Should Feds Let Charities Keep the Rothstein Money?

Scott rothstein.jpg
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Synagogues received big money from Rothstein.
Based on this weekend's Daily Pulp, we know that Scott Rothstein's investors are going to try to get money back from the many charities that received his generous donations. That post triggered a conversation in the comments field about whether it's appropriate for the investors to seek those funds, given suspicion over whether those investments aimed to profit from an extortion scheme of Jeffrey Epstein and his high-profile friends.

If that latter part is true, then Rothstein's victims are a pretty unsympathetic bunch. If some of their greedy millions ended up in the hands of local charities, that seems like poetic justice.

But will that logic last in the courts of justice?

With Madoff and most other famous Ponzi schemers, investors could at least claim that they thought theirs was a legitimate investment. Rothstein's investors may not have that same cover.

For the fun of watching them squirm, let's say the investors can't prove they were acting scrupulously. Then what does that do to the case against Rothstein himself? Does that make him a vigilante who engineered something that looks, in effect, like an FBI sting? And if so, does he then act like the undercover agent, offering testimony about all those who went along with his fabricated plan?

Not likely. Judging by Rothstein's sybaritic spending on luxury cars, watches, and property, he was out for numero uno and will offer testimony against his investors only to save his own neck.

With what we know so far, here's the best guess I can offer: The feds won't have the time or interest to separate the good money from the bad -- it'll all be treated like good money, including the money that went to charities and will have to be returned. The IRS will get involved and go after investors, though probably only through the civil courts. And Rothstein will be pressed to give details on his political ties, rather than his interactions with investors, because he'll need to give the feds an elected official to make it worth a plea deal.

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