Affidavit: Big Payments, Suspicious Email Tied to Key Rothstein Figure
Michael Szafranski has always been one of the most mysterious figures in the Scott Rothstein mess, so new information about hefty payments made to him and a potentially damning email he sent to Rothstein as the fraud fell apart can only add to the intrigue.
Szafranski, a certified investment adviser from Surfside, was brought into the Rothstein scheme by George Levin, who was responsible for pumping about $400 million into the Ponzi. Szafranski's job was to work as an "independent verifier" for investors to make sure money put in Rothstein's settlement deals was safe. Szafranski was supposed to have not only verified Rothstein bank account information but also to have met the defendants and plaintiffs in Rothstein's fake settlements, right down to inspecting their driver's licenses. He also allegedly had full access to the TD Bank trust accounts tied to the scheme.
In addition to serving as verifier, Szafranski also formed a feeder fund for Rothstein's scheme called ABS Capital Funding that is now claiming $31 million in losses in the bankruptcy.
Considering his deep involvement, it's not surprising that on October 30, as the scheme collapsed and Rothstein had already secretly fled to Morocco, Szafranski was panicking. According to a groundbreaking affidavit by attorney Bill Scherer that was filed in civil court yesterday, Szafranski sent Rothstein the following "frantic" email regarding an investor Szafranski called "Melly" (it's not clear whether he's referring to apparent investor Mel Lifshitz). The email:
From: Michael Szafranski
To: Scott Rothstein
Subject: Plz read. Banyon melly
Date: Friday, October 30, 2009 6:00:52 PM
I have spokent to melly. He is planning on meeting with florida counsel on sunday and going into court on Monday morning. He will be going after you, the firm. Everything. I was not able to dissuade him. I was however able to get him to agree to
hold off a few weeks if [Banyon employee] frank [Preve] gives him $37 million plus their abs payments. Frank and george [Levin] agreed to this if they can get bank balances as of 5 p.m. today. I need to have someone get balances for me to see. Or we can have [TD Bank vice president Frank] spinosa write a letter detailing each account's balance since banyon is open to taking everyone out. Please make this happen or we are all done.
Onyx Capital Management
The bold type at the end is courtesy of Scherer, who is representing a group of Rothstein investors. He alleges in the affidavit that the email provides "decisive" evidence that Szafranski was involved in the Ponzi scheme. It's certainly one of the most interesting correspondences involving the scheme we've seen to date.
In addition to the email, Scherer reveals in his affidavit that Szafranski's company, Onyx, received nearly $6.5 million from Rothstein during the four months before the Ponzi scheme collapsed. It's not known if those payments are tied to Szafranski's feeder fund, ABS. "Michael Szafranski's breach of fiduciary duties and acceptance of almost six and a half million dollars of ill-gotten gains are specific examples of Szafranski's complicit role in this Ponzi scheme and evidence supporting his criminal and civil culpability," Scherer wrote in the affidavit. "... [T]here is no plausible explanation for why Michael Szafranski... would be receiving such exorbitant payments directly from Rothstein as all monies should have been received from the investors who hired him."
Behind Scherer's extraordinary affidavit lies a fierce legal battle. Scherer wrote it in response to Szafranski's attempt to have him disqualified as the lawyer in a civil lawsuit that Scherer filed against Rothstein, Szafranski, and others who may be culpable in the fraud. After originally filing suit against Rothstein, David Boden, Debra Villegas, Andrew Barnett, Preve, Spinosa, and two other TD Bank officials, he later added Szafranski and Levin to the list of defendants.
Szafranski spoke with Scherer about the Ponzi scheme on November 7 in a conference call also attended by A.J. Discala, another Rothstein investor (and former husband of Sopranos and Entourage actress Jamie-Lynn Sigler). Szafranski alleges the conversation concerned Scherer's possible representation of him as a Rothstein victim and claims he shared information with Scherer that falls under attorney-client privilege. Scherer argues in the affidavit that there was never a "genuine expectation that Michael Szafranski could retain this law firm or a sincere belief that an attorney-client relationship could or would be formed."
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