In other Rothstein news, the former chief financial officer of RRA cut a deal with the law firm's bankruptcy trustee to turn over a 28-foot Seaport boat bought with a $158,000 loan secured by the firm. Irene Stay was part of Rothstein's inner circle, one of the few RRA employees with access to his high-security office suite, along with chief operating officer Debra Villegas, who has been charged in the Ponzi scheme.

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Rothstein's right-hand woman faces 10 years in prison at October sentencing

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09/13/10 16:41:28

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Rothstein's right-hand woman faces 10 years in prison at October sentencing

By Peter Franceschina, Sun Sentinel - September 13, 2010 - http://www.sun-sentinel.com

Federal sentencing guidelines for Ponzi schemer Scott Rothstein's right-hand woman, Debra Villegas, call for more than 10 years in prison.

And federal probation officials say Villegas doesn't deserve a break on her prison term as a reward for her cooperation in the investigation into her boss's $1.4 billion investment fraud scheme.

Villegas, 43, pleaded guilty to a single count of money laundering conspiracy in June. While the felony carries a maximum 10 years in prison, a pre-sentence report recently completed by probation officials set out recommended guidelines that called for more than that, according to a court document filed over the weekend.

Villegas' attorney, Robert Stickney, filed objections to the pre-sentence report on Saturday. He did not spell out the exact prison time that the report recommends to the judge, but he wrote that it was more than 10 years. He declined to be more specific when contacted Monday, and the report is not public.

Federal probations officials reached their recommendation by considering a number of aggravating factors, including that Villegas was part of a sophisticated money laundering operation. Villegas rose from a paralegal to the chief operating officer of Rothstein's downtown Fort Lauderdale law firm.

Free on bond, Villegas is scheduled for sentencing Oct. 8 before U.S. District Judge William Zloch. Stickney wrote that the sentence is capped at 10 years by law, regardless of the guidelines, and suggested that Villegas deserves a break because of her cooperation.

As part of her guilty plea, Villegas told the judge she helped Rothstein because he said he was in trouble with the Mafia. Stickney wrote that Villegas believed Rothstein was laundering money for one individual and "was unaware that she was in the midst of a Ponzi scheme. She did not possess the intent to defraud anyone and she was unaware that there were any victims until the scheme collapsed."

Stickney said Monday that the judge has the discretion to reduce a potential 10-year sentence. "He can award her a departure downward from the statutory maximum to reward her for acceptance of responsibility," he said.

A spokeswoman for the U.S. Attorney's Office in Miami said any response from prosecutors would come in the form of a court filing.

Stickney's court filing hints that additional co-conspirators were involved. He wrote that the fraudulent settlement agreements that Rothstein was selling to investors were forged by Villegas after the false information was given to her by Rothstein or another co-conspirator.

"Before Ms. Villegas became a member of the conspiracy, a co-conspirator developed a spreadsheet to track the transactions," Stickney wrote. "Once Ms. Villegas became a member of the conspiracy, she maintained the spreadsheet with another co-conspirator by inserting the settlement agreement dollar amounts."

Rothstein, 48, pleaded guilty to racketeering, money laundering and fraud and is currently serving a 50-year prison term at an undisclosed location.

Peter Franceschina can be reached at pfranceschina@SunSentinel.com or 954-459-2255.

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The Money Board

Whistleblower Tells the Fascinating Story of His Intersection with Ponzi Scheme Master Scott Rothstein

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09/28/10 10:42:21

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Whistleblower Tells the Fascinating Story of His Intersection with Ponzi Scheme Master Scott Rothstein

September 28, 2010 - http://www.prnewswire.com

BAY HARBOR ISLANDS, Fla. - Alan Sakowitz, a Miami attorney and real estate developer, details his interaction with Ponzi scheme master Scott Rothstein in Miles Away ... Worlds Apart, now available from Amazon.com and at bookstores.

Sakowitz tells the amazing, entertaining story of how good people were led astray by Rothstein, who through his 70-attorney Ft. Lauderdale law firm, Rothstein Rosenfeldt Adler, offered up fake investment opportunities and bilked those investors out of 1.4 billion dollars. Sakowitz's experience with Rothstein, who was recently sentenced to 50 years in prison, acts as a cautionary tale for a culture fascinated and seduced by the trappings of wealth, and offers remedies on how to change that culture to one focused around putting the welfare of others before material gain.

