Yesterday, an 11th Circuit Appellate Court heard the appeal of Christina Kitterman, who was sentenced to 5 years in federal prison last May. She was found guilty after a 6-day trial for her role in a roughly 13 minute phone call at the behest of Scott Rothstein. Rothstein was the central figure in a billion dollar Ponzi scheme who pleaded guilty and is currently serving a 50 year prison term.
Kitterman's introduction to Rothstein started innocently enough, he was her law professor at Nova Southeastern University in 2002. After graduation, she was offered a job with Rothstein Rosenfeldt Adler PA, the firm that claimed to be representing numerous clients who had settlement claims (Whistleblowers, Sexual Harassment, Wrongful Termination, etc) paid by credit worthy companies, defendants. While the firm worked on some legitimate legal cases, the money that supported it was primarily brought in by investors who believed they were investing in claims that had already been paid to Rothstein, who in turn was paying these out to the claimants over 12-24 months. Rothstein had fake websites created that mimicked TD Bank account statements, showing millions deposited. Investors were signing up to invest by taking over Rothstein's deposits at a discount in exchange for the incremental payments over time. Sound crazy? It should, but some investors were blinded by the "guaranteed" returns.
While Kitterman, like the other 75 lawyers on staff at the height of the firms "success," worked on legitimate legal cases, few were profitable. With a salary of $140,000 and a some extra perks of getting to use the firm's suite to watch Miami Dolphin football games, Kitterman was another working stiff in the legal world. That would change with a single event that would unknowingly put her in the middle of one of the largest Ponzi schemes in history.
Rothstein had convinced hedge funds to invest in the settlement payouts and was receiving that money through efforts of an investment fund known as Banyon. Banyon was more like an intermediary to various hedge funds and investors, bringing in hundreds of millions of dollars to support Rothstein's settlements.
In March of 2009, the financial crisis was in full swing. U.S. banks had lost half their value since the beginning of that year and the stock market had been cut in half from its peak in October 2007. Those who were loaning money were pulling in the reigns and Rothstein was about to find that out first hand. The hedge funds threatened to pull their funding, causing Banyon to miss a payment to them. Once the money runs out, the Ponzi scheme crumbles, and that was just what Rothstein feared.
The hedge funds were concerned at the missed payment and huddled with lawyers in Miami about suing Banyon and Rothstein. Rothstein claimed that the hedge funds refusal to continue funding the settlements had resulted in a number of claimants being unhappy, and threatening to file a grievance with the Florida Bar against his firm. He put together a phone call with the hedge funds, Banyon and the Chief Branch of Discipline for the Florida Bar, Adria Quintela. Quintela would tell Rothstein and his investors that it would be in everyone's interest that the payments be made and money started flowing again. If not, assets at Rothstein's firm would be frozen.
Freezing assets would mean that the hedge funds' $80 million it had outstanding to Rothstein would be in jeopardy. The problem was, there were no claimants complaining of not being paid, in fact there were not even any claimants, and there was no action contemplated by the Florida Bar. The woman on the phone was Christina Kitterman. The whole thing was a set up by Rothstein and, according to Rothstein's testimony, he and Frank Preve of Banyon came up with the idea. They just needed someone to impersonate Quintela, so Rothstein approached his former student and devoted employee, Kitterman, who would have no idea who she was impersonating or who she was even addressing.
On April 22, 2009, a nervous Kitterman was sitting in her car on her cell phone awaiting the conference call. Rothstein had told her that payments for settlement claims had stopped and that it threatened the viability of the firm, not to mention the broken promises to those who had won settlements. It was all a lie he concocted. He needed her to stand in and impersonate someone from the Florida Bar to insist that payments be made. She studied a 10-point email that Rothstein had sent outlining what needed to be said to satisfy the hedge fund. He even included some encouragement for Kitterman, "...Don't act like you're reading ... act like a tough bar prosecutor." She was convincing, but the hedge fund never made any additional payments into the settlements. Six months later, the Rothstein Ponzi scheme was discovered.
Kitterman admitted to her role in the phone call during meetings with U.S. Prosecutors in February 2012. She also told prosecutors and investigators that she and others had made campaign contributions to political candidates that were later reimbursed by Rothstein, a violation of campaign finance laws. She said she did not believe that they were illegal at the time and had even sought reimbursement through emails directed to Rothstein. In August of 2013, Kitterman was indicted.
