The accounting firm linked to jailed former attorney Scott Rothstein claims it's a victim of a smear campaign, it never audited the one-time power broker and has no liability in the $1.2 billion fraud for which he faces federal prison.

Berenfeld Spritzer Schecter & Sheer said it merely did the taxes for Rothstein Rosenfeldt Adler and walked away when Rothstein couldn't answer questions for the firm's 2008 federal tax return. The law firm's bankruptcy receiver hasn't been able to find returns for 2007 and 2008.

But if recent history is any measure, the accounting firm could have plenty to worry about. Accounting firms, no matter how small, that performed work for what have turned out to be big-time Ponzi schemes are considered prime targets by victims and creditors as insured deep pockets. A source said Berenfeld's malpractice policy is worth $5 million.

Investor attorney William Scherer of Fort Lauderdale has said he considers the accounting firm with offices in Fort Lauderdale and Coral Gables among those most liable. Others being sued by his firm include Rothstein, TD Bank, Banyon Investments and Bay Harbor Islands financial adviser Michael Safranski. A suit filed Nov. 9 in Broward Circuit Court seeks $100 million in damages.

The name partner at Conrad & Scherer reiterated last week that Berenfeld was at least negligent if not culpable in Rothstein's side scheme selling phony structured settlements.

Scherer maintains it's obvious the accounting firm had to be an integral part of the fraud conspiracy for auditing and accounting for hundreds of millions of dollars that weren't there.

Scherer claims Berenfeld also audited Banyon Investments, which he accused in the lawsuit of marketing investments in the Rothstein settlement scheme to hedge funds.

"I don't know how they could be so negligent," Scherer said. "They performed an audit for Banyon. How did they not put two and two together?"

Scherer's clients raise 19 accusations in their lawsuit against Berenfeld, alleging false audit papers lured them into Rothstein's investment scam.

Berenfeld attorney Jane Moscowitz of Moscowitz & Moscowitz in Miami said Scherer offers an inaccurate set of facts and has yet to provide any evidence linking her client to Rothstein's investors.

"This case should be litigated in court, not in the press," she said. "Berenfeld never had access to the trust account in which the fraud was committed. Berenfeld has no culpable involvement in the Rothstein matter."

Scherer said he has documents showing Berenfeld worked for Rothstein and his law firm as late as June and claims Berenfeld knew the firm was bringing in revenue that exceeded its legal work.

The accountants "were there right to the end," he said. "They were their four months before it cratered."

He said Tracy Weintraub, the head of Berenfeld's Fort Lauderdale office, worked closely with Rothstein. Weintraub has hired criminal defense attorney Ed Shohat of Shohat Loewy & Shohat in Miami.

"Neither Tracy nor anyone at the accounting firm committed any crimes or had any knowledge or role in what Scott Rothstein did," Shohat said.

Berenfeld, with more than 200 professionals, prepared the 2007 and 2008 tax returns for Rothstein's Fort Lauderdale firm but walked away when Rothstein refused to answer questions on the 2008 return, Berenfeld has said. The accounting firm said its job is not to file the returns, only to prepare them.

Moscowitz filed a motion Jan. 14 to dismiss Berenfeld from the investor lawsuit.

"Plaintiffs cannot and do not cite any facts regarding misconduct or scienter on the part of Berenfeld," the motion reads. "Indeed a review of the amended complaint reveals that there are only a very few factual allegations against Berenfeld, and a number of those [are] indisputably wrong."

The plaintiffs responded ast week, saying Berenfeld improperly questions the veracity of the investors' allegations and cites Berenfeld's audited financial statements for affiliated Banyon entities.

Berenfeld confirmed $517 million in receivables from Rothstein investments worth $1.1 billion.

"The finance receivables confirmed by Berenfeld were pure fiction," the motion states. "Berenfeld either willfully participated in this fraud or knew or should have known that the finance receivables were fabricated and incapable of being independently verified."

Scherer's lawsuit is only one problem for the accounting firm. It also must deal with Herbert Stettin, the court-appointed receiver overseeing the remains of Rothstein's law firm.

The receiver's attorneys at Berger Singerman would only say there is some work to do regarding liability on the part of the accounting firm.

Still, accounting firms linked to massive frauds have not fared well in recent years. BDO Seidman is appealing a $522 million award won by Espirito Santo Bank for failing to detect a fraud while auditing a Miami factoring company that was half-owned by the bank.

When energy giant Enron tanked, it took accounting giant Arthur Andersen down with it. Once one of the Big Five U.S. accounting firms, it was convicted of obstruction of justice in 2002 and never recovered, despite the conviction being overturned.

Closer to home, Doral-based Spear Safer agreed in 2007 to pay $3.5 million to the receivership of Mutual Benefits. A lawsuit accused the firm of auditing the viatical firm as it bilked 30,000 investors out of $1 billion.

Within the accounting profession, Berenfeld is not alone as a target of legal action brought by investors.

Kaufman Rossin of Boca Raton is fighting a lawsuit filed by a Connecticut fund that invested through feeder funds in Petters Group Worldwide. Petters was convicted in Minnesota of running a Ponzi scheme.

William Brandt, president of Development Specialists in Chicago, takes over companies that either go bankrupt or have been shut down amid fraud allegations. In his experience, he said the accountants generally are duped. Ponzi masters like Rothstein choose firms that won't see the complicated shell game for what it is. Brandt, who served as trustee in the Southeast Bank bankruptcy case in Miami, is not involved in the Rothstein case.

"They are doing something far above what they normally do," he said. "Here you have a high-flying attorney who is known to everybody in South Florida and has obvious political connections. That lulls the accounting firm. They are dealing with prime territory. They think, ‘The guy is so famous he must be good.' "

And that was Rothstein's modus operandi. He flaunted his connections to politicians like Gov. Charlie Crist and decorated his offices with photographs of himself with lawmakers and celebrities. Now he is in jail awaiting sentencing after pleading guilty to the largest Ponzi scheme in Florida history.

One-time billionaire R. Allen Stanford, accused of running a $7 billion Ponzi scheme, also didn't use a big auditing company. He tapped a one-man firm in Antigua.

Akerman Senterfitt partner Michael Goldberg, who is representing the unsecured creditors committee in the Rothstein firm's bankruptcy, said receivers and trustees sometimes must sue accounting firms whether a firm participated in a fraud.

For the accounting firm, the key question is whether its malpractice insurance is going to cover the losses.

"Sometimes, it's a negligence cause of action where they messed something up. Other times, it's worse," Goldberg said. "Sometimes, these accounting firms, if they get caught up in these Ponzis, the claims can exceed the amount of their malpractice insurance."

And accounting firms are coughing up real money. Deloitte Touche and Grant Thornton International agreed last November to pay $15 million to shareholders of Parmalat, the Italian dairy company that collapsed in 2003 in Europe's biggest bankruptcy.

For Berenfeld, the Rothstein scandal is a nightmare, Brandt said.

"These accountants aren't worried about the knock on the door. They are worried about getting multiple knocks on the door from the government, from the bankruptcy trustee and maybe from a whole host of creditors who think they have direct claims."

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