New York Hedge Funds Strike Back In Rothstein Suit

We've heard all about how the Centurion and Platinum hedge funds in New York sank hundreds of millions of dollars into Scott Rothstein's Ponzi scheme. 

Fort Lauderdale attorney Bill Scherer is suing them, claiming they were privy to the fraud and now must cough up millions of dollars to multimillionaire Douglas Von Allmen and other Rothstein investors that he represents. 

vonallmen.jpg
Von Allmen
In his massive and much-publicized civil lawsuit, Scherer uses emails and other evidence his law firm collected to make a case that the hedge funds -- led by Meir "Mark" Nordlicht, Ari Glass, and Jack Simony, among others -- knew or should have known that Rothstein's investment scheme was a massive fraud.

Well, that kind of evidence apparently cuts both ways. In a counterclaim filed last week against the Von Allmens and their companies, the hedge funds make an argument that it is the vastly wealthy Von Allmen who is liable to pay them damages, not the other way around. The suit alleges:

"In truth it was Von Allmen and his co-conspirators that were rabid feeder fund promoters of the Rothstein scheme, and funneled tens of millions of dollars of their victims' money into the scheme without doing appropriate due diligence of their own, concealing material facts, and mirespresenting other facts."   

Filed by attorneys Eliot Lauer and Susan Trench, the counterclaim provides the first inside look at the aggressive efforts Von Allmen made to lure additional investors into Rothstein's scheme. The suit also alleges that Scherer exaggerated the Ponzi losses of his Rothstein clients, which he lists in court records as $281,525,358.34, by more than $120 million, the brunt of it involving alleged losses by Miami financier Ira Sochet.

But it is the Von Allmen allegations that are most intriguing. The counterclaim alleges that after sinking $55 million into the scheme of his own money, Von Allmen and his associates (including several family members) became concerned that Rothstein wouldn't be able to pay them back. That's when they claim "Von Allmen and the Von Allmen Conspirators, in concert with Rothstein, began actively and aggressively functioning as feeder fund promoters, in order to lure

fresh capital into the Rothstein program by ensnaring other investors."

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Discala with Sigler
To drum up cash meant to help bail out their millions, the suit claims that Von Allmen worked with Clockwork Capital Advisors, a hedge fund run by A.J. Discala, a Hollywood agent and businessman whose claim to fame was having married Jamie-Lynn Sigler, aka Meadow Soprano. The idea was to turn clockwork into the new Banyan, the monster hedge fund run by George Levin that financed much of Rothstein's scheme.

Von Allmen also formed Delaware companies Razorback Funding and D3 Capital Club as vehicles to raise money from unwitting investors into Rothstein's scheme. The suit claims more than 23 investors sank money into the venture.

In emails included in the counterclaim, Von Allmen wrote that the new Clockwork venture would need to $400 million the first year and $100 million in successive years to succeed. Clockwork agreed on October 1, 2009 to allow Von Allmen to own 10 percent of the new hedge fund.

Von Allmen then met with Rothstein on October 5 to talk about more than $100 million potential settlement deals. Later that day he sent an email to Clockwork, "I saw Scott at a hospital function this afternoon .... Can you raise $46 million next week and $60 million the following?!!!"

Thus began a "furious marketing effort" on Von Allmen's behalf to make Clockwork Rothstein's top feeder, according to the suit. From another email Von Allmen wrote to Clockwork:

I was us (whoever that is) to make the gravy. I am going to tell people this: You make 15% in Banyon and more in Clockwork. For a few people who can write $10 to $20 million checks in a week, we are starting a little "Club" that does even better. Typically, you will get back 115% in 4 months with most of it in the first 2 months. If we can keep this quiet within the Club and not have competition, you will probably end up with 60% or better annual returns! It will all be well documented and no one will get anything before the limited partners are paid their 115%.

Clockwork, presumably Discala, replied, "I agree sir!!! ... The CLUB is the exact play!!"

The suit goes on to outline what it calls "badges of fraud" involving Von Allmen. As Rothstein became more and desperate in October 2009, just days before he fled to Morocco, he began offering higher and higher rates of return, 300 percent and more. Von Allmen found that investors were scared off by such unrealistic returns. On October 11 he wrote to Clockwork: "I met with Scott for a couple hours today. ... He thinks we are scaring people away by offering them such outrageous returns. He thinks we would raise more money offering lower returns."

