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Tag: Fort Lauderdale

  • IT’S OFFICIAL: Scott Rothstein Is A Racketeer; Disbarred Lawyer Pleads Guilty, Forfeits $1.2 Billion; FBI Cites ‘Red Flags,’ IRS Cites ‘Lies’

    Disbarred Florida attorney Scott Rothstein has pleaded guilty to a racketeering conspiracy that included mail fraud and wire fraud, and to two separate counts of wire fraud.

    “Today’s guilty plea is an important step in bringing to justice those who perpetrated a $1.2 billion Ponzi scheme under the guise of operating a legitimate law firm,” said U.S. Attorney Jeffrey H. Sloman.

    The case is far from over, even with the plea, Sloman said.

    “The U.S. Attorney’s office will continue to pursue all leads and evidence as they are uncovered,” Sloman said. “Rest assured, those who are criminally culpable will be held accountable. Victims can also take comfort in knowing that the United States will do everything it can to identify, seize and equitably refund fraud proceeds.”

    Rothstein, 47, of Fort Lauderdale, forfeited $1.2 billion, 24 pieces of real estate, luxury cars such as Bugattis, Rolls-Royces and Cadillacs, yachts, shares in businesses and more. He faces a maximum sentence of 100 years in prison.

    The elaborate Ponzi fraud included bogus legal settlements, forged court documents, fraudulent promissory notes, fraudulent campaign donations and gratuities paid to “high ranking members of police agencies,” prosecutors said.

    A senior FBI agent said Rothstein charmed millions and millions of dollars from investors.

    “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,” Gillies said.  “We will continue to work with our partners to investigate investment fraud schemes.”

    A senior IRS investigator said Rothstein traded on appearances.

    “This case shows that the appearance of success can be a mask for a tangled financial web of lies,” said Daniel W. Auer, IRS Special Agent in Charge. ‘This investigation is not over, as we are committed to ‘following the money trail.’  We will continue to pursue the evidence wherever it leads, leaving no financial stone unturned.”

    Rothstein’s sentencing is scheduled for May 5.

  • DEVELOPING STORY: Scott Rothstein To Plead Guilty In $1.2 Billion Ponzi Scheme

    BULLETIN: Scott Rothstein, the Fort Lauderdale attorney charged with racketeering last month and disbarred amid allegations he orchestrated a $1.2 billion Ponzi scheme involving bogus legal settlements, is expected to change his plea to guilty.

  • 2009 Ends With Ponzi Clawbacks In Nadel Case, Demands By Fleeced Investors In Bolze Case For Politicians To Return Tainted Campaign Donations

    EDITOR’S NOTE: There is a link at the bottom of this story to a report filed by Burton Wiand, the receiver in the Arthur Nadel Ponzi case in Sarasota, Fla. We encourage readers to read the document in its entirety. The Nadel case is not yet a year old. Nadel, who turned 77 today and is  a onetime attorney, was disbarred in 1982 for taking money from a trust fund to pay off a loan shark, a fact allegedly hidden from investors. Nadel allegedly also employed an unlicensed accountant.

    Among other things, the Wiand document shows that unwinding a Ponzi scheme is a monumental undertaking. At the same time, the document may leave some readers scratching their heads and asking how on earth any person actually could advocate for Ponzi schemes — and yet such advocacy occurs on a daily basis in the bizarre world of autosurf and HYIP Ponzi schemes, where so-called “leaders” get paid for recruiting people into Ponzis.

    Here, now, the story . . .

    Arthur Nadel turns 77 today. He is jailed in New York.
    Arthur Nadel turns 77 today. He is jailed in New York.

    Burton Wiand, the court-appointed receiver in the alleged Arthur Nadel Ponzi scheme involving at least $350 million, has identified at least 85 investors who received more than they paid in and is working to identify more.

    Clawbacks have begun in earnest, with the winners offered a choice of settling for 90 percent of the total they received and returning the money or being sued for 100 percent and paying lawyers to defend them in the lawsuits.

    Meanwhile, fleeced investors in a separate Ponzi case in Tennessee are demanding that politicians who received campaign donations from the Dennis Bolze Ponzi scheme return the money so it can be used to compensate victims.

    Bolze, 61, of Gatlinburg, Tenn., pleaded guilty Nov. 10 to all counts against him, and is awaiting sentencing. He was accused of wire fraud and money-laundering in a $21.5 million scheme.

    WATE reported that Bolze gave money to a number of politicians.

    Beyond the Bolze case, it is clear that substantial sums of Ponzi money made its way into the coffers of local, state and national politicians in various jurisdictions. It is equally clear that there is no uniform approach to returning the money. Some politicians have said they’ve spent the money. Others have said they donated it to charity after Ponzi allegations surfaced. Still others have returned money.

