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Law.com Home > Chorus of Bankruptcy Lawyers, Investors Protest Rothstein Agreements
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Chorus of Bankruptcy Lawyers, Investors Protest Rothstein Agreements
Settlements call for 'bar orders' Julie Kay
Daily Business Review August 16, 2010 Print Share Email Reprints & Permissions Post a Comment
A packed courtroom of bankruptcy attorneys and a few investors turned out for the first settlement hearings in the Rothstein Rosenfeldt Adler bankruptcy case, and many were there to protest the agreements. A latecomer to the case, Miami solo practitioner Paul McMahon, threw a monkey wrench into the settlements with George Levin and his Banyon investment funds. Banyon and Levin were the top source of money for Scott Rothstein's $1.2 billion Ponzi scheme, kicking in about $830 million. Thursday, McMahon filed involuntary bankruptcies against Levin and Banyon in a move he said was likely to kill the settlement proposed by RRA bankruptcy trustee Herbert Stettin. McMahon represents more than 30 Banyon investors who claim they lost about $15 million. The settlements considered by U.S. Bankruptcy Judge Raymond Ray with Levin and investment adviser Michael Szafranski called for controversial "bar orders" to prohibit any pending or future Rothstein-related litigation against the settling parties. Ray withheld action on the settlements based on McMahon's filings. Under Szafranski's settlement, he would turn over 90 percent of his assets, or about $6 million. Under Levin's settlement, he would turn over 85 percent of his assets, estimated at $100 million to $200 million, after the first $5 million, which goes directly to the trustee. Levin also would get to keep his Fort Lauderdale house, $750,000 in personal property and $60,000 a month in living expenses. A host of lawyers lined up Friday to protest the Szafranski agreements and question Stettin on the stand. They included McMahon, who said he was hired Wednesday; Steven Schneiderman, an attorney for the U.S. trustee's office; Tew Cardenas attorney Jeffrey Tew of Miami, representing Gibraltar Private Bank & Trust; Glenn Goldstein for TD Bank; and Bruce Katzen for Carolina Casualty, RRA's insurance carrier. The bank attorneys argued bar orders would prevent them from suing Szafranski and that it's far too early for such a global settlement with related litigation pending in federal and state courts. Schneiderman argued that Szafranski as a potential criminal target does not deserve such a settlement agreement. Szafranski ostensibly served as the independent verifier of settlements being financed by Rothstein's investors. The former law form chairman and his top assistant are the only ones to face criminal charges so far in the fraud. "Have you ever heard of a bar order being granted to someone who pled the Fifth during depositions?" Schneiderman asked. Stettin responded: "Mr. Szafranski's conduct was morally reprehensible. He was a participant whose conduct led to losses by many people. He acted grossly irresponsibly. He may be indicted. My difficulty is I have a fiduciary duty to collect money for the estate. If we litigate . I'm worried assets would have been used up." McMahon said the proposed settlements would dissolve a pending lawsuit in Connecticut state court filed by Banyon investors several months ago. Ray took the Szafranski issue under advisement. Despite numerous objections, the judge approved a settlement with former RRA attorney Steven Lippman and his wife, Marcy. They agreed to pay the bankruptcy estate $700,000, or 82 percent of their net worth, in exchange for a bar order preventing all but malpractice suits. Stettin's attorney, Chuck Lichtman of Berger Singerman in Fort Lauderdale, revealed that Lippman showed up the day of his scheduled deposition with a $500,000 cancellation payment, which Lichtman accepted. The money will be credited toward the settlement. TD Bank attorney Mark Bloom of Greenberg Traurig argued the payment raised red flags and the settlement should have been approved without a bar order. "He's still earning a living practicing law," Bloom said. "This is a perfect case to call Mr. Lippman's bluff. He's not going to walk away from the settlement." Lippman's attorney, Harry Schafer of Kenny Nachwalter in Miami, said the Lippmans would settle only with a bar order in place. "I spent two months negotiating this," he said. "The Lippmans want to buy peace."
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