The agreed upon return was 45 percent, which of course is still exceedingly high. The law firm Von Allmen hired to do due diligence, Clifford Chance LLP, apparently agreed. After meeting with Rothstein, the firm "withdrew abruptly from the representation" and returned its $50,000 advance. According to Clockwork emails, this "spooked" and "freaked out" its own general counsel, Robert Mazzeo.

The lawsuit also cites irregularities in the way Von Allmen presented the deal to investors and how payments were made to Rothstein. He kept drumming up investors until Rothstein fled to Morocco, at which point he switched into lawsuit mode, hiring Scherer. On November 3, 2009, after the Ponzi scheme story was all over the news, Von Allmen wrote to investors: "The attorney I hired is doing a great job and is working to get us ahead of all the people that will be in the bankruptcy mess. He is a bull dog and is looking to go after anyone who touched this and has deep pockets." The next day he wrote in an email that the Rothstein mess was "actually fun" and that "I assume anything we recover is found money."

He also tried to do some damage control, according to the lawsuit, writing that he was going to tell investors that they were suspicious of Rothstein but that he "took the money and ran."

"It'll look better for both of us if it comes off like we were on top of this instead of we just got blindsided," he wrote to Clockwork.

Of the lawsuit, Scherer said, "Desperate men take desperate actions."

He said that among the money Von Allmen sank into Rothstein's scheme at the very end was his own grand children's trust fund money. They on the other hand put $440 million in and got $420 million back. So they did a good job of getting their money back."


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40 comments
Fred23
Fred23

aj discala is a parasite - every business venture results in total loss - he plays the pretty boy hollywood act but is nothing but a thieving, fraud piece of garbabge that belongs in jail - every parasite needs a host and i guess jamie-lynn didnt want to be his host anymore

Peggy
Peggy

Do not miss American Greed this Wed Feb. 23rd @ 10:00pm~~~~~The show announced this evening that Wednesdays show IS ALL ABOUT SCOTT ROTHSTEIN!

anonymous
anonymous

Did Sherer win yet? Oh, I thought he already had. He will, then.

Anonymous
Anonymous

So, Pulp, did American Greed ever interview you for their episode on Rothstein?

observer
observer

The law firm hired to perform the due diligence walked away and returned the $50,000. Wow. And saavy biz people look the other way. Don't know where the info on the emails is coming from, but if they actually exist it sounds like criminal activity.

They started talking to investors about 115% returns, moved up to 300% and finally came down to 45%, all to attract capital. It seems these returns in no way reflected the expected returns on invested capital. That's fraud.

Mugsy
Mugsy

Is none of this (feeder funds, representing knowingly false returns) not illegal? Where are the Feds?

unowho
unowho

"Allen West" he's our man hero of our nation ....For his adventure has just begun so stay tuned to this station .....Good Mornin USA .......Any arrests today!!!

Amill20
Amill20

I hear Roger Stone was a consultant to the American Greed segment on Rothstein. I wonder if he mentioined that he was banging Kimmie while Scottty was out Ponzi scheming?

cindermaggi
cindermaggi

HOLY chit when i went to people finders and typed in RRA and sawnames of everyone in my past i almost shit meself!!!!! omg omg cullen lazaro taxmaster turner omg omg omg i cant believe im alive!!! my neighbors on utah dr deltona childhood friends from miami beach all fuckin over omg omg !!!

Nucky Thompson
Nucky Thompson

I haven't seen a true victim yet in this case. Let the greedy bastards suffer. Only the Nigerian e mail scammers are stupid enough to offer a 115% return. One thing this story confirmed -a proper law firm like Cliffoird Chance is a million miles away from scam artists such as RRA.Rosenfeldt and Adler wouldnt have got a job in their mail room never mind making partner.

Anonymous
Anonymous

Who is Scherer representing? That's the winner.

Goldilocks
Goldilocks

Just heard on the radio: international conference on money laundering to be held soon (date?) at the Hollywood Diplomat.

Guest
Guest

sfl-rothstein-american-greed-021411-link CNBC's "American Greed" will feature Ponzi schemer Scott Rothstein on Feb. 23 at 10 p.m. The "American Greed" crew appears to have gotten some previously unseen footage of Rothstein, who pulled off the largest fraud in South Florida history.

Those featured in the preview include Fort Lauderdale attorney Jeffrey Sonn, Rothstein's defense attorney Marc Nurik and Sun-Sentinel reporter Peter Franceschina.

