Scott Rothstein (Melanie Bell)
When Scott Rothstein testified at the trial of a former attorney at his law firm, he boasted about helping federal authorities reimburse victims for every cent he stole for his $1.2 billion Ponzi scheme.
At the sentencing of Irene Shannon, Rothstein’s former chief financial officer, a federal prosecutor confirmed Rothstein’s claim. Indeed, all $363 million stolen from investors has been returned.
Between clawback lawsuits, judgments and bank settlements, Assistant U.S. Attorney Lawrence LaVecchio said all the victims have been reimbursed. His comments came almost as an aside at Shannon’s sentencing.
She joined 20 others who have been sentenced for crimes directly or indirectly tied to the disbarred Fort Lauderdale attorney.
Shannon, a trusted member of Rothstein’s opulent inner sanctum, received the maximum five-year prison sentence for helping him engineer the settlement financing fraud at his labor and employment firm.
Shannon, who served as chief financial officer at Fort Lauderdale-based Rothstein Rosenfeldt Adler, pleaded guilty in May to money laundering and defrauding a financial institution.
During her time at RRA, Shannon went by her ex-husband’s last name of Stay. She and Jeff Stay received $200,000 plus salaries and gifts, including a boat, from Rothstein.
U.S. District Judge Ursula Ungaro in Miami said she believed Shannon was remorseful and would not be a repeat offender but that severity of the fraud “cries out for a prison sentence.”
Ungaro said Shannon’s role was basically to move the money around bank accounts to cover Rothstein’s tracks.
“Ms. Shannon was really instrumental in allowing Mr. Rothstein to perpetrate this fraud,” the judge said.
But she praised defense attorney Brian Tannebaum, who secured a plea bargain calling for a five-year maximum term when the fraud loss drove the advisory federal guidelines to 27 to 33 years.
Shannon fared much better than Debra Villegas, the firm’s chief operating officer, who pleaded guilty almost immediately after Rothstein, who is serving 50 years after his downfall as law firm chairman and political power broker. Villegas is serving a 10-year sentence for helping Rothstein forge court documents to support his bogus settlements.
Both women were among the few employees allowed to work in Rothstein’s locked office suite at RRA.
Ungaro set a Nov. 21 hearing to determine the amount of restitution and Dec. 1 for Shannon to surrender to start her prison sentence.
Shannon, tearful but dignified, told Ungaro about the crippling depression that seized her when she learned of the scope of Rothstein’s crime in 2009.
“I couldn’t even bring myself to write a resume because I couldn’t bring myself to write the name of the firm I used to work for,” she said.
She went to work for Miami criminal defense attorney Brian Barakat, a former prosecutor who wrote a letter on Shannon’s behalf to the court. She also donated a kidney to her brother last year.
Tannebaum of Tannebaum Weiss in Miami said his client was just another pawn manipulated by Rothstein.
Tannebaum said Shannon’s highest level of education was a general equivalency degree and her CFO title was “illusionary,” he wrote in a sentencing memorandum.
Bookkeeper at best
“Shannon was at best a bookkeeper,” he wrote in the pleading. “While she had on-the-job education in the purpose of law firm trust accounts, she has no finance education and no college degree—in anything.”
As part the negotiated plea, Shannon admitted transferring hundreds of millions of dollars for Rothstein to keep up with payments to investors when new money comes in.
She also said she floated checks for Rothstein and lied to investors that their money was safe in accounts at TD Bank and Gibraltar Private Bank & Trust Co.
Rothstein told investors their money was going to pay lump-sum court settlements in employment and discrimination cases.
“While this was arguably the biggest scam in South Florida history, Irene Shannon is not the biggest scammer in South Florida history—far from it,” Tannebaum wrote in requesting a light sentence.
When RRA imploded in October 2009, Shannon stayed on to help make sense of the wreckage for the firm’s court-appointed bankruptcy trustee and was rehired by another law firm, Tannebaum said.
“This is a case that proves environment can be a large contributor to someone’s behavior,” he wrote. “Without Rothstein, Irene Shannon has proven to be a productive member of the legal profession in her nonlawyer role.”