A key question regarding Scott Rothstein's fraudulent scheme that until now has gone largely unanswered: How did he lure so many rich and powerful locals to pour tens of millions into the estimated billion-dollar Ponzi that imploded last weekend?One way he did it was by tricking investors into believing that his firm was representing numerous underaged girls who had sex with Palm Beach billionaire and convicted child sex offender Jeffrey Epstein, sources have confirmed. On top of that, Rothstein claimed that he had flight logs showing that Epstein flew extremely prominent people, including former President Bill Clinton, on his private jet with some of the plaintiffs.
He told investors that Epstein, Clinton, and other celebrities involved basically had no choice but to settle these cases and that it was a veritable treasure-trove. They then ponied up millions to invest in the settlements, pay out a portion of those settlements to the victims, and pocket the rest.
Problem: Rothstein, who is currently in talks with federal officials after returning from his run to Morocco, was fabricating the story. He took a shred of the truth -- there were some civil suits filed against Epstein, including at least one handled by the Rothstein Rosenfeldt and Adler firm -- and built it into a grandiose lie that promised hundreds of millions of dollars in returns for his investors. There apparently is no indication that the former president, who was at one time a real friend of Epstein's, and other celebrity names bandied about by Rothstein wereinvolved in any way. Of course, his investors didn't know this. The settlements were supposedly confidential, so they had to take Rothstein's word for it. Adding to the secrecy -- and Rothstein's cover -- was the fact that many of the actual plaintiffs in the Epstein case were underaged girls known only by initials.
Even his claims about celebrities flying on Epstein's jet has a seed in truth. It was well-known that in 2002, he flew Clinton, Kevin Spacey, and Chris Tucker to Africa on an anti-AIDS mission in his private Boeing 727.
I learned about Rothstein's use of the Epstein angle from a source close to the case and contacted Fort Lauderdale attorney Bill Scherer, who is representing multiple Rothstein investors. He confirmed that the Epstein ploy had been used by Rothstein.
"He used the [Epstein case] as a showpiece, as bait," said Scherer. "That's the way he raised all the money. He would use legitimate cases as bait for luring investors into fictional cases. All the cases he allegedly structured were fictional. I don't believe there was a real one in there."
At least one legitimate case involving Epstein and an underaged girl -- initials E.W. -- were being handled by Rothstein Rosenfeldt Adler lawyer William Berger, a former Palm Beach County Circuit Judge. Sources say they believe Berger wasn't involved in Rothstein's scam. Efforts to reach the former judge weren't successful.One source close to the case said there were numerous other ploys, though this one appears to have been one of Rothstein's more profitable creations.
"Think of the legitimate Epstein civil case as a car on the road," said the source. "Then think of that car driving off the road onto heavy terrain and kicking into four-wheel drive. That's what happened here, and Rothstein was at the wheel."
Known investors and feeder funds include venture capitalist Doug Von Allmen, prominent car dealer Ted Morse, socialite art dealer Bonnie Barnett, and the Banyon Fund, which involved Fort Lauderdale businessman George Levin. There are many others who contributed to what Scherer now estimates was a billion-dollar Ponzi scheme.
Rothstein's fraudulent empire came crashing down last weekend, sending his 70-lawyer firm into a tailspin and receivership almost literally overnight. Rothstein fled to Morocco before returning Tuesday on a G5. He is now said to be in extensive talks with federal officials in hopes of cutting a plea deal.
Epstein was hit with scandal more than two years ago when it was discovered he was having sex with underaged girls in his Palm Beach mansion. He was charged by state authorities in 2006 and entered a plea deal last year. Since, he has been hounded by civil suits.