The Importance of Community and Selflessness

Sakowitz himself, in his new memoir of the case, Miles Away ... Worlds Apart, seems to offer a subtle theory. It is a theory with moral and psychological implications, but he never expresses it overtly. What he does, with devastating clarity, is contrast Rothstein's self-serving behavior with the selfless dedication to community shown by his neighbors in North Miami Beach, mere miles from Rothstein's opulent office in Fort Lauderdale.

Could it be that impropriety has its own allure? Does the pain of the embarrassed businessman add panache to the money? Is there a kick in being a partner to blackmail, even if plied within a technical framework of legality?

There are other components to this story, and Sakowitz covers them all thoroughly. You get a flavor of the Rothstein persona, the atmosphere of excess somehow hovering at the fringe of lawyerly respectability. Various politicians, local, statewide and federal, march across the stage with one hand slapping Scott Rothstein on the back and the other hand reaching into his larcenous pocket.

There is enough comedy and tragedy here for a lifetime.

But Sakowitz will not leave this story to wallow in the realm of sensationalism. He keeps making us look through the moral viewfinder to see the character of the players. How the manipulator manipulates, how the manipulated are manipulated.
We do not get to walk away feeling superior to this den of thieves, this band of buffoons. We cannot tsk-tsk our way through, disapproving of evil and disdainful of naivete. We have to look inside ourselves and see just how clean we are, just how open our own eyes are ... or not.

Alan Sakowitz is available for interviews and appearances in the greater Miami area, and hopes to bring his experience to the largest possible audience, in order to stop similar frauds from being perpetuated on other hard-working Americans.

For information: http://www.LegacySeriesPress.com or contact: AlanBHI@aol.com,
Phone: 305-655-1234
Book trailer: http://www.youtube.com/watch?v=HSzq12koYG0
Contact:
Alan Sakowitz
305-655-1234
http://www.LegacySeriesPress.com
1111 Kane Concourse, Suite 401F
Bay Harbor Islands, Florida 33154

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Judge: 10 years for Scott Rothstein's right-hand woman at law firm

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10/10/10 01:40:51

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Judge: 10 years for Scott Rothstein's right-hand woman at law firm

BY JAY WEAVER - jweaver@MiamiHerald.com - October 8, 2010 - http://www.miamiherald.com\

Debra Villegas, the former right-hand woman for Ponzi schemer Scott Rothstein, was sentenced Friday to serve 10 years in prison and pay $363 million in restitution.

Villegas had hoped a federal judge in Fort Lauderdale would cut her some slack on the potential 10-year prison sentence for scheming with the convicted lawyer to launder money from his $1.2 billion investment racket.

Villegas' attorney, Robert Stickney, was seeking a lesser sentence from U.S. District Judge William Zloch, stressing that his client accepted responsibility for her criminal conduct and pleaded guilty to a money-laundering conspiracy count in June.

``I am very sorry to all the victims, and all the employees who lost their jobs,'' Villegas, 43, said in court. She also apologized to her family.

Prosecutors had recommended a sentence of just over seven years, and Stickney had sought ``home confinement for a period of time,'' also about seven years.

The judge gave Villegas until June 24 to surrender to authorities.

Villegas, who once lived in a $475,000 home in Weston and drove a Maserati that Rothstein bought for her, was the first co-conspirator named in his investment scam, which unraveled almost one year ago.

Villegas, who moved to Clewiston after the scandal broke, rose from being a paralegal with no college degree to serving as the chief operating officer at Rothstein's Fort Lauderdale firm, Rothstein Rosenfeldt Adler. He described her to colleagues as his second-in-command and paid her $250,000 a year.

At her plea hearing, Villegas told the judge that she agreed to help her former boss break the law because Rothstein told her he was in trouble with the Mafia. Sources familiar with the case said Rothstein made up that story to rope her in.

In court papers, Stickney said Villegas believed Rothstein was laundering money for one individual and ``was unaware that she was in the midst of a Ponzi scheme.''