She went to trial to prove that while she was on the call, she knew nothing of the larger Ponzi scheme and, like others at the firm, had been manipulated by Rothstein. In fact, she would say that her motives that day were to keep funds going to those who had settlements coming to them. One of the witnesses she called was Scott Rothstein and his testimony proved to be damaging to Kitterman.
Rothstein, an accomplished liar, insisted that while Kitterman was not in on the day-to-day operations of his scheme, he knew that she would be willing to cross the line for him by participating in this call. His testimony was that she frequented an alleged mobster hangout, Runway 84, with him on occasions and knew a number of shady characters there. Hardly puts her at the scene of a crime but juries soak up that kind of stuff. The restaurant is still in business and while they are playing great Frank Sinatra and Dean Martin tunes, they have not been raided by the FBI for being a mob hangout.
This damaging testimony, which Kitterman's attorney sought to suppress, was allowed by U.S. District Judge Daniel T.K. Hurley and also vehemently denied by Kitterman. Judge Hurley also allowed testimony about the illegal campaign contributions, for which she was never charged. Then there was her alcohol and substance abuse, always a character assassin. All of this was meant to cast Kitterman as a shady participant in the Ponzi scheme.
The problem with having a guy like Rothstein on the stand as a defense witness is that he only wants to help himself and the only way to do that is to curry favor with the government prosecutors by throwing defendants like Kitterman under the bus. His hope must be that the government will recommend, someday, that his 50 years prison term be reduced. Rothstein, no matter who calls him to the stand, will always be a government witness.
In a rare move, Kitterman took the stand in her own defense since it was going to be her words against Rothstein's and to give the jury here state of mind at the time of the call. She testified that she was on the call, that she had told prosecutors about it during a meeting, but that she had been duped by a lying Rothstein. The jury had heard enough, they found her guilty.
Judge Hurley's sentencing would prove to be more complicated for Kitterman. The U.S. Probation Office, who puts together a sentencing recommendation for the judge, recommended a Federal Sentence Guideline of 41 points resulting in a sentence of 27-33 years for a non-violent, first time offender. This calculation was derived by putting Kitterman on the hook for over $50 million in losses and having over 250 victims, something far beyond her role in the single phone call. In fact, no money was even invested by the hedge fund as a result of the phone call, there not even any claims, the whole event was fictitious, making it difficult to determine how much money was lost. Judge Hurley even disputed the recommendation and put the loss at $0, moving the sentence guideline down to a more reasonable 8-14 month prison term. He then reversed himself and put the loss at an arbitrary $120,000 because "there was no precise figure by which to measure loss but that to say the loss had no value would be blatantly wrong." So it seems he just made something up to justify an appropriate sentence. The new guideline now would be 37-36 months based on this "loss." Judge Hurley then proceeded to sentence Kitterman to 60 months in prison and have her immediately taken into custody inside the courtroom.
Kitterman admitted her wrongdoing to investigators as part of her cooperation long before she was indicted. Her defense at trial was to focus on charges associated with her indictment ... sort of makes sense. Instead, unsubstantiated testimony did further damage to her character and a tough judge decided to give her a sentence as if she were one of the ringleaders of the fraud. Even two programmers who pleaded guilty for creating fake TD Bank web pages, received lesser sentences (37 months). Preve, who Rothstein says helped cook up the fake phone call and who also funneled hundreds of millions to Rothstein through Banyon, pleaded guilty and was sentenced to 30 months in prison (he will self-surrender in June 2015 to begin that sentence).
She hopes to either win a chance at a new trial or be resentenced. If she wins a resentence, she will have to go back to Judge Hurley who said of the term he gave her, "...If I erred on the valuation [driver of the points under the Federal Sentencing Guidelines], I think I would reach exactly the same sentence." Sounds like 60 months is going to be Judge Hurley's number.
Many would argue that Kitterman deserves some prison time for her role and since May of last year she has been incarcerated. However, just because someone worked at the firm does not make them a willing co-conspirator and this case has the appearance of over-prosecution, misleading evidence and a prison sentence that seems, well, misguided.
Even after this appeal, it will be months before a decision and, if successful, it could be months before her resentencing. By the time this is resolved, she will have served longer than the 14 months that Judge Hurley initially believed she should get.
Appeals like Kitterman's shine a bright light on how people who choose to go to trial can be punished, even over punished, by just exercising their rights as granted under the Sixth Amendment to the Constitution. If she wins, she just might find her way back in front of the same judge and she's hoping he has had a change of heart.
