Tax Refund Satisfies Bankruptcy Trustee on Ponzi Funds

Tax Refund Satisfies Bankruptcy Trustee on Ponzi Funds

Ponzi schemer Scott Rothstein's former law partner, Stuart Rosenfeldt has agreed to settle a $10 million lawsuit against him for a fraction of the complaint, only $1.6 million. The settlement was disclosed Thursday in a settlement agreement filed in the bankruptcy of Rothstein and Rosenfeldt's former law firm, Rothstein Rosenfeldt Adler.

But, here's the bizarre part: Stuart is getting the money to fund the settlement from a tax refund of $3.97 million by the IRS for reasons no one is explaining.

The bankruptcy trustee has alleged in a lawsuit that Stuart was overpaid, and received loans and gifts with money from Rothstein's $1.2 billion Ponzi scheme.

Don't these alleged facts explain the enormous refund? Don't these facts cry out that he's receiving money back from the government that he may have received from the proceeds of Ponzi Scheme!?!? And this money is absolving him from any liability in the lawsuit rather than implicating him more?

I would think this enormous payment from the IRS would raise red flags for all involved rather than getting him off the hook. Consider this: If $3.97 million were the entire amount Stuart paid in taxes over the last 10 years, that would mean he made and claimed over $10 million in compensation over those 10 years. He more than likely would not be getting all his tax back so he must have claimed compensation far in excess of $10 million. Scott Rothstein, now in federal prison, is clearly the man behind the Ponzi scheme as his ultra-extravagant lifestyle demonstrated. But, perhaps some of his partners received some of the unlawful gain.

Maybe the bankruptcy trustee should get to the bottom of such an enormous refund before being too quick to settle?

Read more articles about consumer debt by Ted Connolly, co-author of The Road Out of Debt

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