Ponzi Schemer's Wife Gets 18-Month Sentence For Hiding Jewelry

"She is not the poster child for a greedy Ponzi wife — how hurtful, how inaccurate."

- Kim Rothstein's defense attorney

A Florida woman whose husband, Scott Rothstein, is currently serving a 50-year prison sentence for masterminding one of the largest Ponzi schemes in history, was sentenced to serve an 18-month prison term for hiding various jewelry from authorities - including a 12.08 carat diamond ring.  Kim Rothstein, 39, received the sentence from U.S. District Judge Robin Rosenbaum last week after previously pleading guilty to a federal conspiracy charge.  Immediately following the sentencing, Mrs. Rothstein was permitted to surrender at the federal detention center in Miami - provided she made the 30-minute trip from the Ft. Lauderdale courthouse without making any stops.

After authorities arrested her husband in October 2009, Mrs. Rothstein was present at the couple's home when federal authorities arrived to inventory and secure the couple's extensive collection of jewelry and luxury items.  While Kim Rothstein assisted authorities in gathering the jewelry, it was later discovered that she had concealed several pieces of jewelry from authorities in what was later described as an "insurance policy" to help her with expenses.  This jewelry included (i) a 12.08 carat diamond ring, (ii) an engagement ring and wedding band with 18 emerald cut diamonds, (iii) 10 watches, including a Rolex with leopard design, a woman's Piaget and a platinum/diamond Pierre Kunz, (iv) pearl, diamond, and sapphire cufflinks, and (v) 50 1-ounce gold bars.  

Along with Kim Rothstein, authorities also charged her former lawyer, Scott Saidel, her friend Stacie Weisman, and several jewelers that participated in the sale of the jewelry.  Rothstein, Weisman, and Saidel chose to plead guilty and cooperate with authorities, while the two jewelers have indicated they plan to contest the charges.  Weisman recently received a three-month prison sentence, while Saidel received a three-year term that also included his agreement to turn over (1) $65,000 in legal fees paid by Kim Rothstein; (2) four expensive pens; and (3) a pair of mother of pearl, diamond, and sapphire cuff links. 

While Kim Rothstein appeared to stand by her husband after his arrest and incarceration, that changed just before her sentencing when she took a variety of steps to distance herself from Scott Rothstein.  This included a filing for divorce in which she levied allegations of physical and emotional abuse, as well as revealing for the first time that it was Scott Rothstein who had originally conceived the idea of hiding some jewelry from authorities to act as insurance for the "avalanche of litigation" that would soon ensue - an account that was seemingly confirmed by prosecutors.  According to Kim Rothstein, she and her husband communicated in coded letters while he was incarcerated in an effort to coordinate the sale of the jewelry. 

As part of Kim Rothstein's agreement with prosecutors, she also agreed to pay $515,000 and hand over dozens of valuable items, including the diamond ring, wedding and engagement rings and other jewelry, and numerous gold coins and gold bars.

Judge: Alzheimers-Stricken Attorney Unfit to Face Ponzi Scheme Charges

A federal judge ruled that a 78-year old Pennsylvania attorney suffering from advanced Alzheimer's disease is not competent to stand trial on charges that he masterminded a $6 million Ponzi scheme.  Anthony J. Lupas, a once-prominent local attorney, was facing mail fraud charges after he was accused of swindling millions of dollars from clients who thought they were investing in tax-free trusts.  After holding a competency hearing in August, U.S. District Judge Robert Mariani issued an order siding with Lupas's attorneys and agreeing that Lupas had "lost his perception of reality".  

Lupas is alleged to have offered clients the ability to earn a steady 5% return through an investment in tax-free trusts.  This continued for years, until Lupas suffered injuries in a 2011 fall that allegedly diminished his mental faculties.  After his injuries prevented him from maintaining scheduled investor payments, his son, a state court judge, allegedly discovered the scheme and alerted authorities.  After an investigation, the elder Lupas was arrested and charged with 29 counts of mail fraud, one count of conspiracy to commit mail fraud and one count of conspiracy to commit money laundering.

Last month, a Pennsylvania state fund supported by attorney registration fees announced it would pay $3.25 million to Lupas's victims in what Pennsylvania Supreme Court Chief Justice Ronald D. Castille remarked was 

one of the most egregious cases of attorney theft of clients' escrow funds that I have seen in the 20 years that I have been on the Supreme Court..."

In his order declaring Lupas unfit to stand trial, Judge Mariani made a point to clarify that Lupas had not "evaded the justice system by any means," and that his condition would be re-evaluated after he had spent several months in a local treatment facility.

Jetpack-Peddling Ponzi Schemer Faces Prison, Deportation

A Utah man who perpetrated a massive Ponzi scheme that caused nearly $7 million in losses was sentenced to a 5-year prison term - after which he will face deportation back to his native Great Britain.  John S. Dudley, 59, received the sentence from U.S. District Judge Robert J. Shelby after previously pleading guilty to a single count of wire fraud.  While wire fraud carries a maximum term of twenty years per count, Dudley's plea agreement included a recommendation by prosecutors for a five-year term. Dudley, a citizen of Great Britain, is expected to face deportation after serving his sentence.  