    Unlike fleeced Ponzi investors who receive tainted largess directly, politicians’ ill-gotten gains may come indirectly from a polluted money stream linked to a Ponzi. There are allegations in Florida, for instance, that disbarred Fort Lauderdale attorney Scott Rothstein provided campaign donations from Ponzi proceeds, while at the same time paying lawyers in his now-shuttered, 70-attorney firm from Ponzi proceeds. It is possible that some of the Ponzi money paid to attorneys also made its way into the political process.

    Elsewhere in Florida, there are allegations that Andy Bowdoin, president of Quincy-based AdSurfDaily — itself implicated in a Ponzi scheme — donated at least $5,500 to the National Republican Congressional Committee (NRCC) — before the alleged ASD Ponzi scheme was exposed in August 2008.

    Meanwhile, the Miami Herald reported that Allen Stanford, implicated in an alleged $7 billion Ponzi scheme, also donated to politicians prior to the scheme being exposed. Like the Rothstein case, politicians in both major U.S. political parties received donations.

    Nadel Clawbacks

    In the Nadel case, Wiand estimated that the winners received at least $39 million in fictitious profits — ill-gotten gains from the scheme. He has settled with 26 investors to date, meaning that at least 59 potential clawback cases remain to be resolved. The number could increase because Wiand still is working to identify winners.

    The Sarasota Herald Tribune reported that six of the 26 settled clawback cases were settled in the final two weeks of 2009. One investor agreed to return $207,000 in fictitious profits by making four payments over the next three years.

    This chart from Burton Wiand's court filings in the Arthur Nadel case shows that the hedge funds purported to have recorded more than $272 million in gains between 2003 and 2008, then the funds actually lost more than $18 million. In 2007, the funds purported to have gained more than $54 million, but actually lost nearly $25 million.
    This chart from Burton Wiand's court filings in the Arthur Nadel case shows that the hedge funds purported to have recorded more than $272 million in gains between 2003 and 2008, when the funds actually lost more than $18 million. In 2007, the funds purported to have gained more than $54 million, but actually lost nearly $25 million.

    The SEC approved the 90 percent settlement figure, Wiand said. He added that the window was closing on the discount deal.

    In a November court filing, Wiand said that “those who do not settle with the Receiver should anticipate that litigation will be commenced in the immediate future” and that the discount “will no longer be available.”

    It appears as though two groups of clawback targets exist: a group of 85 who received letters and were offered the discount, and a group of an unknown size that will receive settlement letters soon.

    Wiand said the group of 85 represented about $16.2 million in fictitious profits from the scheme. The other group represents about $22.8 million.

    Read Wiand’s interim receivership report in the Nadel case.

    See Nadel story in Sarasota Herald Tribune.

    See Bolze story from WATE.

  • Virginia Attorney Whose License Was Revoked After Firm Wrote Bad Checks For Huge Sums Convicted In Ponzi Scheme; Troy Titus Faces Up To 590 Years In Prison

    ponziblotterThese are some trying times for the legal profession. Disbarred Florida attorney Scott Rothstein is implicated in an alleged $1.2 billion Ponzi fraud in which prosecutors said attorneys from his shuttered, 70-attorney firm in Fort Lauderdale were getting paid from Ponzi proceeds that flowed from bogus “settlements” in cases involving sexual harassment or sexual infidelity.

    And now a federal jury in Virginia has found former attorney Troy A. Titus, 43, guilty of running a real-estate Ponzi scheme and other fraud schemes that fleeced clients out of more than $7 million.

    Titus was found guilty of 33 charges. He faces up to 590 years in prison. Sentencing is scheduled April 15 before U.S. District Judge Raymond A. Jackson.

    “[A] jury found Troy Titus stole millions from people who trusted him to protect their investments,” said U.S. Attorney Neil H. MacBride of the Eastern District of Virginia. “[His] conviction is a testament to the ability of our law enforcement partners to tackle complicated investment and mortgage fraud cases. Especially in the light of the recent economic crisis, we are even more determined to work together to aggressively fight financial fraud in this district.”

    A veteran FBI agent said enough is enough.

    “[W]e will continue to target those who, motivated by greed, prey on honest investors and damage our country’s financial confidence,” said A.J. Turner, special-agent-in-charge of the FBI’s Norfolk field office.

    Titus’ law license was revoked by the Virginia State Bar in 2005 after an investigation revealed a continuing pattern of writing bad checks for tremendous sums. Between November 2002 and May 2005, according to records, Sun Trust Bank and Monarch Bank notified both Titus and the Virginia Bar about 15 overdrafts on accounts Titus had the responsibility of maintaining.

    The Virginia Bar, which initially gave Titus an opportunity to right the ship after he explained that his accounting systems lacked controls and that he had taken corrective measures and hired a CPA, later determined he had engaged in a continuing pattern of “ethical misconduct” when more bad checks surfaced.

    Even after the CPA produced evidence and showed Titus in August 2004 that statements reflected that a key Titus account had a balance of $2.177 million, that checks totaling $4.746 million had been written on the account and that the account had an adjusted negative balance of $2.569 million, Titus pooh-poohed the situation and continued to overdraft the account by tremendous sums.