Rothstein pleaded guilty to racketeering charges stemming from his sales of fabricated legal settlements to investors, and was sentenced in June to 50 years in prison.

Both Rothstein and Villegas have been providing prosecutors with inside information on other former employees of the defunct 70-attorney RRA law firm. Several are expected to face charges this fall, according to sources.

Among those under investigation: name partners Stuart Rosenfeldt and Russell Adler; another senior partner, Steven Lippman; chief financial officer Irene Stay; and general counsel David Boden.

Their attorneys have denied their clients did anything wrong.

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Reputed mob figure sentenced to 4 years in prison

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11/03/10 10:29:44

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Reputed mob figure sentenced to 4 years in prison

November 3, 2010 - http://www.washingtonpost.com

FORT LAUDERDALE, Fla. - A reputed Italian mobster has been sentenced to 4 years in prison for money laundering conspiracy in connection with a $1.2 billion Ponzi scheme.

U.S. District Judge James Cohn also ordered 42-year-old Roberto Settineri to complete 500 hours of alcohol abuse counseling in prison. Settineri also was sentenced to two years probation.

Settineri did not speak during Wednesday's hearing. Afterward, his attorney said the sentence was fair.

The FBI snared Settineri in a sting operation using convicted Ponzi schemer Scott Rothstein, who pretended he wanted help shredding documents and laundering $10 million. Rothstein is now serving a 50-year prison sentence.

Settineri was arrested in March in what authorities called a major takedown of organized crime in New York and Italy.

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Rothstein bank hit with $60 million clawback suit

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12/08/10 04:16:57

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Rothstein bank hit with $60 million clawback suit

By Peter Franceschina - Staff Writer - December 7, 2010 - http://blogs.trb.com

The trustee for the Scott Rothstein bankruptcy case has filed a clawback suit seeking nearly $60 million from Gibraltar Private Bank & Trust, alleging the bank aided the Fort Lauderdale attorney in running his massive Ponzi scheme.

More than two dozen clawback suits have been filed in the Rothstein Rosenfeldt Adler law firm bankruptcy. Gibraltar also is the target of a civil lawsuit filed by a group of investors that allegedly lost more than $100 million. Rothstein bought roughly a 5 percent interest in the Coral Gables-based bank, which has offices in downtown Fort Lauderdale.

The clawback suit, filed Monday in U.S. Bankruptcy Court, alleges that “from the outset, Rothstein utilized the cooperation of Gibraltar in order to give birth to and to perpetuate the life of his Ponzi scheme.”

“Gibraltar gained actual and/or constructive knowledge of Rothstein’s criminal conduct by monitoring and questioning the high volume, high velocity flow of funds between RRA and/or Rothstein accounts, as well as the substantial, recurring overdrafts which were clearly indicative of money laundering, tax evasion, and other criminal conduct,” the suit alleges.

Thomas Tew, an attorney for the bank, said Gibraltar would contest the suit. Tew said the bankruptcy trustee doesn’t have standing under the law to bring claims that the bank was implicated in the fraud scheme, because Rothstein used his law firm as a criminal enterprise.

“If you’re a crook, you can’t turn around and sue someone else for your wrongdoing,” he said.

Tew also said the clawback claims are a form of “double dipping” because it was money from the investors who are suing Gibraltar in the civil case that Rothstein used to cover millions of dollars in overdrafts at the bank. A judge is now considering a Gibraltar motion to dismiss the bank as a defendant in that case.

John Genovese, an attorney for the bankruptcy trustee, said only the trustee could bring certain claims against Gibraltar. He said the bank has to demonstrate it received the money from Rothstein in good faith and had no knowledge of the fraud.

“We have alleged there are significant badges of fraud that would have put them on notice that Rothstein was engaged in a fraud. These claims could not be asserted in state court,” he said. “We feel fairly certain that given that they failed to follow their own policies and practices, that they can’t demonstrate they acted in good faith.”

Rothstein's $1.4 billion fraud scheme collapsed in the fall of 2009. Rothstein, 48, is still cooperating in the federal investigation and is serving a 50-year prison term in an undisclosed location after helping bring down a reputed Mafia figure.

