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February 14, 2011

Hedge funds fight back in Scott Rothstein fraud suit

By Peter Franceschina
Staff Write

Two New York hedge funds that invested with Ponzi schemer Scott Rothstein are fighting back in the largest fraud suit ever filed in Broward circuit court.

The suit was brought in the fall of 2009 by a group of Rothstein investors, headed by wealthy Fort Lauderdale entrepreneur Doug Von Allmen, that alleges losses of more than $100 million. The suit has been amended three times and is more than a thousand pages long.

The hedge funds, Platinum Partners Arbitrage Fund and Centurion Structured Growth, are related and named as defendants. They are already contesting some of the settlement agreements a trustee for Rothstein’s bankrupt law firm, Rothstein Rosenfeldt Adler, has reached in federal clawback suits. They also are suing one of Rothstein’s banks, TD Bank, and Rothstein’s largest feeder, Fort Lauderdale businessman George Levin.

Last week, Platinum Partners filed a counterclaim in the state case, alleging that the funds lost more than $20 million investing with Rothstein. The counterclaim alleges that Von Allmen and the group of investors have overstated their losses because they did not account for returns received from Rothstein.

Fort Lauderdale attorney Bill Scherer, who represents the investors, said Von Allmen had no idea Rothstein was running a Ponzi scheme and put money in until the very end.
While the investors are seeking $280 million in damages, they have overstated their loses by $120 million, according to the counterclaim. Scherer said the investors he represents lost roughly $165 million.

“The damages are higher than at,” he said.

Platinum and Centurion assert that allegations that they solicited investments for Rothstein are false, and that instead Von Allmen played that role just before the $1.4 billion fraud scheme imploded.

“By thus joining Rothstein's conspiracy, it is Von Allmen and those who conspired with him who have rendered themselves liable under Florida law to all victims of Rothstein's scheme, including the Fund Defendants and those Plaintiffs who did not join in Von Allmen's conspiracy,” the counterclaim alleges.

Scherer denied that.

“They essentially took the allegations that we have made against them for aiding and abetting the Rothstein Ponzi and flipped it around, and said our victims did what we accused them of doing,” he said. “The only problem is, they got back all of their money, all but $20 million out of R440 million. That is a pretty good return.”

The high-stakes litigation involves dozens of plaintiffs and defendants. Boxes and boxes of documents in the case are stored at the clerk of court’s office. More than 78 volumes of pleadings have already been created.

Rothstein, 48, is serving a 50-year prison sentence after pleading guilty to racketeering, money laundering and fraud.

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"American Greed" will feature Scott Rothstein next week

CNBC's "American Greed" will feature Ponzi schemer Scott Rothstein on Feb. 23 at 10 p.m. The "American Greed" crew appears to have gotten some previously unseen footage of Rothstein, who pulled off the largest fraud in South Florida history.

Those featured in the preview include Fort Lauderdale attorney Jeffrey Sonn, Rothstein's defense attorney Marc Nurik and Sun-Sentinel reporter Peter Franceschina.

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January 27, 2011

Former Scott Rothstein law partner Russell Adler reaches $350,000 clawback settlement

By Peter Franceschina
Staff Writer

Russell Adler, one of Ponzi schemer Scott Rothstein’s former law partners, owes more than $200,000 to the IRS and has little in the way of assets, yet he has agreed to pay $350,000 to the estate of his bankrupt law firm.

The last-minute settlement in a clawback suit was reached Wednesday night and announced Thursday in U.S. Bankruptcy Court. If Adler fails to pay the money within 2 1/2 years, a judgment for $500,000 will be entered against him.

The bankruptcy attorneys marshaling assets for the now-defunct Rothstein Rosenfeldt Adler law firm agreed to the settlement, in part, because there is little likelihood Adler would be able to pay a hefty judgment, according to court documents filed Thursday that outline Adler’s financial condition.

“Critical to determining [the] settlement was a detailed analysis of the Adlers’ current financial condition, which based upon mediation related financial disclosures revealed that the Adlers have no existing bank, securities or other accounts upon which to execute, no equity in their home, leased vehicles and no other liquid non-exempt assets that could be used to satisfy any potential judgment,” bankruptcy attorney Chuck Lichtman wrote in a motion asking a judge to approve the settlement.

