To be sure, the juicy part of the federal filing by the U.S. against Rothstein on Monday lists a number of his prized assets that were forfeited, like his 2009 Bugatti Veyron, touted as the most expensive street car available in the U.S. at about $1.7 million.
More striking to me, was the stunning revelation that could clearly place the firm’s principles in serious legal hot water, even to the extent that paid employees may be required to pay back some of their earnings to the government. Yes, it could arguably, actually happen.
You see, the government’s forfeiture filing from the Miami U.S. attorney's office said that Rothstein's now-defunct law firm, Rothstein Rosenfeldt Adler, in a single year earned about $8 million but paid its 150-person staff $18 million in salaries.
Specifically pointing out in its complaint that "The additional $10 million for salaries, as well as other expenses for operation of the law firm, came from the operation of and the funds generated by the Ponzi scheme." Assistant U.S. Attorney Alison W. Lehr is laying out the foundation for a ‘clawback’ of earnings but not just from those who were in the know, or perhaps, reasonably should have known.
The clawback provisions go after innocents who are revictimized by these schemes. The law is simply that you cannot lawfully acquire rights and title to stolen property. If the US is taking the position that nearly ten million dollars in salaries were paid to lawyers who had no right to those funds, who were reaping the benefit of stolen funds, why the government is potentially opening the door to making the lawyers pay back their illegally gained salaries.
You think it can’t happen? We have already been reading articles about how charities may have to give back monies, but so too could others who were unjustly enriched by the Ponzi scheme be required to give back monies they never should have lawfully gotten. Over 250 companies got clawback letters for close to $735 million in the Madoff mess.
If bankruptcy trustees have done this with hundreds of innocent investors in recent Ponzi schemes, such as the mini-Madoff Philip Barry scandal in Brooklyn, NY, and Madoff himself, why not here?
Who better to apply that standard too then lawyers? How is that for a new wrinkle? Of course, if the bundling of those political donations were also tied to kickbacks returning monies to the lawyers who made them, as rumor has it, then we may see some issues developing for all of them far more serious than just money.
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What about the cars, houses, boats, jewelry, catered parties, etc. bought and paid for by 'stolen' ponzi money? While the properties (boats, houses, cars, jewelry) are siezed under the law... what about the sales people who facilitated the sales? If a charitable or political donation must be returned, what does that do to the commissions, fees, or profits made from his purchases? Curious.
ReplyDeleteanyone who gets illegal funds one way or another can have them recalled if the trustee can find them, if they still have them, but it is alot easier to get back a boat then someone's salary which went to his car rent and life. i don't see too many of the lawyers threatened, but man, the named partners are in trouble, no?
ReplyDeleteNorman, would you take a look at the charging document from the Feds and give us your view, will the RRA lawyers lose $$ to clawback? It sure looks like those bonuses to cover campaign contributions are a crime........................Give us your thoughts?
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