Scott Rothstein – Money Laundering Synopsis

6 June 2017

Through the use of his law firm he fabricated court orders, forging the signatures of federal court udges, that showed that his clients had been awarded large sums of money in lawsuits in an effort to promote his credibility and pocket book. Clients were told that defendants had transferred funds to off shore accounts such as the Cayman Islands. In order for Rothstein to recover the money, his clients had to post bonds worth millions of dollars with his firm. The offshore accounts were owned by Rothstein.

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Rothstein would used the acquired funds to live a lavish lifestyle (cash exchange for negotiable goods). The exchanges included such items as a 1967 Corvette onvertible. a Ferrari F-40, a Ferrari F430 Spider, a Mercedes SLR McLaren, a Bugatti Veyron, and a 2010 Lamborghini. A fraudulent transaction follows certain trends. We will look at the methodology now. Incentive In this situation, Mr. Rothstein was living a lavish lifestyle. For him to afford such materialistic possessions he had to become innovative with acquiring more funds.

Opportunity Circumstances exist – in Mr. Rothstein’s case, he was a senior partner within his law firm. His reputation had been his strongest attribute. During his laundering time, Mr. Rothstein would offer exceptional gracious bonuses to him associates. Since he was a senior partner, many took this as Mr. Rothstein sharing the firms success with the entire team. Instead of viewing it as bribe money. Those that were eventually involved in the scheme, knowingly accepted the rewards in exchange for assisting and not commenting on the fraud. Mr.

Rothstein shared the attitude, character, and ethical values that allowed him to knowingly and intentionally commit these dishonest acts against his clients. Due to his necessity of living a life of luxury. It most cases, a situation like this would be unavoidable, unless the perpetrator decided to tone down his lifestyle. Rationalization/Attitude Mr. Rothstein’s attitude was that of greed. It would have been easy for him to rationalize any conclusion. However, there were really only 3 outcomes: He did not commit the fraud and stay an honest lawyer.

He committed the fraud and reaped the rewards of doing so. He should have cut back on his life of luxury before it became an issue. In Rothstein’s case, the incentive or pressure to live in the “big deals” was so enticing hat he was able to rationalize the act of committing fraud. Capability Those involved are able to rationalize committing a fraudulent act. Some individuals possess an attitude, character, or set of ethical values that allow them to knowingly and intentionally commit a dishonest act.

OVERVIEW: In reviewing this information, my first order would be to examine where the funds are coming from. For this I would investigate the settlement info. I would verify the validity of each settlement, followed by matching the settlement to the depositing account. I would also verify the timing of deposits, the amounts deposited and that the client received payments. As well, I would confirm and match settlement income to their respective non taxable settlement accounts on the financial statements through verifying all invoices. I would conduct a horizontal analysis of the settlement amortization.

If Rothstein was creating fraudulent settlements and “selling” them at discounted rates, there would be an immense increase in cash as well as a substantial increase in the amortization of settlements. The paper trail would give warranted reasons for suspicion. The con revolved around the law firm settling numerous lawsuits and that the plaintiffs wanted to expedite the receiving of their funds. Rothstein would sell their settlements at a lump-sum discount so they could receive their funds up front to another individual/flrm. In return, Rothstein promised investors substantial returns on the full value of the fraudulent settlement.

Alongside a financial review, I would inquire into Rothstein’s personal communication with staff and external colleagues. Obtaining computer, email and telephone information would give me the greatest ccess to his communication. I would also contact all of his registered clients and confirm their information with the information Rothstein has provided. Three Step Money Laundering Process Placement Phase: Illegal puts money in. Creates fake settlements to interest purchasers out the to buy out the settlements at a discounted rate. Layering Phase: Move money around.

Once he created the settlement, he would receive cash payments for them at a discounted rate. In another ploy, in order for Rothstein to recover the money, his clients nad to post bonds worth millions ot ollars with his firm. Integration: Rothstein would move the funds in several ways so that it would offer the illusion of being legitimate sources of income. In several cases, he would pay his own substantial salary with fraudulently acquired funds, offer up houses, and cars as bonuses to his employees or simply keep the cash and not record the transaction due to its illegal nature.

Scott Rothstein Synopsis The 50-year prison sentence imposed on Scott Rothstein in July of this year for running a IJS$I . 2 billion Ponzi scheme from his Florida law firm, money laundering nd stealing client trust funds, is the latest in a series of high-profile money laundering cases involving lawyers in the U. S. , Canada and Europe that have raised renewed questions about the role of lawyers and the effectiveness of anti-money laundering laws. Rothstein is now in Jail but what U. S.

District Judge James Cohn called the ”tsunami] left in his wake is far from over – Rothstein’s 70 lawyer firm is bankrupt and 35 of its former lawyers are being investigated, the TD Bank, N. A. is being sued by an investor for allegedly facilitating Rothstein’s laundering activities, former associates and mployees of the firm are being asked to repay lavish bonuses and gifts (that sometimes included houses and cars) from their boss by the firm’s receiver, and the firm’s COO Debra Villegas was recently received a 10-year term in prison after pleading guilty to conspiracy to launder money at the firm.

