The Rothstein Effect

More fallout from the Scott Rothstein Ponzi scheme in a disbarment from the New York Appellate Division for the First Judicial Department

On October 23, 2014, respondent pleaded guilty in the United States District Court for the Southern District of Florida to conspiracy to commit wire fraud in violation of 18 USC § 371, a felony. Respondent’s conviction arose out of his involvement in a Ponzi scheme orchestrated by disbarred Florida attorney Scott Rothstein, through his now defunct law firm, which respondent had been a non-equity shareholder of. Prior to 2009, Rothstein, through his law firm, devised a fraudulent scheme involving fictitious confidential settlements. In 2009, respondent and codefendant Richard L. Pearson, a broker, engaged in a conspiracy to broker the sale of Rothstein’s purported confidential settlement agreements to investors. Rothstein paid Pearson a sales commission for each investment brokered, and Pearson in turn paid a portion of the commissions to respondent.

The conviction resulted in automatic disbarment.

Although the federal felony of conspiracy to commit wire fraud has no direct felony analogue under New York law, the Committee contends that respondent’s plea admissions, read in conjunction with the information to which he pled guilty, satisfy the elements of Penal Law § 190.65(1)(b) because he admitted that over a period of time he and co-conspirator Pearson caused investors to transfer funds by interstate wire transfer to invest in approximately five confidential settlement agreements through material omissions and misrepresentations as to the sales commissions he and Pearson were to receive and thereby caused them to incur losses of more than $1 million but less than $2.5 million. In addition, the Committee relies on respondent’s admission in his written plea agreement that investor losses exceeded $1 million.

As a result, we find respondent’s admitted conduct satisfies the elements of the New York felony of scheme to defraud in the first degree (see Matter of Goldfarb, 141 AD3d 90 [1st Dept 2016]; Matter of Treffinger, 11 AD3d 185 [1st Dept 2004], lv denied 4 NY3d 703 [2005]).

Moreover, respondent’s assertion that the 11th Circuit may expunge his conviction based on a motion he has yet to file is pure speculation, and respondent’s request for a postponement of this proceeding should be denied because, possible postconviction challenges notwithstanding, he was disbarred by operation of law at the time of his conviction.

(Mike Frisch)