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Monday, June 7, 2010

Scott Rothstein Sentencing

Notorious South Florida lawyer turned Ponzi schemer Scott Rothstein is scheduled to be sentenced Wednesday in a Fort Lauderdale, FL federal court.

Rothstein's lawyer, Marc Nurik (also a former partner of Rothstein's), has argued in a pre-sentencing brief that Rothstein deserves 30 years. Prosecutors argue for 40 years. (Click for the Rothstein sentencing memorandum and the Government's sentencing memorandum.)

I believe that both positions are flawed, if one uses as a guidepost the sentence handed down to the New York hot-shot lawyer turned Ponzi schemer, Marc Dreier of the eponymously named Dreier LLP (and formerly known as Dreier & Baritz LLP, also Dreier Baritz & Federmann LLP).

In the Dreier case, district judge Jed Rakoff (Southern District of New York) may have inadvertently established a de facto standard for sentences in these large dollar loss cases. In the sentencing hearing, Rakoff disagreed with the government's argument (read the Government's sentencing memorandum) for a Bernie Madoff style sentence (150 years from Judge Denny Chin, despite pleading guilty), stating that he contemplated a sentence that would essentially be a life sentence and asking the sides to discuss Dreier's future expected life expectancy. In the hearing it was argued by Dreier's counsel, Gerald Shargel (who argued for a ten-year sentence, see Defendant's sentencing memorandum), that Dreier (then 59) could reasonably be expected to live to near or about 80. Rakoff handed down a 20-year sentence that thus approximates life for Marc Stuart Dreier.   (Author's note:  A transcript of the hearing could not be available; I rely on my observations of the hearing in an adjacent courtroom with a video link for the overflow audience.)

Using what I will call the Rakoff Standard, "essentially life" for Rothstein (age 48) would be about 30 years, or what Nurik is arguing for.

There are differences in the cases. Dreier was released on bail to home confinement, the better with which to help the bankruptcy receiver untangle the finances. Rothstein, however, is being described as having provided "extraordinary" cooperation and prosecutors argue he deserves a break... That is, to 40 years.

(Extraordinary cooperation, or more lies?)

Another difference. The amount of the claimed losses. Dreier's losses were estimated to be north of $400 million; Rothstein's fraud is estimated to be about $1.4 billion. Loss amounts affect the advisory sentencing guidelines.

We shall see what happens Wednesday.

In the meantime, the respective firms' partners and administrative staff may still be under scrutiny.   Rothstein's assistant Debra Villegas recently pled guilty, and so far a few of Dreier's partners have pled guilty but no office staff / bookkeepers have been charged.   At least, that is what is being made known to the public.

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