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Fla. Firm's Attorneys Rally Their Defenses as Partner Faces Fraud Allegations
FBI and IRS agents raided the law firm Wednesday, seizing 44 boxes of evidence, hard drives and trash
Daily Business Review
November 06, 2009
The downfall of one-time power broker Scott Rothstein amid fraud allegations that investors say cost them $400 million or more is generating new business for lawyers all over South Florida.
Rothstein Rosenfeldt Adler attorneys, along with banks listed in papers seized from the office of ousted firm chairman Rothstein, and investors who claim they have been fleeced have contacted South Florida's high-profile legal elite seeking representation.
FBI and Internal Revenue Service agents raided the firm Wednesday night and stayed for 7 1/2 hours, seizing 44 boxes of evidence, hard drives and trash. Investors say they bought into sexual harassment and whistleblower settlements at discounts to give clients money up front, but the clients may not have existed. The law firm disclaimed any knowledge -- until days ago -- of what it called Rothstein's side business.
An inventory of items seized by investigators listed structured settlement agreements, certificates of verification and investment deposit logs. Agents also found a flight log for a one-week private jet trip to Morocco that ended with Rothstein's surprise return Tuesday, a Ferrari key, a safe deposit box and jewelry records for Rothstein, who collected luxury watches. Bank deposits were seized as well as boxes of "deal folders."
Wisecracking criminal defense attorney Fred Haddad, who has been in court for everyone from Mafia figures to a member of the Irish Republican Army, is representing name partner Russell S. Adler. Although he's on the nameplate, Adler is not an equity partner. Rothstein and Stuart Rosenfeldt were 50 percent partners until the firm was placed in receivership Tuesday.
"The whole law firm is being talked about," said Haddad, one of Adler's neighbors. "Every single person in there should have a lawyer or someone. Innocent people need a lawyer more than guilty people in something like this."
The firm that started with seven attorneys in 2002 grew to 70 under Rothstein's leadership. He became known for an ostentatious show of wealth, buying high-end homes, collecting luxury cars, being photographed with leading Republicans on the national stage and making regular appearances on the charity circuit.
Rothstein plastered his walls with photos of himself with prominent political figures and sports heroes, including U.S. Sen. John McCain, Florida Gov. Charlie Crist, former New Mexico Gov. Bill Richardson and Miami Dolphins quarterback Dan Marino.
Facing the possibility of arrest, Rothstein has reportedly spent time with federal agents since returning to the country earlier this week. His law firm had only about $500,000 in operating funds, and many of its lawyers have consented to skip their pay.
HIRING TIME
With questions flying about criminal and financial exposure, people at the firm are on the hunt for attorneys. Some investors were looking ahead of them.
Norman Tripp, founder and chairman emeritus of Tripp Scott, has been retained to represent Rothstein friend and car dealer Ted Morse, along with his father, Ed Morse, and their company, Morse Operations. Ted Morse has reportedly lost $25 million to $65 million, sources said.
Former federal prosecutor Matthew Menchel of Kobre & Kim in Miami is representing Banyon Investment Fund, which reportedly lost more than $300 million in Rothstein's settlement business.
Menchel referred comment to Banyon spokesman Jesse Derris, who declined to provide information about the fund but said the firm contacted the U.S. Attorney's Office last weekend when Rothstein was in Morocco. Banyon's name was on documents seized from Rothstein's office, including a folder and investment deposit logs. Papers bearing Banyon's name were found in Irene Stay's office at the firm. She works in the firm's accounting department.
Debra Villegas, the firm's chief operating officer, is on administrative leave. Rosenfeldt said she worked with Rothstein for 17 years, and it was better for appearance's sake that she not be at the office.
"She's doing what I wish I could do," he said. "We agree she should stay home because of issues with her closeness to Scott is very well-known."
TAKE NOTHING
High-profile commercial litigator William Scherer of Conrad & Scherer is representing investors who claimed to have been duped out of $75 million. Broad and Cassel's Miami managing partner Mark Raymond, who represented BDO International in an accounting negligence case, and Sonn & Erez lawyer Jeffrey Sonn have announced they are representing investors.
Top-flight defense attorney David Bogenschutz, who represented Broward County Sheriff Ken Jenne in a public corruption case that ended with a plea and prison time, said he has been retained by an undisclosed client. Jenne joined RRA's consulting arm when he got out of federal prison.
Fort Lauderdale attorney David Vinikoor is representing the firm's general counsel David Boden. Several investors said they met him at the firm on their investments. Vinikoor declined to comment other than to say, "David continues to be a cooperating witness with the federal government." He said all RRA attorneys are "just as much victims as anybody."
Fort Lauderdale criminal defense and family attorney Howard Greitzer of Lyons & Sanders said he is representing six undisclosed RRA attorneys.
"A number of lawyers have consulted with me and asked me to represent them, to provide advice and direction in terms of both their ethical and legal responsibilities to their clients," he said.
Greitzer said his clients need advice on how to balance an ongoing duty to the firm with their clients' best interests. He advised the lawyers not to remove anything from their offices -- not even pictures -- if they decide to leave the firm.
"They shouldn't take anything without the knowledge and consent of the receiver," Greitzer said.
He also advised the lawyers to tell their clients to put all questions, concerns and requests for documents in writing for submission to the firm's management.
Coral Gables criminal defense attorney Joel Hirschhorn of Hirschhorn & Bieber said the unraveling of Rothstein's firm is good for lawyers in a slow economy.
"It's sort of like the Criminal Defense Lawyers Welfare Relief Act," he said. "Basically, anybody who has had a position above a secretary ought to be lawyered up. And even secretaries ought to be cautious of speaking with authorities without counsel."
Hirschhorn said he has been contacted by someone associated with the RRA law firm but hasn't decided whether to take the new client.
Miami legal malpractice attorney Warren Trazenfeld noted, "In my experience, lawyers only hire criminal defense lawyers if they're concerned about their own exposure or being questioned by law enforcement authorities."