“Further, it appears as if the Adlers may be subject to an IRS notice of lien or other action in an approximate amount of $234,000 and Mr. Adler could be facing other types of exposure in potential Florida Bar or criminal proceedings.”

The proposed settlement comes ahead of a trial on the clawback suit that was scheduled for Feb. 14. Adler has said he knew nothing about Rothstein’s massive $1.4 billion investment fraud scheme, and he admitted no wrongdoing in the settlement.

"I did nothing wrong and was eager to go to trial and be vindicated. The settlement was purely a business decision that will put this case behind us and let me focus on my family, my future and the pursuit of justice for my clients,” Adler said Thursday in a statement.

The $350,000 will go toward paying back the creditors of Rothstein’s law firm, which has been in bankruptcy since his fraud scheme imploded in the fall of 2009. To pay the money, Adler agreed to give up half of the legal fees he earns from cases he is handling that originated with his former law firm, and 15 percent of the fees from new cases. He also agreed to surrender a $90,000 retirement account.

The bankruptcy attorneys were seeking $1.2 million from Adler, alleging he was overpaid and received loans from the law firm that were not repaid.

The clawback suit alleged Adler and his wife used $475,000 of that money to buy a Manhattan co-op apartment. Adler surrendered the apartment to the federal government as part of the criminal forfeiture proceedings against Rothstein.

Rothstein, 48, is serving a 50-year prison sentence after pleading guilty to federal charges last year.

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January 26, 2011

Republican Party of Florida agrees to return $75,000 in Scott Rothstein contributions

By Peter Franceschina
Staff Writer

The Republican Party of Florida has agreed to cough up $75,000 in contributions from Ponzi schemer Scott Rothstein, to settle a clawback lawsuit filed by bankruptcy attorneys.

Rothstein, who ran a $1.4 billion investment fraud scheme from 2005 until the fall of 2009 and rained dollars down on politicos, gave roughly $237,000 to the state party through multiple contributions.

After Rothstein’s fraud came to light, the Republican party returned $90,000 to the federal government, which went into a restitution fund for the fraudster’s victims.

The attorneys marshaling assets for Rothstein’s bankrupt law firm Rothstein Rosenfeldt Adler filed a clawback suit against the Republican party in November in an effort to reclaim the contributions. The state party answered the suit by denying it had any responsibility to return the contributions.

But the bankruptcy attorneys and party officials began negotiating behind the scenes, and on Dec. 12 the party’s board of directors voted to approve the $75,000 settlement, according to the proposed agreement filed late Tuesday in U.S. Bankruptcy Court in Fort Lauderdale.

Both sides said the settlement will save legal costs and avoid a protracted court battle. The agreement still must be approved by the judge overseeing the bankruptcy case.

It also looks like the bankruptcy attorneys will be bringing another chunk of change into the estate – they have reached a proposed $700,000 settlement with a New York company, Utica Advisors, that invested late in the Ponzi scheme.

Utica Advisors invested $1.8 million with Rothstein in July 2009 and was to be repaid $2.6 million over three months, but received only $2.3 million before the fraud’s collapse, according to court documents. The $700,000 settlement also must be approved by the judge.

Rothstein, 48, is serving a 50-year prison sentence after pleading guilty to committing the massive fraud.

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December 10, 2010

Rothstein bodyguard hit with $300k clawback suit

By Peter Franceschina
Staff Writer

The former bodyguard for Ponzi schemer Scott Rothstein’s wife, Kim, has been hit with a $300,000 clawback suit alleging law firm money went to purchase a Victoria Park condo.

The bankruptcy suit against bodyguard Joe “Meaty” Alu – a former Plantation police officer – alleges that $301,000 was used to purchase the $430,000 condo on NE 5th Court in May 2009, “a mere five months before the Ponzi Scheme was revealed and subsequently exploded.”

In the aftermath of the revelations surrounding Scott Rothstein’s $1.4 billion investment fraud scheme in the fall of 2009, Alu was a constant presence at the side of Kim Rothstein.

