Rothstein Associate Charged with Conspiracy to Violate the Federal Election Campaign Act, Defraud the United States, and Defraud a Financial Institution

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office; and José A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), announced the filing of charges against Steven N. Lippman, 49, of Plantation, for conspiring to commit crimes through the operation of the former Fort Lauderdale law firm of Scott W. Rothstein, called Rothstein, Rosenfeldt, and Adler, P.A. (RRA). The defendant was an attorney admitted to practice law in Florida and, in early 2005, was designated as a shareholder of RRA, but had no equity interest in the firm.

The one-count information, which was filed earlier today, charges Lippman with conspiracy to violate the Federal Election Campaign Act, to defraud the United States, and to defraud a financial institution, in violation of 18 U.S.C. §371. If convicted, the defendant faces a maximum statutory sentence of up to five years in prison.

According to the information, Lippman violated the Federal Election Campaign Act in that he was unlawfully reimbursed by RRA for certain contributions that he made to the presidential campaign of John McCain. More specifically, the information alleges that co-conspirator Rothstein and others, including defendant Lippman, attempted to dramatically increase the stature and political power of RRA on the federal, state, and local levels by making substantial political contributions to political candidates. However, since many of the attorneys and administrative personnel of RRA either had insufficient funds to contribute to the political campaigns and/or lacked the desire to contribute to the various political candidates selected by Rothstein, co-conspirator Rothstein enlisted Lippman and others to contribute to the McCain campaign by agreeing that RRA unlawfully would provide them with the funds to make the political contributions. For example, in one instance, Lippman made a $67,800 contribution to McCain-Palin Victory 2008. Lippman, in turn, received a check from RRA in the amount of $77,500, which constituted reimbursement of the funds he used to make the contribution. The check was fraudulently backdated to reflect that it was issued six days prior to the date of the actual contribution, and the memo section of the check stated “bonus.”

The information also alleges that Lippman engaged in a bank fraud scheme with Rothstein. According to the allegations in the charging document, RRA was experiencing financial difficulties and required a source of funds to maintain the law firm’s operations. Lippman maintained a bank account from a prior law firm where he had been a partner (the LVS account). Around February 2006, co-conspirator Rothstein requested that Lippman use the LVS account to float checks between and among certain bank accounts maintained by RRA, a practice commonly known as “check-kiting.” By simultaneously issuing and depositing checks between the LVS account and the RRA accounts, co-conspirator Rothstein and defendant Lippman would artificially inflate posted balances in each of the checking accounts, which allowed them to unlawfully obtain beneficial financing for RRA from financial institutions during the “float” period, i.e., the time that it took for the checks to clear. For example, the information alleges that from February 2006 through February 2008, Lippman issued checks in amounts ranging from $4,000 to $400,000, totaling approximately $10,311,688, from the LVS account. At the time many of the checks were written, there were insufficient funds in the account of LVS to cover those checks. Defendant Lippman also deposited into the LVS account checks issued from RRA accounts in amounts ranging from $37,500 to $330,000, totaling approximately $10,664,987. Lippman and other co-conspirators engaged in this fraudulent conduct to create the appearance that RRA was an affluent and successful law firm and to gain additional time to meet the financial obligations of RRA.

Lastly, the information alleges that Lippman defrauded the IRS by failing to report as income certain expense reimbursements and other reportable income he received from RRA. Among other things, the information alleges that defendant Lippman and co-conspirator Rothstein agreed that Lippman would be paid a base salary and be given an expense account for which he would be fraudulently reimbursed for personal expenditures disguised as deductible business expenses. This was done so that Lippman and RRA could avoid paying additional federal income and employment taxes. In addition, Lippman was paid from both the operating account and the payroll account of RRA but would only receive an IRS Form W-2 reflecting the money paid to him through the payroll account. Lippman would not report to the Internal Revenue Service the money paid to him by RRA for expenses.

U.S. Attorney Wifredo A. Ferrer stated, “The breadth, scope, and sheer complexity of Rothstein’s $1.2 billion Ponzi scheme is mind-boggling. Its success depended, in no small part, on the complicity of his colleagues and associates, like Steven Lippman. Lippman, an attorney, is now the ninth person to face criminal charges in connection with this scheme. As this investigation continues, I am sure that more will follow.”

“The charges against Steven Lippman show our resolve to unravel all the schemes in this complex financial fraud perpetrated by convicted Ponzi schemer Scott Rothstein and his co-conspirators,” said John V. Gillies Special Agent in Charge of the FBI’s Miami Office. “It is disappointing that the number of people who chose wrong over right and participated with Rothstein in this massive fraud is at nine and rising.”

“With the April 15 tax deadline fast approaching, it is important for people to have confidence that when they file accurate, honest, and timely income tax returns, their neighbors will do the same,” said José A. Gonzalez, Special Agent in Charge of the IRS-Criminal Investigation, Miami Field Office. “Defendant Lippman attempted to skirt his tax obligations but got caught. IRS–CI will continue to aggressively pursue those who attempt to defraud America’s tax system.”

Mr. Ferrer commended the investigative efforts of the FBI and the IRS-CID. This case is being prosecuted by Assistant U.S. Attorneys Lawrence D. LaVecchio, Paul F. Schwartz, and Jeffrey N. Kaplan.

An information is only an accusation and a defendant is presumed innocent unless and until proven guilty.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Southern District of Florida at www.usdoj.gov/usao/fls.