Former Rothstein Firm Partner Sued for $8 Million

John Pacenti

Daily Business Review

The bankruptcy trustee for jailed attorney Scott Rothstein's defunct law firm set his sights Thursday on equity partner Stuart Rosenfeldt, claiming $8 million in excessive compensation and linking bonuses to political contributions.

Rothstein has pleaded guilty to racketeering, fraud and conspiracy in a $1.2 billion Ponzi scheme based on fake structured settlements sold through the 70-lawyer Rothstein Rosenfeldt Adler.

Federal prosecutors accused Rothstein of funneling some of the tainted money to employees of the Fort Lauderdale, Fla.-based firm for political campaign contributions to avoid federal and state election donation caps.

Herbert Stettin, the firm's court-appointed trustee, is demanding the return of $7.94 million from Rosenfeldt and his wife, claiming he was entitled to a maximum $1.15 million in the past four years but received much more. Rothstein and Rosenfeldt were the firm's only equity partners.

Stettin filed similar suits Tuesday against former name partner Russell Adler, seeking $1.2 million in repayments on loans and salary bonuses, and in December against former firm partner Steven Lippman for $3.8 million, seeking the return of "improper" payments.

Without explicitly alleging illegal campaign contributions, the latest suit lists bonus and donation dates for Rosenfeldt, Adler and firm partner Steve Lippman.

For example, the trustee claims Rosenfeldt and Adler received bonuses of $140,000 each from the firm May 19, 2008. Ten days later, Rosenfeldt donated $140,000 and Lippman and his wife, Marcy, gave $65,000 and $60,000, respectively, to U.S. Sen. John McCain, the Republican presidential candidate. About two weeks later, Adler donated $80,000 to the McCain campaign and his wife, Katie, donated $39,200.

The lawsuit alleges bonuses to the three men track to political contributions through 2008 and much of 2009.

Rosenfeldt's attorney, Bruce Lehr, with Lehr Fischer & Feldman in Fort Lauderdale, said his client did nothing wrong. "My client took draws of money that he assumed were clean and legitimate monies and did political donations pursuant to his political tenets."

Rosenfeldt is currently practicing law with his new firm, Rosenfeldt & Birken.

Also Thursday, creditors met in the federal courthouse for an update on the defunct law firm. Stettin said he has collected $3.7 million primarily from personal injury settlements. In the clawback department, the trustee has recovered $1 million in charitable contributions, $389,000 in political contributions and $152,000 from the auction of office furnishings.

Stettin said he would seek the return of $357,000 from the Internal Revenue Service in uncashed checks for payroll taxes.

But the trustee has been unable to find IRS returns for 2007 and 2008. When an IRS representative asked if the trustee was going to file them, Berger Singerman partner Paul Singerman, one of Stettin's attorneys, said, "It's not a high priority."

All of the firm's offices have been closed, and the firm is down to two employees.

Creditors were told the Justice Department is intervening to go after Scott Rothstein's life insurance policy and the law firm's malpractice policy.

On the upside, the firm's Super Bowl skybox was sold for $7,172.