Accused of Running $1B Ponzi Scheme, Rothstein Gives Up Law License
Posted Nov 18, 2009 12:41 PM CDT
By Martha Neil
Accused of operating a Ponzi scheme into which investors allegedly paid up to $1 billion or more for shares of nonexistent legal settlements, a South Florida attorney has agreed to give up his law license.
Scott Rothstein requested disbarment by consent Monday, and the Florida Bar's executive committee agreed yesterday to accept his request, the Palm Beach Post reported.
Rothstein's disbarment now goes to the Florida Supreme Court for a final decision, which could vote on the matter as early as today.
His lawyer could not immediately be reached by the newspaper for comment.
Fallout from the situation, which has already put Rothstein Rosenfeldt Adler into receivership and a Chapter 11 bankruptcy, continues.
Among the latest developments, counsel for a former client of the firm, financier Jeffrey Epstein, who faces civil litigation by claimed underage victims of sexual molestation, are looking into whether Rothstein's alleged efforts to sell settlements to investors affected RRA's representation of Epstein, reports the South Florida Business Journal.
“How can any RRA attorney in these civil actions represent its client’s interests and give unbiased legal counsel when an outside investor has been promised a financial interest in the outcome of the action?” writes attorney Robert Critton in a Nov. 12 filing in federal court in West Palm Beach. It seeks an order requiring the law firm to preserve records and to depose a court-appointed receiver now overseeing the apparent dissolution of the law firm.
As discussed in a previous ABAJournal.com post, a federal forfeiture action against Scott Rothstein alleges that he and unnamed co-conspirators created fake documents to mislead investors into thinking they were purchasing securitized portions of income streaming in from confidential structured settlements of sexual harassment and workplace claims.
In fact, "no such settlement agreements had ever existed, and the entire investment scheme was a fraud," contends a filing by Assistant U.S. Attorney Alison Lehr. "These transactions constituted a 'Ponzi' scheme in which new investor money was utilized to pay previous investors in furtherance of the scheme."
A McClatchy Newspapers article gives further details of the alleged scheme.
Rothstein, who has not been criminally charged, has admitted that he made "a very, very serious mistake" and promised to repay investors, according to a WSVN interview.
Exactly how he plans to do so isn't clear.
ABAJournal.com: "FBI: Rothstein Scheme Could Top $1B; Filing: Firm Spent $1.4M in Escrow Funds"
ABAJournal.com: "‘Sonic Boom’: Rothstein Churned $250M in Trust Funds Last Month, Lawyer Says"