Fort Lauderdale lawyer Scott Rothstein was a Republican ATM. In four years, he and his law firm gave $650,000 to Republican candidates and the state GOP. They gave nothing to Florida's Democratic Party and just a pittance to state candidates.
On Sept. 9, the state Democratic Party received a $200,000 check from Rothstein's firm, money he had pledged to donate at a fundraiser he hosted at his home for Chief Financial Officer Alex Sink.
About three weeks after the $200,000 contribution was recorded, Rothstein's firm landed on a list of law firms being considered for potentially lucrative work with the State Board of Administration — with an assist from Sink's chief of staff.
Sink, who along with Gov. Charlie Crist and Attorney General Bill McCollum oversee the board, said there was no connection between the contribution and her deputy's intervention for Rothstein's firm. She said she didn't know her chief of staff had put in a word for the law firm until the St. Petersburg Times asked her about it.
"Any lawyer who approached me or anyone on my staff about SBA type work — we talk to them, we hear them out,'' Sink said. "Then it's understood we'll refer you to the appropriate person and you need to take it from there.''
The SBA manages one of the nation's largest pots of public money — $136 billion in investments for 1 million current and future retirees and hundreds of cities, counties and school districts. In the wake of the financial meltdown, dozens of law firms clamored to represent the agency in securities class-action suits against U.S. companies, seeking to recover lost billions for taxpayers — and big fees for themselves.
SBA executive director Ash Williams, who reports to the three politicians who make up the oversight board of the SBA, said he had "courtesy'' calls "once or twice'' with a lawyer in Rothstein's firm.
"They (Rothstein's firm) were not shown favoritism,'' Williams said.
It all came to naught last month, when it was revealed that Rothstein is suspected of running a $1.2 billion Ponzi scheme from his law office, Rothstein Rosenfeldt Adler. He's in a detention center now, awaiting trial on federal fraud and racketeering charges.
His firm never got the chance to submit its application to represent the SBA in securities lawsuits, a deal that could have netted it millions in fees. But the behind-the-scenes efforts of Sink's chief of staff, Jim Cassady, show how politicized the hiring process can be.
Critics question how Rothstein's firm, with little experience in the securities field, got on the list of invitees to compete for complex, taxpayer-funded legal work.
"That's a political decision, let's be honest,'' said Jeffrey Sonn, a Fort Lauderdale lawyer who represents some of those who say Rothstein swindled them. "Of course, he would have the political juice to get on the list.''
Michael Hanzman, whose Miami-based law firm is considered one of Florida's top securities litigators, said he couldn't recall ever being invited to bid on a public job.
Hanzman said politics shades the process. "It's unfortunate and somewhat cynical, but I firmly believe it.''
Having GOP buddies such as Gov. Crist
In the weeks since the Rothstein scandal broke, much of the publicity has centered on the lawyer's ties to Gov. Crist. The two were once tight. Between February 2006 and August 2009, Rothstein and his law firm gave more than a half-million dollars to Florida Republicans. In June 2009, Rothstein and his circle gave almost $80,000 to Crist's campaign for U.S. Senate.
Crist would not be interviewed for this story. A spokesman said neither the governor nor his aides had contact with Rothstein or anyone in his firm about SBA legal work.
The contact between Rothstein's firm and Sink's office began well before the firm made its $200,000 contribution. Records show that Cassady, who will leave Sink's office next month to work on her campaign for governor, helped arrange introductions for two lawyers from Rothstein's firm.
First, in 2007, was Grant Smith, one of Rothstein's law partners. Smith wanted to pitch a client's investments and used Cassady's name in an e-mail to then-SBA director Coleman Stipanovich to arrange a meeting.
Second was Gary Farmer Jr. On Oct. 30, 2008, Farmer, also a partner in the firm, attended a "meet and greet'' event for Sink in South Florida, sponsored by state Sen. Ted Deutch. Cassady was there.
