Rothstein blames associates in $1.4B scam

Convicted Ponzi schemer Scott Rothstein said his two former law partners knew he was illegally moving money through their booming downtown Fort Lauderdale firm and did nothing about it, according to transcripts of his testimony released Wednesday.

Rothstein not only implicated Stuart Rosenfeldt and Russell Adler, but said seven other attorneys within and outside the Rothstein Rosenfeldt Adler firm helped keep the Ponzi scheme alive. His extraordinary sworn statements came in the first hours of a 10-day deposition he started giving last week, offering his first detailed account of his $1.4 billion Ponzi scheme, the largest financial fraud in South Florida history.

Rothstein, who has been brought to Miami from a federal prison cell so he can be questioned by lawyers, wove a tale of corruption and greed, describing how outside attorneys were paid off to lie, how he laundered money and how he put bank officials “in his pocket.”

“There is a very large category of people that fell within the … what we fondly refer to as living the rock star or Rothstein lifestyle,” Rothstein said. “And that is, in fact, we paid off a substantial number of the people that we were ultimately, for lack of a better term, bribing to do our dirty work.”

In his first testimony ever about his criminal activities, Rothstein’s massive financial fraud, for which he was sentenced in 2010 to 50 years in prison, comes across as not so much as a methodical scheme, but as a daily scramble to keep the money coming in and investors in the dark. Rothstein is set to wrap up his testimony Friday in the closed-door proceedings where he is answering the questions of more than 30 attorneys involved in the civil litigation arising from his financial misdeeds.

Among the attorneys named by Rothstein as aiding him was Ken Padowitz, a well-known former Broward homicide prosecutor who shared office space with the firm. Rothstein described Padowitz, who ran for judge in 2006, as being “involved on a sublevel,” helping draft a false legal opinion letter to help Rothstein attract new funding.

Attorneys for Rosenfeldt, Adler and Padowitz denied the allegations leveled by Rothstein, saying people need to consider the source—an accomplished and admitted con man desperate to reduce the prison time he is serving for his five felony convictions.

“Ken’s impeccable reputation in the community as a former assistant state attorney and homicide prosecutor speaks for itself,” said Padowitz’s attorney, David S. Weinstein. “Scott Rothstein’s reputation for dishonesty speaks for itself. Rothstein has lived a complex series of lies in order to prop up his scam.”

Adler’s attorney, Fred Haddad, said he rejects anything Rothstein has to say.

“The only way out of jail is to dump on those he knows,” Haddad said.

Rothstein’s Ponzi scheme, which collapsed around Halloween 2009, revolved around investors believing they were buying big-dollar legal settlements in sexual harassment and whistleblower cases from plaintiffs who preferred to get a lump payment quickly rather than wait for all the money. The now-disbarred attorney said his office staff created hundreds of phony settlements, making up names of people and companies.

But the swindle was in jeopardy of being exposed when New York hedge funds questioned how the law firm was getting so many legal settlements referred to it, Rothstein said. He said Adler helped round up outside attorneys to meet with suspicious investors and lie about sending the cases to the firm.

Rothstein named local attorneys Steve Rossi, Howard Herskowitz, Doug Bates and Wayne Koppel as going along with the plan, lying about referring cases and giving the investors “tremendous comfort and saving the Ponzi scheme.” Rothstein said he gave Adler cash to pay off the attorneys.

Herskowitz’s attorney, Robert Nicholson, said his client referred a small number of personal injury cases to Rothstein’s firm, but never did what Rothstein described or take such a payment.

“Any suggestion that Howard Herskowitz was an active or knowing participant in Scott Rothstein’s Ponzi scheme is a pure fabrication,” Nicholson said.

Attempts by the Sun Sentinel to reach Rossi, Bates and Koppel by phone Wednesday were unsuccessful.

Rothstein said the other people inside the RRA firm who had knowledge of illegal activities were attorneys David Boden and Steven Lippman, his former chief financial officer Irene Stay, his former chief operating officer Debra Villegas, his uncle Bill Boockvor, computer technicians Curtis Renie and Bill Corte, office staff members Marybeth Feiss and Amy Howard and two paralegals.

Villegas, Renie and Corte have all been sentenced for their roles in the scheme, while Feiss and Boockvor were criminally charged this month.

Boden’s attorney, David Vinikoor, said his client would be exonerated if is criminally charged, while Lippman’s attorney could not be reached for comment.

Rothstein said that many within his 70-lawyer firm had no clue about his criminal activities and if they did, felt that some of them would have reported him to authorities.

“In a law firm that size, it’s not difficult to hide information … They were interested in practicing law and in properly representing clients, so it wasn’t difficult to hide it from them,” he said. Rothstein described Rosenfeldt as being “in a unique situation.”

Rosenfeldt’s attorney, Bruce Leher, said Wednesday the first his client had known about Rothstein’s criminal activities was when Rothstein briefly fled to Morocco.


Source:  Miami Herald