« A Miami Fire Fighter Defends His Pay and Pension | Main | »

The Man Who Blew The Whistle On Scott Rothstein

    Alan Sakowitz, one of the few heroes in the unseemly Scott Rothstein saga, has written a book on his encounter with the flamboyant creator of a billion-dollar Ponzi scheme. A lot of people should have seen through Rothstein. Sakowitz was one of the few who recognize the fraud and took his concerns to the FBI. The following is a publisher's review of Sakowitz's book, Miles Away… Worlds Apart, which I found to be a facinating read:

 

            Attorney Scott Rothstein’s scam to bilk hundreds of millions from investors was shocking, not so much because of its moral turpitude.  It was shocking in its crudity and transparency.  Reading about it has to make you ponder two major questions.  How did so many savvy, educated, financially successful people fall into the trap?  And how did an intelligent con man, however unprincipled, know to anticipate its perverse effectiveness?

            The premise itself has an aspect of cleverness.  A noted lawyer calls you and offers you a deal.  He is litigating a sexual harassment case against a wealthy man, on behalf of an aggrieved former secretary or client.  Before the case could actually be filed in court, the tycoon comes groveling, begging to settle.  This man wanted no paper trail, no stain to his reputation.  He signs an out-of-court settlement agreement to pay a sizable sum.  He cannot pay a lot at once, without his wife or business associates noticing the tidal wave coursing through his cash flow.  So a schedule of monthly payments is set up, covering some years.  Our former secretary, virtue intact, wants to move on with her life and get one big check now.  You can buy the payments by giving her 70% of the total, 60%, 50%, depending on how many years of monthlies are involved.  You can make 24% on your money, 27%, 31%, numbers you cannot match on any other investment with similar risk or lack there of.  A reputable lawyer is the middleman and custodian; seems like a fairly reasonable risk to take with a promise of a nice upside.

            Now assume all this is a fraud.  The attorney made up the whole business, and he is running a Ponzi scheme, grabbing money now while he figures out how to make the payments later, perhaps from future investors.  You have to admit that it could very well work for years.

            Instead Rothstein used this structure, but sped up the times and magnified the incomes to the point of absurdity. Rather than the accused employer making the payments monthly, the entire settlement is said to be  placed in Rothstein's trust account at once. The settlement was going to be paid out over 3 - 8 months.  The discount was so severe that the investor would make a 67% to 207% annualized return.  It all stopped making any sense.  Along came whistleblower Alan Sakowitz, brought in as a potential investor, and he began asking the obvious questions.  Why can’t the girl wait three months?  Why does the businessman need a payment plan if he has to pay within 90 days anyway?  How many such cases could one law firm manage to land?

            The answers were inadequate and Sakowitz called the FBI.  Before the FBI closed down the operation, it collapsed when it ran out of money. The swindle is arrested and others are being investigated.   But how did it fool so many?  Why would a smart man structure it so implausibly?  These mysteries endure.

  

            Sakowitz himself, in his new memoir of the case, Miles Away… Worlds Apart, seems to offer a subtle theory.  It is a theory with moral and psychological implications, but he never expresses it overtly.  What he does, with devastating clarity, is contrast Rothstein’s self-serving behavior with the selfless dedication to community shown by his neighbors in North Miami Beach, mere miles from Rothstein’s opulent office in Fort Lauderdale.

            Could it be that impropriety has its own allure?  That people who made a lot of money through the relentless drudgery of valuable work feel too dull, too drab, unless they can top it off with some slightly shady transaction?  Does the pain of the embarrassed businessman add panache to the money?  Is there a kick in being a partner to blackmail, even if plied within a technical framework of legality?

            There are other components to this story, and Sakowitz covers them all thoroughly.  You get a flavor of the Rothstein persona, the atmosphere of excess somehow hovering at the fringe of lawyerly respectability.  Various politicians, local, statewide and federal, march across the stage with one hand slapping Scott Rothstein on the back and the other hand reaching into his larcenous pocket.  There is enough comedy and tragedy here for a lifetime.

            But Sakowitz will not leave this story to wallow in the realm of sensationalism.  He keeps making us look through the moral viewfinder to see the character of the players.  How the manipulator manipulates, how the manipulated are manipulated.  We do not get to walk away feeling superior to this den of thieves, this band of buffoons.  We cannot tsk-tsk our way through, disapproving of evil and disdainful of naivete.  We have to look inside ourselves and see just how clean we are, just how open our own eyes are… or not.

 

 

 

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451b26169e2013487a1f336970c

Listed below are links to weblogs that reference The Man Who Blew The Whistle On Scott Rothstein:

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

The comments to this entry are closed.

 
 
Terms of Service | Privacy Policy | Copyright | About The Miami Herald | Advertise