Attorney charged as Ponzi man
‘Fort Lauderdale Attorney Charged in Billion-Dollar Ponzi Scheme’. This headline would probably have hit you harder in a pre-Madoff era. But even now this is quite an impressive allegation. The FBI and IRS seek to confiscate $1.2 billion, including (the usual) ferraris, roll’s royces, yachts, houses, jewelry, bank accounts in Morocco and Gibraltar and what have you. An interesting fact is that 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.
The defendent, Mr Rothstein, from around 2005 through 2009, allegedly engaged in a pattern of racketeering activity through his law firm, Rothstein, Rosenfeldt, and Adler, P.A. (RRA), located in Ft. Lauderdale. Specifically, the information alleges that RRA was the criminal enterprise through which defendant Rothstein and others fraudulently obtained approximately $1.2 billion from investors through bogus investment and other schemes. The information alleges that defendant Rothstein and co-conspirators used RRA to fraudulently induce investors to: (1) loan money to non-existent borrowers based upon promissory notes and requests for short-term bridge loans for business financing; and (2) invest funds based upon anticipated pay-outs from purported confidential civil settlement agreements.
According to the DOJ press accouncement, “To execute this four-year fraud scheme, Rothstein and his co-conspirators allegedly used multiple bank accounts at TD Bank, N.A., Gibraltar Private Bank and Trust, and other financial institutions to deposit and launder investors’ money. As well, to perpetuate and conceal the fraud, Rothstein and his co-conspirators created and caused the creation of false bank documents, false on-line bank account information, and false settlement agreements and promissory notes, which were shown to investors as proof that the settlement and loan monies existed. In fact, however, there were no settlement funds or loan clients and the bank accounts only contained “Ponzi” scheme funds.”
According to the information, defendant Rothstein and other co-conspirators used the funds obtained through the Ponzi scheme for their own benefit. This included, for example, using the money to fund and operate RRA, to make contributions to federal, state, and local political candidates, and generous donations to public and private charitable institutions. The money was also used to pay for lavish gifts, including exotic cars, jewelry, boats, cash and bonuses to individuals and members of RRA, to hire local police officers to provide security, and to provide gratuities to high ranking members of police agencies. In addition, the money was used to purchase controlling interests in restaurants and other businesses, and to socialize with politicians and sports figures. According to the information, these expenditures were calculated to enhance defendant Rothstein’s reputation and ability to solicit potential investors in the Ponzi scheme, provide an air of legitimacy and credibility to RRA, engender loyalty, and deflect law enforcement scrutiny.
During the last year, Mr Rothstein allegedly used ‘Ponzi money’ to cover the RRA’s payroll expenses. Other RRA partners ‘were not aware’ of the fraud. Why not? That question remains unanswered for now. With such a huge Ponzi fraud going on in your own firm, it seems difficult to believe you ‘were not aware’.
And now it stopped.
