After months without arrests, the Scott Rothstein investigation regained steam Friday when federal prosecutors charged two Broward County attorneys with participating in the convicted lawyer’s $1.2 billion Ponzi scheme.
The two defendants — Christina M. Kitterman, who worked in Rothstein’s Fort Lauderdale law firm, and Douglas L. Bates, a Plantation lawyer — were arrested on fraud charges by Internal Revenue Service agents. Kitterman, 38, and Bates, 54, who were granted bonds at their first appearances in federal court in West Palm Beach, could not be reached for comment at their homes in Deerfield Beach and Parkland.
According to separate indictments, Kitterman and Bates were busted, ironically, for playing fictional roles as lawyers to help keep Rothstein and his racket rolling in dough. When Rothstein’s investment scam unraveled nearly four years ago, the fallout rocked South Florida’s top tiers of law, finance and politics.
After Rothstein, 51, was arrested in late 2009, everyone began wondering who else was in on it. So far, 14 others — including his wife, Kimberly Rothstein, among the last crop of suspects to be arrested a year ago — have pleaded guilty to charges related to his scheme of selling fabricated legal settlements to wealthy investors. Collectively, hundreds of investors from Florida, New York and Texas lost more than $360 million between 2007 and 2009, but they have recovered much of that money through civil and bankruptcy actions, including damage settlements with the Rothstein law firm’s former bank, Toronto Dominion.
After Friday’s arrests, the U.S. attorney’s office will refocus its attention on prosecuting a half dozen other suspects who were either legal partners or business associates of Rothstein’s when he ran a 70-lawyer firm on Las Olas Boulevard.
Kitterman’s role was a cameo by comparison to Bates’ more complex performances, according to the indictments returned by the Fort Lauderdale grand jury. But hers came at a critical point in Rothstein’s scheme.
It revolved around the ruse that his law firm had settled numerous sexual harassment, discrimination and whistle-blower lawsuits and that the plaintiffs wanted to sell their purported settlements at a lump-sum discount so they could receive their funds up front. In return, Rothstein promised investors substantial returns on the full value of the bogus settlements.
When major investors in Rothstein’s settlements complained about his failure to pay them in April 2009, he “falsely informed” them that he was under investigation by the Florida Bar and that their investment trust accounts at TD Bank had been “frozen,” the Kitterman indictment said.
To dodge them, Rothstein asked Kitterman to pose as the head of the Florida Bar’s Fort Lauderdale office and he supplied her with a script, according to the indictment.
In a phone conversation with some institutional investors, the indictment says, Kitterman falsely said Rothstein’s purported legal clients had filed 26 complaints against him for deceiving them about the lump-sum advances and that his investors “caused part of the problem.”
In another phone conversation, Kitterman falsely told a representative of the investors that Rothstein faced disciplinary Bar action because of his failure to pay his legal clients the lump sums, according to the indictment. She also said the investors’ trust accounts at TD Bank were frozen, but that Rothstein’s problems could be resolved if the purported plaintiffs were paid the funds they were owed. According to the indictment, Kitterman told the representative that their millions were still needed to pay off the Rothstein law firm’s non-existent clients — all to keep his Ponzi scheme going.