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Former Rothstein law partner ready for Feb. 14 civil trial

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01/05/11 01:51:08

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Former Rothstein law partner ready for Feb. 14 civil trial

By Jon Burstein - Sun Sentinel - January 5, 2011 - http://www.palmbeachpost.com

There's no love lost between one of Scott Rothstein's former law partners and attorneys tasked with recovering money from Rothstein's massive investment fraud, but they will be spending Valentine's Day together anyway.

Russell Adler is set to go before a federal jury that day to defend himself against a $1.2 million lawsuit brought by the attorneys handling the bankruptcy of the Rothstein Rosenfeldt Adler law firm.

It would mark the first time that any matter related to the implosion of Rothstein's law firm would be considered by a jury in either civil or criminal court. Rothstein's $1.4 billion Ponzi scheme, the largest financial fraud in South Florida history, sent shockwaves across Broward County where Rothstein had established himself as a power player in legal, political and charitable circles.

Adler adamantly denies knowing anything about Rothstein's crimes, saying he never saw the firm's financial statements.

"Russell did nothing wrong and I expect to go to trial and be vindicated very quickly," said Fred Haddad, one of Adler's attorneys. "We're looking forward to a trial."

The lawsuit against Adler—commonly referred to as a "clawback"—alleges he was overpaid for the work he did for the law firm, and should also pay back $655,000 in unpaid loans he received from the firm.

Haddad said that just as Adler was tricked into believing Rothstein was a successful businessman, so too were some powerful people. Adler has submitted a list of potential witnesses in his case that includes Broward Sheriff Al Lamberti, former Gov. Charlie Crist, U.S. Sen. John McCain, R-Ariz., and former Democratic gubernatorial candidate Alex Sink.

Adler's attorneys said Tuesday anyone on the witness list could be drawn into the case, but court documents indicate only one of them has so far—Lamberti. The sheriff was served with a subpoena last year to give a deposition in Adler's case.

Lamberti's attorneys have argued there's "no legitimate reason" for Broward's top cop to be deposed because he has no knowledge about Adler's salary or the loans the attorney received.

"The deposition will serve no purpose other than to harass Sheriff Lamberti and draw him away from his duties as a public servant," wrote Christian Petersen, one of Lamberti's attorneys, in a court filing.

Lamberti's attorneys are set to go before U.S. Bankruptcy Judge Raymond Ray on Jan. 14 to try to block any deposition. While Ray is hearing pre-trial motions in Adler's case, U.S. District Judge James I. Cohn will preside over the civil trial, set to begin Feb. 14.

Cohn was the judge who sentenced Rothstein in June to 50 years in prison for the Ponzi scheme. Rothstein and his law firm's former chief operating officer, Debra Villegas, are the only two people who have been criminally charged in the investment fraud.

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Rothstein associate allegedly breaches settlement with bankruptcy lawyers

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01/08/11 06:56:24

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Rothstein associate allegedly breaches settlement with bankruptcy lawyers

January 7, 2011 - By Peter Franceschina, Staff Writer - http://articles.sun-sentinel.com

One of the feeders to Scott Rothstein's massive Ponzi scheme has allegedly breached his $6.6 million settlement agreement with bankruptcy attorneys, who now want his million-dollar Bal Harbour home.

The glitch appears to be that financial advisor Michael Szafranski pledged to turn over $300,000 that he donated to a charity, but which the charity won't release.

As a result, Szafranski is in violation of the settlement agreement he reached last summer with the bankruptcy attorneys collecting assets that belong to Rothstein's defunct Fort Lauderdale law firm, the attorneys said in court documents filed Friday.

Szafranski's attorneys could not be reached Friday evening for comment.

The bankruptcy attorneys filed a motion seeking a judge's permission to record a deed to Szafranski's Bal Harbour home – bought in his wife's name for $1.5 million just a month before Rothstein's investment fraud imploded in October 2009 – and take possession of it.

Szafranski has already turned over nearly $5 million, which is part of the first required payment, but still owes the bankruptcy estate another $300,000, the bankruptcy attorneys allege. That money was to come from a donation Szafranski made to the Fidelity Charitable Gift Fund, which refuses to turn over the money, according to court records.

