In a case already being compared to the Bernie Madoff affair, a lawsuit filed Monday in Broward County accuses south Florida “super attorney” Scott Rothstein of bilking investors in a scheme run out of the powerful firm Rothstein, Rosenfeldt and Adler, which now says it can’t make payroll.
An attorney for one investor told the South Florida Sun Sentinel that the amount of money missing could be over $100 million, though it’s not clear where it went.
Rothstein and his wife are jet-setters who live in a 6-plus million dollar Fort Lauderdale home and were known for driving a veritable fleet of expensive sports cars and showering their favorite charities with big donations. A flamboyant character who was once pictured on billboards with Miami Dolphins great Dan Marino, Rothstein grew up in a lower-middle class family in the Bronx. He’s now out of town and possibly out of the country — no one knows where exactly — and the Feds have reportedly shown up at his law firm offices.
He has not been charged with a crime.
In keeping with his luxury lifestyle, Rothstein was a generous contributor to politicians of both parties, especially Republicans. He gave $200,000 to the state Democratic party in the past three years and $525,000 to the state Republican party, the Sun Sentinel reports. And Rothstein is a personal friend of and contributor to Governor — and US Senate candidate — Charlie Crist, who reportedly attended the attorney’s wedding at the Versace mansion.
Longtime GOP operative Roger Stone partnered with Rothstein on a business called RRA Consulting, which was run out of the firm’s offices.
Referring to a “a seismic blast” that devastated the firm and citing assertions by investors, an attorney for the firm said in a filing in Broward circuit court that Rothstein “allegedly orchestrated a substantial misappropriation of funds from investor trust accounts.”
While all of the specifics of the the alleged fraud are not known, CBS 4 reports it may have involved both taking from client trust funds and setting up a side company to sell investments in structured settlements. Those are arrangements in which payments are made over time rather than all at once, reaping tax benefits for the payee and allowing the payer to avoid having to come up with the lump sum upfront.
At the point a settlement was agreed to, Rothstein’s side business would woo investors with promises of eye-popping payoffs. Investors would pay a fraction of the lump sum, and would be promised a huge return on their investment — a minimum of 20% guaranteed — in between 3 months and a year, according to the Sun Sentinel.
The problem? Some of the settlements Rothstein sold didn’t actually exist, according to the lawsuit.
And that’s not at all. Confidential offerings obtained by the Sun Sentinel show that Rothstein specialized in a particular type of sordid case:
Those documents say that Rothstein’s firm sought out sexual discrimination and whistle-blower cases and used former cops to dig up incriminating evidence.
Sakowitz, the potential investor, said Rothstein boasted of having sophisticated eavesdropping equipment and that former cops would sift through potential defendants’ garbage.
With compromising evidence in hand, the firm urged the targets of the claims to pay a settlement without a public lawsuit.
The accused parties in the cases would naturally want such charges kept under wraps, so they had an incentive to settle without any lawsuits or dealings in court.
Now, the people who invested in those settlements are in a state of panic. CBS 4 reports on the dramatic scene outside the courtroom Monday, where lawyers for creditors and investors “packed the hallway”:
Shortly after the hearing got started, a man pleaded with sheriff’s deputies to let him enter the packed courtroom, saying he had rented a private jet to fly down from New York and that he was afraid Rothstein had stolen millions from him.
Rothstein’s partners at the firm are in a state of shock. Co-founder Stuart Rosenfeldt told the Sun Sentinel: “The only reason that I am not crying is I took a Xanax. I’ve been crying nonstop since Friday.”
Rothstein brought on former elected officials to work for him as he built the firm from the ground up into a legal powerhouse in the past seven or so years. But since the news about the alleged fraud started to leak out, multiple attorneys have resigned, including the everyone in the firm’s branch in Caracas, Venezuela.
The firm has asked a judge to appoint a receiver to help sift through its finances.
Late 5:30 p.m. Update: Rothstein has now returned to Florida, probably from Morocco.
Late Update: Here’s the complaint against Rothstein.