(Bloomberg News) Scott Rothstein, the Florida lawyer sentenced to 50 years in prison for running a $1.2 billion Ponzi scheme, said officials at three Manhattan hedge funds helped him prop up the fraud in its final months, according to transcripts of a court deposition.
Rothstein, 49, said his scheme began to collapse early in 2009, when he could no longer pay customers. Officials at Platinum Partners Value Arbitrage, Centurion Structured Growth LLC, and Level 3 Capital Fund agreed not to tell potential new investors he failed to make payments to them, he testified.
"The funds were going to give us a positive credit rating," he said in testimony released Dec. 28. "We were going to use as much of the new money coming in to pay them off, and in fact that's what we did." Rothstein was later asked about "false exculpatory e-mails" he had sent to co-conspirators. Eliot Lauer, a lawyer for Platinum and Centurion, asked Rothstein if he was correct in saying no such e-mails were sent to the hedge funds. Rothstein told Lauer he "did not consider your clients to be co-conspirators."
Rothstein, who has been disbarred, was questioned with the approval of U.S. Bankruptcy Judge Raymond B. Ray in Fort Lauderdale, Florida, on how the scheme worked and who knew about it, as victims seek money from those with knowledge of the fraud.
Behind Closed Doors
The questioning took place behind closed doors in a Miami courtroom. Transcripts are being released on the website of the plaintiffs' law firm Conrad & Scherer.
Rothstein said that, in hopes of a reduced sentence, he was telling prosecutors about everyone involved in his scheme and about police officers and others whom he bribed with cash or encounters with prostitutes.
A recommendation from Centurion, Platinum and Level 3 would have been a lie because he had stopped paying them, Rothstein said. He said Meir Nordlicht, Platinum's chief investment officer, and Jack Simony, a portfolio manager, agreed to help.
"My only concern was that, at the end of the day, they would lie for us," Rothstein said. "That was my concern. They didn't want this to blow. I didn't want it to blow up. I had been assured by Mr. Simony and Mr. Nordlicht that they would not let it blow up." Ray Casas, a spokesman for the funds, said Rothstein gave inconsistent accounts and the executives didn't lie about the fraud.
'Absolutely False'