Wealthy Fort Lauderdale businessmen, hedge funds, money managers for the ultrarich — the sweep of Scott Rothstein's alleged $1 billion Ponzi scheme is beginning to emerge.
The alleged fraud even vacuumed up the little guy. A Miami man who owns an ink cartridge business put up $2 million, and a Fort Lauderdale couple in their 80s, $1 million. A Palm Beach County man fears his life savings — $135,000 in a Rothstein law firm escrow account, money to close on a condo — is gone.
Rothstein, 47, a Fort Lauderdale attorney whose conspicuous spending, political contributions and charitable giving in recent years launched him to the heights of society, spawned an entire cottage industry to feed him cash to invest in his purported secret legal settlements.
Investment consortiums were formed, middlemen took a commission on the deals, and investors brought in other investors for a percentage of the profits. Financial advisers and bank officials reassured investors their money was safe, according to a lawsuit filed Friday.
From all outward appearances, Rothstein was on top of the world — until investors didn't get paid in late October, and Rothstein vanished on a chartered Gulfstream V jet that spirited him to Morocco.
After a week spent contemplating an unpleasant future, Rothstein returned to Fort Lauderdale and a massive federal investigation into what a top FBI agent described as one the largest investment frauds ever in South Florida.
The juggernaut that was the Rothstein Rosenfeldt Adler law firm, with 70 attorneys and about 80 support staff, was plunged into involuntary bankruptcy and is all but dissolved. Lawsuits are raining down on Rothstein, his firm and the bank that some investors allege was complicit.
One of the central figures who was directing huge amounts of money to Rothstein was George G. Levin, a Fort Lauderdale businessman with interests in land, real estate and manufacturing replica-car kits modeled after classic autos.
One Levin company operated as Classic Motor Carriages in Miami-Dade. Hundreds of consumer complaints were filed with the state and the company went out of business in 1995. Four years later, the company pleaded guilty to a federal charge alleging an 11-year scheme to defraud customers and was ordered to pay $2.5 million in restitution.
In December 2006, Levin began setting up Nevada companies under the name Banyon, which marketed investments in the Rothstein legal settlements to hedge funds, according to documents filed with the lawsuit Friday. A Banyon employee, Frank Preve, recruited investors and had an office at Rothstein's firm. Preve was convicted of bank embezzlement in the 1980s, according to the lawsuit.
At least three hedge funds lent about $100 million to Banyon, according to a report in the trade newsletter Hedge Fund Alert. Levin set up his own hedge fund earlier this year under the Banyon name, and 41 investors put up $65 million, records show.
Altogether Levin's Banyon entities invested more than $500 million with Rothstein, according to attorney Bill Scherer, who filed the lawsuit Friday on behalf of businessman Doug Von Allmen and other investors.
Von Allmen and his family allegedly lost about $100 million — largely through investments with Banyon. The lawsuit names Rothstein; TD Bank, where trust accounts were held; Preve; and others. Levin was not named as a defendant in the suit; it did describe him as a "mentor and confidant" to Rothstein.
Levin's representatives say he had no knowledge it was a Ponzi scheme.
"The company has lawyers and investigators working full time to try and get answers as to exactly what happened. But the fact is George Levin was first to contact the government when he smelled that something was not right with Mr. Rothstein's purported investments," a Levin spokesman said in a statement. "Mr. Levin and his investors are victims in this whole mess and are heartbroken over what has happened."
The Philadelphia connection
Von Allmen was introduced to Levin and the Banyon investments last spring by Barry Bekkedam, according to Scherer's lawsuit. Bekkedam is a financial adviser for high-wealth individuals who runs Ballamor Capital Management in Philadelphia and has ties to Fort Lauderdale's social and business circles.
In May, Bekkedam appeared at a financial conference for trustees of public employee pension funds in Las Vegas. While on a panel discussion, Bekkedam said he had put $100 million into structured legal settlements, an online video of the discussion shows. Bekkedam never mentions Rothstein in the video.
"We negotiated the first $100 million of outside money to go in. We're getting a 15 percent current cash return, and a clawback and personal guaranty on the part of the general partner who has half a billion of his own money in the fund," Bekkedam told the audience. "How's that possible? How can you get that return? Literally, he didn't know the fund structure was out there. We put him in the fund business, basically."
The week the Rothstein scandal broke, Bekkedam was in Fort Lauderdale and denied to a reporter that he had invested with Rothstein. He said he was here to console friends who had invested. He has not returned subsequent messages.
Bekkedam told Von Allmen that Levin was worth more than $400 million and that Levin would personally guarantee the legal settlements, according to Von Allmen's suit.
Renato Watches founders
Last year, Rothstein — a big collector of watches — took a 30 percent stake in Renato Watches, founded in 2005 by Ovadia Levy and Daniel Minkowitz.
The two men and their families have lost $15 million to $20 million, according to their attorney, William Salim. Scherer, however, said bank statements show payments to Levy were still being made in October, even as Rothstein fled the country.
Attorneys say less wealthy people, like the Palm Beach County condo buyer, are likely to surface in coming weeks, victims of the alleged plundering of the Rothstein Rosenfeldt Adler trust accounts.
"There have been a lot of other people that have gotten hurt — people that were normal clients of the law firm," Scherer said. "He wasn't just Robin Hood. Don't believe he just took from the rich and gave to himself. He took from other people, normal people, who put money into that trust account to buy houses, to sell houses. They trusted that law firm, and he drained all of that out when he left."
Peter Franceschina can be reached at pfranceschina@SunSentinel.com or 954-459-2255.
Scott Rothstein: Scope of scandal emerges
Rothstein's investors included the ultrarich
We've upgraded our reader commenting system. Learn more about the new features.
Los Angeles Times welcomes civil dialogue about our stories; you must register with the site to participate. We filter comments for language and adherence to our Terms of Service, but not for factual accuracy. By commenting, you agree to these legal terms. Please flag inappropriate comments.
Having technical problems? Check here for guidance.