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South Florida Business Journal - March 15, 2010
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Friday, March 12, 2010

Feds: RRA bankruptcy fees have ‘heavy impact’ on victims’ money

South Florida Business Journal - by Paul Brinkmann

The standoff between the U.S. Attorney’s Office in Miami and the bankruptcy trustee for the defunct law firm of
Ponzi schemer Scott W. Rothstein kicked up a notch this week.

The two overseers of Rothstein’s wreckage are butting heads over the best way to distribute assets and restitution in
the case. U.S. Attorney Jeff Sloman represents the U.S. Department of Justice, which controls assets forfeited by File photo
Rothstein following his arrest for running the $1.2 billion scheme. The federally appointed bankruptcy trustee, Scott Rothstein’s wife,
senior Judge Herbert Stettin, is trying to recover assets from Rothstein’s former law firm, Rothstein Rosenfeldt Kim, was left in charge
of some assets,
Adler. Rothstein was chairman of the firm and used the firm’s name to help solicit investments in his scheme.
including several
houses.
Sloman recently filed a motion with the federal court, seeking to stop a joint conference with the trustee.
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The U.S. attorney took aim at fees being racked up by bankruptcy attorneys in the Chapter 11 case of RRA.

Fees demanded by bankruptcy attorneys are having a “heavy impact” on the money available to victims of the scheme, prosecutors said.

Law and accounting firms working on the bankruptcy recently asked the court to approve $2.2 million in fees. The two law firms
representing Stettin – Miami-based bankruptcy specialists Berger Singerman and Genovese Joblove & Battista – are seeking the
lion’s share of that, $1.5 million.

Rothstein, who is jailed pending his sentencing hearing in May, signed over his assets to the feds, stating he thought that was best for
alleged victims and creditors.
Attorney: fees are well deserved
From the perspective of the alleged victims, legal fees in the bankruptcy are well deserved, said attorney William Scherer, who represents
alleged investors who claim to have put more than $125 million into the scheme.

“This is a massive endeavor, so I wouldn’t take a position that the fees requested are too high at all,” he said.

Scherer said his clients were bothered by the fact that Rothstein’s wife, Kim Rothstein, was left in charge of some assets, including several
houses.

“I don’t know what the government was thinking,” he said. “They should put a professional in there.”

Stettin’s attorneys have attempted to cite other Ponzi schemes, including those of Bernard Madoff and New York attorney Marc Dreier, as
examples of cases where other bankruptcy trustees were tapped to distribute Ponzi schemers’ assets.

But, attorneys for Sloman argued that, in the Dreier case, there was an agreement struck that detailed terms of the feds’ arrangement with
the bankruptcy estate.
Szafranski takes the fifth
In other recent court action, investment adviser Michael Szafranski recently cited the Fifth Amendment repeatedly during questioning in a
deposition for the RRA bankruptcy, Scherer said.

Szafranski was grilled about what efforts he made to verify that investments in the Ponzi scheme were tied to supposed lawsuit settlements
that Rothstein touted, but Szafranski did not answer.

Scherer said he still has questions about Gibraltar Private Bank & Trust, one of the banks that handled accounts for RRA. But,
Charles Lichtman, an attorney with Berger Singerman, said that bank has cooperated fully with requests from the bankruptcy trustee.

In a Broward County Circuit Court hearing on March 5, TD Bank, which also handled Rothstein accounts, argued it should be dismissed
from a lawsuit filed by Scherer’s clients. But, Judge Jeffrey Streitfeld held off on a ruling for that motion because Scherer is filing an
amended complaint with more complete allegations soon.

pbrinkmann@bizjournals.com | (954) 949-7562

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