Fort Lauderdale, Fla., attorney Scott Rothstein's meteoric rise in the South Florida legal and political worlds ended over Halloween weekend with the revelation that investors claim he stole in excess of $200 million.
The money is tied to a side business started by Rothstein, a major Republican fundraiser and philanthropist, that offered structured settlements, which converts a lump sum award to installments for tax and cost-of-living reasons.
Rothstein Rosenfeldt Adler founding partner and law firm president Stuart Rosenfeldt, in a complaint filed Monday by Coffey Burlington partner Kendall Coffey, asked Broward Circuit Judge Jeffrey Streitfeld to dissolve the law firm and appoint a receiver to take over the firm's finances but not its legal practice.
A hearing Monday resolved nothing, including Rothstein's whereabouts. A second hearing was set for Tuesday.
"This is a seismic blast that shattered the law firm," Coffey said at the hearing. Afterward, he said, "When you have a shattering event like this, you still have cases, you still have hearings to attend, you have closings. All of that is ongoing."
Rothstein's attorney, Marc Nurik, who quit the firm to take his former boss as a client, told Coffey that Rothstein is out of the country. Coffey said he heard "rumors from country A to Z" on Rothstein's location.
Coffey said Rosenfeldt and the firm wanted Miles McGrane of McGrane Nosich & Ganz in Coral Gables to be named receiver, but the judge asked about appointing Rosenfeldt as half owner of the firm rather than "bring in a total stranger." Coffey noted Matthew Menchel of Kobre & Kim of Miami, who represents a large creditor, wants James Cassel to be the receiver.
After a brief discussion among lawyers, Rosenfeldt said he would be willing to take charge. An amended complaint proposing an outside receiver or Rosenfeldt to take charge of firm finances could be filed in time for Tuesday's hearing.
"It is with surprise and sorrow that the attorneys of Rothstein Rosenfeldt Adler have learned that Scott W. Rothstein, the managing partner and CEO of the firm, has, according to assertions of certain investors, allegedly orchestrated a substantial misappropriation of funds from investor accounts," the complaint said.
Rothstein headed the second prominent legal firm to implode in South Florida in a month. He refused to resign as a 50 percent shareholder in the firm, Coffey wrote. Coffey, a former Miami U.S. attorney and Democratic Party attorney, said he had no comment on the complaint.
Rothstein is credited with bundling millions of dollars for GOP presidential candidate John McCain and numerous state and Broward County races. For his efforts, he was invited to Gov. Charlie Crist's wedding.
Money was taken "from investor trust accounts that made use of the law firm's name," the lawsuit said. The money was not associated with cases handled by the fast-growing, 7-year-old law firm but from the structured settlement business created and operated by Rothstein, according to the complaint. The business purchased structured legal settlements and sold them to investors.
A source told the Daily Business Review the amount allegedly misappropriated by Rothstein was at least $200 million but could be as high as $500 million.
"Immediate judicial action is being sought to facilitate the investigation and accounting of investor funds and to address the ongoing affairs of the firm in an appropriate manner," Coffey wrote in the complaint. After the hearing, he said, "the law firm is facing significant financial challenges."
Rothstein maintained iron-fisted control of the law firm's finances, and its attorneys had limited knowledge of the alleged scheme until just recently, according to the complaint.
"I trusted him," Rosenfeldt said of Rothstein. "Scott was like a brother to me."
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