BREAKING NEWS: Feds Say Rothstein Law Firm Had $8 Million In Revenue, But Paid $18 Million In Salaries
UPDATED 1:52 P.M. ET (U.S.A.) The Rothstein Rosenfeldt Adler (RRA) law firm recorded $8 million in receivables during an unspecified year, but paid out $18 million in salaries to its employees, according to an amended forfeiture complaint filed today in the Scott Rothstein Ponzi scheme case.
Ponzi proceeds of $10 million were used to close the revenue gap, prosecutors said. It was not immediately clear if the government intended to claw back the portion of the salaries allegedly paid for with Ponzi proceeds.
Today’s filing, which was co-signed by Assistant U.S. Attorney Alison Lehr and an investigator for the Internal Revenue Service, lists a dizzying array of property seized or targeted for forfeiture in the case to date. It also showcased the dangers Ponzis pose not only to investors, but also to beneficiaries of Ponzi largess given as charitable contributions or political donations.
Tainted funds were given to politicians and charities such as hospitals, prosecutors said. The Joe DiMaggio Children’s Hospital in Hollywood, Fla., received $800,000 in tainted funds, according to the complaint. Meanwhile, Holy Cross Hospital in Fort Lauderdale received $1 million.
The charitable contributions to the hospitals and the donations to political campaigns now are listed as defendants in the in rem forfeiture proceeding, meaning they are considered ill-gotten gains. The hospitals alerted authorities to the donations after news of the scandal broke.
More than $160,000 in political contributions are listed as in rem defendants. The largest benefactor of Ponzi proceeds was the Republican Party of Florida, which received $145,000 in tainted proceeds.
Florida Gov. Charlie Crist received $9,600 in tainted contributions, according to the complaint. Democratic gubernatorial candidate Alex Sink received $6,000 in tainted contributions.
Crist and Sink already have turned over the money, as has the Republican Party, prosecutors said.
Vehicles seized had luxury nameplates such as Bentley, Ferrari, Mercedes, Rolls-Royce, Maserati, Bugatti, Lamborghini, Hummer, BMW, Corvette and Cadillac. A Ford Expedition limousine also was seized.
From the lineup of vehicles seized in Rothstein case.
Multiple Ferraris, Corvettes, Rolls-Royces and Mercedes were seized, according to the complaint. Also seized were marine equipment, including an 87-foot yacht and jet skis.
Numerous bank accounts were seized, including an account at Banque Populaire in Morocco that contained $12 million, prosecutors said. Two other accounts at Banque Populaire were seized, including an account containing $2 million in the name of Ahnick Khalid and an account containing $1 million in the name of Steve Caputi.
Also seized were 304 pieces of jewelry, 16 Pu Pont lighters, sports memorabilia, more than $272,000 in U.S. currency, $80,000 in American Express Gift cards, watches, investment equity and millions of dollars in real-estate holdings.
Everything was purchased with Ponzi proceeds, prosecutors said.
So is the prosecution going to try to clawback the salaries of the employees?
Hi d_b,
At the moment the answer is unclear. One mystery that may be solved, however, is how RRA could have grown so rapidly. The clear implication in today’s filing is that Rothstein used Ponzi proceeds to pay for talent.
Investigators also reverse-engineered real-estate transactions that occurred just prior to the seizure. Numerous properties were transferred to shell companies this year, according to the complaint.
Patrick
Quick note:
The Feds also assert in today’s filing that “no such settlement agreements had ever existed and the entire investment scheme was a fraud.”
If true, it means that Rothstein’s investors who thought they were buying an interest in sexual-harassment and labor lawsuits literally bought “nothing,” which makes this scheme all the more Seinfeldian. The entire thing was fabricated, according to the Feds.
“Seinfeld,” of course, was a TV show about “nothing.” Part of that “nothing” was a cast of characters that did not recognize their excruciating self-absorption.
It’s easy to look at the Rothstein case as a collection of people who did not recognize their own self-absorption and managed to persuade themselves that buying interests in sexual-harassment lawsuits allegedly unearthed by former FBI and CIA agents — and packaged as securities paying 20 percent a month — was just another garden-variety business pursuit.
The Feds outlined an allegation today in which an investor was offered a sexual-harassment settlement purportedly valued at $450,000 for $375,000. The deal was structured in such a way that the investor would pay $375,000 up front to fund the settlement, and would receive three monthly installments of $150,000 from Rothstein, which means a gross profit of $75,000 in 90 days.
The yield translated to 20 percent per month over the three months, which translates to an annualized yield of more than 80 percent. Investigators said the prospect was shown “a purported wire transfer receipt” as “evidence” that RRA had the funds on deposit in a trust account.
This deal was pitched in September 2009, meaning that Rothstein was still selling the scheme even as he was transferring real estate to shell companies. It’s evidence that he knew the scheme was collapsing, but still was collecting money.
