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February 1, 2010 4:00 PM

Rothstein E-mails Reveal Role of Former Plaintiffs Lawyer

Posted by Brian Baxter

A court filing in a civil suit brought by investors of Ponzi schemer Scott Rothstein includes a batch of e-mails that show how the Fort Lauderdale lawyer's firm came to an abrupt end last November, according to reports in The Miami Herald and Palm Beach Post.

The e-mails also reveal how another disgraced lawyer--Menachem "Melly" Lifshitz--had a role in expediting the unraveling of Rothstein's $1.2 billion fraud. Rothstein pleaded guilty last week to orchestrating a scheme that brought down his 70-lawyer firm, Rothstein Rosenfeldt Adler (RRA). Several investor groups have already filed suit against Rothstein, RRA, and other entities that held investors' money.

E-mails disclosed as part of a civil suit filed by William Scherer III, a name partner at Florida's Conrad & Scherer, show several late October communiqu├ęs between Rothstein and a Miami financial adviser named Michael Szafranski. A recurring topic of discussion in those e-mails is Lifshitz, a former name partner at New York plaintiffs firm Bernstein Liebhard.

Lifshitz negotiated more than $200 million in securities settlements alone during his time with the firm, and the ex-securities and consumer class action litigator is a well-known contributor to Democratic political campaigns and Jewish charities. But he's also a tax cheat.

According to sibling publication the New York Law Journal, Lifshitz pleaded guilty in November 2008 to a felony charge of falsifying his 2005 income tax return and agreed to pay $4.75 million in back taxes and interest. He didn't receive any jail time in return for the tax payment and guilty plea, but agreed to resign from the state bar. (Bernstein Liebhard was not implicated in any wrongdoing.)

Although he was not able to practice law, Lifshitz still wielded serious legal clout. According to a series of e-mails between Szafranski and Rothstein, Lifshitz was representing an entity called ABS Capital Funding that Szafranski had recruited to invest in confidential employment discrimination settlements. (The settlements were fictitious and formed the foundation of Rothstein's Ponzi scheme.)

In late October, ABS was demanding a $30 million payment. Rothstein had already flown to Morocco in a panic after telling his business associates that he was heading to London to recruit new investors. Seeing things starting to go south, Szafranski pleaded with Rothstein via e-mail to return and straighten out the tenuous financial situation. Szafranki seemed particularly spooked by Lifshitz's involvement.

"I don't wanna pressure u but if melly does what his partners want him to do then there [are] bigger prbs," Szafranski wrote to Rothstein in an e-mail. "Plz call him."

Another missive from Szafranski to Rothstein urges the Fort Lauderdale lawyer to release the funds requested by ABS investors because they "will destroy me if I lose them $$, [I'm] begging you."

Szafranski then asked Rothstein for a loan in order to make scheduled payments to investors. When Rothstein promised he would make the payments, which never materialized, Szafranski wrote Rothstein in an e-mail: "Where are you? I am so worried. I want u back here...Tell me u closed ur deal and ur coming back today."

In one of the final e-mails between Szafranski and Rothstein included in the civil court filing, Lifshitz's ferocious reputation reared its head once again.

"I have spoken to melly. He is planning on meeting with florida counsel on Sunday and going into court on Monday morning," Szafranski wrote Rothstein. "[Lifshitz] will be going after you, the firm. Everything. I was not able to dissuade him...Please make this happen or we are all done."

Szafranski, who has not been charged with a crime, is being represented in the civil suit by Christopher Berga from Florida's Lydecker Diaz. Berga told The Herald that the e-mails are evidence that Rothstein also duped his client. (The court filing containing Szafranski's e-mails was actually in response to a motion by Berga to disqualify Scherer from the case.)

Rothstein returned from Morocco on November 3 and surrendered to law enforcement officials. He could face up to 100 years in prison at a sentencing hearing on criminal charges scheduled for May 6.

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