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Judge Stettin Accrues Millions In Private Payments and Fails to Make Proper State Ethics Disclosures

The investigations into the Rothstein Ponzi scheme, the biggest fraud in South Florida history, are also raising questions about Judge Herbert Stettin, the Chapter 11 Trustee for the victims of the scheme.

Judge Stettin was appointed despite the existence of allegations charging Stettin with repeated violations of the Florida Constitution, the Code of Judicial Conduct, and Florida ethics laws governing financial disclosures. Questions have also surfaced regarding possible undisclosed conflicts with respect to Stettin and his relationships with the Rothstein firm, Gibraltar Bank, and other parties under scrutiny in the fraud investigations.*

Tensions have flared in the bankruptcy proceedings recently as Judge Ray considers various settlements Stettin has negotiated for the Rothstein Estate.[1]  Among those that have been questioned include settlement deals with former RRA lawyers such as Russell Adler, Steven Lippman, and Gary Farmer Jr. Even the US Trustee’s office has questioned settlements brokered by Stettin granting individuals under scrutiny in the investigation a bar order to release them from any further Rothstein related civil litigation.[2]

Since his appointment as Trustee, Judge Stettin has repeatedly clashed with Federal officials over his demands for control of RRA assets.[3]  One of the concerns that officials have sighted is the impact Stettin’s fees may have on the fraud victims.[4]  In fact, the Miami Herald has estimated Stettin and his handpicked lawyers will take home millions of dollars in fees out of recovered Ponzi scheme funds.[5]  Ultimately, Stettin and his team may end up taking home the largest portion of the recovered funds.

Questions have also been raised about Stettin’s ability to conduct a fair investigation of Gibraltar Private Bank’s role in the fraud. Federal authorities are investigating Gibraltar Bank after it was found that Scott Rothstein was part owner of the bank and used the bank for his Ponzi scheme.[6]  Deposition testimony given by employees of Gibraltar and the accounting firm retained by the Rothstein firm have raised questions about whether Gibraltar looked the other way when confronted with suspicious activity in Rothstein’s accounts.[7]

Yet Judge Stettin hired and retained one of Rothstein’s co-owners in Gibraltar Bank, Paul Singerman and his law firm, as his lawyers. This decision by Stettin has been questioned given the inherent conflict that exists when an owner of a bank plays a prominent role in a bankruptcy investigation into that same bank.[8]
This is not Judge Stettin’s first encounter with Gibraltar Private Bank. In fact as recently as three months before his selection in the RRA matter, Stettin issued orders in a case in which he had delivered a favorable ruling to Gibraltar in its efforts to foreclose on a commercial real estate project developed by Miami businessman Leonardo Gomez.[9][10]

At the time, Judge Stettin was serving by temporary appointment in the 11th circuit, even though that is an elected position.[11]  Mr. Gomez petitioned the Florida Bar Association and the recently convened Statewide Grand Jury on Corruption to investigate Judge Stettin and Gibraltar Bank for misconduct.[12]  In his complaint to the Florida Bar, Mr. Gomez alleged that Judge Stettin orchestrated a favorable outcome for Gibraltar Bank. To date, the Florida Bar has declined to take action and will not make their investigative findings public.

Included in Mr. Gomez’s complaint are court transcripts that he claims reveal how Stettin gave Gibraltar’s lawyers instructions to steer the judicial assignment process to procure Stettin’s participation as the presiding judge.[13]  In fact, within weeks of the conversation in the transcript Stettin provided a favorable ruling to Gibraltar despite repeated objections by Gomez’s attorney, George Evans, over the issue of whether Stettin had been properly assigned to the case.

Stettin has also been accused in another complaint filed with the Judicial Qualifications Commission of ongoing violations of State ethics rules regulating financial disclosures by public officials.[14] Since public financial disclosures are made under oath, any knowing omission or misstatement of fact would be perjury. During the past decade of his tenure as an appointed Judge, Stettin has nurtured a booming private arbitration and mediation practice through his own law firm Herbert Stettin PA. In 2009, Stettin’s practices netted a reported $900,000 in addition to his judicial salary from the State.[15]

Under State ethics laws, judges must identify major sources of extra-judicial income. Even though Judge Stettin has declared millions of dollars in extra judicial payments over the last 10 years, he has failed to reveal where a substantial portion of that money came from.

The citizens of Florida have every right to know who pays money to their Judges, especially when talking about $900,000 a year. The mere fact that a sitting Judge with such a prominent position as the Rothstein Trustee is receiving such payments should be alarming given the obvious conflicts that could arise. When coupled with sworn public filings that clearly do not provide proper disclosures, it should shake the public trust to its core.

Reference Note:

* Such RRA ties include: Judge Stettin’s Judicial service with RRA lawyer Judge Barry Stone on the 4th District Court of Appeals; Judge Stettin’s service on the 4th DCA with Judge Gary Farmer Sr., father of Rothstein partner Gary Farmer Jr.; and Gary Farmer Jr.’s professional connections with Eric Stettin, Judge Herbert Stettin’s son.

Bibliography:

1.^ Mishory, Jordana. Law.com "Tension Flares Over Distribution of Seized Rothstein Assets" Web, February 23, 2010
2.^ Kay, Julie. Law.com "Chorus of Bankruptcy Lawyers, Investors Protest Rothstein Agreements" Web, August 16, 2010
3.^ Pacenti, John. Law.com "Prosecutors, Bankruptcy Trustee Hit Stalemate Over RRA Assets" Web, May 4, 2010
4.^ Brinkmann, Paul. South Florida Business Journal "Feds: RRA Fees Have ‘Heavy Impact’" Web, March 12, 2010
5.^ Kay, Julie.Miami Herald "Scott Rothstein case seen as economic boon for lawyers" Web, January 26, 2010
6.^ Coral Gables Gazette "Alleged ‘Ponzi’ lawyer a Gibraltar Bank owner" Web, November 9, 2009
7.^ Norman, Bob. The Daily Pulp "DBR:Accountant Admits “Mistakes” in Rothstein Ponzi" Web, March 18, 2010
8.^ Brinkmann, Paul. South Florida Business Journal "Gibraltar Bank’s role in Rothstein scheme under scrutiny" Web, December 18, 2009
9.^ Brinkmann, Paul. South Florida Business Journal "Judge names receiver for Rothstein’s firm" Web, November 4, 2009
10.^ Stettin Order Granting Plaintiff’s Motion to Discharge Receiver and Order Discharging Receiver
11.^ Herbert Stettin Supreme Court Appointments (1999-2010)
12.^ Gomez FL Bar Complaint v. Perez
13.^ Gomez FL Bar Complaint v. Friedman
14.^ Judicial Qualifications Committee Complaint
15.^ 2009 Form 6