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Sacramento Bee
Nov 17, 2009 - 01:30 PM

by Dan Walters

Schwarzenegger Got Big Money From Alleged Ponzi Schemer

See the original article here.

A big chunk of the money that Gov. Arnold Schwarzenegger collected last year to finance a political reform ballot measure came from a man now being accused of running a massive Ponzi-style fraud in Florida.

When federal investigators raided the offices of Fort Lauderdale, FL, attorney Scott Rothstein, looking for evidence to bolster civil and potentially criminal charges of running a huge Ponzi-style fraud, they found many pictures of Rothstein with prominent politicians.

The Wall Street Journal reported that Rothstein appeared to be particularly close to Florida Gov. Charlie Crist but among other political figures in the photos were former President George W. Bush and Schwarzenegger.

Schwarzenegger's relationship with Rothstein was more than photographic, however. The law firm founded by Rothstein was one of the biggest contributors to Schwarzenegger's 2008 drive to reform California politics by shifting legislative redistricting from the Legislature to an independent commission.

The firm, Rothstein Rosenfeldt Adler, gave $250,000 to the campaign for Proposition 11 just a month before voters passed the measure, according to state campaign finance records.

The Florida Republican Party is donating at least some of the money it received from Rothstein to charity, according to the Wall Street Journal. But what of the money he gave to Schwarzenegger's campaign?

The committee that received the money is now out of business, according to a lawyer for the firm that handled its affairs. Aaron McLear, Schwarzenegger's press secretary, says the governor has no plans to return the money since it went to the Proposition 11 committee, not his personal campaign account.

Schwarzenegger, McLear said, asked Florida Gov. Crist to help him raise money for the Proposition 11 campaign and flew to Florida for the event Crist organized. "The governor met Rothstein at the event," McLear said, and that where the photo federal agents found was snapped.

A federal civil suit, as well as those filed by private investors, alleges that Rothstein was selling shares in a business that supposedly provided lump sum payments to recipients of annuities and other long-term payments, but that the deals he was touting didn't exist. Rather, it's alleged, he was using money from investors to provide payments to other investors, a classic example of the scheme named for early 20th century defrauder Charles Ponzi.

The full Wall Street Journal article about Rothstein, which makes only a passing mention of Schwarzenegger, may be found here.

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