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September 2, 2010 |
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| March 17, 2010 |
By: John Pacenti |
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Fort Lauderdale judge overseeing the criminal case against Ponzi schemer Scott Rothstein told bankruptcy attorneys he plans to keep control over the recovered assets for the time being.
Judge Cohn's order
U.S. District Judge James I. Cohn said he has the discretion to determine restitution to Rothstein’s victims, which might include creditors owed money by Rothstein and his defunct Fort Lauderdale law firm, Rothstein Rosenfeldt Adler.
“Maximization of the amount of restitution and preservation of assets available for restitution is of paramount concern to this court,” Cohn wrote in his order Tuesday. Rothstein is scheduled to be sentenced May 6 for perpetrating the $1.2 billion fraud.
Cohn also denied a request by Herbert Stettin, the law firm’s bankruptcy trustee, for a joint status conference with U.S. Bankruptcy Judge Raymond Ray. Cohn said the government and Stettin’s team should resolve their differences and exchange records.
If conflicts remain by March 23, Cohn will order prosecutors to show a connection between recovered funds and Rothstein’s crimes.
The tension between the criminal and bankruptcy courts began in December, when Cohn issued an order to preserve all of Rothstein’s assets. As the court-appointed trustee, Stettin’s job is to round up any assets he can locate to pay the law firm creditors, including vendors with unpaid bills.
Cohn’s order also noted it has not been determined whether non-investor clients of the firm are entitled to any recovery under either criminal restitution or forfeiture.
The order could end up being a major roadblock for Stettin as he tries to recover Rothstein assets for creditors of the law firm.
“We are continuing to review the order that was issued,” said attorney Paul Singerman, a Berger Singerman partner who represents Stettin in the bankruptcy case. “We are considering its implications and our client’s options.”
Stettin asked Cohn to hold a joint hearing with Ray to decide on third-party rights to forfeited assets, such as real estate and Rothstein’s extensive car collection. But Cohn’s order spelled out why the criminal court will have first crack at distributing assets to victims. He said restitution is mandatory as part of sentencing for victims identified by the government. Prosecutors have focused on identifying victims of Rothstein’s settlement financing fraud as opposed to law firm clients who claim money placed with the firm has disappeared.
This could leave third parties in the lurch because they usually would assert their claims in a forfeiture hearing, Cohn said. It has not been determined whether non-investor clients who kept money in the firm’s trust accounts can be considered “victims.”
“These non-investor clients were not clients of Mr. Rothstein’s investment scheme,” Cohn said. “They merely suffered the misfortune of having their funds commingled with Ponzi funds.”
John Pacenti can be reached at (305) 347-6638.
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