The next day, Farmer e-mailed Cassady, told him it was great to see him and Sink and asked for a meeting to discuss a potential lawsuit to help the SBA recover millions in pension fund losses.
On Nov. 3, 2008, Cassady e-mailed Williams, who had been on the job as SBA executive director for less than a month.
Cassady asked Williams if he was interested in meeting with a lawyer in Rothstein's firm. "We have received similar inquiries from other firms,'' Cassady wrote, "but we know this firm.''
What did Cassady mean?
Sink said Cassady meant that he knew Farmer personally — both were from Fort Lauderdale — and that Rothstein's firm was Florida-based.
"That doesn't imply anything else by any stretch,'' Sink said.
In response to written questions, Cassady said, "It would have been more accurate to have typed 'I know Gary Farmer.' '' Cassady said he doesn't recall discussing Farmer's requests with Sink.
Farmer sent Sink's office a five-page memo outlining a lawsuit that Rothstein's firm hoped to pursue for the SBA. The memo said the firm was teaming up with "fellow powerhouse law firms'' to bring a "groundbreaking'' case against Wall Street credit-rating agencies.
In Farmer's view, the rating agencies cost Florida hundreds of millions of dollars because they gave top ratings to high-risk, subprime-related securities.
Farmer closed his note to Cassady, "Thanks very much for your assistance in securing this meeting.''
On Nov. 26, 2008, Cassady e-mailed a copy of Farmer's memo to Williams, the SBA director. Cassady's note, which he copied to Sink, said he would appreciate it if Williams and the SBA's in-house counsel would meet with Farmer soon. Williams e-mailed back to Cassady: "We will follow up with Gary per your request.''
On Jan. 29, 2009, Farmer again sought Cassady's help. He had not spoken to Williams yet and wanted to touch base with Cassady first. "Please give my best to the CFO,'' Farmer wrote.
Cassady wrote back that he had mentioned Farmer's name to Williams and suggested that Farmer contact him directly. "Just reference our conversation, please.''
Farmer talked briefly with Williams in February. "We are going to do a formal selection process,'' Williams remembered telling Farmer, and "I have no interest in meeting with people prematurely, and there's no point in coming to Tallahassee.''
In June, Rothstein created a buzz among South Florida politicos when he said he supported Sink for governor.
"I'm a Republican and I will back 95 percent Republicans in this cycle,'' he said at the time. "I'm backing Alex because she is the most qualified in this race.''
Rothstein's attorney, Marc Nurik, said his client "clearly'' thought Sink was the "best candidate.''
Said Nurik: "I'm sure that if you scratch the surface of any major political contributor, whether it be an individual or an entity, you will always see that there's a certain degree of self-interest.''
"That's the way the political system works. Without it, candidates wouldn't make it on TV — they'd be on street corners with signs and cups.''
'Most qualified' counsel expected
In July, the SBA's legal department prepared its search for law firms to handle securities cases. Deputy general counsel Maureen Hazen later wrote that as fiduciaries acting on behalf of millions of Floridians, the SBA had a "duty'' to retain the "most qualified'' counsel.
For the law firms, the work could mean tens of millions in fees. Looking for an edge, more than four dozen firms spent hundreds of thousands on Florida politics, hiring lobbyists and contributing to political groups and politicians.
Sink said that "probably about a dozen law firms'' talked to her office about doing legal work for the SBA, and the referrals to the agency had nothing to do with politics. Rather, Sink said, she was trying to get the SBA to be more aggressive about filing lawsuits against corporate wrongdoers.
Williams said he doesn't believe he got similar referrals from aides to Crist or McCollum, but he said he didn't take the requests from Sink's office as advocating for any firm.
Rothstein's firm gave $25,000 to the Florida GOP on Aug. 4, and $5,000 on Aug. 27. That same day, he hosted the fundraiser for Sink at his home and, according to a Sink campaign aide, wrote a check from his law firm to the Florida Democratic party for $200,000. (Sink's campaign staff delivered the check to the party, and it was recorded with the state on Sept. 9.)
