At one point during the commission of his $1.2 billion Ponzi scheme, Scott Rothstein allegedly wrote an email in which he gave a perverse twist on the story of Robin Hood.
He wrote that he stole from the rich and gave to the richer.
The Rothstein quote was supplied by lawyer Bill Scherer, who is representing several alleged Rothstein victims, including major investor Doug Von Allmen, in a lawsuit against numerous alleged conspirators in Rothstein's Ponzi scheme.
Perhaps Von Allmen is the rich guy in Scherer's scenario while huge Rothstein funder George Levin is the richer fellow.
In his massive new 1,329 amended complaint, Scherer clarifies his view on Levin, the wealthy Fort Lauderdale businessman who was responsible for pumping $657 million into the Ponzi through his Banyon hedge funds.
He mentions in his suit that another Levin company, Classic Motor Carriages, was convicted of a fraud charge and calls the Ponzi scheme "Classic Motors 2.0."
"Similar to his operation of Classic Motor Carriages, Levin relied on others in Banyon to do his 'dirty work' in an attempt to insulate him from both criminal and civil liability," Scherer alleges.
So who does Scherer say did that dirty work? That would be Frank J. Preve, a felon and Banyon's chief operating officer. Preve had an office at RRA and "acted as the first level of insulation between his boss, Levin, and the fraud being committed by Rothstein," the suit claims.
In an attempt to prove this contention, the suit cites numerous emails from Preve to Rothstein that serve as evidence of Banyon's "complicity" in the scheme. I am going to share them below in raw form, grammatical errors and all, and will save the analysis and explanation for later. It ends with an exclamation-filled October 30 email from Levin in which he says that he is afraid "the game will be
over" and that they "will have more lawyers and publicity than the NY [T]imes by Saturday."
The implosion of the Ponzi scheme and Rothstein's flight out of the country was indeed broken (on this site) the following night, Saturday, and was confirmed on that Sunday. The email stream begins on April 18, 2008, when Preve wrote to Rothstein about one of the (the (bogus) settlement deals:
"This one we already funded completely (according to our books)... is it worth getting [the New York hedge fund] Centurion to fund it again or will it be a hassle 'proving' she got the money when Milk Toast comes in???"
In a July 2, 2008 email, Preve wrote Rothstein:
"Hoodsie, You send me the deposit and I will send the $687,500 back to you as a 'mistake' so your books are balanced."
From February 8, 2009:
"What are doing about the $10.m? Why are your people giving out money with papering the deals? This will (already has) got us in hot water because we will not be able to plan our cash flows."
On April 13, 2009, Preve sent Rothstein an email regarding an "inadequate partial payment" sent to the New York hedge fund Platinum, which had invested substantially in the scheme.
"This exactly what we need to avoid," Preve allegedly wrote. "Betwen the phone call to Mayer [Platinum owner Meir 'Mark' Nordlicht] and the this wire, we have opened the floodgates of doubt. Why send them anything if we are going to only send them $256k?? What is the plan for the next 20 minutes? Give me a shout when you finish with BSO so I can respond to the NY calls."
It's not known what business Rothstein had with the sheriff's office that day.
On April 27, 2009, Preve sent an email to Rothstein with the subject line "DECISIONS."
"Your lenders will never agree to any program which allows you or anyone else to interrupt their flow of their own funds based on a totally undocumented funding requirement. Even today everyone is being asked to acknowledge a funding goal for which there is absolutely no documentation -- this will never stand up under scrutiny. However, we do know that on Monday we had 30 million dollars to be funded and these were held up based on the above dispute. We have already sacrificed the interest of at least a third of your clients based on her misperception of the funding cycle. Lets get this back tomorrow. If you do not fund and then do not receive funds in return you are guaranteed to lose your suspension/license appeal. If you do fund and receive the funds under a 'settlement' agreement with Banyon, you can at least show your critics that you defended your clients and finally have received partial performance and have an expectation of receiving the remaining funding."
I'm not sure what the "suspension/license appeal" refers to. Will get answers.
Also on April 27, 2009, we have this email from Preve to Rothstein:
"Problem #1: RRA needs cover for its non-funding of clients -- Banyon provides the cover as follows: Banyon signs a Default Agreement with RRA acknowledging that it has defaulted on its commitment to RRA's clients to fund their settlements. Banyon consents to fund $150 million in the next 20 days. George Levin gives his personal written guaranty to make available funds. Problem #2: Where is the 150m coming from??"
