Trustee Says RRA Attorney Helped Funnel Money to Former Boss

John Pacenti

Daily Business Review

Attorney Steven Lippman helped his former boss, jailed Ponzi scammer Scott Rothstein, arrange fraudulent transfers while collecting millions of dollars in bonuses, loans and personal expenses, a bankruptcy lawyer claimed in court Wednesday.

The allegations came from attorney Charles Lichtman, who is representing the court-appointed trustee picking through the ruins of Rothstein's former Fort Lauderdale, Fla., firm -- Rothstein Rosenfeldt Adler -- to recover money for creditors. Rothstein is awaiting sentencing after pleading guilty to coordinating a $1.2 billion fraud.

Some of the money Lippman received from the law firm went to political candidates and personal purchases, Lichtman said.

An attorney for Lippman told U.S. Bankruptcy Judge Raymond Ray that his client did not breach any fiduciary duty and was just following Rothstein's instructions.

"Mr. Lippman at best was a conduit," his attorney, Patrick Scott of GrayRobinson in Fort Lauderdale, told Ray.

Scott said none of the money funneled into an old account set up by Lippman's previous firm ended up in his client's pocket.

Ray quickly denied Lippman's motion to dismiss the lawsuit brought by Herbert Stettin, the trustee managing what is left of the firm's finances. Stettin hasn't been shy about going after former RRA lawyers or even the government to retrieve money.

Of $8.9 million in RRA loans to Lippman, he has not paid back $2.2 million that went to third parties, said Lichtman, a Berger Singerman attorney representing Stettin.

After the hearing, Lichtman said some of the unreturned money went to investors in Rothstein's Ponzi scheme.

Lippman also used some of the money he received from the firm to donate "hundreds of thousands of dollars" to political campaigns in 2008 in his name and his wife's name, Lichtman told the judge.

Lippman received $3.1 million above his base salary and was reimbursed for $930,000 on a private credit card for purchases made by his wife, Marcy, and himself, including membership at the Weston Country Club and furniture.

Lippman did not respond to a call for comment by deadline.

Scott said there was no specific "intent to defraud" allegation in a Feb. 11 complaint filed by Stettin against Lippman, accusing him of working hand-in-hand with Rothstein.

Lichtman got up from his seat and interrupted Scott to show him language in the complaint.

"You might want to correct yourself," Lichtman said.

"I would not," Scott retorted.

Lichtman said Lippman's motion to dismiss was specious.

"We don't even think it's a close call," he said.

What exactly Lippman and his wife knew about Rothstein's fraud remains largely unknown. News media were barred from Marcy Lippman's deposition with bankruptcy attorneys last week, and the transcript remains sealed under court order.

Steve Lippman's deposition is scheduled Friday. He has said he will not invoke his Fifth Amendment right against self-incrimination. News media have also been barred from Lippman's deposition at his request.

In a second hearing Wednesday, Ray denied a motion to reconsider his order requiring two former RRA partners to surrender their logons to an outside computer file storage system.

The files are administered by Burbank, Calif.-based Qtask, also one of Rothstein's investments. Former RRA attorney Robert C. Buschel of Fort Lauderdale's Buschel & Gibbons argued for the company that it should not have to turn over anyone's logon for privacy reasons.

He said the bankruptcy attorneys could get access to pertinent files without accessing personal information, but Lichtman quoted William Shakespeare's "Hamlet," saying, "Doth protest too much."

Ray wants the information in 10 days and warned, "If I have to enforce my order, I will do so."

Stettin attorney Paul Singerman said firm assets started at $956,000 and have grown to $3.86 million.