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Attorney Stuart Rosenfeldt, Ponzi mastermind Scott Rothstein’s equity partner, is broke, attorneys for their defunct law firm’s bankruptcy trustee told a judge Tuesday.

As a result, trustee Herbert Stettin agreed to take a portion of a tax refund that could net about $1.6 million for the estate of the Fort Lauderdale law firm of Rothstein Rosenfeldt Adler.

U.S. Bankruptcy Judge Raymond Ray approved the settlement of the clawback lawsuit filed by Stettin, noting there were no objections.

But the settlement is nowhere near the $9.4 million Stettin’s attorneys said Rosenfeldt owed for excessive compensation, credit card charges and loans.

Ray also warned creditors that federal prosecutors could lay claim to the expected tax refund under forfeiture proceedings if Rosenfeldt winds up facing criminal charges in Rothstein’s $1.2 billion Ponzi scheme.

Sources say the federal prosecutors are readying a racketeering case flowing from the Rothstein investment fraud. Rosenfeldt has said he was unaware of Rothstein’s settlement financing scam.

"We know we are walking into a minefield because this is a unique way of solving a difficult problem, and this approach hasn’t been tested before," said attorney Chuck Lichtman, a Berger Singerman partner who represents Stettin.

Rosenfeldt is due $3.97 million from the Internal Revenue Service for the tax year 2007 but owes the IRS for 2008 and 2009 taxes. Under the settlement, another $250,000 would come from Rosenfeldt’s wife, Suzanne.

"We are taking pretty much all that is left," Lichtman said.

A small amount of the refund, which should be released by the IRS shortly, will be given to the Rosenfeldts to pay for a family matter.

Licthman told Ray he had not come across any similar settlements structured like this one but said it was the only option considering Rosenfeldt’s financial condition and the cost of taking the case to trial.

"The difficultly in collecting is what drove the train," Lichtman said.

RRA was forced into involuntary bankruptcy after Rothstein’s $1.2 billion Ponzi scheme fell apart in October 2009. Rosenfeldt made a brief, unsuccessful bid at the time to retain control of the firm.

Rothstein is serving a 50-year prison sentence for running the fraud. Four men were charged last week in the Rothstein fraud, and the only other RRA co-worker to face criminal charges so far is former COO Debra Villegas, who received a 10-year prison term.

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