One way to look at the behavior of ASD during the summer of 2008 was that Andy Bowdoin knew the scheme was collapsing, but still was collecting money — just like Rothstein. One also could look at the formation of Bowdoin/Harris Enterprises in the same fashion as the Feds are looking at Rothsteins real-estate transfers: A bid to hide assets in shell companies.
In the summer of 2008, Bowdoin was talking about his real-estate dreams, saying his stepson George Harris was head of ASD’s “real estate division.” What Andy did not tell the crowd at the July 12 Miami rally was that Harris was his stepson. Nor did he tell the crowd that the Harris home had been paid off with ASD money transferred from BOA to Capital City Bank, in an account set up my Harris and his mother — Bowdoin’s wife, Edna Faye Bowdoin.
It was too soon for him to tell the crowd about the acquisition of the Lincoln luxury sedan, which occurred later in the month. But he could have chosen to tell the crowd about the other cars. Those acquisitions were complete by July 12, as were the acquisitions of the boat and jet skis.
Rothstein, by the way, also had jet skis. So did ASI, the parent company of the Noobing autosurf.
Patrick
A McLaren Merc, two 430s, a Drophead, and a Bugatti Veron! Are these ponzi scammers fans of Top Gear? Some say he lost all his money to to someone from Florida, and that he is a left wing liberal, but all we know is, he’s called The Stig!
I’m astonished how much money has been flowing into these ponzi schemes. Where has it all been coming from?
Buried in the complaint about 12 Daily Pro a few years ago is the fact that the revenue for that ponzi scheme was over $500 million dollars in I believe less than 6 months. When that fact sunk in is when I got a little less forthcoming about giving out my personal information. At the time I was in the middle of working with authorities in relation to CEP and it occurred to me then that for half a billion it wasn’t unrealistic to think someone might wish to do me physical harm. Hell, for that kind of money I’d whack me. Anyhow, I’m not, as convicted felon Bob Guenther so snidely puts it “hiding behind a fake name on the internet” and in fact the little I do apparently is enough to keep him from finding out who I am, but I don’t mention much anymore that makes it easy.
My point is, there is an astonishing amount of money involved in these ponzi schemes. The ones that get the biggest, I have found, are the ones run by the dumber among the players, often by “well known and trusted” people from forums who get sick of getting scammed and instead of earning an honest buck decide to start their own little scam. Since these amateurs are somewhat well known in certain circles, and they team up with some big time referral farmers, they get a pretty good opening and since they don’t have enough sense to try to stay low key they get big enough to catch the attention of people they should rather avoid. My prototypes here are Mrs V, the CEP boys, Lee from ASA and DR Fund, Nick Smirnow etc..all low level ponzi losers who made names for themselves as forum cheerleaders and then got ambition. They make a big splash and do eventually fail, but the real pros are the ones running the much lesser known HYIPs and Surfs, that never get big enough to have thousands of members. Turns out you can make more and run much less risk if you’re willing to settle for a few hundred, maybe a few thousand punters at a time (and often run 3-4 schemes at a time) and quietly disappear than having the big time rallys and thousands of members. Food for thought. The dummies are the ones running big ASD type operations from the USA, but the pros are running an assembly line of short lived programs that operate from eastern europe and the middle east and you never hear about them after they go ***POOF*** one day.
For example,
I have seen 25 “autosurf” and HYIP ponzis parked on a single server waiting to be called into play.
All of them owned by a single “playa” and the whole time they’re “parked” accruing Brownie points with future victims for “being in business” since the day the domain name was registered.
These last two posts highlight an issue that Gregg and others have raised many timres – the role of the enablers of the ponzi autosurfs.
Mention has been madee of the thousands of small ponzis that never fly above the various governments radars as there are simply insufficient amounts of money or number of members to justify the cost of Govrenmernt intervention. Equally, it has been commented that some of the big names in autosurf frauds have benn forum cheerleaders who have rised through the ranks.
Without the support of a vast number of pro-ponzi “work at home” forums,and blogs, neither the small nor large would have such easy and cheap access to their audience of future investors/victims. As present there is no liability on the part of the forums for the pro ponzi promotions that take place in them, even they form an essential part of those promotions.
It looks as the payment processors are no longer as risk free as before since the inditement of eGold,The non US processors – in Canada, the Caribean, and other offshore paradises – are still enabling the movement of money which would not be permitted by the Banks in ther US. However, with the US Administration addressing the issue of ciber fraud, it will be interesting to see long it takes for the authorities to “click” that without the processors they have a hard of running.
None of the ponzis – from Maddoff down to the bottom of the scale can function without its network of enablers and, as far as ciber fraud is concerned, the forums and paymnents processors wouldnt be bad places to start
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