Ex-lawyer charged in $1.2 billion Florida Ponzi scheme
MIAMI (Reuters) - A disbarred Florida lawyer surrendered to the FBI on Tuesday and pleaded not guilty to charges he bilked investors out of $1.2 billion in a Ponzi scheme that funded his luxury lifestyle and political largess.
Scott Rothstein, who fled to Morocco in late October but returned to Florida in early November, was denied bond during a brief appearance before a federal magistrate in Fort Lauderdale.
He was charged with racketeering conspiracy under a statute often used to prosecute organized crime chiefs and drug lords.
Rothstein, who was disbarred last week by the Florida Supreme Court, also was charged with mail, wire and bank fraud, and money laundering. He faces up to 100 years in prison if convicted on all counts.
Court documents said he acted with co-conspirators to carry out the scheme, creating false bank documents that fooled investors and providing "gratuities to high-ranking members of police agencies" in order to deflect law enforcement scrutiny.
No co-conspirators were identified but the documents suggested additional defendants could be charged.
Rothstein, a frequent campaign contributor who was often photographed with politicians, lived a lavish life with opulent homes and a fleet of foreign sports cars. He used his connections and charm to lure wealthy friends and patrons to invest with him.
PHONEY SETTLEMENTS
The charges said Rothstein, 47, had been selling shares in fabricated legal settlements to unsuspecting investors since at least 2005, using new investor money to pay previous investors in the classic Ponzi scheme model.
He claimed to have won lucrative awards in workplace discrimination and whistle-blower lawsuits, when no such settlements existed, federal investigators said.
In one instance, prosecutors charged, Rothstein falsely told clients they had won a $23 million judgment in a lawsuit but needed to put up more than twice that amount as a bond in order to recover the money.
The unsuspecting clients did so, and Rothstein used their money to run his firm, make political and charitable donations, and buy cars, yachts, jewelry and controlling interests in restaurants and other businesses, prosecutors charged.
"Attorneys, like elected officials, hold a special position of trust in our society, and owe a corresponding duty to deal honestly with their clients and to promote their clients' best interests," U.S. Attorney Jeffrey Sloman said.
Rothstein breached that duty and used clients' stolen money to create the illusion of success, Sloman said.
"Now, the mansions, Ferraris, yachts, the law firm and his friends are gone. He sought to buy power and influence at the expense of his clients, and instead has potentially bought himself a lengthy prison sentence," he said.
YACHT, HOME SEIZED
Rothstein pleaded not guilty to all the charges. His lawyer, Marc Nurik, said after the hearing that Rothstein was "going to try to do the right thing" for his investors.
"My client wishes to see that legitimate investors get paid their money back," Nurik told journalists, without specifying how that might be done.
FBI and IRS agents raided Rothstein's Fort Lauderdale law office in November and seized his waterfront home, yacht and nearly two dozen properties in Florida, New York and Rhode Island.
Investors have already begun filing lawsuits saying they were cheated and should get a share of the assets.
Rothstein was chief executive and managing partner in the firm of Rothstein Rosenfeldt Adler PA, which had about 150 employees and was placed in receivership in November.
(Editing by Jim Loney and David Storey)
