THE CON: To pad his bank account, secure his role as a major political donor and satisfy his early investors, Scott Rothstein fabricated lawsuits and falsified court document to convince investors to “buy” legal settlements.
THE DAMAGE: $1.2 billion
THE OUTCOME: Rothstein pleaded guilty to racketeering, money laundering and fraud and was sentenced to 50 years.
In the flurry of news articles that appeared about Scott Rothstein and his $1.2 billion Ponzi scheme, one adjective was used again and again to describe the con artist: “Flashy.” It seemed that Rothstein took an over-the-top approach to everything. He lived – and donated – large. If there was a major social event, he was there. If there was an opportunity to grab attention or curry favor with a significant political contribution, Rothstein took it.
The New York Times described him as “Bronx raised, Fort Lauderdale rich” and a man known for “loud epithets, fast cars and big checks, written often.” Rothstein’s rags-to-riches story was dramatic, as was the speed with which his law firm took off.
Rothstein Resenfedt Adler opened its doors for business in 2002 with eight lawyers. Within six years, there were about 70. The firm’s niche specialty was selling employment discrimination settlements at a discount. Rothstein persuaded investors to make high interest loans to clients of his law firm. The investors provided Rothstein’s clients with a payout upfront and then collected big returns when the settlements were paid off.
The only catch was that most of these clients didn’t exist. The lawsuits were pure fabrication. Those phony lawsuits supported Rothstein’s lifestyle: his fleet of Rolls-Royces, Lamborghinis and Ferraris, his waterfront homes and his 87-foot yacht. Investors’ money also helped to mollify earlier investors and allowed Rothstein to make political donations and secure alliances with the powerful and elite.
As was his way, Rothstein made donations in as ostentatious a manner as possible. He made sure everyone noticed his wealth and generosity. When Florida Governor Charlie Crist threw a 52nd birthday party/GOP fundraiser, attendees were invited to buy a $5,200 candle. Not satisfied with turning up with just one candle like everyone else, Rothstein bought an entire chocolate cake and covered it with 52 candles.
Rothstein’s good times slipped away in October 2009. Anxious investors who were tired of waiting for their scheduled payments contacted the authorities. Rothstein immediately cleaned out his law firm’s trust accounts and took off for Morocco.
He sent text messages from Morocco, expressing regret for “letting you all down” and considering his choice between life in prison or suicide. He chose the former, returning to the States by private jet to face the music.
Governor Crist and other politicians who took his money also had to face the music. In the largest giveback of donations in the state’s political history, neither party was safe. The Republicans had received a half million dollars, while the Democratic Party returned about $200,000 in dirty money.
Rothstein, who pleaded guilty to racketeering, money laundering and fraud, wrote a 12-page letter expressing his guilt and shame. In the letter, which he read aloud to the judge at his sentencing hearing, Rothstein wrote that “the money and power were intoxicating -- jealousy and greed took hold.”
The judge was not moved. The judge was, in fact, deeply disturbed that Rothstein had forged court orders to convince an investor that one of his clients had won a $23 million settlement. (He convinced that same investor to post bond of $57 million directly into Rothstein’s trust account.)
Taking this into consideration, the judge sentenced Rothstein to 50 years – which is 10 years longer than prosecutors requested asked for. In August 2010, Rothstein was ordered to pay $363 in restitution to his victims.