Feds Investigating McCain Donors, Campaign Lied About Money ($1.1M+ taken from Ponzi scheme)

Sen. John McCain must personally and publicly explain why he allowed his staff to lie to the media about returning all $1.1 million given to his presidential campaign by a convicted felon; if he accepted even more from the felon's law partners; and why he has not donated all the dirty money to charity as his campaign claimed.

Federal authorities have been investigating 30 lawyers who worked in the now-defunct firm of Scott Rothstein, who yesterday was sentenced to 50 years in prison for running an elaborate Ponzi scheme.

According to his lawyer and media reports, the convicted felon is giving up the names of people involved and has even gone "undercover" which will likely lead to the arrest of lawyers, business associates and perhaps even politicians.

Tomorrow, Rothstein's chief operating officer, who personally gave McCain's political committees at least $30,000, is scheduled to plead guilty to assorted criminal activity.

The lawyers, along with 15 other Rothstein employees, made about $2.2 million in state and federal campaign contributions while he was running the Ponzi scheme from 2005 to 2009.

"McCain is knee-deep in this scandal and he needs to come clean," said Mark Sanders, spokesman for U.S. Senate Candidate J.D. Hayworth (R-AZ). "He first lied to the media when his campaign said the entire $1.1 million Rothstein collected was given to charity and it was old news. Then he tried to cover it up by saying he gave back the few thousand dollars Rothstein and his wife gave directly."

Federal officials are examining Rothstein's use of money from his $1.2 billion Ponzi scheme to pay salaries and give huge bonuses to senior attorneys on the condition that they donate generously to his favorite politicians, including McCain.

"Rothstein and his wife Kimberly held fundraisers for McCain," Sanders said. "His partner Stuart Rosenfeldt and his wife Susanne gave to McCain and to others, including Florida Gov. Charlie Crist.

"McCain likes to say character matters, but he is displaying his lack of it by keeping the $1.1 million and returning to Rothstein two small individual contributions," Sanders said.

One employee close to Rothstein, chief operating officer Debra Villegas, donated about $46,000 to McCain, other politicians and political committees in Florida. They gave the dirty money back, while McCain kept his million.

"Everybody seems to get it but McCain," Sanders said. "He needs to fully account for the distribution of the money he collected from everyone at this corrupt firm and explain to Arizona voters why accepting and keeping money gained from a criminal activity makes him worthy to serve in any public office."

The racketeering charges against Rothstein allege that the firm's donations to politicians and campaign committees were largely illegal because they were funded with money from the now-disbarred lawyer's illegal Ponzi scheme.

"According to media reports, agents for the FBI and the IRS are investigating campaign records to determine how Rothstein used his investment scam to fund the political donations," Sanders said. "Their next stop needs to be in Phoenix to interview McCain. If he didn't know how his top contributor was making money he should have. Ignorance is not a defense when this contributor is the number one donor to the 'McCain Victory 2008' fund and the 'McCain-Palin Victory 2008' fund."

Sanders said McCain should not try to hide behind his spokesman when it comes to answering these questions.

"McCain's mouthpiece is the same guy who lied to the media in the first place and prior to joining the Senator's campaign was the research director for Al Gore while Gore was trying to convince everyone that planet Earth was about to turn into a fireball because of global warming," Sanders said. "It's time for Mr. McCain to step up and personally disavow his acceptance of more than a million dollars he took from a convicted felon."

More arrests expected in next phase of Rothstein saga - S-S, 2010 June 09, by Sally Kestin

With Scott Rothstein's fate finally determined, expect more arrests that ensnare members of his former law firm, business associates and maybe even politicians, legal experts predict.
Rothstein has provided the government with a road map of his fraud, spending hundreds of hours with federal agents and going undercover on "multiple occasions," he wrote in a court memo filed last week. His lawyer, Marc Nurik, said Rothstein had given a play-by-play narrative "of his crimes as well as crimes of others."
Rothstein didn't name names in his memo but for the first time appeared to implicate his former law partner, Stuart Rosenfeldt. "My partner and I continued to grow the firm, and continued to draw down ridiculous sums of money, though we knew the business was not there to support it," Rothstein wrote.
Rosenfeldt's lawyer, Bruce Lehr, insists his client knew nothing about the $1.4 billion Ponzi scheme run out of the now bankrupt Rothstein Rosenfeldt Adler firm. "What a shame when [Rothstein's] supposedly coming clean, he would gratuitously throw Stuart under the bus with allegations that are untrue," Lehr said.
Others said that Rothstein's statement signals trouble for Rosenfeldt.
"It would be extremely damaging," said Michael Seigel, a University of Florida law professor and former federal prosecutor. "If you're at all involved in the operation of the [firm], it's hard to be an innocent bystander."
Rosenfeldt co-founded the Fort Lauderdale-based firm with Rothstein and was a 50 percent shareholder.
So far, only one legal associate of Rothstein's has been charged criminally. Debra Villegas, the firm's former chief operating officer, is scheduled to plead guilty Friday to money laundering.
Other members of the firm in Rothstein's inner circle include partner Russell Adler, General Counsel David Boden, Chief Financial Officer Irene Stay and attorney Steven Lippman.
Caught in a broader net may be the accountants and bankers who helped Rothstein, the investors who gave him money and the politicians who accepted contributions from him and his firm.
Rothstein and his associates gave more than $3 million to political parties and candidates for offices ranging from Broward County Commission to the governor of Florida and the president. Rothstein used money from the Ponzi "to corrupt the political process," his attorney wrote in a court document last week.
That could be bad news for the recipients of the contributions.
"The question becomes what did the politician and his staff know about it?" Seigel said. "That is something the feds would be very interested in."
Rothstein would be key to implicating any politicians.
"If there were conversations, he's the one who had them," Seigel said. "If he's providing evidence that this was known to the people he was dealing with, then I would suspect we'll see some indictments in that area."
Political donors tied to Rothstein also may face charges. Prosecutors have said members of his law firm were reimbursed for making donations, a violation of federal and state election laws.
Bill Scherer, a Fort Lauderdale attorney representing investors who lost millions with Rothstein, said he expects more indictments soon.
"More co-conspirators are going to be charged criminally, and there are probably going to be more that we're going to sue civilly," he said.
A lawyer for Howard Kusnick, a longtime Rothstein associate, has said he is under investigation and expects to be indicted. Financial advisor Michael Szafranski and banker Frank Spinosa have both declined to answer questions in depositions, citing their Fifth Amendment right against self-incrimination.
Federal agents Wednesday vowed to continue their criminal investigation and "relentlessly pursue" Rothstein's assets on behalf of his victims — from clients who entrusted him with money for legal work to wealthy investors. But that will likely take a long time, said attorney Bruce Reinhart of West Palm Beach.
"There are a lot of people trying to get their money back," he said. "Businesses, cars, buildings have to be liquidated. There's close to $1 billion in claims."
Staff writer Megan O'Matz contributed to this report.

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