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$100M Suit Claims Ex-Firm Leader Peddled Phony Investments in Sex Scandal Case
Law firm, not named in lawsuit, has shrunk to 14 employees from a height of 167 employees before investors began complaining of skipped payments
Daily Business Review
November 23, 2009
Photodisc Green
Fort Lauderdale, Fla., law firm leader Scott Rothstein would piggyback on actual lawsuits, including one tawdry case his firm was handling, to solicit investors in an alleged Ponzi scheme, according to a lawsuit by investors claiming more than $100 million in losses.
The Broward Circuit Court case filed Friday alleges Rothstein told investors he was handling confidential settlements with billionaire financier and convicted sex offender Jeffrey Epstein, who was accused of engaging in sexual activities with underage girls.
Rothstein’s former firm, Rothstein Rosenfeldt Adler, sued Epstein on behalf of a woman identified in her federal suit only as Jane Doe. Rothstein told one potential investment group, D3 Capital Club, that the firm’s top-notch investigative team had found other molested girls.
Rothstein showed the D3 investors 13 banker boxes full of court documents and allegedly used discovery in the case to embroider his investment offerings, the lawsuit contends.
"RRA relentlessly pursued flight data and passenger manifests regarding flights Epstein took with other famous individuals, knowing full well that no underage women were on board and no illicit activities took place," the lawsuit filed Friday claims. The firm also attempted to take depositions of the famous passengers.
Rothstein, who would show off flight logs, told potential investors that Epstein didn’t want news to come out about illicit airborne acts and was willing to pay $200 million to settle claims.
In an Oct. 6 letter, Rothstein promised a $12 million investment in a sexual harassment case would produce an $18 million payout.
"She is giving up huge money as she wants the attacker out of her life," said the letter attached to the lawsuit. "She and her mom are moving the minute she gets her money."
Rothstein signed the letter: "Ciao ciao, Money never sleeps motherfucker :-)"
This is just one example offered in the 147-page lawsuit filed against Rothstein by several investors claiming losses exceeding $100 million. The fraud complaint claims Rothstein would show investors confidential pre-suit settlements with names redacted. He explained the defendants agreed to settle to avoid the embarrassing limelight brought by sexual harassment, whistleblower and tort cases. The settlements would be paid out over time, but the plaintiffs were willing to settle for less money up front. Rothstein told investors he would invest if he could.
The suit filed by Conrad & Scherer’s William Scherer also contends TD Bank served as the "critical linchpin legitimizing" a fraud and knew the law firm was moving hundreds of millions of dollars through its accounts.
"The Ponzi scheme simply could not have gained traction without TD Bank’s involvement in sanctioning or otherwise willfully failing to authenticate the origin of the enormous amounts of money coming through its doors," Scherer wrote. The lawsuit also names the firm’s general counsel David Boden, chief operating officer Debra Villegas and corporate development director Andrew Barnett.
Not named in the suit is the law firm, RRA, which will likely keep the suit in state court rather than getting caught up in bankruptcy proceedings.
The complaint assigned to Circuit Judge Jeffrey Streitfeld also names TD Bank, senior vice president of operations Frank Spinosa, assistant manager Jennifer Kerstetter and assistant vice president and branch manager Rosanne Caretsky. The lawsuit contends the bank officers met with investors and gave them letters claiming settlement proceeds can "only be paid directly to the investor’s designated account."
Frank Preve of Banyon Investment Fund is accused of serving as a feeder in Rothstein’s alleged fraud and operating from space in the law firm’s Las Olas Boulevard office. The lawsuit refers to the fund as Banyon Income Fund.
