As Ponzi scheme unraveled, Rothstein repaid millions

In the weeks before his $1.2 billion Ponzi scheme was revealed, lawyer Scott Rothstein repaid hundreds of millions of dollars to the investors he had swindled, according to records filed in bankruptcy court this week.

From August to October, Rothstein paid about $43 million to investment funds run by Fort Lauderdale financier George Levin — who soon became one of the first victims to complain to the FBI. Levin's investment funds are owed more than $778 million from Rothstein's defunct Fort Lauderdale law firm, Rothstein Rosenfeldt Adler.

Another $23 million was paid to the company of South Florida car dealer Ed Morse, whose family is claiming more than $115 million in losses to Rothstein, who was once its lawyer.

Rothstein also paid about $85 million to Miami investor Ira Sochet, who is still owed more than $147 million, records show.

A court-appointed trustee in the law firm's bankruptcy case said Rothstein Rosenfeldt Adler has about $43 million in assets — and debts totaling more than $1.4 billion.

Documents show that Rothstein used the law firm as his piggy bank, withdrawing massive sums for himself and doling out fat loans and payments to friends and relatives. He even paid salaries to his parents and wife.

Rothstein, 47, was arrested Dec. 1 on federal racketeering, money laundering and fraud charges. He has pleaded not guilty. Prosecutors say he bilked investors by selling them purported lawsuit settlements, then used the funds to repay earlier investors in a classic Ponzi scam.

The bankruptcy records show that Rothstein paid himself $13.4 million from his law firm's accounts between November 2008 and October, when he flew to Morocco as his scheme unraveled. Yet Rothstein never cashed $846,000 in paychecks from the firm.

Millions more were listed as being paid to Rothstein's partners, employees and business associates, the bankruptcy trustee says.

Rothstein's firm paid about $300 million to creditors in the 90 days before the bankruptcy case was filed in November, the records show. That timing is significant because those entities might be asked to return money.

But the records of the law firm — where the now-jailed Rothstein was said to manage the books — are in disarray.

Trustee Herbert Stettin said the information is based on the law firm's unaudited books and records and might be amended.

Court records also show more than $6 million the law firm gave to charities, including $2.5 million to Rothstein's own Rothstein Family Foundation. One of the largest donations was $1 million to the Florida Care Foundation.

Stettin is expected to seek return of the charitable donations.

Among the firm's assets, Stettin listed several bank accounts and items found in Rothstein's offices, including a pair of sneakers signed by basketball star Shaquille O'Neal, a knife signed by Louisiana Gov. Bobby Jindal and two handguns.

As Ponzi scheme unraveled, Rothstein repaid millions 12/23/09 [Last modified: Wednesday, December 23, 2009 10:12pm]

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