Inside the Rothstein Swindle, Part II
Once Scott Rothstein explained the concept of buying secret settlement deals (see Part I), he explained just how big these deals could be and how much money could be involved in them.
To illustrate, he told his prospective investor about the giant Eli Lilly pharmaceutical case. The beauty of that was it was real -- the company settled with plaintiffs and the federal government for $1.42 billion -- and a real Rothstein Rosenfeldt Adler attorney, Gary Farmer, was a named lawyer in the case. Efforts to reach Farmer have been unsuccessful.
The Eli Lilly case, which involved several whistleblowers from inside the company, was one of the largest qui tam cases in history. In that case, Eli whistleblowers went to the fed with unlawful practices regarding the marketing and sales of an anti-psychotic medication called Zyprexa. The federal government took the case and distributed the giant settlement among the whistleblowers -- and their attorneys, of course.
The investor said Rothstein called the Eli Lilly case the "best luck of
Then Rothstein said he had another Eli Lilly-like case in the making, only it was all being done confidentially prior to any lawsuit being filed. It was so confidential that he couldn't name the company and told the investor that, in fact, he shouldn't even speak of its existence at all.
But it was a big case involving a major company and a government contract. The product it was selling wasn't up to standard, and Rothstein had proof of it. Not only that, but the company actively covered up that fact, and the fraud and/or cover-up went all the way up to the president of the company.
Rothstein said he represented the chief witness in the case -- known as the "relator" -- and numerous other whistleblowers. He said the had negotiated settlements, and those were what he was selling that day.
The point was raised that this seemed like legal extortion.
"That's not what I'm doing, and that would be unethical," Rothstein told him.
Rothstein went on to say that the company in question realized it had a big problem not only with the whistleblowers but with the government. He said the company wanted to settle with the whistleblowers out of court before moving forward in the process with the government. He said that not only was it not extortion but that the firm didn't even have an adversarial relationship with the company.
The deal would be that the investor would buy whistleblower settlements that would add up to a figure in the single-digit millions of dollars. The profit turnaround was enormous -- roughly 60 percent in a short period of time. Of course, it would be completely secret; the investor would never know the name of the company or the whistleblower.
"If I wanted to screw you, I could screw you," Rothstein said. "If you don't trust me, you shouldn't do this deal."
But he also told the investor there was a solid fallback -- TD Bank Regional Vice President Frank Spinosa would confirm the deal. The settlement money would go through a trust account at TD Bank that would be accessible only to the investor at the appropriate time.
"Before you fund, we're going to be on the phone and we're going to call Frank Spinosa, who is going to confirm that the money from the defendant has been wired into a locked account," Rothstein said.
Soon thereafter, the meeting ended. David Boden led them out of the office and said he would follow up with all questions and hammer out the contract.
Now it was time for due diligence.
[Part III, dealing with the actual structure of the deal and who at RRA was involved, will be published tomorrow].
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