They should have The Pulp there too.

Pulp
Pulp

Off topic but the Miami Herald has Keuchenberg's face dominating its home page right now. It's a DUI, not a child rape. Report the story, sure, but sensationalizing a bad day for the Keuch is just wrong on the Herald's part.

Guest
Guest

I believe everything that their claiming in their counter suite. Von Allmen created that hedge fund to recoup his initial investments. I also feel he knew this was nefarious dealings and planned this out with Rothstein. It sounds like he branched off and started his own corrupt scheme. He's a greedy bastard.. He's not an innocent victim and I hope he loses this law suit.

DeathFrog3
DeathFrog3

FYI SR will be on Greed next week

Gatorfl
Gatorfl

If they can prove that Von Allmen conspired with Rothstein to manipulate the rate of return they have a good shot at winning, IMO. That's the smoking gun. I wonder if Scotty boy can be subpoeana'ed for testimony.

Christy
Christy

When your ship is sinking you don't allow more passengers on board. When Von Allmen saw the Ponzi scheme sinking he turned into a maniac cruise ship recruiter allowing anyone on board.

Captain Von Allmen, Your ship has sunk. Careful of the sharks.

Zee Zee
Zee Zee

Putting the victims on trial . . . shameful tactic often employed only by the most desperate offenders.

DeathFrog3
DeathFrog3

This does appear to be smoke and mirrors by the people suing Von Allmen. If that is the smoking gun evidence, then this is just a ploy to settle the suit.

hatrus
hatrus

Wonder what Scotty Boy is doing right now....

Virgil Starkwell
Virgil Starkwell

Unowho:

I didn't have you pegged as someone who would support a religious nut. West will never have a long term political career. I'll be surprised if he lasts beyond one term.

I see him following the Palin model. Fail as a legislator and then thrive as a rightwing cable star. You know, someone who farts out ideology that has no actual application in the real world.

Virgil Starkwell
Virgil Starkwell

I was posting that very thought as far back as November 2009.

Greedy douche bags that could have done something simple with their money, or heaven forbid, something good.

Harry
Harry

Key difference between von allmen is that they werent out there soliciting people to invest in this fraud, he was. He is a special kind of scum....and did scherer know that hewas representing the primary feeder into the scheme all along? I guess it wdnt have mattered to him...just as long as someone is paying his bills.

Tvillan
Tvillan

Is this a "How to Do It" self help conference?

B_tan
B_tan

Thank you for posting the date & time!

Tvillan
Tvillan

This was not his first DUI. Also, he hit another vehicle as he did in a previous DUI.Maybe attention is exactly what is needed. He endangered lives, a greater danger than many you have beat up on in this blog. Just sayin.

Christy
Christy

I have no sympathy for drunk drivers. The more coverage, exposure they get perhaps they will think about drinking and driving. He is lucky he didn't kill anyone.

DeathFrog3
DeathFrog3

Good point. The rate manipulation could be the smoking gun. That said, at its core settlement funding is a negotiation. Using a legit theory, SR could negotiate a lower price to purchase the settlement, hence a higher return. They manipulated the ROR but in a legitimate way.

SR was cooperating with Scherer. I am certain they can subpoena him.

John
John

Like I've said from the beginning, there are few if any real victims in this thing. It is just thieves stealing from thieves.

Dustin Mifartz
Dustin Mifartz

Do you think the people that were signing up for a 50% return did not know they were rolling the dice?The 'victims' as you call them, knew what they were buying into and were just playing a game of get out before it blows up.Some got out, some did not.This may have something to do with why the feds have taken little interest in this case.The only victims here are the dead people.No need for civil suits.

unowho
unowho

Virgie Many have criticized Rick Scott for his past as they do West ..Give them a chance they are voted in because the majority wanted them as leaders .The results will be significant ...And they will be in the pol world a long time..IMHO

KennyPowersSays
KennyPowersSays

Never underestimate the collective stupidity of the uneducated masses. I don't.

Virgil Starkwell
Virgil Starkwell

I'm willing to give Scott a chance, despite the fact that he is a corporate criminal, but West is batshit crazy. He is one of these neo-conservatives that believes in a worldwide Muslim caliphate. And as you saw recently in Egypt, the overwhelming majority of Muslims want freedom and opportunity, just like us.

The garbage that West utters comes directly from Glen Beck's blackboard.

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