Bankruptcy attorneys seek $18 million in payments from three Scott Rothstein law partners
By Peter Franceschina
Three of Scott Rothstein’s former law partners must surrender nearly $18 million in salary, loans and other benefits they pocketed but didn’t legitimately earn, attorneys presiding over the liquidation of Rothstein’s bankrupt law firm demanded in lawsuits filed Thursday.
The millions in allegedly ill-gotten funds were used to purchase jewelry, a New York apartment, and country club memberships, and also to funnel big donations to politicians and political causes, the lawsuits filed in federal bankruptcy court claim.
Attorneys for the targets of the lawsuits – Stuart Rosenfeldt, Russell Adler and Steve Lippman countered that their clients were entitled to every cent they received from the now-defunct Fort Lauderdale law firm, and that they had known nothing of Rothstein’s $1.2 billion Ponzi scheme, which led to Rothstein’s guilty plea to five federal felony counts last month.
“I’m sure as the facts are brought to light, it will be made clear that Stuart did not knowingly take any money wrongfully,” said Bruce Lehr, Rosenfeldt’s lawyer. “There is nothing wrong with Stuart taking a distribution he thought was clean and then contributing to candidates pursuant to his political affiliations and beliefs.”
In their criminal case against Rothstein, federal prosecutors portrayed the Rothstein Rosenfeldt Adler law firm as a racketeering enterprise used to funnel cash into charitable donations and illegal political contributions, as well as to pay for the finer things in life. They also accused Rothstein of violating state and federal campaign laws by paying “bonuses” to his law firm employees, who in turn gave the money as political contributions.
None of Rothstein’s former coworkers have been charged by federal prosecutors with criminal acts. The government has made clear, however, that it is investigating unidentified “co-conspirators.”
According to the lawsuits, the trio of Rothstein partners were grossly overpaid, and received tens of millions of dollars in loans to boot.
Rosenfeldt ran up $1 million on a law firm credit card and bought dozens of pieces of jewelry; Lippman used law firm money for furniture, country club fees, clothing and sports tickets; and Adler bought a $450,000 Manhattan apartment last summer with firm money, according to the suits.
Together, Rosenfeldt, Lippman and Adler and their wives made almost $2.3 million in federal, state and local political contributions from 2007 through 2009, election records show. The biggest beneficiaries were Sen. John McCain’s Republican presidential campaign, at $700,000, and the Republican Party of Florida, at more than $500,000.
Bruce Zimet, who represents Lippman, said Lippman is not a target of the investigation and is willing to cooperate with federal investigators because he has nothing to hide. Zimet also said Lippman earned all the payments he received from the law firm.
Adler's attorney, Fred Haddad, said, “They can make all the allegations they want, let them try to prove it. I don't think Russ has done a single thing wrong.”
The lawsuits say the three partners should not have been paid more than $300,000 a year, yet Rosenfeldt was paid $8.8 million since 2006; Lippman was paid $4.3 million since 2006; and Adler was paid $1.4 million since 2007.
Some of payments to the trio, the lawsuits say, coincide with the political donations they or their wives made. The lawsuits also describe how money was moved around in bank accounts by “engaging in the systematic trading of checks” with the law firm and making payments to third parties.
“For example, and demonstrating it was part of a scheme to funnel cash out of RRA to use for political contributions and not to pay legitimate earned income, on May 19, 2008, Rosenfeldt, Russell Adler (“Adler”) and Steven Lippman (“Lippman”) each received an alleged bonus of $140,000 from RRA,” the suits say.
“On May 28, 2008 Rosenfeldt made a donation of $140,000 to the John McCain presidential campaign. Also on May 28, 2008, Lippman and his wife Marcy, made payments to the same campaign of $65,000 and $60,000 respectively. On June 12, 2008, Adler contributed $80,000 to the McCain campaign and his wife Katie likewise contributed $39,200.”
Rosenfeldt used firm money to pay for 72 pieces of jewelry, furniture, hotel expenses, vacations, personal travel, exotic reptiles, home repairs, athletic club charges, clothing and groceries, according to the suit.
Both Rosenfeldt and Lippman were given nearly $9 million in loans; Rosenfeldt still owes $458,000 of that and Lippman owes $2.5 million, according to the suits, and Adler has $180,00 in unpaid loans.
Rothstein, 47, pleaded guilty last month to five federal charges of racketeering, money laundering and fraud and faces up to 100 years in prison at his May 6 sentencing. Federal prosecutors and FBI and IRS agents are still conducting a sweeping investigation of the Ponzi scheme.
Database specialist Dana Williams contributed to this report.
Peter Franceschina can be reached at email@example.com or 954-459-2255.