    Titus eventually was charged criminally. In March 2009, a superseding indictment was issued by a grand jury, accusing Titus of dozens of counts of fraud, including Ponzi fraud.

    “Titus approached clients or seminar participants and induced them into investing money with him to purchase and rehabilitate real estate, promising to return the money at a later date with a high rate of interest,” prosecutors said. “However, Titus obtained many of the real properties involved through fraud or transferring the properties into trusts controlled by him. Instead of using the funds as promised, Titus directed the investment income toward paying business or personal expenses, backfill investment losses, and at times to make token payments or repay previous investors.”

    The disgraced lawyer also took advantage of “elderly or incapacitated clients who provided him with income intended to be held in trust and took steps to conceal those uses from those who inquired about the management of the trust,” prosecutors said.

    Trial evidence and testimony “showed that Titus failed to make payments for the trust clients’ basic medical and housing needs,” prosecutors said. “Titus engaged in a similar scheme to defraud involving real estate closing funds he held in trust.”

  • U.S. Attorney: Rothstein Ponzi Money Went To Politicians, Charities; ‘High-Ranking’ Police Officers Received ‘Gratuities’

    ponziblotterIn a criminal information and news release dripping with the word “co-conspirators,” federal prosecutors, the FBI and the IRS said Ponzi proceeds were used to grease wheels in law enforcement and pollute the worlds of business and politics in South Florida.

    Former attorney Scott Rothstein of Fort Lauderdale was arrested for racketeering yesterday. He was arraigned, denied bail and jailed. Residents are waiting for other shoes to drop in what is shaping up to be a scandal of monumental proportions.

    No co-conspirators were named immediately. But even police officers were involved and received “gratuities,” prosecutors said.  Politicians received donations designed to evade campaign-finance laws.

    One crime targeted at clients of Rothstein’s law firm involved $57 million, fraudulent legal documents, forgeries and a claim a lawsuit had been won when it actually had been settled against the interests of the clients, prosecutors said.

    “To perpetuate and conceal the fraud, defendant Rothstein and other co-conspirators created a false federal court order, purportedly signed by a Federal District Court Judge, stating that the clients had won the lawsuit and were owed a judgment of approximately $23 million. The false court order also stated that the defendant in the civil suit had transferred the funds to the Cayman Islands to avoid paying the judgment. Defendant Rothstein and other co-conspirators falsely advised the clients that to recover those funds, the clients were required to post bonds. In this way, defendant Rothstein caused the clients to wire transfer approximately $57 million to a trust account he controlled, purportedly to satisfy the bonds.”

    But that was only a single element of a colossal fraud, prosecutors said.

    “Rothstein and other co-conspirators used the funds obtained through the Ponzi scheme for their own benefit,” prosecutors said. “This included, for example, using the money to fund and operate [the Rothstein Rosenfeldt Adler (RRA) law firm], 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 individuals and members of RRA, to hire local police officers to provide security, and to provide gratuities to high ranking members of police agencies.

    “In addition, the money was used to purchase controlling interests in restaurants and other businesses, and to socialize with politicians and sports figures,” prosecutors continued. “These expenditures were calculated to enhance defendant Rothstein’s reputation and ability to solicit potential investors in the Ponzi scheme, provide an air of legitimacy and credibility to RRA, engender loyalty, and deflect law enforcement scrutiny.”

    Acting U.S. Attorney Jeffrey Sloman of the Southern District of Florida said the crime was epic and had stained the legal profession.

    “Attorneys, like elected officials, hold a special position of trust in our society, and owe a corresponding duty to deal honestly with their clients and to promote their clients’ best interests,” Sloman said. “This attorney breached that duty and stole approximately $1.2 billion from clients and investors. He spent his clients’ money on real estate, cars, yachts, politics and philanthropy, all to create the illusion that he, his law firm, and his schemes were hugely successful.

    “Now, the mansions, Ferraris, yachts, the law firm and his friends are gone,” Sloman said. “[Rothstein] sought to buy power and influence at the expense of his clients, and instead has potentially bought himself a lengthy prison sentence.”

    The New York Times reported that Rothstein, who was disbarred by the Supreme Court of Florida last week, was overheard yesterday giving legal advice to people with whom he shared a holding cell before his arraignment.

    Rothstein, 47, faces up to 100 years in prison if convicted of racketeering and associated crimes such as mail fraud, wire fraud and money-laundering offenses.

    A veteran FBI agent said Rothstein’s world was filled with artificial realities.

    “Scott Rothstein appeared to be a charismatic, reputable attorney one could trust to invest one’s money and make a sizeable profit,” said John V. Gillies, Special Agent in Charge of the Miami Office of the FBI.

    “We now know it was all smoke and mirrors,” Gillies said.

    Daniel W. Auer, IRS Special Agent in Charge, said the investigation is ongoing.

    “We will continue to move forward with this investigation, wherever it leads, and we will bring to justice those who defrauded the American public and members of our community out of their hard-earned money,” Auer said.