Two Broward lawyers charged in Scott Rothstein Ponzi scheme
08/30/2013 1:43 PM
08/30/2013 7:50 PM
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.
Bates, by comparison to Kitterman, played multiple roles for Rothstein, according to his indictment.
Bates is accused of arranging to have an attorney in his Plantation law firm, Koppel & Bates, meet with an investment group’s representative to say the firm had referred numerous civil cases to Rothstein’s law firm. Based on that falsehood, the indictment said, the investors continued to sink more than $140 million into Rothstein’s scheme in 2009.
Bates also agreed to write a phony opinion letter saying he represented a group that invested in Rothstein’s “confidential” legal settlements and vouched for them. Rothstein then used the letter to lure more investors, according to his indictment.
Later that year, Bates switched roles. Rothstein wrote a letter in Bates’ name, on the Bates’ law firm stationery, in which Bates falsely claimed he represented a plaintiff in a purported settlement deal in order to induce investors to put more money into Rothstein’s scheme.
And in September 2009, one month before Rothstein’s scheme collapsed, Bates switched roles yet again, according to his indictment.
Bates is accused of writing another letter for Rothstein that was used as part of a separate ruse to defraud two wealthy clients. Bates is accused of assisting his boss in a civil case in which Rothstein swindled car dealer Ed Morse and his wife out of $57 million — the result of an actual legal dispute over construction of the couple’s home in Boca Raton and a fabricated legal fight over an air conditioning system in the couple’s summer home in Maine.
Rothstein, who once lived in a waterfront mansion and chartered private jets, is serving a 50-year prison sentence in a witness-protection facility after pleading guilty to his racketeering conspiracy in 2010. But the disbarred lawyer has been cooperating with prosecutors since his Fort Lauderdale empire crashed, in the hope of slicing years off his prison term.
In recent years, he has testified in parallel civil and bankruptcy cases that he blew $150 million on a “rock-star lifestyle” that allowed him to create the illusion of power to peddle his Ponzi scheme.
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