On the day Ponzi schemer Scott Rothstein fled to Morocco last October, his law partner Stuart Rosenfeldt was paid $500,000.
The Rothstein Rosenfeldt Adler law firm check was dated Oct. 27, according to records that were exhibits in Rosenfeldt's bankruptcy deposition last week. Rosenfeldt was told by Rothstein that he had to pay taxes on income he derived from being partners with Rothstein in various businesses, Rosenfeldt's defense attorney, Bruce Lehr, said Wednesday.
The check was meant to pay those taxes, even though Rosenfeldt didn't see any income from the businesses, Lehr said.
"He immediately returned it," Lehr said. "It is just one more example of him being an innocent victim."
Rosenfeldt's check back to the firm carried the notation, "Repayment of Monies re: taxes." The IRS filed a $10.5 million tax lien for 2008 against Rosenfeldt last month.
Rosenfeldt, 55, a Boca Raton resident, is being sued by the trustee for his bankrupt law firm for allegedly receiving more than $9 million in compensation he wasn't entitled to, including $1 million in credit card charges covered by the law firm.
During his deposition on Friday, Rosenfeldt repeatedly invoked his Fifth Amendment right against self-incrimination – more than 700 times, according to a transcript. Lehr said the questioning touched on matters under investigation by federal prosecutors, and that Rosenfeldt was invoking the Fifth to protect his innocence.
Rosenfeldt would not say whether he knew Rothstein had fled when he was issued the check, which appears to bear Rothstein's signature. "Under the advice of my attorney, I'm going to assert my Fifth Amendment rights," he said.
The deposition featured dozens of e-mails, two years of American Express records and other documents. Rothstein's firm-wide e-mails show that as early as 2006 he was scrambling to bring more money into his firm.
"I want us all to be very rich. i am unhappy with current deposits. I will expect a minimum of 250k to be deposited this week in addition to the funds that I am generating," Rothstein wrote that July. "Please do whatever is necessary to make this happen. We are all partners. lets work together to insure our continued success."
Rothstein routinely sent out ranting e-mails to his attorneys complaining that were not bringing in enough business or cash. In an e-mail dated April 22, 2007, Rothstein informed Rosenfeldt he was getting a firm American Express card for his personal use.
"This will not affect your credit. It is all on my card as I am the guarantor but they request [your Social Security number] for security purposes and to make sure you are not a deadbeat :-)," Rothstein wrote. "This will put the card in your hands in approx 5 business days.You may then start charging up to 35k per month of personal charges that will be credited to your shareholder account as distributions."
That same day, Rothstein instructed one of his assistants to write a $50,000 check to Rosenfeldt, according to a Rothstein e-mail. The next day, Rothstein sent out another e-mail to some of his attorneys.
"If you are receiving a copy of this e-mail directed to YOU personally, you are one of the attorneys whose new client production efforts is poor," Rothstein wrote. "I suggest that you make immediate and concentrated efforts to generate significant new business for our firm."
The American Express records covered from November 2007, when Rothstein's $1.4 billion investment fraud scheme was accelerating, to November 2009, when the Ponzi ultimately collapsed. In that time, a handful of people – including Rothstein, his wife, Kim, and Rosenfeldt – charged more than $14 million.
Rothstein never held Rosenfeldt to the $35,000 limit, according to the records. Rosenfeldt – who would not answer deposition questions about the credit card – charged upwards of $85,000 a month, and a total of $1.1 million. Kim Rothstein routinely charged tens of thousands of dollars a month, for a total of more than $800,000, according to the records.
But no one topped the free-spending Rothstein. He would charge half a million dollars or more a month, topping out at $900,000 in July 2009, the records show. He dropped hundreds of thousands of dollars at a time on jewelry, and tens of thousands on clothes at Tom James, to reach $10 million total.
A number of times he spent more than $10,000 at one of his favorite haunts, The Capital Grille. He also was a big tipper – a $900 meal could generate a $1,000 tip.
The bankruptcy trustee has filed a $20 million clawback suit against American Express, alleging the company should have detected fraud in Rothstein's spending habits. The company has denied it had any knowledge of Rothstein's crimes.
After Rothstein returned from Morocco in early November, he tried to cash in on his 20 million American Express reward points. He had the company convert 16 million of the points into 800 gift cards each worth $100, court records show. Federal agents seized the gift cards at UPS before Rothstein could get them. Rothstein, 48, is now serving a 50-year prison sentence.
Peter Franceschina can be reached at pfranceschina@SunWSentinel.com or 954-459-2255.