OM • n/A4 LOCAL & STATE WEDNESDAY, JUNE 27, 2012 I 3B t SCOTT ROTHSTEIN CASE Letter sent Rothstein into panic ■ In testimony this month, Scott Rothstein recalled feeling his Ponzi scheme was 'going to explode' after he got a letter from a family demanding $4.25 million back. BY JON BURSTEIN Sertmei The letter sent Scott Rothstein into a panic. He feared his colossal crimes were about to be exposed. It was February 2009, eight months before his $1A billion Ponzi scheme collapsed. A family of investors had sent him the letter demanding their $4.25 million back immediately, and Rothstein was certain they had uncovered his secret "Holy s—, this is going to explode," Rothstein recalled thinking. 'They figured out the P011Z1 scheme. They know there's no money in the.accounts. We are all going to jail." The imprisoned Rothstein offered fresh details into his final, paranoid-filled months. of freedom in more transcripts released this week from his three weeks of closed-door testimony earlier this month. In addition to testifying how he kept the largest fmancial fraud in South Florida history alive, Rothstein explained how he hooked a group of investors by us-. ing real civil cases accusing billionaire money-manager Jeffrey .Epstein of having sex with underage girls. Rothstein, 50, told prospective investors they were buying confidential legal settlements in whistieblower and sexual harassment cases from plaintiffs who preferred quick lamp-sum payments rather than waiting for all the money; The settlements were phony; Rothstein and his office staff made up the backup.paperworit. The fraud unraveled in October 2009 with Rothstein, a now-disbarred Fort Lauderdale attorney, briefly fleeing to Morocco, then returning to secretly cooperate with the FBI until his arrest a month later. He is serving a 50-year prison sentence, his whereabouts unknown because he's in a witness protection program behind bars. While he may be in hiding, he still has a lotto sayi giving a twoweek deposition in December followed by the 15-day session this month. So far, more than 5,000 pages of Rothstein's testimony have been'made public with at least another 1,000 pages set to be released in the next few wet Testifying via videoconferencing in the most recent deposition. Rothstein said he believed his Ponzi 'theme was at risk of being exposed when Gerald Brauser and his family demanded back $4.25 million they'd invested with him. Bothstein said the Brausers' attorney, Frank Graziadei, claimed he had obtained a banking report showing the Rothstein Rosenfeldt Adler law firm's trust accounts didn'thave nearly as much money in ihemss Rothstein was Halt-fling ROTHSTEIN Rothstein said he acted quickly to reimburse the Brausers with other investors' money and to have them sign a confidential settlement. "We didn't want them to go to authorities," Rothstein said. The bankruptcy trustee for Rothstein's law firm has since sued the Brausers to recover the $4.25 million. A lawyer for the Brausers told the Sun Sentinel that Rothstein's allegation he bought the Brausers' silence is •"n0nsene.P" 'They asked for their principal back bo•sme they were led to believe they could withdraw the money at any time and one of the Brausers had the need for the investment back to pay off the mortgage on a completely unrelated property," said Allan Joseph, another attorney for the Brausers. "My clients are victims and now they have to defend against a lawsuit solely on Scott Rothstein's testimony." Joseph said that it makes no sense that if the Brausers had believed Rothstein was a crook why one of them retained him as an attorney in another matter. In addition, another family member, put $900,000 of his own money into a different Rothstein investment vehicle two days before the letter was sent, Joseph said. Joseph said Graziadei, who wrote the letter, has testified he never mentioned anything about a banking report to Rothstein. In other testimony, Rothstein acknowledged he allowed a group of investors togo through files involving sex abuse suits against Epstein. One of Rothstein's law partners, Bradley Edwards, had sued Epstein on behalf of three underage girls who alleged they had sex with him while he was staying at his Palm Beach mansion. 'In 2008, Epstein reached a plea deal with prosecutors on two sexrelated chargesand spent about a year in Palm Beach County JaiL Rothstein said he lied to the investors about being able to buy hefty confidential legal settlements in the Epstein cases. He said Edwards knew nothing about the Ponzi scheme and had no idea the files were being shared with investors. "I took advantage of some good, innocent people for my own and my co-conspirator's illegal purposes," Rothstein said. "Mr. Edwards is one of them, and for that I am sorry, Brad." Epstein is suing Edwards in Palm Beach Circuit Court, alleging the lawyer knew Rothstein was using the cases to solicit investors. Edwards filed a countersuit accusing Epstein of malicious prosecution and abuse of the legal process. One of Epstein's attorneys, lbnja Haddad, said Tuesday that it's clear her client's cases were used to solicit investors. Jack Scarola. Edwards' attorney, said there are no facts to back up Epstein's allegations. 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