Convicted Ponzi Guru Scott Rothstein Wasn't Worried About Whores, Hotboxing Derailing His Scam

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Not sure how many people here know this, but there's an old saying that when one is running on Ponzi scheme, one needs total focus. It's a lot of work defrauding investors and while some activities by your staff are tolerable (smoking weed in every corner of the office, as well as the parking garage and the courtyard out back and having sex with prostitutes on the desk), a line must be drawn at those which create unacceptable distractions, like dealing said pot and purveying said prosties. If that doesn't make any sense or you're confused at the finely drawn distinction, perhaps convicted Ponzster Scott Rothstein, who was deposed on the matter today, can shed some light.

Q: All right. So you said the only drugs you used were marijuana with your wife. Is she the only — you didn’t — that wasn’t incorporated in the rock-star lifestyle, using drugs with any of your investors or co-conspirators?

Rothstein: No, actually, never. Actually, I had a lot of opportunities to because there was a lot of marijuana smoking going on in my office, but it wasn’t something — I prefer to drink vodka.

Q: Actually in the office it was going on?

Rothstein: In the office, in the garage, outside the office, I had some partners that couldn’t come to work without smoking pot.

Q: Okay.

Rothstein: I also found out they were actually dealing drugs in the office. I actually tried to put a stop to that.

Q: That was one crime you wouldn’t tolerate?

Rothstein: No, no, it’s not that. I didn’t want to draw attention. You don’t want to have marijuana dealing from the middle of your law office because I was running a giant Ponzi scheme out of there.

Q: Did you ever have any of the escorts visit the office?

Rothstein: Yeah. Sure.

Q: You had had prostitutes in the office, but you wouldn’t have pot?

Rothstein: You’re missing the point. The police also were sleeping with my escorts….Pot, not a great idea in the office, I don’t know why, specifically, it bothered me; but it troubled me, probably because they were actually dealing the pot out of the office while I was in the middle of running a several-hundred-million-dollar Ponzi scheme.

Get it now? No further questions.

Rothstein: As Ponzi Scheme Unfolded, My Co-Workers Got Blazed [WSJ/Law Blog]

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Convicted Insider Trader Matthew Kluger "Shocked" To Find Out He Couldn't Trust The Guys With Whom He Was Committing Federal Crimes

Remember Matthew Kluger? To recap, he's the mergers and acquisitions lawyer who spent two decades feeding inside information to convicted insider trader Garrett Bauer, that he picked up from partners at the six different law firms he worked at over the years. The operation, which included Kenneth Robinson, an old friend of Kluger who acted as the tips mule between MK and GB, went very smoothly for a very long time (17 years), and would have continued going smoothly had Robinson stuck with the plan instead of deciding to start making the same trades as Bauer, raising suspicion with SEC, which was watching the men and used "relationship analysis" to determine they were "part of the same trading scheme and had a common source: Kluger." In March 2011, federal agents showed up to Robinson's house and after thinking it over for a couple days, he decided to cooperate by giving prosecutors a step-by-step guide to how the scam operated, telling them Kluger's name, and recording conversations with Kluger and Bauer in which the two said things like "I went right up to my apartment and I broke the phone in half and went to McDonald's and put it in two different garbage cans" and "I can't sleep. I can't sleep. I'm waiting for the FBI to ride into my apartment" and "We have to get all the fingerprints off that money. Like you wearing gloves or something and wiping every bill down or something" and "There is no way [these cell phone conversations] could ever be recorded." Robinson was ultimately sentenced to 27 months in prison, Bauer got nine years (despite his 147 speeches about how insider trading is a bad idea on the college lecture), and Kluger was handed 12 years, beating Raj Rajaratnam for "the longest insider trading U.S. history." Recently, Kluger sat down with Bloomberg to offer a few more specifics re: how the scheme went down ("Sometimes it was a deal I was working on, sometimes it was a deal I heard being discussed in the office"; "I would call Ken and say 'X/Y/Z company is considering a takeover of Q company") but what he really wants to talk about? What was the biggest surprise and hardest punch to the gut in all of this? Is what it was like finding out that his buddies were stiffing him on cuts of their ill-gotten gains. "On the day I was arrested, when they showed me the criminal complaint against me, finally that day, I saw the amounts that had been traded and I was absolutely shocked. Our agreement from the beginning was always that that profits were being shared equally three ways. I felt very used and manipulated, that he was basically pumping me for information, that he was then lying to me about how he was using and then allowing his obviously better friend to make millions and millions of dollars while telling me that that was not happening. “Maybe you want to laugh and say of course there’s no honor among thieves,” Kluger added. “But even when you’re doing something you’re not supposed to do, I trusted that they were honoring the commitments that they had made.” You can imagine Kluge's utter dismay to find out that such was not the case. It's one thing to get nailed for insider trading, it's another to find out you could've been making 10 times the profits while doing so.