Feds Search Rothstein's Firm In Missing Funds Probe

By Christine Caulfield

Law360, New York (November 05, 2009) -- U.S. federal agents searched the office of South Florida firm Rothstein Rosenfeldt Adler PA as part of an investigation into allegations that high-flying attorney Scott W. Rothstein misappropriated millions of dollars in investor funds.

Rothstein's partner Stuart Rosenfeldt — who filed suit in a Florida state court on Monday seeking to dissolve the firm — said FBI and U.S. Department of the Treasury agents served a warrant to search the firm's Fort Lauderdale office on Wednesday evening.

“We are cooperating completely with that search warrant. Indeed, we publicly stated before it was served that we welcomed it, and we want them to search and look for everything they need to find evidence of any crimes that may have occurred,” Rosenfeldt said in a video posted Thursday on the Florida Sun-Sentinel's Web site.

Rosenfeldt said he had consented to a search beyond the terms of the federal agents' warrant and had offered the firm's information technology staff to help in the hunt for documents. The firm reopened for business Thursday.

In his complaint filed in the Circuit Court for the 17th Judicial Circuit of Broward County, Rosenfeldt alleged that Rothstein — the managing partner and CEO — may have orchestrated a “substantial misappropriation of funds” from investor trust accounts that made use of the firm’s name.

Rothstein, 47, returned to Fort Lauderdale from Morocco on Tuesday and met with investigators, according to the Associated Press. His attorney, Marc Nurik, could not be reached for comment.

On Wednesday, Judge Jeffrey Streitfeld issued an order appointing receiver Herbert Stettin — a retired Florida judge — to oversee the firm's breakup.

The judge also removed Rothstein as CEO of the 70-lawyer firm and designated Rosenfeldt to take over, saying Rothstein had “relinquished his authority” by failing to appear before the court.

“All authority to manage the firm's operations and its ongoing client engagements is vested in plaintiff Rosenfeldt,” Judge Streitfeld said. “Additionally, plaintiff Rosenfeldt has full authority to take any legal action he deems to be in the best interests of the firm and its clients.”

Rosenfeldt has appointed Miami-based firm Coffey Burlington PL as counsel. Neither Rosenfeldt nor attorney Kendall Coffey responded to calls for comment Thursday.

The AP reported that federal agents seized computers, bank records, cash and the key to a Ferrari during its all-night search.

According to Rosenfeldt's suit, the firm's lawyers recently learned of irregularities surrounding a Rothstein-operated settlement funding business, which involved the purchase of structured legal settlements and the sale of the settlements to investors.

“Various investors have informed the firm that they believe that substantial funds are not properly accounted for and are missing,” the complaint stated.

Some investors allege that Rothstein may have been fabricating nonexistent structured legal settlements for sale to investors — a classic indicator of a Ponzi scheme in action.

Details surrounding the transactions are still emerging, according to the lawsuit.

A copy of Rothstein's firm bio, pulled from the site but replicated elsewhere, says he is “extremely active” in politics. The bio crows that Rothstein is a "close friend" of Florida Gov. Charlie Crist and that he rubs elbows with Sens. Arlen Specter, D-Pa., and John McCain, R-Ariz. – among other heavy hitters in Washington.

According to Law360's records, the dissolving firm is active in several significant litigations:

The firm represents the named plaintiff in an active class action accusing Ford Motor Co. of unjust enrichment when it installed 2003 model year engines known for defects in certain 2004 model year vehicles.

It also represents Reckitt Benckiser Inc. in its litigation against Watson Pharmaceuticals Inc.,which is seeking to make generic versions of Mucinex cough treatments.

Rosenfeldt and the firm are represented by Coffey Burlington PL.

Rothstein is represented by attorney Marc Nurick, formerly of Rothstein Rosenfeldt Adler.

The case is Stuart A. Rosenfeldt et al. v. Scott W. Rothstein, case number 09-059301, in the Circuit Court for the 17th Judicial Circuit of Broward County.

--Additional reporting by Pete Brush