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Tearful Ex-General Counsel Details Huge Ponzi DiscoveryDavid Boden gives testimony in all-day deposition concerning fraud committed by Scott Rothstein
Scott Rothstein's former law firm general counsel cried Thursday as he recalled how he discovered his boss had committed a fraud of epic proportions. David Boden, who worked for Rothstein Rosenfeldt Adler for 18 months before it imploded last November, testified in a deposition about discovering the $1.2 billion Ponzi scheme. He was the subject of an all-day deposition by attorney Chuck Lichtman of Berger Singerman, which represents trustee Herbert Stettin in the firm's bankruptcy.
Daily Business Review2010-04-30 12:00:00 AM
Scott Rothstein's former law firm general counsel cried Thursday as he recalled how he discovered his boss had committed a fraud of epic proportions.
David Boden, who worked for Rothstein Rosenfeldt Adler for 18 months before it imploded last November, testified in a deposition about discovering the $1.2 billion Ponzi scheme. He was the subject of an all-day deposition by Fort Lauderdale attorney Chuck Lichtman of Berger Singerman, which represents trustee Herbert Stettin in the firm's bankruptcy.
Boden, 48, cried several times -- and stopped the deposition at one point to compose himself -- as he recalled finding hundreds of millions of dollars were missing from the firm's TD Bank accounts. He said he was told the accounts were frozen Oct. 30, shortly after receiving notice from Richard Pearson, RRA's investment broker, that he had not been paid and would no longer do work for RRA.
At the same time, George Levin, Rothstein's largest investor, told RRA equity partner Stuart Rosenfeldt that he would be willing to hand over $100 million -- later upped to $300 million -- to cover the missing funds, Boden said.
"That didn't sound right to me," Boden said.
Boden said he told Rosenfeldt to ask the firm chief financial officer, Irene Stay, to check the firm's bank accounts. Stay repeatedly refused, saying only Rothstein, who was out of the country, could access those accounts. She finally left the room crying, Boden said.
At that point, Boden asked Rosenfeldt if he knew anyone at TD Bank. Rosenfeldt offered to call senior vice president Frank Spinosa, who immediately put his branch manager on the phone. The branch manager e-mailed two sets of trust account balances to the two men. They were shocked to see the balances had gone from $13 million on Oct. 23 to $720,000 a week later. There were accounts at other banks, too.
The same day, firm partner Marc Nurik told them he received an e-mail from Rothstein saying he was in London. Boden wept as he related how Nurik told the partners he was resigning to represent Rothstein. Nurik handed the men the names of three attorneys who could represent the firm, among them former U.S. Attorney Kendall Coffey.
Boden said he told Nurik, "I can't believe you're doing this." Nurik responded, "Scott Rothstein has been my friend for 25 years. I can't desert my friend." Boden said he responded, "You need to think about that -- you're deserting us."
Lichtman asked if Nurik felt obligated to Rothstein because Nurik was living rent-free in a waterfront Fort Lauderdale house owned by Rothstein and had received law firm loans. Boden also was living in a house owned by Rothstein but said he was paying $10,000 a month rent.
"I didn't ask," Boden said. He also said he didn't know where Nurik's $50,000 retainer from Rothstein came from.
Boden convened a meeting at his house the next day -- Halloween -- with Rosenfeldt and RRA partners Russell Adler, Frank Smith and Les Stracher. Partner Steve Lippman was out of town.
Nurik showed up and said, "Hypothetically, someone you guys know committed a major fraud," Boden said. Hands shaking, Boden said he threw Nurik out of his house.
During the deposition, Lichtman also grilled Boden about what he knew about the bogus settlement financing at the heart of Rothstein's Ponzi scheme. Boden said he did not know anything about the fake settlements but signed off on them because "I trusted Scott." He said many of the settlements were attributed to cases generated by other firms.
Lichtman asked, "Why would they need Scott to come in and settle?"
Boden answered, "I don't know."
Lichtman asked if Boden had ever met any of the plaintiffs, and Boden said he had met two plaintiffs.
Boden said he was comfortable with the settlements -- which turned out to be phony -- because Rothstein provided loan documents from hedge funds, letters from labor attorneys at other firms describing the cases, tax forms on completed cases and letters from TD Bank listing trust accounts. He also said he was able to verify the accounts by phone with TD Bank.
"How did you know it was actually someone from TD Bank on the phone?" Lichtman asked.
"I didn't," Boden answered.
Boden said he went to work for Rothstein after spending 15 years as general counsel for Corporate Management Advisers of Plantation, where he managed the business affairs of National Beverage and handled deals totaling several billion dollars. He said Rothstein, who handled a case for his company, lured him away with a promise of a cut of all his business ventures.
Boden initially worked as general counsel on a Rothstein start-up luxury cruise line called Jewel River Cruises and then worked on Qtask, a data storage system that Rothstein invested in and used at RRA.
Boden's starting salary was $300,000, but Rothstein quickly raised it to $500,000. Rothstein also at one point wrote him a check for $250,000 to make up for his lost income from his old job.
"I needed a change in my professional career," he said. "I wanted some control of my destiny."
Lichtman asked Boden why he never received a Florida Bar license and was licensed only in New York despite receiving the title of general counsel at RRA. Boden said he was preparing to take the Florida Bar exam last year but Rothstein told him it wasn't necessary.
"But isn't it your responsibility to make sure you are in compliance with the Bar?" Lichtman asked.
"I trusted the man," Boden said.