Ponzi Scheme
Rothstein gets 50-year sentence for $1.2 billion Ponzi scheme
Scott Rothstein, a one-time run-of-the-mill labor and employment attorney turned larger-than-life power broker, was sentenced today to 50 years in federal prison for engineering one of Florida's biggest investment scams.
U.S. District Judge James Cohn in Fort Lauderdale imposed a longer term than both the prosecution and defense suggested for the $1.2 billion Ponzi scheme, which cost about 400 victims a total of $400 million.
"This defendant has put himself in the pantheon of fraudsters," Assistant U.S. Attorney Lawrence LaVecchio said.
While the defense argued for a relatively light sentence based on Rothstein's cooperation after his fraud was exposed, the judge said he couldn't overlook the defendant's "greed and arrogance as part of his history."
The government was seeking a sentence of 40 years. Defense attorney and former Rothstein law partner Marc Nurik asked for a 30-year sentence. The federal probation office recommended a life term.
Rothstein, who looked noticeably thinner than his days as a man of influence, stood to face the standing-room-only courtroom crowd and said he wanted to address his victims, employees at his defunct law firm, people who trusted him and fellow lawyers "who I brought shame upon."
"I don't expect you to forgive me," he said. "No matter what happens here today, I will continue to try to undo the terrible harm I caused. I am ashamed and embarrassed."
Rothstein's wife, Kim, bent over and started sobbing hysterically when she reached an elevator bank after leaving the courtroom. She was comforted by family members. Kim Rothstein has kept a low profile since her husband was charged.
The law firm's bankruptcy trustee is seeking more than $1 million from her, claiming she spent "well into the millions of dollars just on jewelry purchases alone." The couple married in 2008 while the fraud was running. In a deposition, Kim Rothstein said she knew nothing of her spouse's crimes but spent so much money on gowns, purses and gifts that she couldn't remember it all.
Steven Bitton, a Plantation municipal employee who was represented by Rothstein in a wrongful termination case, was the only victim to speak at the sentencing hearing.
Bitton told the judge he visited the law office regularly. Rothstein, he testified, would declare he was working on the case. But Bitton did not learn until after Rothstein's fraud was exposed that the city of Plantation had offered to settle Bitton's case for $650,000.
"Every month for four years I went to see him and got one B.S. story after another," Bitton said outside court.
Rothstein, in a contrition-filled letter to the judge last week, wrote that he turned to crime to keep his Fort Lauderdale firm, Rothstein Rosenfeldt Adler, afloat after expanding faster than its billings. The Broward County native said he eventually settled on a scheme to finance non-existent settlements.
He targeted friends and investors attracted by word of mouth. Auto magnate Ed Morse claims more than $57 million in losses.
These days Rothstein serves the government as a snitch. He has been held in protective custody for months after helping set up a reputed organized crime figure before federal prosecutors rolled out a five-count fraud and conspiracy complaint last Dec. 1.
Admitted co-conspirator Debra Villegas is scheduled to plead guilty Friday to fraud charges. Villegas rose to become chief operating officer of RRA, which grew to about 70 lawyers.
The firm appeared to be a powerhouse, coming out of nowhere and landing in an opulent suite of offices in a high rise on Las Olas Boulevard. But in reality it was all a facade, as Rothstein called it. He installed cameras to spy on his staff and built an inner sanctum where only a few, such as Villegas, were permitted to work.
Others had to communicate by intercom if they wanted to speak to Rothstein. He plastered the walls of the office with sports memorabilia and photographs of himself with politicians such as Govs. Charlie Crist and Arnold Schwarzenegger.
Cohn said the case generated so much interest because Rothstein infiltrated so many spheres of public interest: sports, charities, politics and the legal profession.
The Ponzi scheme generated so much money that Rothstein didn't know what to do with it. He bought two red Ferraris, almost indistinguishable from each other, ostentatious watches, real estate, yachts, expensive suits and invested in high-tab restaurants where he would hold parties and socialize with specially invited guests.
It all came crashing down last October. Rothstein said he didn't have the courage to kill himself and instead fled to Morocco, which doesn't have an extradition treaty with the United States. He decided to return home days later after intense praying.
Rothstein did his profession no favors. He fooled his partners, clients, politicians and a broad spectrum of local charities.
"His conduct reflected very poorly on the legal community, but he is one person," said Miami defense attorney Paul Calli. a partner at Carlton Fields who is not involved in the criminal case. "He was a nobody before he started, and soon he will be nothing more than a footnote."
Rothstein's sentencing is far from the final act in his criminal case. Villegas is the only other person to face criminal charges in the scheme. There is a fight between the bankruptcy attorneys dismantling his defunct law firm and federal prosecutors over control of recovered assets. Money-losing investors have sued a slew of defendants, including TD Bank, which Rothstein used as a conduit to move his stolen millions.
(Published by Law.com – June 9, 2010)