The following is a report by the Miami Herald: Scott Rothstein, the flashy Fort Lauderdale lawyer who investors – including many prominent Baalei Tzedakah in the NYC area – say fleeced them out of hundreds of millions of dollars and whose partners say wiped out his law firm’s finances, is cooperating with federal investigators and identifying others who may be involved in his alleged scam, sources familiar with the probe said Wednesday.

Rothstein and his defense attorney, Marc Nurik — seeking to cooperate with the feds — disclosed details of his alleged Ponzi scheme to prosecutors, FBI agents and IRS agents at the U.S. attorney’s office in Fort Lauderdale, the sources said.

Investigators are not only looking into allegations that Rothstein bilked investors by selling them “fabricated” civil settlements, but also into accusations that he stole from his law firm’s financial operations and from clients’ trust accounts, the sources said.

Rothstein had secreted away millions of dollars into foreign bank accounts in recent months as he prepared for the possibility of fleeing, the sources said. It’s unclear how much — or if any — of that money could be available to repay possible victims.

Rothstein, 47, had left for Morocco on Friday as news of his alleged investment scheme started leaking around Broward County. He came back mid-day Tuesday to face a federal investigation and the loss of his Las Olas Boulevard law firm, Rothstein Ronsenfeldt Adler. The once high-flying firm, formed in 2002, has only $500,000 left in its bank account, a lawyer said.

On Tuesday, a Broward County judge appointed an independent receiver to examine the financial records of Rothstein’s 70-attorney law firm.

Rothstein apparently drained vast sums of money from the firm, his partners say.

“I believe there are about $500,000 in operating funds — maybe slightly more,” Grant Smith, an attorney at the firm, said at a court hearing. He said the firm set up new bank accounts Tuesday for funds that started to come in over the weekend.

Most of the firm’s lawyers have agreed to forgo their paychecks due Nov. 13.

On Oct. 31, Rothstein sent his law partners a text message that indicated he was contemplating suicide, sunsentinel.com reported Tuesday night.

Rothstein mused that he had three options — kill himself, live life “on the lam as a fugitive” or go to prison and risk being killed there because he had made enemies, said the law firm’s co-founder, Stuart Rosenfeldt, according to the website. Rosenfeldt talked to Rothstein, urging him to “choose life.”

In court papers, the firm has accused Rothstein of secretly running a fraudulent investment scheme that sold falsified structured settlements from employment discrimination and whistle-blower cases to investors who were promised lucrative returns for fronting the payouts.

Rothstein’s investors had $500 million deposited in a Canadian bank on Oct. 23 and that money was gone seven days later, said William Scherer, an attorney representing 12 investors he says lost about $80 million. Among them: Rothstein’s neighbor, businessman Doug Vonallmen.

Some investors said they intend to sue Rothstein and the law firm.

Rosenfeldt and other law partners said they knew nothing of Rothstein’s alleged investment scheme.

Among Rothstein’s biggest investors: a private Fort Lauderdale-based investment firm called Banyon, which claims it has lost hundreds of millions of dollars.

The firm, run by George Levin, declined to comment about Rothstein.

Jeffrey Sonn, a Fort Lauderdale attorney representing investors, said in an interview that he has talked to other lawyers who claim investors in Morocco gave Rothstein $85 million.

Sonn said that some investors were being paid commissions of up to 20 percent to lure other investors into the deal.

Sonn, who reviewed documents associated with Rothstein’s investment fund, said some were written on the law firm’s letterhead. The money was wired to and from a Canadian bank.

(Source: Miami Herald)