Former Miami banker charged in Rothstein Ponzi scheme
07/14/2014 6:26 PM
07/14/2014 7:19 PM
A former high-profile Miami banker, Frank Prevé Jr., was charged Monday with conspiring with convicted Ponzi schemer Scott Rothstein to swindle millions of dollars from wealthy investors who sank a fortune into his $1.2 billion scam.
Prevé was charged with committing wire fraud by misleading investors about the viability of Rothstein's investment scam in the final months before its collapse almost five years ago.
Rothstein, a flashy attorney with a Fort Lauderdale law firm, was selling fabricated legal settlements at a discounted price, promising sky-high returns to investors from Florida to New York.
Toward the end of his scheme, Rothstein had informed Prevé and others that he needed more investors’ money to fund the settlements, lying that he had to freeze their trust accounts to appease Florida Bar regulators who were supposedly concerned about the welfare of his law firm’s purported clients.
According to prosecutors, Prevé became aware that Rothstein had depleted much of the investors’ money kept in those trust accounts at Toronto Dominion Bank in Fort Lauderdale. Yet Prevé failed to disclose that “red flag” to investors as he asked them to put an additional $20 million into Rothstein’s scheme before it unraveled in October 2009.
Prevé and others made “misrepresentations and omissions” in paperwork presented to investors with the sole goal of enriching themselves, according to federal prosecutors Lawrence LaVecchio, Jeffrey Kaplan and Paul Schwartz.
Prevé, 70, of Coral Springs, was charged by “information,” not indictment, a tell-tale sign that he is planning to plead guilty to the wire-fraud conspiracy that ultimately destroyed Rothstein and his 70-attorney law firm. The single count carries up to five years in prison.
“We expect to enter into a plea agreement with the government,” Prevé’s attorney, Ramon Rasco, said Monday. “He is cooperating with the government and doing everything in his powers to help investors.”
Rasco said his client, however, “did not have direct knowledge of Rothstein’s Ponzi scheme.”
Before becoming entangled in Rothstein’s massive criminal conspiracy, Prevé had been the president of two South Florida banks — International Bank of Miami and Citizens and Southern International Bank. In the mid-1980s, he was convicted of bank fraud and received a probationary sentence, Rasco said.
Two years ago, Prevé was charged along with an investment partner in a civil complaint filed by the Securities and Exchange Commission. The SEC suit says the partner, George Levin, a wealthy Fort Lauderdale investor, played the role of the Pied Piper in Rothstein's Ponzi scheme, though he has not been charged with any criminal wrongdoing.
In the civil lawsuit, the SEC charged Prevé and Levin with bilking hundreds of investors in their so-called Banyon fund group, which lost almost $140 million in Rothstein’s scam.
Between 2006 and 2009, Rothstein fabricated confidential legal settlements in sexual-harassment, discrimination and whistle-blower cases and sold them to investors willing to put up discounted lump-sum payments in exchange for profitable payouts “structured” over many years.
But Rothstein had lied about the plaintiffs, cases and settlements to lure in Prevé, who operated the Banyon fund, and Levin, the managing partner who had connections on Wall Street. Levin, who socialized with Rothstein, brought him dozens of rich hedge fund investors.
Both men hired a Miami financial adviser, Michael Szafranski, to monitor and verify their investments with Rothstein. Szafranski has not been charged in the federal criminal case.
The SEC complaint, still unresolved, stopped short of accusing Prevé and Levin of participating in Rothstein's investment swindle. But the civil suit asserted that the now-convicted lawyer could not have kept it churning without them and their connections.
“Levin and Prevé fueled Rothstein's Ponzi scheme with the false sense of security they gave investors,” Eric Bustillo, director of the SEC's Miami regional office, said in a statement. “They promised to safeguard investors' assets, but gave Rothstein money with nothing to show for it.”
“Levin and Prevé sold promissory notes and created a feeder fund to funnel investor capital to Rothstein, ultimately becoming his largest source of capital,” according to the SEC complaint.
Rothstein's investment racket, which he ran out of his law firm on Las Olas Boulevard, was among the largest in Florida history. He is serving a 50-year prison sentence on a racketeering conviction for stealing more than $360 million from hundreds of investors, and using their money to finance his lavish lifestyle and Ponzi scheme — until it all went poof.
Rothstein, 51, left a trail of carnage: His law firm is defunct and 21 other defendants, including fellow partners Stuart Rosenfeldt and Russell Adler, have been convicted on fraud, money laundering or other charges.
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