Miami Lawyer Says He Pointed Feds to Rothstein in Claimed $500M Scheme
Updated: An investment opportunity offered by managing partner Scott Rothstein of Rothstein Rosenfeldt Adler seemed too good to be true, a Miami lawyer and developer thought.
So, Alan Sakowitz tells the South Florida Sun-Sentinel, he called the feds and put them on Rothstein’s trail.
After meeting with Rothstein three times, “I was convinced it was all a Ponzi scheme and I notified the FBI in detail how Scotty was hiding behind a legitimate law firm to peddle fake settlements,” Sakowitz tells the newspaper.
He wasn’t the only South Florida lawyer who considered the investments allegedly offered by Rothstein to be a dubious prospect: Mark Raymond, who serves as managing partner of Broad and Cassel in Miami, tells the Sun Sentinel he told a client “no way” when asked about them.
Since news of hundreds of millions in allegedly missing investor funds exploded over the past few days, at least six U.S. lawyers have left the approximately 70-attorney Fort Lauderdale-based international firm. Its entire 15-attorney branch office in Venezuela has also departed, the Sun-Sentinel reports in another article.
Partner Stuart Rosenfeldt said after a court hearing yesterday that $100 million to $185 million was missing; however, Bloomberg now reports that Rosenfeldt says $500 million disappeared between Oct. 23 and Oct. 30.
Rothstein made use of the law firm’s name in orchestrating a “substantial misappropriation” of investor trust account money, the firm alleges in a lawsuit filed yesterday in Broward County Circuit Court. It seeks a dissolution of the firm—in which Rothstein, its managing partner, chairman and CEO, allegedly claims to have a 50 percent interest—and a receivership.
A lawyer for Rothstein promised that his client would return to straighten out the situation before the end of the week, and indeed Rothstein did arrive back in Ft. Lauderdale today, of his own volition, the Bloomberg article reports.
According to Sakowitz and confidential private offering material obtained by the Sun Sentinel, Rothstein offered investors extremely high returns on their money if they funded lump-sum payments to his client plaintiffs in claimed confidential settlements of employment discrimination and whistle-blower cases. Rosenfeldt tells Bloomberg that these claimed plaintiffs are not clients of the Rothstein Rosenfeldt Adler firm.
The plaintiffs took a discount on the total settlement amount due to them in order to get their money up-front, and the investor funds were to be repaid in full within a short time, along with a guaranteed minimum of 20 percent annual interest, from the income stream generated through structured settlement payments. (Although the newspaper article doesn’t detail how the structured settlement payments were claimed to have been made in the Rothstein cases, a defendant generally pays a lump sum to an insurance company to purchase a structured settlement that is paid out over time in specified amounts to a prevailing plaintiff, much like an annuity.)
Sakowitz says Rothstein claimed to use sophisticated eavesdropping equipment to get the goods on defendants, who then agreed to “quite lucrative” settlements in order to resolve the cases confidentially, according to Rothstein offering material, the Sun Sentinel reports.
Sonn & Erez, a Fort Lauderdale securities litigation firm, is reportedly investigating the investments allegedly offered by Rothstein.
Additional coverage:
ABAJournal.com: “Rothstein Firm Seeks Allegedly Missing $100M to $185M; Is He in Morocco?”
Updated at 4:50 p.m. to include information from subsequent Bloomberg article.
