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Surprise from Rothstein's scheme unlikely

fgrimm@MiamiHerald.com

It was like hearing tough-guy lawyers, former prosecutors among them, whine that Scott Rothstein had sprinkled fairy dust in their eyes.

In a Broward circuit court complaint, lawyers from his disgraced firm claimed they never noticed that an audacious scheme nurtured by the flashiest lawyer in town was a mite suspicious.

``With surprise and sorrow,'' attorneys of Rothstein Rosenfeldt Adler P.A. claimed they discovered their managing partner ``allegedly orchestrated a substantial misappropriation of funds from investor trust accounts.''

``Sorrow?'' No doubt, considering the misappropriation could amount to several hundred million bucks.

But ``surprised?''

Only if they suffered from mass delusions while their CEO spent inexplicable millions on mansions, yachts and luxury cars like his million-dollar Bugatti.

The epidemic of willful ignorance also infected elected officials, from the governor on down, who happily pocketed his political contributions while ignoring disquieting rumors around Rothstein's dazzling wealth.

Charitable organizations in Broward County happily conferred an aura of legitimacy on the big spender, helping him to attract even more investors into his scheme, in return for a cut of the take.

Rothstein's alleged scheme entailed bundling up lawsuit settlements (like subprime mortgages) and peddling them to investors. Plaintiffs supposedly would get a quick, deeply discounted payoff. Investors would eventually get the whole settlement.

Alan Sakowitz said Rothstein met with him three times in August and September trying to lure his Miami-based investment group into putting money into his scheme. Sakowitz's group was offered, as an introductory enticement, three $900,000 sexual harassment settlements for $660,000 each. Sakowitz was skeptical. He wondered at Rothstein's claim to have access to thousands of these settlements. Sakowitz wanted to read the settlement agreements, talk to clients, their lawyers. Rothstein grew irritated, evasive, vaguely threatening. Sakowitz thought it didn't make any sense. Not only did he walk away from the offer, he called the FBI.

``I'm no genius,'' he said. ``I'm just an ordinary guy.'' But Sakowitz recognized fundamental flaws that should have been obvious to the lawyers, investors and politicians hovering around Rothstein. But they were in the same fix as the fellow in the old Woody Allen joke whose brother thought he was a chicken. He knew his brother was insane but he needed the eggs.

If all this information had unfolded in 2006, when South Florida was still in the throes of economic fantasy, so much willful ignorance might have been less jarring. But by the summer of 2009 the real estate illusion had vanished. This happened in the post-Bernie Madoff era. The subprime mortgage scandal still loomed over the region. Joel Steinger's viatical scam had been exposed as a criminal enterprise.

Broward should have been roiling with skepticism. ``But Greed is so blinding,'' said Sakowitz, who thinks that if Rothstein had promised a 12 percent or even 25 percent return on investment, clients might have thought to ask some tougher questions. ``But offer a 100 percent return and nobody wants to know anything.''

Rothstein's crew had to know his scheme was crazy. But they wanted the eggs.

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