Prominent Fla. lawyer's sales pitch called suspect

[November 04, 2009]  FORT LAUDERDALE, Fla. (AP) -- A South Florida attorney who has raised millions for notable politicians nationwide and hobnobs with sports stars and celebrities was removed Tuesday as head of the law firm he co-founded, suspected by his partner, investors and federal investigators of financial wrongdoing in an exotic investment scheme.

Scott Rothstein, 47, was dumped as chief executive officer at Rothstein Rosenfeldt Adler by Broward County Circuit Judge Jeffrey Streitfeld, who named a retired Miami judge as receiver to take control of the 70-lawyer firm's finances.

"He has, for now, relinquished his authority," Streitfeld said at a hearing.

Rothstein drives around in luxury cars, owns three homes and in August purchased the former Gianni Versace mansion in South Beach. Now he is suspected of fabricating a business in which he sold legal settlements to investors, hiding the scheme from the firm's other attorneys and keeping millions of dollars for himself.

Federal prosecutors and the FBI declined comment on whether Rothstein is under investigation. But Kendall Coffey, a former U.S. attorney hired by firm co-founder Stuart Rosenfeldt, said he has turned over his preliminary findings about a possible scam to federal authorities and the FBI has been contacted by several investors.

In court Tuesday, Coffey told the judge he was informed that Rothstein was absent from the hearing because he was meeting "with federal authorities" but declined to get into specifics.

The accusations are reverberating to the state capital in Tallahassee, where the Florida Democratic Party said Tuesday it was returning $200,000 in contributions linked to the firm Rothstein Rosenfeldt Adler, while the state Republican Party said it would also refund about $150,000.

"We sincerely hope our action today helps the victims of any wrongdoing recover what they have lost," said Scott Arceneaux, executive director of the Florida Democratic Party.

Republican Gov. Charlie Crist announced later that "in an abundance of caution" he would refund $9,600 contributed to his U.S. Senate campaign by Rothstein and his wife, Kim. Rothstein has raised money for other politicians around the country, including former President George W. Bush and California Gov. Arnold Schwarzenegger.

Rothstein's investors estimate their losses could easily exceed $100 million, said attorney Jeffrey Sonn who represents some of them. But he added it will take time to reach a final figure.

"Honestly, we don't know how much was involved," Sonn said.

Attorney and developer Alan Sakowitz said he and some friends were offered what appeared to be a sweet deal by Rothstein in August, but eventually went to the FBI when things didn't look right.

"I'm always looking for an opportunity," Sakowitz said Tuesday. "We were always looking for a way to show this was real, and we couldn't find it."

It worked this way: Rothstein said his firm had negotiated a $900,000 settlement that would pay out over several months. The person who won the settlement needed money right away and was willing to "sell" the rights for $660,000. Under the deal, Sakowitz and his friends would pocket the $240,000 profit in just three months.

Rothstein, who has been in Morocco since last week, returned Tuesday and will answer the allegations, said his attorney Marc Nurik. He said Rothstein never intended to flee the U.S.

"You will be seeing him shortly," Nurik said. "It would be premature for me to address any of this."

Rothstein told the group that his firm does 3,000 such settlements a year without ever filing a lawsuit, mainly by using private investigators and surveillance tactics to build airtight cases in areas such as workplace sexual discrimination and corporate malfeasance that defendants immediately seek to settle. For example, photographs of a senior manager having an affair with a worker.

Michael Goldberg, an attorney who has been appointed a receiver in numerous Ponzi schemes, said such scams share similar hallmarks: promises of unrealistic returns on investment, secrecy and hidden financial books, and people willing to suspend disbelief in pursuit of a big payoff.

"They are all variations on the same themes," Goldberg said. "We've got to ask questions. We can't just bury our heads in the sand."

[Associated Press; By CURT ANDERSON]

Associated Press writer Brendan Farrington in Tallahassee contributed to this story.

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