Starting in May, you can feel the panic in Preve. On May 18, 2009, he writes to Rothstein:
"[C]oncerned? I am petrified ... if word gets out that we are $125 million past due we will never see another cent in 3rd party funding including the PPM. We will have the auditors looking at our books in another 12 days and that also gives me great concern ... it is so easy to see the sudden lack of releases and you auditors ... everything has to be explained in footnotes ... and by the way, no one is throwing you under the bus ... all we have done is support you at every single turn and we will continue to do so. The fact that I am concerned that 25% of our portfolio is past due should not come as a surprise to you, to the Bar, to God, or to anyone else that notices that I am walking around smelling like just peed my pants."
On September 15, as the end of the Ponzi draws near, more alarm from Preve:
"The 'system' is not working ... yesterday I failed to make $500,000 in payments to our largest investor and it will not be pretty today. In addition, on the 28th we have two loans maturing that cannot be extended -- $1.5m and $5.5m -- if we don't plan for these in advance. George [Levin] is going to make the newspapers big time. Because of your youth, inexperience, and drugs none of this bothers you. Because of my age, failures, and drugs -- all of this is sending me off the deep end ... expect expletives shortly!!!!!!!!!!!!!! Have a jolly good day."
On September 22, 2009, Preve writes to Rothstein, "Can we at least get the documents for the monies that have been sent so if we do have public scrutiny over the BIF books we have things balanced rather than the cavernous hole that I have allowed to be created????"
On October 3, Preve writes Rothstein an email with the subject line "Mike Szafranski," a reference to the "independent verifier" of the scheme who was also an investor working very closely with Rothstein, whom he once referred to as "master."
"This is bullshit about [Rothstein investor and Scherer client] Doug [Von Allmen] but we have to get Mike in there on Monday or the crapola is going to hit the fan -- we do not need this sort of distraction which is being solely by in attention. Please get this monkey off. Also, before you talk any business with AJ [Discala] need to discuss a couple of approaches."
On October 21, six days before Rothstein's flight to Morocco, Preve writes Rothstein saying that Banyon is "teetering on bankruptcy." He continues:
"If I don't get $8m today and tomorrow I will be officially gone -- you know where $5m is going ... the rest are for my bank payments. By this time I would have thought that we could come to some sort of daily payment schedule that would relieve me as my role as official groveler for the Levin's. I just don't do a good job at this. As you know, we have invested, reinvested and raised about $170,000,000 since the meltdown last April. In return you have released about $13 million Ban1030 money. I don't know what we need to do to resolve this as it seems we are dealing with a moving target but my ability to stay afloate with smoke and mirrors is gone ... really gone. So am I."
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On October 30, Rothstein receives this email directly from George Levin, who had learned that investors weren't being paid:
"If we don't make [Doug Von Allmen's] payment tomorrow, I am afraid the game will be over! Just when we were going to put the ball over the goal next week. Aj [Discala] goes out for $ wed of next week! We won't be able to recover. This being our first payment! I will calm Barry down, however Doug will be impossible to calm down! The entire town will know this by tomorrow night! Why wouldn't this payment be made? No matter what it takes tomorrow the payment will be made! That means if Scott has to release some of the $400,000,000+ that he is holding, enough to cover the payments then, that's what we are going to have to do. We can't let the entire business go down over this, if we keep cool heads and take the course of least resistance we will get over this tomorrow. If we stick our heads in the sand, or think this is going to be like the NY boys, this strategy will never recover. Not this time and not with Doug! He is nuts and very suspicious of us! We will have more lawyers and publicity than the NY times by Saturday! I am available for the next 24 hours day or night to help get over this problem. We have the way to do it if we act as businessmen! So lets get it done! One way or the other."
Wow. The day after Levin, who was apparently unaware that Rothstein had already fled to Morocco, sent that email, I learned from sources that the lawyer had fled town. I put up a rather cryptic blog post that night, Halloween, and another one the next morning. Later that day, the story was confirmed and RRA was already preparing to file for bankruptcy.
There's more, but this is enough for now. I will try to make more sense of the raw data today and update later.