Sink said about 100 people were there. "I maybe spoke with (Rothstein) for two minutes,'' she said, "and I can't recall anything that was business-related.''
The fundraiser also netted Sink's campaign for governor about $43,000 in individual contributions.
On Sept. 1, Hazen, the SBA lawyer, announced that the agency would be selecting a pool of law firms eligible to represent the SBA in securities cases.
On Sept. 10, the Broward-Palm Beach New Times published an unflattering story about Rothstein and his political and business connections.
On Sept. 29, Farmer checked in with Williams. Did he or others need anything else? "You had said that our firm was in the mix for consideration.''
Williams recalls it differently, saying he played down expectations and put off a personal meeting.
Still, records show, Williams wrote to Hazen 12 minutes after receiving Farmer's e-mail: "Maureen, This is one of the law firms that has been circling us. Can you confirm that they are on the list to receive ITN (invitation to negotiate) for services?''
"They are now,'' Hazen replied. "We have not put together the formal list yet, but it will be extensive, and this firm will be included.''
Williams e-mailed Farmer: "Gary, I have confirmed with our counsel that your firm is on the list to receive our ITN. We are wrapping this up now and will have it out in the near future.''
Farmer said he would keep a lookout and thanked Williams for the quick response.
Williams forwarded Farmer's e-mail to Cassady and wrote, "(Follow up) our conversation Friday, this may be the person who said something to the CFO.''
On Oct. 19, Rothstein's firm was among 44 firms invited to apply for the legal work.
Farmer says it's a stretch, a "very circumstantial case,'' to think campaign contributions could have influenced the process.
Williams says now that anyone who expressed interest got on the list. The process was "nationally advertised,'' with notices posted on the SBA Web site and in periodicals.
Kalju Nekvasil, a Clearwater attorney who has successfully sued financial planners for bad advice, said he never saw ads for the legal work. He said it's "amazing'' that Rothstein's firm got on the list — "given their lack of a track record'' handling securities cases.
"You don't see the state of Florida beating a path to our door,'' said Nekvasil. "But then again, we're not political contributors.''
Of criticism that the firm lacked experience in securities cases, Farmer said he envisioned a consumer fraud lawsuit, a type of case he had handled many times.
Sonn, the lawyer for investors fleeced by Rothstein, said, "I wish we could have gotten on the list because that's what we specialize in.''
"You just see the same firms over and over again," Hanzman added. "There has to be some reason, and it's not the fact that they're the only ones qualified to do this work.''
Oversight reforms for SBA blocked
On Oct. 27, days before applications for the SBA work were due, Rothstein secretly boarded a private jet for Morocco. South Florida papers reported that he was under investigation for orchestrating a Ponzi scheme. The law firm dissolved and Rothstein was disbarred.
"We were in the process of doing (the application) when everything broke,'' Farmer said.
Sink's campaign already returned $6,500 of Rothstein-related contributions and is in the process of returning more than $10,000. The Democratic Party returned the $200,000 check.
The SBA ended up selecting five law firms, three of them Democratic donors with ties to Sink.
Sink has made reform of the SBA a campaign issue. She has suggested that the oversight board be expanded to include nonpoliticians, which Crist and McCollum have balked at. In a campaign e-mail, Sink recently said her reforms were being blocked by "career politicians who would rather protect their own political interests'' than the retirement checks of Floridians.
Should she and her two fellow politicians who oversee the SBA be barred from accepting campaign contributions from firms seeking business with the agency?
"I think the whole governance structure is not appropriate,'' she said. "It would suit me to have no elected official on the board.''
On Dec. 1, Rothstein was arrested and charged with fraud and racketeering. Federal prosecutors said he ingratiated himself with politicians to give an appearance of wealth so he could woo investors in a Ponzi scheme.
The prosecutors suspect that some donations used to court the politicians were dirty money from the Ponzi scheme.
Times computer-assisted reporting specialist Connie Humburg contributed to this report.