The Scott Rothstein saga: Upcoming deposition will decide if Ponzi victims get any money

Scherer said Spinosa and other TD Bank employees assisted Rothstein and were partly responsible for his clients’ losses — including Spinosa’s allowing Rothstein to wire $16 million to Morocco. “I think Rothstein was conniving from the beginning,” Scherer said, calling Spinosa a “co-conspirator.

The Miami Herald
October 12, 2011

The Scott Rothstein saga: Upcoming deposition will decide if Ponzi victims get any money
The investigation of Scott Rothstein’s $1.2 billion Ponzi scheme shifts from the criminal to the civil arena as he takes the witness stand in an unusual deposition involving his bankrupt firm and his many victims.
Jay Weaver, moc.dlareHimaiM|revaewj#moc.dlareHimaiM|revaewj

scott-rothstein.jpg

Scott Rothstein Charles Trainor Jr / 2009 file photo

When Scott Rothstein takes the witness stand Monday for an unusual deposition involving the bankruptcy of his law firm, the convicted con man’s credibility — if he has any — will be in the eye of the beholder.

Dozens of lawyers trying to recover millions for victims of his $1.2 billion investment scam will want to believe Rothstein’s every word if he says he colluded with deep-pocketed parties such as TD Bank, where the disbarred Fort Lauderdale attorney manipulated his clients’ trust accounts.

But lawyers defending the bank and others who might be on the hook for big bucks lost in his massive fraud will paint him as a pathological liar.

“Without exaggeration, every act that Scott Rothstein undertook and every word that he uttered was designed to mislead and deceive everyone around him,” said Miami criminal defense attorney Sam Rabin, who represents a TD Bank vice president, Frank Spinosa, who dealt directly with Rothstein and is under criminal investigation.

Rothstein, now serving a 50-year prison sentence on a racketeering conspiracy conviction, will be questioned by more than 30 lawyers about details of his Ponzi scheme when he sits for the closed-door civil deposition, scheduled to last two weeks. It gets underway Monday amid heavy security in the James Lawrence King Federal Justice Building in downtown Miami.

The disgraced lawyer is serving his prison term in the federal witness protection program and has already spent hundreds of hours spilling his guts to federal authorities. Now the civil lawyers are chomping at the bit to grill him about his Ponzi scheme, the bankruptcy of his now-defunct Fort Lauderdale law firm, Rothstein Rosenfeldt Adler, and related litigation.

In federal court last year, some 320 victims filed claims for losses totaling more than $360 million, mostly stemming from Rothstein’s sale of phony legal settlements to wealthy investors from Florida to New York to Texas.

His fictitious financial empire crumbled in fall 2009 when dozens of investors began clamoring for millions they had invested in the purported employment-discrimination and sexual-harassment settlements.

Rothstein has already been entrenched in South Florida history as a one-man wrecking ball who destroyed his own 70-attorney law firm and used it to play among rich investors, society types, trendy entrepreneurs and prominent politicians — including Gov. Charlie Crist and Republican presidential nominee John McCain.

All of that will be fair game when the bankruptcy trustee Herbert Stettin and his team of lawyers question Rothstein during the civil deposition.

So far, they have managed to recover more than $100 million that Rothstein paid to investors and other creditors. From whatever the bankruptcy lawyers recover, 18 percent will go to them and the rest will be proportionally redistributed to creditors — depending on how much they invested with Rothstein and how much they were paid back before his scheme fell apart.

But Stettin’s work is far from over, which is why Rothstein’s deposition is so crucial.

Just obtaining permission for his deposition was an ordeal, requiring dispensation from U.S. District Judge James Cohn, who is presiding over the criminal case, and the U.S. attorney’s office, which has charged eight defendants including Rothstein so far and plans another major racketeering indictment.

“Obtaining Rothstein’s deposition is critical in order for the trustee to fully investigate all matters related to the Ponzi scheme,” Fort Lauderdale lawyer Paul Singerman, whose firm is working for the trustee, wrote in court papers.

The goal is to “learn facts about potential targets and existing defendants … as well as to have a complete understanding of the assets and liabilities of RRA, and the various roles that insiders, creditors and other third parties had with respect to the Ponzi scheme and the events at [the law firm].

”Former Miami U.S. Attorney Jeffrey Sloman, whose office charged Rothstein two years ago, said the disbarred lawyer’s civil deposition is “unprecedented,” noting that notorious New York Ponzi schemer Bernie Madoff, serving a 150-year sentence, certainly didn’t give one.

