MIAMI (CN) – In a nightlong raid, federal agents seized documents from the office of Scott Rothstein, a Fort Lauderdale attorney suspected of his using firm’s name to run a multimillion-dollar Ponzi scheme. Rothstein, who apparently fled to Morocco as his partners unraveled his scheme late last week, returned to the United States and is reported to be trying to trade information for leniency.
FBI and IRS agents searched Rothstein’s offices Wednesday night. “The agents arrived around 6:30 p.m. and didn’t leave until 5 a.m.,” according to the South Florida Business Journal.
Rothstein, 47, was a founder and CEO of Rothstein Rosenfeldt Adler, which employs more than 70 attorneys in Florida, New York and Venezuela.
Rothstein’s former partner, firm president Stuart Rosenfeldt, sued Rothstein on Monday, when Rothstein’s whereabouts were still unknown, seeking dissolution of the firm and a court-appointed receiver. Rosenfeldt the firm had just learned of Rothstein’s doings, which he hid from his partners.
Rothstein is suspected of running a multimillion-dollar Ponzi scheme by selling interests in settlements that did not exist.
The Miami Herald reported that Rothstein fled to Morocco last Friday, after his clients called the law firm to complain that they were missing millions of dollars.
Rothstein sent his law partners a text message on Oct. 31 that indicated he was contemplating suicide, according to the Florida Sun-Sentinel.
The South Florida Business Journal reported that he returned to country Tuesday and “may be attempting to negotiate leniency in exchange for providing information.”
In response to the law firm’s complaint, Broward County Judge Jeffrey Streitfeld on Tuesday appointed retired Miami-Dade County Judge Herbert Stettin as receiver of the firm.
William Scherer, an attorney representing investors, told the Miami Herald that Rothstein’s investors had $500 million deposited in a Canadian bank on Oct. 23 and that the money was gone seven days later.
Another attorney representing investors, Jeffrey Sonn, said in an interview that he has talked to other lawyers who said investors in Morocco gave Rothstein $85 million, and that investors were paid as much as 20 percent in commissions to lure others into Rothstein’s deals.
Rothstein appears to have drained the firm’s accounts.
“I believe there are about $500,000 in operating funds, maybe slightly more,” Grant Smith, an attorney at the firm, said at a court hearing. “He said the firm set up new bank accounts Tuesday for funds that started to come in over the weekend,” the Herald reported.
A hearing is set for 3 p.m. today (Friday) before Broward County Judge Jeffrey Streitfeld, to confirm details about the duties of Stettin, who will have power to investigate the firm’s financial accounts.
But federal involvement could bring new jurisdiction to the case.
Here is Courthouse News’ Nov. 3 story on the firm’s complaint against Rothstein.
Prominent Florida Attorney Vanishes, Leaving Big Firm With Questions
FORT LAUDERDALE (CN) – Attorneys with Rothstein Rosenfeldt Adler, a 70-attorney international law firm, say they learned “with surprise and sorrow” that managing partner and CEO Scott Rothstein “allegedly orchestrated a substantial misappropriation from investor trust accounts that made use of the law firm’s name.” Firm president Stuart Rosenfeldt seeks a receiver and dissolution of the firm, saying the problems were discovered “in the past few days.”
The Miami Herald reported today that Rothstein, 47, is suspected of “operating a Ponzi scheme by selling hundreds of millions of dollars in fabricated legal settlements.” Rothstein’s attorney said the lawyer has left the country and his whereabouts are unknown, but he is expected to return this week, the Herald reported.
According to the complaint in Broward County Court, “Stuart Rosenfeldt and the firm have filed this action to minimize any further damages caused by Mr. Rothstein, to emphasize that the innocent attorneys and staff of the complaint are not implicated in this controversy, and, most importantly, to protect the best interests of their clients.”
Rosenfeldt says Rothstein, “a charismatic and talented lawyer, has controlled firm management, especially financial matters, and has not extended access to core financial matters and records to any other attorney in the firm.”
Rosenfeldt and Rothstein founded the firm in 2002 in Fort Lauderdale. They have seven offices, in Florida, New York and Venezuela, and employ more than 70 lawyers.
Rosenfeldt says attorneys in the firm learned “in the past few days about irregularities surrounding a settlement funding business operated by Rothstein. The settlement funding business involved the purchase of structured legal settlements and the sale of these settlements to investors. Various investors have informed the firm that they believe that substantial funds are not accounted for and are missing. A review of the firm’s records undertaken over this past weekend indicates that various funds unrelated to the direct practice of law cannot be accounted for, circumstances suggesting that investor money may have been misused by Rothstein, who controlled all such accounts. Some investors allege that defendant Rothstein may have been fabricating nonexistent structured legal settlements for sale to investors.”
Rosenfeldt says any such transactions were done “without any knowledge of the other attorneys at the firm, and, in fact, Rothstein actively endeavored to hide the existence of the scheme. … (I)t appears that defendant Rothstein may have transferred substantial sums out of the investor trust accounts, and that the emergency appointment of a receiver is necessary to account for and, if appropriate, consider taking action to recover the missing investor trust account funds.”
Rosenfeldt says Rothstein refused to resign, and he owns 50 percent of the firm. Rothstein seeks judgment of dissolution and appointment of a receiver. He and the firm are represented by Kendall Coffey with Coffey Burlington of Miami.
Rothstein and his firm were major donors to Florida politicians, giving about $600,000 to the state Republican Party and about $200,000 to Democrats, leaving politicos worried about whether they should return the money, the Herald reported.
“On Friday, ‘He walked out on his wife and said, “Goodbye, baby, see you tonight,” kissed [her] and went to the airport,’ said a source close to the law firm,” according to the report in this morning’s Herald.