"The allegations [against Rothstein] do not involve the firm's law practice, they involve an investment business that Scott Rothstein created," said Coffey, who contacted the Pulp this evening. "There are a number of allegations being made and I'm trying to assess the firm's position and what steps it may need to take."
When asked if the firm's lawyers feel victimized by Rothstein, Coffey answered simply, "Yes." It's a near certainty that victims of Rothstein's investment scheme will sue the law firm and possibly even individual lawyers -- whether on solid ground or not -- in an attempt to get their money back.
Coffey said the law firm will be open for business Monday, but said it's too early to tell if the firm will
survive. Other sources say that the firm is filing for bankruptcy Monday. Lawyers have been holding meetings all day and I'm told were still at it during this writing. I expect it will be quite a scene at the firm's suite of offices at 300 Las Olas tomorrow.
Coffey confirmed that Rothstein's investment scheme involved purchasing "structured settlements," in which people sell large settlements in legal cases for lump sums of cash. It's not clear how many victims there are or how much money is believed involved. Coffey said the law firm is trying to find those answers but said the amount is significant. I am hearing from solid sources that the sum appears to be about $100 million.
Two sources say that among the investors -- and possible victims -- is the family of car dealers Ed and Ted Morse. Rothstein once told me that he considered Ted Morse Jr., one of his most loyal supporters, his best friend.
Many are making comparisons of the implosion of Rothstein's business and law firm to events surrounding New York City lawyer Marc Dreier. You can read about that case here. It is still important to note, however, that there have been no formal allegations made against Rothstein to date and there is no proof of wrongdoing.
But one thing is certain: This is going to be a hugely complicated saga. I'll keep you posted on it as it goes.
UPDATE: Local securities lawyer Jeff Sonn, who represented several Bernie Madoff victims, put out a press release saying he's now investigating Rothstein and Banyan Capital, which Sonn says was a fund run by Rothstein. The Sun-Sentinel, which finally published something on this story, reported that Banyan, which involves Fort Lauderdale businessman George Levin, reported Rothstein to the U.S. Attorney's Office for "suspicious activity." Here's the brunt of Sonn's release:
Sonn & Erez, a nationally known securities litigation firm, is investigating claims that Scott Rothstein, a Fort Lauderdale attorney with strong Republican ties including to Florida Governor Charlie Christ, may be involved in a $100 million investment that imploded. Rothstein's law firm, Rothstein Rosenfeldt and Adler, has hired former U.S. Attorney Kendall Coffey, who stated in a New Times article that "The allegations (against Rothstein) do not involve the firm's law practice, they involve an investment business that Scott Rothstein created." The New Times article stated that Coffey confirmed that Rothstein's investment scheme involved purchasing "structured settlements," in which people sell large settlements in legal cases for lump sums of cash.
Jeff Sonn, Esq., a nationally known securities lawyer who has appeared as a Wall Street fraud expert for CNBC, commented that "Often these private investment schemes, in which many individuals invest in an unregistered hedge or mutual fund with the intent to share profits are nothing more than unregistered securities, that may not be exempt from state and federal securities laws. In many instances, promoters claim these are private investments that need not be registered as they are allegedly exempt under Regulation D of the federal securities laws, but often they fail to meet all the exemption requirements, including failure to file a Form D with the SEC. If the securities are not exempt from registration, investors would be able to seek recision of their investment and to hold all promoters, and possibly others, for the loss." Sonn added, "I have heard that one of the funds run by Rothstein was named 'Banyon Capital,' but I have not yet seen the offering documents." Sonn said, "My law firm had seen Scott Rothstein living a very large lifestyle, including armed body guards, police protection, very expensive cars, luxury homes, jewelry, donations, and appeared to be something out of a Great Gatsby movie."
Sonn & Erez PLC is investigating allegations against Scott Rothstein and the Banyon Capital fund.