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Prosecutors: Rothstein covered payroll using scheme

Attorney Scott Rothstein tapped into millions of dollars from his massive investment scam to cover payroll costs at his expanding Fort Lauderdale law firm, federal authorities said in court records released Monday.

Rothstein's law firm generated revenue of $8 million in one recent year, yet his 70-lawyer firm had a payroll of $18 million, prosecutors said. Rothstein, who owned half of Rothstein Rosenfeldt Adler, used investors' money from his Ponzi scheme to make up the shortfall, they said.

The allegations were revealed in an amended forfeiture complaint against dozens of Rothstein's real estate properties, foreign cars, restaurants and other assets — including $12 million in the lawyer's bank account in Morocco, along with millions more donated to political-campaign and charitable funds.

"Funds used to acquire the (Rothstein) assets came from the 'Ponzi' scheme and not from legitimate RRA funds," Assistant U.S. Attorney Alison W. Lehr wrote in the amended forfeiture action.

Rothstein, 47, fled to Morocco in late October with the collapse of his investment fund, which was built on bogus legal settlements sold to wealthy investors. After his return to South Florida in early November, FBI and IRS agents began seizing his assets and raiding his law firm. He has not been charged with a crime.

The civil forfeiture is based on money-laundering allegations that Rothstein amassed his fortune by defrauding investors, prosecutors said. Investors bought shares in his fabricated confidential settlements from employment-discrimination and other civil cases during the past four years -— investments that promised returns of up to 40 percent.

The FBI said the total investment sales could top $1 billion.

Rothstein's partner, Stuart Rosenfeldt, who owned the other half of the now-defunct law firm, has said he was unaware of Rothstein's Ponzi scheme and the firm's finances, saying his partner was fully responsible. Rosenfeldt could not be reached for comment Monday.

Rothstein's attorney, Marc Nurik, declined to comment.

According to the forfeiture action, the U.S. government now wants to seize 15 parcels of South Florida real estate — adding seven to the original list. Also seized were 20 cars — including three Ferraris, three Corvettes, two Rolls-Royces, a limousine and a $1.5 million Bugatti sports car, plus an 87-foot yacht, four personal watercraft, 304 pieces of jewelry, a guitar collection, $80,000 in American Express gift cards and $272,000 in cash.

The government is also seeking the equity Rothstein has in about 21 different companies in which he invested, including restaurants, a mortgage company, a sports agency, two banks and a biofuel company.

Rothstein also had an overseas account with Bank Populaire in Morocco, where he had $12 million. Federal authorities are trying to seize an additional $2 million held in the same bank under the name Ahnick Khalid and a $1 million account held by Steve Caputi, owner of the Cafe Iguana nightclub in Pembroke Pines.

A further $1.3 million is held in four accounts at Gibraltar Bank. And Rothstein had a separate investment account holding $1.2 million.

Finally, the government is seeking more than $160,000 in political contributions and charitable donations of $800,000 to the Joe DiMaggio Children's Hospital in Hollywood and $1 million to Holy Cross Hospital in Fort Lauderdale.

Holy Cross officials announced last week that the hospital would return the $1 million gift, which was to have been used for a new women's center with the name of Rothstein's charitable foundation engraved over the entrance to the lobby.

Miami Herald staff writer Amy Sherman contributed to this report.

Prosecutors: Rothstein covered payroll using scheme 11/23/09 [Last modified: Monday, November 23, 2009 7:53pm]
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