“I have never heard of it,” Sloman said. “This is highly unusual, to say the least, especially when more criminal charges are pending in the Rothstein case.

”But he added: “I don’t think Scott Rothstein is going to have a revelation that he hasn’t already told the government.

”Sloman also said it’s possible but highly unlikely Rothstein will invoke his Fifth Amendment right against self-incrimination at the deposition. The reason: Attorneys likely won’t ask him anything about his criminal conduct beyond what he has already disclosed to federal prosecutors.

One thing seems likely: Civil attorneys representing creditors will argue that Rothstein is telling the truth if he blames monied parties such as TD Bank, while lawyers for the bank and other entities will claim he’s lying.

The bank has potential liability not only in the bankruptcy case, but also faces potential damages in a lawsuit filed by about 25 investors from South Florida and elsewhere. Collectively, those investors, whose lawyers also will attend Rothstein’s deposition, bought about $160 million of his bogus legal settlements in the months before the scheme collapsed.

Rothstein, who forged TD Bank account statements, computer spreadsheets and letters to dupe investors, has told federal authorities that he could not have pulled off the scam without the help of bank employees. Among them: Spinosa, who was fired after the Rothstein scandal broke in fall 2009.

Spinosa has not been charged, and TD Bank officials have denied any wrongdoing.

Spinosa’s criminal defense attorney, Rabin, who will be attending Rothstein’s deposition, said the Ponzi schemer cannot be trusted.

Rabin contends that Rothstein was continuing his con right up until the end of his scheme in late October 2009, after he chartered a jet and fled to Morocco. He was so desperate that he couldn’t decide whether to kill himself or return to South Florida to face the feds, according to emails filed in court.

But Rothstein cooked up a final plot to appease panicky investors, Rabin says. He cited a series of emails between the lawyer and one of his major investors in which Rothstein tried to blame TD Bank for the loss of their money.

On Nov. 1, 2009, the investor, Frank J. Preve, asked Rothstein if his various investors had “much of a case against” TD Bank.

“Yes, they do have a case,” Rothstein wrote to Preve on the morning of Nov. 1, 2009. “I will explain how when I get back.”

Rabin said he plans to ask Rothstein about the emails. “It should be no surprise that after his scheme had unraveled and he had fled the country that he orchestrated one last lie — to falsely blame my client, Frank Spinosa, and his employer TD Bank.

”William Scherer, a Fort Lauderdale civil lawyer representing the 25 investors who sued Rothstein, TD Bank, Spinosa and others, disagrees with Rabin. Scherer said Spinosa and other TD Bank employees assisted Rothstein and were partly responsible for his clients’ losses — including Spinosa’s allowing Rothstein to wire $16 million to Morocco.

“I think Rothstein was conniving from the beginning,” Scherer said, calling Spinosa a “co-conspirator.

”At the deposition, lawyers also will likely ask Rothstein questions about his relationship with Preve and his boss, George Levin, who invested as much as $125 million of his own money and hundreds of millions of dollars through his hedge fund, named Banyon. Preve was Banyon’s chief operating officer.

On Oct. 31, 2009, Rothstein emailed Levin from Morocco: “Do not try to bail me out of this. … save yourself,” adding that Levin and Preve “did nothing wrong.”“I am the liar,” Rothstein confessed.

“I am the thief. … I am the scumbag. … I either go to jail or die.”

http://www.miamiherald.com/2011/12/10/v-fullstory/2541878/the-scott-rothstein-saga-upcoming.html


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Risks: Badge of Authority persuasive technique, Bankruptcy, Banks collude, Bernard Madoff-type scheme, Bribery, Confidence game, Conspiracy, Conspiracy to commit fraud, Corruption, Credence goods: taking advantage of the innocents, Disbarred, Extortion, False sense of security, Fraudster banker, Fraud, Fraudster lawyer, Incompetent or predatory: for the small business investor, the outcome is the same, Influence-peddling, Knew or could have reasonably been expected to know, Legitimate Businessman's Social Club, Money laundering, Organized crime, Ponzi (pyramid) scheme, Racketeering, Self-regulating professionals does not protect consumers, TD Canada Trust, Towers of gold, feet of clay, Violence, Weapons of Influence: Authority, Whistleblowers, Wire fraud, Willful blindness, Witness protection program, United States, 20111012 The scott

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