According to authorities, Dudley began pitching a variety of investment programs to potential investors as early as 2007.  These investments, including forex trading, mining speculation, and even a human jetpack rocket suit, were touted by Dudley at investment club meetings also known as "bounce nights" or "Tashi group meetings."  Investors were told that they could expect monthly returns ranging from 5% to 10%, that Dudley had not suffered a trading loss since 1978, and that their investments were protected from potential loss by a "senior life settlement policy."  Additionally, even if investors were low on available funds for investment, Dudley coached them on how to extract money from financial institutions through loans on houses or boats.  In total, Dudley raised more than $12 million from approximately 100 investors from January 2007 to March 2010.

Not surprisingly, Dudley's promises of steady and significant returns were possible only through perpetrating an elaborate Ponzi scheme that used new investor funds to repay older investors.  Instead of using investor funds for the various ventures he pitched, Dudley used investor monies for a variety of personal expenses including more than $2 million for the purchase of two homes, a down payment for a ski boat, and travel expenses.  After he was arrested in mid-2011, Dudley initially pleaded not guilty.  He later agreed to plead guilty in March 2013 to a single count of wire fraud.  

As part of his plea agreement, Dudley has also agreed to pay $6.8 million in restitution.  

Canadian Woman Charged in $40 Million Ponzi Scheme

A Vancouver woman is facing fraud charges after she was arrested and charged with masterminding a $40 million Ponzi scheme that is rumored to be the largest Ponzi scheme in Canadian history.  Rashida Samji - also known as Rashida Makalai - was charged with 28 counts of fraud and theft related to approximtely $17 million in losses suffered by 14 investors between 2006 and 2012, and police believe the charges are part of a much larger fraud with significantly higher losses.  

Beginning as early as 2003, Samji, a former Vancouver notary, allegedly solicited investor funds through her company, Samji & Assoc. Holdings Inc.  Investors were told that their funds would be safe in Samji's notary trust accounts at several financial institutions, including Toronto-Dominion Bank ("TD Bank"). These funds would then purportedly be used as collateral for investments by Mission Hill Winery in Kelowna, British Columbia.  In return, investors were promised hefty annual returns ranging from 12% to 30%.  In addition to Samji's solicitation efforts, a former financial planner at Coast Capital Savings, Arvin Patel, also helped recruit approximately 90 investors to the scheme.  In total, more than $80 million is estimated to have flowed into Samji's trust accounts.

However, rather than keep investor funds in notary trust accounts, Samji is alleged to have deposited investor funds into her own personal bank accounts, which she then used to make fictitious interest payments to existing investors - a hallmark of a Ponzi scheme.  None of the alleged wineries linked to the scheme claimed to have any knowledge of Samji, and authorities filed civil charges against Samji in 2012 after an investigation.

Samji has since posted a $100,000 bail, and is subject to a variety of bail conditions while the case remains pending.

New Zealand's "Madoff" Receives 10-Year Sentence For $300 Million Ponzi Scheme

(Editor's Note: While fraud never sleeps, the blog is now back after a 12-day hiatus necessitated by the editor's recent nuptials and honeymoon.  Many thanks for your continued support of the blog.)

A 63-year old man known as New Zealand's "Madoff" was handed down a 10-year sentence - the most severe sentence handed down to anyone involved in a Serious Fraud Office investigation - for perpetrating a massive Ponzi scheme that took in hundreds of millions of dollars from unsuspecting citizens.  David Ross was labeled a "liar" and a "thief" by Judge Denys Barry of Wellington District Court, who handed down the record sentence.  Under New Zealand laws, Ross must serve a minimum sentence of nearly six years before becoming eligible for parole.

Ross was the director of Ross Asset Management ("RAM"), which he used along with numerous associated entities to solicit investors with the promise of guaranteed and lucrative returns - including annual returns of up to nearly 40%.  Investors received regular returns, and Ross was generally perceived as an astute investor.  Indeed, between June 2000 and September 2012, investors believed that Ross had accumulated a collective $351 in "profits" by trading securities.  

However, in late 2012, many investors began complaining about delays in scheduled payments, and in November 2012, authorities from New Zealand's Financial Markets Authority raided RAM's offices.  After a Receiver was appointed and began sifting through RAM's finances, it was discovered that only $10 million remained in RAM's accounts despite previous claims of over $450 million under management.  The Receiver, John Fisk, estimated that RAM took in over $300 million since 2000, keeping nearly $30 million kept as management fees while $290 million was withdrawn or paid to investors.  Fisk also found that the fund was insolvent since 2007 - that is, fund outflows exceeded new investor inflows, sometimes by $60 million.  When authorities raised RAM's offices in November, the scheme was on the verge of collapse.  Fisk later estimated that the total losses to victims exceeded $115 million.  

Ross pleaded guilty to several fraud charges in August 2013, including four false accounting charges and one charge of theft by a person in a special relationship.  

Many victims decried the sentence, claiming that the term was much too lenient to discourage the scourge of financial fraud that has recently plagued New Zealand.  While the 10-year term is much smaller than similar sentences across the globe - and many times smaller than the scheme perpetrated by Bernard Madoff whose name has been used as a nickname for Ross - the sentence is said to be the longest ever handed down to a failed investment company official or to anyone involved in a Serious Fraud Office prosecution.  Indeed, one former SFO prosecutor speculated that the sentence was the longest he could recall for a fraud-related prosecution.