After months without arrests, the Scott Rothstein investigation regained steam Friday when federal prosecutors charged two Broward County attorneys with participating in the convicted lawyer’s $1. 2 billion Ponzi scheme. After Rothstein, 51, was arrested in late 2009, everyone began wondering who else was in on it. So far, 14 others ” including his wife, Kimberly Rothstein, among the last crop of suspects to be arrested a year ago ” have pleaded guilty to charges related to his scheme of selling fabricated legal settlements to wealthy investors.

Collectively, hundreds of investors from Florida, New York and Texas lost more than $360 million between 2007 and 2009, but they have recovered much of that money through civil and bankruptcy actions, including damage settlements with the Rothstein law firm’s former bank, Toronto Dominion. It revolved around the ruse that his law firm had settled numerous sexual arassment, discrimination and whistle-blower lawsuits and that the plaintiffs wanted to sell their purported settlements at a lump-sum discount so they could receive their funds up front.

In return, Rothstein promised investors substantial returns on the full value of the bogus settlements. When major investors in Rothstein’s settlements complained about his failure to pay them in April 2009, he ”falsely informed] them that he was under investigation by the Florida Bar and that their investment trust accounts at TD Bank had been ”frozen,] the Kitterman indictment said. To dodge them, Rothstein asked Kitterman to pose as the head of the Florida Bar’s Fort Lauderdale office and he supplied her with a script, according to the indictment.

In a phone conversation with some institutional investors, the indictment says, Kitterman talsely said Rothstein’s purported legal clients nad tiled 26 complaints against him for deceiving them about the lump-sum advances and that his investors ”caused part of the problem. ] In another phone conversation, Kitterman falsely told a representative of the investors that Rothstein faced disciplinary Bar action because f his failure to pay his legal clients the lump sums, according to the indictment.

She also said the investors’ trust accounts at TD Bank were frozen, but that Rothstein’s problems could be resolved if the purported plaintiffs were paid the funds they were owed. According to the indictment, Kitterman told the representative that their millions were still needed to pay off the Rothstein law firm’s non-existent clients ” all to keep his Ponzi scheme going. Bates is accused of arranging to have an attorney in his Plantation law firm, Koppel & Bates, meet with an investment group’s representative to say the firm had referred umerous civil cases to Rothstein’s law firm.

Based on that falsehood, the indictment said, the investors continued to sink more than $140 million into Rothstein’s scheme in 2009. Bates also agreed to write a phony opinion letter saying he represented a group that invested in Rothstein’s ”confidential” legal settlements and vouched for them. Rothstein then used the letter to lure more investors, according to his indictment. Later that year, Bates switched roles.

Rothstein wrote a letter in Bates’ name, on the Bates’ law firm stationery, in which Bates falsely claimed he represented a plaintiff in purported settlement deal in order to induce investors to put more money into Rothstein’s scheme. And in September 2009, one month before Rothstein’s scheme collapsed, Bates switched roles yet again, according to his indictment. On Wednesday, Mr. Rothstein appeared in the federal courthouse here, a few blocks from his now-shuttered law office, and pleaded guilty to running a $1. billion Ponzi scheme from 2005 to 2009. He is charged with five counts of federal racketeering, money laundering, and wire fraud, and faces up to life in prison. A month after he returned, he was arrested. Federal agents seized as much of his assets and property as they could locate. These included the cars, waterfront homes, an 87-foot yacht, 304 pieces of Jewelry, bank accounts, and equity stakes in a long list of companies, including local restaurants.

Agents even seized Rothstein’s American Express rewards points: 20,920,701 of them. Federal agents are estimated to have found assets valued at about $100 million. That’s a long way from $1. 2 billion. ”The rest of the money is in the Ponzi scheme,] said William Scherer, a local lawyer who has filed a lawsuit to recover money for Rothstein’s victims. Ђ”And he probably spent a large amount – living large and all that. ] Prosecutors say Rothstein specialized in selling investors a stake in confidential settlement agreements.

The settlements were said to involve sensitive pre-litigation negotiations in embarrassing sexual harassment cases or whistle-blower cases that the parties wanted to keep quiet. The investments could be purchased at a discount and would be repaid to investors at full value over time. But sometimes there were no settlement agreements and no real clients . Rothste n and others allegedly created false statement agreements, bank statements, ssignments of settlement agreements and personal guarantees.

Rothstein then created a fraudulent court order purportedly signed by a federal judge, prosecutors say. The order said that Rothstein and his clients had won the lawsuit and were owed $23 million. But it added that the defendants had transferred their funds to the Cayman Islands, making recovery difficult. Rothstein then told his clients that to recover the funds they would need to post bonds to be held in a Rothstein-controlled trust account. The clients wired $57 million into the Rothstein account, according to court documents.

When the clients became anxious about the money, Rothstein allegedly created a false order from a federal magistrate mandating a later date for the return of the clients’ money. Not all of Rothstein’s illicit gains went into his pocket. He had a reputation as an effective political fundraiser. According to court documents, Rothstein paid large bonuses to employees at his law firm. Before receiving the bonuses, the employees were told to make significant contributions to political candidates in their own names. The maneuver was apparently designed to bypass campaign finance laws.

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