UPDATED: Banyon By the (Confidential) Numbers
Let me start this post with a note about Scott Rothstein's net worth in 2003.
It wasn't much.
|Rothstein at Versace mansion wedding party|
Because Rothstein was holding all the house money and had more in his retirement account than his wife, he had to pay a total of $107,646.56. He paid it in $13,455.82 quarterly installments over two years. The only other marital asset was his Harley-Davidson motorcycle, which was in his wife's name. They agreed to sell it and split the profits.
Fast-forward a few years and Rothstein was rolling in hundreds of millions of dollars, driving a few million dollars worth of cars, hobnobbing with Dan Marino and Charlie Crist, and generally looking like the biggest shot in Broward County. It was a huge and fast leap from workaday lawyer in Plantation to kingmaker on Las Olas, and he couldn't have done it without George Levin.
A good view of the scope of his Ponzi scheme comes from a confidential offering memorandum put out by Levin's Banyon Income Fund, which I told you this weekend put in staggering sums of money into the scheme. Levin was, indeed, Rothstein's whale.
In it, Banyon explained why this sensational business was all but unknown to the
the world at large.
"Labor and employment settlement financing has largely been ignored because it is a niche market and lacks visibility due to confidentiality issues. ... It is the [Banyon] Partnership's belief that this is a largely un-tapped market."
The implication in that document, a confidential offering memorandum issued on April 30, is that Scott Rothstein had basically discovered gold. The memorandum, though, never mentioned the name "Scott Rothstein," just his law firm, Rothstein Rosenfeldt Adler, which it described as a "substantial practice representing plaintiffs in labor and employment cases."
It was actually garbage, of course. The settlements didn't exist, and the law firm was a straw business, full of overpaid attorneys whose salaries were being subsidized by the Ponzi scheme.
But the mirage worked fantastically well after Banyon's inception in December 2006. Levin was able to raise $656 million up to that point to buy about $1 billion worth of Rothstein's settlements, according to the memorandum. Here are the numbers Levin showed to potential investors:
Purchases Gross 656,823,968.38
Discount Gross 433,196,839.97
Total Settlements 1,090,020,808.35
Collections Gross 531,159,770.75
Net Purchases 220,648,156.00
Net Discount 338,212,881.60
I'm figuring out these numbers (if possible), but at the end of the day, Levin believed that Banyon had $850 million owed from Rothstein's accounts when the scheme unraveled at the end of October, according to attorney Bill Scherer, who is representing $100 million worth of Banyon investors (the Von Allmen family).
Banyon explained that it got most of its investment money from hedge funds and explained the "ramp up" in investments going to Rothstein this way:
"Although the initial flow of business in early 2007 were rather small, once a structure of formal documentation was put in place and a relationship established with Rothstein, the General Partner was able to achieve a large ramp up in business volume. Today's volumes have stabilized at approximately $60,000,000 to $75,000,000 in funded business per month."