Former Banker Charged For Role In $1.2 Billion Rothstein Ponzi Scheme

Former Banker Charged For Role In $1.2 Billion Rothstein Ponzi Scheme

 He assisted in soliciting investors. He assisted in helping me handle the bankers. He assisted in helping me prepare fake opinion letters. He assisted me in coming up with plans of action to deceive investors and others. He assisted me in moving money between accounts in order to facilitate the Ponzi scheme. He assisted me in controlling our accountants. He assisted me with preparation of the initial set of deal documents.He assisted in holding off auditors who would have likely discovered the Ponzi scheme. He assisted my CFO, who was also a coconspirator, in making sure that balance statements were correct. That's on overview, I'm certain that there's more.

- Scott Rothstein, on Frank Preve's role in his fraud.

A former prominent south Florida banker now faces a criminal fraud charge over allegations that he conspired with convicted Ponzi schemer Scott Rothstein to keep the scheme afloat in its waning days. Prosecutors filed a criminal information charging Frank Prevé, 70, with a single count of conspiracy to commit wire fraud. WhilePrevé could face up to a five-year maximum prison sentence if convicted, the use of a criminal information suggests that Prevé plans to enter into a plea agreement with authorities. Prevé's lawyer has maintained that he did not have "direct knowledge" of Rothstein's scheme. Rothstein is currently serving a 50-year prison term after pleading guilty to carrying out the largest Ponzi scheme in Florida history.

According to authorities, Prevé worked with George Levin to solicit investors for Rothstein's scheme since 2007, at first offering potential investors the ability to invest in promissory notes. The promissory notes offered investors annual rates of return ranging from 12% to 30%, and typically carried a 180-day term, and Prevé and Levin sought to profit by keeping any excess return paid by Rothstein on the investments. Through the issuance of the promissory notes, the pair raised nearly $60 million from 90 investors to invest in Rothstein's scheme.

While representations were made to Levin's investors that the purported settlement funds called for in Rothstein's purported legal settlements would be wired in before Prevé and Levin purchased the settlements, email correspondence showed that Prevé often purchased settlements from Rothstein while knowing that required documentation was missing.

As Rothstein's scheme grew, he pressed Levin for additional funding and claimed that he was experiencing problems in his ability to keep the scheme going. To convince Levin, Rothstein claimed that his clients, the alleged plaintiffs entering into the settlements, had filed complaints with the Florida Bar and that the scheme could grind to a halt if he was disbarred. According to Rothstein, the only way he could continue the scheme was with $100 million in fresh financing from Levin and Prevé. This was followed by the cessation of payments on the settlements that Levin and Prevé had already purchased - bringing Levin's investment strategy to a halt and threatening the returns he had promised to his investors.

In early 2009, Levin formed the Banyan Income Fund, L.P. ("Banyan") as a "feeder fund" with the stated purpose of investing solely with Rothstein. Between May and October 2009, Banyan raised approximately $100 million from 83 investors to invest with Rothstein. In the Private Placement Memorandum ("PPM") provided to investors, Banyan represented that a settlement would undergo a verification process that included an independent third-party verifier to review the unredacted settlement documents and bank account balances to ensure everything was in order. As with the earlier investments, Prevé again failed to obtain the necessary documentation represented in the PPM's, and Rothstein again failed to make payments on a majority of the purchased settlements. Several months later, Rothstein's scheme collapsed, and Banyan investors lost the majority of the $100 million they had invested.

Prevé is now the 22nd individual to face criminal charges related to Rothstein's scheme.

For more Ponzitracker coverage of Rothstein's scheme, click here.

 For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.

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