He chauffeured her around in a black Cadillac Escalade and stood guard outside the gated Rothstein compound on Isla Bahia, even as Scott Rothstein dropped out of sight and was secretly cooperating with federal prosecutors. He was thrust into the media limelight, with his bulging, tattooed arms and his sometimes pithy quotes.


And he defended Scott Rothstein, who hired him in September 2008 to protect his wife.

"I don't abandon my friends because they make mistakes,” Alu told the Sun Sentinel earlier this year. "Or I'd have no friends left. He never did anything to hurt me, ever. ... I'm sorry some people led Scott astray to do some bad things. I don't think it's Scott's fault."

Alu said Friday that he has been making monthly mortgage payments, which are being held in escrow by his attorney. He said he is a victim of a dispute between the bankruptcy attorneys and federal prosecutors over Rothstein's assets.

"I don’t care who I pay the money to. They can fight among themselves over the money. I just want to get out of this mess," he said.

He was still working as a Plantation police officer in 2008 when Rothstein hired him to guard his wife, and Alu retired from the force that fall, after a 21-year career. He told the Sun Sentinel he had known Scott Rothstein for 20 years, after they met in Plantation when Rothstein had an office there and represented the police union.

More than two dozen clawback suits have been filed in the bankruptcy case, seeking tens of millions of dollars. The suit against Alu was filed on Thursday.

Rothstein, 48, is still cooperating in the federal investigation and is serving a 50-year prison term in an undisclosed location after helping bring down a reputed Mafia figure.

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December 7, 2010

Rothstein bank hit with $60 million clawback suit

By Peter Franceschina
Staff Writer

The trustee for the Scott Rothstein bankruptcy case has filed a clawback suit seeking nearly $60 million from Gibraltar Private Bank & Trust, alleging the bank aided the Fort Lauderdale attorney in running his massive Ponzi scheme.

More than two dozen clawback suits have been filed in the Rothstein Rosenfeldt Adler law firm bankruptcy. Gibraltar also is the target of a civil lawsuit filed by a group of investors that allegedly lost more than $100 million. Rothstein bought roughly a 5 percent interest in the Coral Gables-based bank, which has offices in downtown Fort Lauderdale.

The clawback suit, filed Monday in U.S. Bankruptcy Court, alleges that “from the outset, Rothstein utilized the cooperation of Gibraltar in order to give birth to and to perpetuate the life of his Ponzi scheme.”

“Gibraltar gained actual and/or constructive knowledge of Rothstein’s criminal conduct by monitoring and questioning the high volume, high velocity flow of funds between RRA and/or Rothstein accounts, as well as the substantial, recurring overdrafts which were clearly indicative of money laundering, tax evasion, and other criminal conduct,” the suit alleges.

Thomas Tew, an attorney for the bank, said Gibraltar would contest the suit. Tew said the bankruptcy trustee doesn’t have standing under the law to bring claims that the bank was implicated in the fraud scheme, because Rothstein used his law firm as a criminal enterprise.

“If you’re a crook, you can’t turn around and sue someone else for your wrongdoing,” he said.

Tew also said the clawback claims are a form of “double dipping” because it was money from the investors who are suing Gibraltar in the civil case that Rothstein used to cover millions of dollars in overdrafts at the bank. A judge is now considering a Gibraltar motion to dismiss the bank as a defendant in that case.

John Genovese, an attorney for the bankruptcy trustee, said only the trustee could bring certain claims against Gibraltar. He said the bank has to demonstrate it received the money from Rothstein in good faith and had no knowledge of the fraud.

“We have alleged there are significant badges of fraud that would have put them on notice that Rothstein was engaged in a fraud. These claims could not be asserted in state court,” he said. “We feel fairly certain that given that they failed to follow their own policies and practices, that they can’t demonstrate they acted in good faith.”

Rothstein's $1.4 billion fraud scheme collapsed in the fall of 2009. Rothstein, 48, is still cooperating in the federal investigation and is serving a 50-year prison term in an undisclosed location after helping bring down a reputed Mafia figure.

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