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Feds: Fla. Attorney Rothstein's Alleged Fraud Could Hit $1 Billion
Daily Business Review
November 13, 2009
An alleged investment fraud operated by disgraced Fort Lauderdale, Fla., attorney Scott Rothstein could mount to $1 billion and involve thousands of victims, the FBI said Thursday.
In a rare outreach effort, the FBI and Internal Revenue Service issued a public plea asking fleeced investors to come forward.
Investors in what appear to be fictitious structured settlements began complaining late last month that payments had been skipped, and the discovery has brought down the operations of Rothstein's law firm, Rothstein Rosenfeldt Adler.
Documents offered to prospective investors indicate the law firm guaranteed payments to investors in what is described as a Ponzi scheme. But the firm denied any knowledge of the investment pool.
John V. Gillies, the FBI chief in Miami, emphasized the venture was "not a one-man show."
Meanwhile in U.S. Bankruptcy Court, an attorney for the law firm's receiver, former Miami-Dade Circuit Judge Herbert Stettin, announced Stuart Rosenfeldt is out as the firm's chief executive officer, and Stettin is assuming full control of the firm.
An involuntary Chapter 11 bankruptcy petition was filed Tuesday against the firm, and the first hearing was held Thursday morning.
Berger Singerman attorney Jordi Guso, who represents Stettin, said the firm consents to the filing and was about to file its own bankruptcy petition anyway.
The firm has been operating on a shoestring after a review of its accounts found there was too little to pay employees at what had been a 70-lawyer operation.
A civil forfeiture complaint filed in federal court Monday seeks control of eight Broward County properties bought or controlled by Rothstein and linked to fraud.
The FBI news conference was unusual. The agency normally brings in news media to announce major arrests and major cases, but Rothstein has not been charged.
Gillies said Rothstein has not been arrested because investigators want to take their time getting as much information as possible to build a solid case for prosecution.
Federal agencies took weeks to charge Bernard Madoff after he admitted swindling investors in a Ponzi scheme. The same was true for Texas financier R. Allen Stanford, who faced civil charges while prosecutors developed a criminal case charging him with selling $7 billion in fraudulent certificates of deposit to clients through his offshore bank in Antigua.
To assist the Rothstein investigation, the FBI has set up an e-mail site and a toll-free hotline to seek information about investment losses or any other details about Rothstein.
Explaining the news conference itself, FBI spokeswoman Judy Orihuela said,
"I believe they used it in Houston for the Stanford case," referring to Stanford.
