FORT LAUDERDALE, Fla. -- A once high-flying South Florida attorney who lived lavishly and courted both politicians and celebrities was arrested Tuesday on federal charges that he operated a $1 billion investment fraud scheme using faked legal settlements.
The arrest of lawyer Scott Rothstein came as federal prosecutors prepared to unveil racketeering charges against him later in the day, according to two law enforcement officials speaking on condition of anonymity because of the ongoing investigation. Rothstein's attorney declined comment when contacted early Tuesday.
Rothstein, 47, was expected to make an initial court appearance later Tuesday, the officials said. Federal racketeering charges carry a 20-year maximum prison sentence.
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Criminal charges were seen as inevitable after Rothstein returned from Morocco early last month amid mounting questions from investors and the FBI about missing money. The FBI has estimated the Ponzi scheme could top $1 billion and asked investors to come forward with information.
Federal agents have seized Rothstein's boats, including an 87-foot yacht, as well as 20 luxury cars and numerous other assets, including his share of the Miami Beach mansion formerly owned by fashion designer Gianni Versace. Prosecutors are also going after 21 homes and other properties linked to Rothstein in Florida, New York and along Rhode Island's Narragansett Bay.
Meanwhile, the once fast-growing law firm Rothstein Rosenfeldt Adler is defunct and Rothstein has been disbarred by the Florida Supreme Court. Several investors have already filed lawsuits seeking their money back, including one case demanding more than $100 million in damages.
Rothstein promised huge returns on investments in legal settlements he said would pay out over time. Prosecutors say most of the settlements never existed and that Rothstein operated a Ponzi scheme, using money from new investors to pay older ones.
Shortly after the scandal broke, the Florida Democratic Party returned $200,000 in contributions from Rothstein and his law firm. The state Republican Party gave back $150,000, and Gov. Charlie Crist returned $9,600 that Rothstein and his wife, Kim, had donated to Crist's campaign for the U.S. Senate.
Rothstein's office is filled with photos of him with politicians from around the country, including former President George W. Bush, former Alaska Gov. Sarah Palin, Arizona Sen. John McCain and California Gov. Arnold Schwarzenegger. He was also close to Miami Dolphins great Dan Marino and many South Florida business and community leaders.
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