Lawyer charged in $1.2b Ponzi scheme

By Ellen Tumposky, December 3, 2009
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A prominent Florida lawyer who was a major donor to US politicians and to Chabad has been charged with running a $1.2 billion Ponzi scheme.

Scott Rothstein, 47, was arrested on five racketeering and fraud charges and could face up to 100 years in prison. He pleaded not guilty to the charges, which included conspiracy to commit money laundering, mail fraud and wire fraud, and was being held without bail.

Acting US Attorney Jeffrey Sloman called the case “a glaring example of greed run amok. Rothstein spent outrageous sums on real estate, bars, jewelry, politics and philanthropy --- all to create the illusion that he, the law firm and the schemes to defraud were highly successful. Now the mansions, the Ferraris, the yachts and his friends all are gone.”

Mr Rothstein’s lawyer, Marc Nurik, told reporters that his client felt “very remorseful” and hoped to repay “legitimate investors”. He added: “At this point in time, we’ll try to do the right thing”. He would not elaborate.

Mr Rothstein grew up in modest circumstances in the Bronx and rose to become the chairman of Rothstein Rosenfeldt Adler, a giant law firm. His Ponzi scheme allegedly involved selling stakes in fictitious legal settlements he said his firm had negotiated in employment disputes.

His name had graced the Rothstein Family Downtown Jewish Centre Chabad, built partially with his largesse, but after his arrest it was hastily removed from the façade.

It is not yet clear whether Jewish investors will be major victims, as they were in the Bernie Madoff case, although blogs were rife with rumours of losses in the Orthodox community.

In October he fled to Morocco. Later in the month, he sent a desperate text message to five partners in his law firm. According to the Florida Sun-Sentinel, the message read: “Sorry for letting you all down. I am a fool. I thought I could fix it but got trapped by my ego and refusal to fail and now all I have accomplished is hurting the people I love. Please take care of yourselves and please protect Kimmie [Rothstein’s wife]. She knew nothing... I hope God allows me to see you on the other side. Love, Scott.”

Despite the suggestion of planned suicide in the text, Mr Rothstein returned to Florida in early November.

Before his arrest federal agents seized $60 million worth of assets.

    Last updated: 3:06pm, November 2 2010