Rothstein admits to billion-dollar scam

scott w. rothsteinFORT LAUDERDALE — High profile Fort Lauderdale lawyer Scott Rothstein has pleaded guilty to federak charges that he orchestrated a four-year scam that took investors for more than $1 billion. He faces a maximum of 100 years in prison.

Rothstein, 47, on Thursday pleaded guilty to one count of conspiracy to violate the Racketeering Influenced Corrupt Organization statute; one count of conspiracy to commit money laundering; one count of conspiracy to commit mail fraud and wire fraud; and two counts of wire fraud. Rothstein agreed to forfeit $1.2 billion, including 24 pieces of real property, numerous luxury cars, boats, and other vessels, jewelry, sports memorabilia, business interests, bank accounts, and more. He is to be sentenced May 6 in federal district court.

"Scott Rothstein used a classic approach to mislead investors — an ostentatious lifestyle, a charismatic personality, and guarantees of sky-high returns — all red flags in the world of Ponzi schemes,” said FBI Special Agent in Charge John V. Gillies. “It is a lesson for all investors to learn that they need to look beyond the hype.”

Rothstein admitted that for four years through November, he used his law firm, Rothstein, Rosenfeldt, and Adler, to take investors for $1.2 billion using bogus investments and other schemes.

The scheme unraveled in November when trust accounts that Rothstein had set up at the law firm and supposedly held $500 million were found to be empty. A Broward County judge placed Rothstein Rosenfeldt and Adler in receivership. Rothstein was sued for fraud.

According to court records, Rothstein and others got investors to loan money to non-existent borrowers who supposedly were willing to pay high rates to get the funding; he also got them to invest in pay-outs from supposedly confidential civil settlement agreements that ranged from hundreds of thousands to millions of dollars.

Rothstein claimed that these settlements could be bought at a discount but that investors would be repaid at the full face amount.

To keep the schemes afloat, Rothstein created a series of bogus bank documents about nonexistent bank accounts. Rothstein went so far as to create a court order to show investors that they had won a $23 million judgment in a case they had actually lost. Rothstein, however, took this to another level of audacity by telling his investors that the defendant in the case had shifted the money to the Cayman Island, and that he would need money to post bonds necessary to recover the money. He got investors to cough up $57 million.

Rothstein used the money to make contributions to federal, state, and local political candidates, and generous donations to public and private charitable institutions. The money was also used to pay for lavish gifts, including exotic cars, jewelry, boats, cash and bonuses, to hire local police for security, and to provide gifts to high-ranking members of police agencies.

Rothstein bought controlling interests in restaurants and other businesses, and to socialize with politicians and sports figures. According prosecutors, all of this was done to burnish his image, enhance his ability to attract new investors and deflect law enforcement scrutiny.

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