More than $2 million in donations doled out by disbarred attorney Scott Rothstein have come back to haunt many of the South Florida charities and nonprofits that once counted on the largess of the alleged fraudster.
Hospitals, schools, charities benefiting children, battered women and religious groups all received donations from Rothstein over the past year — a period when nonprofits struggled to stay afloat amid the economic recession.
While many groups have returned Rothstein’s donations voluntarily, others have already spent the money, and at least one risks losing nearly $1.5 million in federal matching grants.
Nearly all of the groups acknowledge that Rothstein’s donations were “dirty money,” said Charles Lichtman, an attorney working on the bankruptcy of Rothstein’s firm, Rothstein Rosenfeldt Adler.
Lichtman said the bankruptcy trustee, Herbert Stettin, does not relish the role of clawing back donations from legitimate charities, but the law compels him to recover as much as he can for Rothstein’s victims.
“We’re going to try to work out a strategy that makes this as painless as possible and is as non-adversarial as can be with all these charities,” Lichtman said.
Lichtman said bankruptcy attorneys are working closely with charities to determine the appropriate amount for repayment, because not all donations were given under the same circumstances.
For instance, some donations were made in return for advertising and promotion of Rothstein’s now defunct law firm, or included meals and other goods or services.
Federal authorities are working separately to recover donations paid by Rothstein himself, and any of the dozens of subsidiaries related to RRA, such as the Rothstein Family Foundation, which was founded in 2008 with about $500,000 in seed money from the firm.
Recovered monies will be distributed among Rothstein’s creditors and victims of his $1 billion Ponzi scheme, which involved selling bogus employment discrimination settlements to investors expecting lucrative returns.
Rothstein told a federal judge on Jan. 6 that he will formally plead guilty to running the investment racket.
Join the official YWN WhatsApp status
