The U.S. Attorney’s Office has issued a press release providing some details of the case against four former associates of Scott Rothstein — and they help explain how how the disbarred lawyer was able to pull off his billion-dollar Ponzi scheme.
He did it with a little help from his friend — and employees.
The most explosive revelation: Former Cafe Iguana owner Stephen Caputi, 53, assisted Rothstein in his Ponzi scheme by posing as both a banker and a plaintiff in Rothstein’s structured settlement scam to help dupe investors into believing the scam was legitimate. From the release:
The Information against Stephen Caputi alleges that Caputi at times acted as both a purported banker and plaintiff during meetings with potential investors. For example, the Information alleges that Caputi, posing as an official from TD Bank, provided investors with fraudulent bank statements that reflected purported balances of trust accounts at TD Bank. In this way, Caputi lulled the investors into believing that the account balances were sufficient to fund their investments. On another occasion, Caputi posed as a plaintiff during a meeting with potential investors who had requested to meet with plaintiffs. Caputi pretended to be a plaintiff who had purportedly executed a $10,000,000 settlement agreement, thus raising potential investors’ confidence in the deal.
Now get this: Caputi and Rothstein met with investors at a TD Ameritrade branch in Weston. Apparently bank officials allowed Rothstein to use a conference room inside the bank. There’s no indication that those officials knew Caputi was posing as one their own, but the setting must have done wonders for Caputi’s credibility.
was a partner with Caputi in the Cafe Iguana nightclub, which was seized by the feds and is now on the sales block (minimum bid: $1.4 million). Caputi also traveled to Morocco to meet with Rothstein after the Ponzi schemer fled the country in October 2009. Rothstein wired $1 million in Caputi’s name to a Moroccan bank as well. Caputi, along with fellow arrestee William Corte, are now free on bond of $100,000 apiece.
Former Rothstein law partner Howard Kusnick, who is expected to surrender next week, is alleged to have duped two RRA clients by claiming they had won a settlement in their case when in fact there was no settlement and their money had already been used to pay off previous investors in the Ponzi scheme. While the press release doesn’t mention the clients’ names, the charges are believed to related to prominent car dealer Ed Morse, who was allegedly duped out of $57 million of dollars by Rothstein in an elaborate lawsuit scam. At the time, Rothstein was supposedly best friends with Ed Morse’s son, Ted Morse.
To read more about 58-year-old Kusnick’s involvement with Rothstein, click here.
And finally we have the two IT guys at RRA, Curtis Renie and William Corte, who are alleged to have helped Rothstein pull off the billion-dollar Ponzi by fabricating a TD Ameritrade website Rothstein showed to investors to dupe them into believing the money was in the bank. How much money?
1.1 billion dollars.
“On one occasion, the defendants modified the phony TD Bank web site to reflect that RRA held between $300 million and $1.1 billion on deposit at TD Bank,” prosecutors wrote in the press release. “In fact, however, no such funds were in the accounts. The false account balances were shown to investors to induce them to invest into the fraudulent investment scheme.”
Both Caputi and Corte surrendered to marshals this morning and are expected to have their first appearance in court at 11 a.m. Kusnick and Renie are sheduled to surrender next week. All four are cooperating with federal authorities and are expected to plead guilty to conspiracy to commit wire fraud charges. This is expected to be just the first wave of arrests after the sentencing of Rothstein, who was hit with 50 years in prison, and his right-hand woman Debra Villegas, who was sentenced to ten years in prison for her involvement.
“The FBI will continue to unravel the remaining web of fraudulent schemes created by Scott Rothstein. One thing is clear, Rothstein was able to deceive investors because of the participation by others,” Miami FBI chief John V. Gillies said in the press release. “We will shine a light on every aspect of this fraud. Like Rothstein, those who chose greed over integrity will also have a price to pay.”