Scott Rothstein Gets 50 Years In $1.2 Billion Ponzi Scheme
South Florida mini-Madoff tells the court, 'I don't expect your forgiveness.'
June 9, 2010 — -- Former lawyer Scott Rothstein was sentenced to 50 years in federal prison Wednesday for using his Fort Lauderdale law firm to run a $1.2 billion Bernie Madoff-style Ponzi scheme that brought him yachts and sports cars and allowed him to make sizable contributions to Florida politicians.
Rothstein had faced up to 100 years behind bars after pleading guilty in January to two counts of fraud and three counts of conspiracy. The sentence imposed by Judge James Cohn, however, is ten years more than prosecutors requested, and 20 years longer than the term Rothstein had hoped to receive because of his reportedly extensive cooperation with federal investigators.
Rothstein had cited his assistance to authorities in a plea for leniency filed last week, and prosecutors still have the option of asking that his sentence be reduced if he continues to help investigators. "I don't expect your forgiveness," Rothstein told the court Wednesday, and said he would do "everything in his power" to help investors recoup their losses.
In a statement, U.S. Attorney Wilfredo Ferrer said that the "rags-to-riches-to-jail saga" of Rothstein, who rose from blue-collar roots in the Bronx to the society pages of South Florida, was a "humbling reminder of what can happen when greed and ambition run amok."
"Today's sentence punishes the defendant for his thievery," said Ferrer, "and hopefully brings some sense of justice to the victims of this massive fraud."
Rothstein admitted that he ran a scam that involved selling shares in fake lawsuit settlements, promising investors they would reap rewards with the cases were settled. He created false bank documents and phony settlement agreements to dupe investors. In a classic Ponzi scheme, he used funds for new investors to pay off old investors. Rothstein's scheme destroyed his law firm, Rothstein Rosenfeldt Adler, which once employed more than 70 lawyers and is now defunct.
"Unfortunately today's sentencing does not immediately offer complete financial restitution for the victims of South Florida's largest Ponzi scheme," said Daniel W. Auer, Special Agent in Charge of the Criminal Investigation Division of the IRS in Miami. "Victims can rest assured that IRS-CID, together with our law enforcement partners at the U.S. Attorney's Office and the FBI, will continue to relentlessly pursue forfeiture proceedings relating to Rothstein's criminally-derived assets."
The scam began to unravel in late 2009. In October, Rothstein flew to Morocco without his wife. The Florida Sun-Sentinel reported that four days later, he texted partners at his law firm, saying he wouldn't see them again. "Sorry for letting you all down," he wrote. "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 [my wife]. She knew nothing. Neither did she, nor any of you deserve what I did. I hope God allows me to see you on the other side. Love, Scott."
While Rothstein was out of the country, a Florida newspaper confirmed that investors had contacted federal prosecutors about his investment business, and that his law firm had contacted outside counsel.
Rothstein returned from Morocco on Tuesday, Nov. 3 and apparently met with federal prosecutors. Local investors filed their first lawsuit the same day, alleging losses of $3 million. The FBI and the IRS raided the offices of his law firm on Wednesday, Nov. 4. Documents filed by the IRS on Nov. 9 alleged a Ponzi scheme dating back to 2004.
Before his trip to Morocco, Rothstein was an important figure on the South Florida social and political scene. Rothstein was a major contributor to the Republican Party, as reported by ABC News. Political contributions to the state Democratic and Republican parties and to individual politicians have now been returned. Rothstein gave $9,600 to Republican Gov. Charlie Crist's campaign for the U.S. Senate and $6,000 to Democrat Alex Sink's gubernatorial campaign.
Rothstein gave big to charitable organizations and hospitals as well. All together, he donated $1.8 million to two Ft. Lauderdale hospitals -- $800,000 to Joe DiMaggio Children's and $1 million to Holy Cross.
The full extent of Rothstein's cooperation is still unclear, but it is known that before he was officially charged by federal authorities he aided a government sting that snared three men, including a man described as an Italian mobster by both U.S. and Italian authorities. Rothstein recorded conversations with the men. He allegedly asked Settineri to move cash and destroy documents for him.
In a statement filed with the court prior to sentencing, David Mandel, attorney for victims Coquina Investments and Emess Capital, disputed the notion that Rothstein deserved leniency for cooperation.
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"While Rothstein may have cooperated with 'some' victims and with the bankruptcy trustee," argued Mandel, "through his counsel he has refused to cooperate with other victims of his fraud."
After the sentencing, Mandel expressed his approval to ABC News. "The 50-year sentence imposed by Judge Cohn acknowledges the deep pain that Rothstein caused," said Mandel. "The result was well-reasoned and completely justified."