"The Gift Fund is an independent public charity. Contributions to the Gift Fund, including yours, are irrevocable," the charity wrote to Szafranski in November, according to a copy of the letter included in court documents. "Property contributed to the Gift Fund can only be used for proper charitable purposes, and may not be used to confer an impermissible private benefit on a donor or on any other person."

The bankruptcy lawyers allege Szafranski owes the money to the estate, regardless.
"The Settlement Agreement is unambiguous: the Settling Parties are required to tender the full amount of the First Payment, irrespective of their ability to liquidate any of their assets, including the Gift Fund," they wrote.

If the bankruptcy judge voids the settlement, that could open up Szafranski to other court judgments. The current settlement prohibits other Rothstein investors from seeking damages from Szafranski, who is a defendant in investor lawsuits.

Szafranski, 32, invested tens of millions of dollars with Rothstein at the same time he was supposed to be "verifying" that the legal settlements Rothstein sold to investors were legitimate, according to court documents. The settlements were bogus and the basis for Rothstein's $1.4 billion Ponzi scheme, the largest financial fraud in South Florida history.

Rothstein, 48, is serving a 50-year prison sentence in an undisclosed location after helping federal investigators arrest a reputed Mafia figure.

Peter Franceschina can be reached at pfranceschina@SunSentinel.com or 954-459-2255.

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The Money Board

Tew: Gibraltar had no knowledge of fraud

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01/16/11 03:26:21

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Tew: Gibraltar had no knowledge of fraud

South Florida Business Journal - By Paul Brinkmann - January 14, 2011 - http://www.bizjournals.com

There have been some developments in the bankruptcy case of convicted Ponzi schemer Scott Rothstein’s former law firm, Rothstein Rosenfeldt Adler.

On Jan. 6, Gibraltar Private Bank & Trust filed yet another response to allegations that it should have detected a Ponzi scheme in years of Rothstein’s sloppy banking practices.
The bank has been battling such allegations for months. Its latest explanation came in the form of a formal answer filed by the bank’s attorney in the lawsuit filed against it by the bankruptcy trustee for RRA.

The trustee filed suit against Gibraltar for about $60 million, mostly for allowing massive overdrafts in Rothstein accounts. The suit alleges those overdrafts would not be allowed in the course of customary and legal banking practices.

The trustee’s lawsuit alleges the Rothstein’s overdrafts were large and continued over a period of years.

Attorney Thomas Tew, of Tew Cardenas LLP, represents Gibraltar. He says that, like others who dealt with Rothstein, Gibraltar put up with a lot of malarkey because Rothstein was a big customer.

“He was a pain in the ass, frankly, but that does not mean the bank had actual knowledge of the fraud,” Tew said.

In its formal answer to that lawsuit, the bank stated: “Gibraltar extended overdraft protection and covered negative account balances as part of its normal banking practices ….”

Could there be specific individuals to blame for the banking elements of Rothstein’s fraud?

In its response, Gibraltar offers this interesting tidbit: “There may be other negligent or otherwise responsible parties, the details of whose actions may be revealed through discovery and subsequent investigation. Gibraltar reserves the right to name any other possibly negligent or otherwise responsible persons or entities that may be revealed during discovery and further investigation in this case.”

Another lawsuit brought by RRA investors, generally referred to as the Razorback group, also targets Gibraltar. In that lawsuit, it is alleged that bank officers attempted to raise suspicions about Rothstein’s activities, only to be shot down by upper management.

Gibraltar has said both lawsuits are without merit.

Tew also repeated earlier defenses raised by the bank and others involved in Rothstein’s Ponzi cases: that the bank owed no duty to non-customers, and that the trustee, Herbert Stettin, shouldn’t be able to sue Gibraltar because he’s standing in the shoes of the crooked law firm now.

“To the extent that plaintiff’s claims are based on a situation where Gibraltar was a conduit of funds, there is no liability for a conduit’s handling of transfers,” Gibraltar’s response reads.

Gibraltar also claims that it relied on information from RRA, Rothstein and Rothstein’s accounting firm, the now-defunct Berenfeld Spritzer Shechter & Sheer.

In October, the Office of Thrift Supervision chastised Gibraltar for having weak controls regarding detection of money laundering, but the federal agency did not mention the Rothstein scandal specifically.

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