THE MIAMI MIRROR – TRUE REFLECTIONS  

 

   

LADY ROTHSTEIN’S SHOES
"What you wear doesn't define what you are.” Kim Rothstein

By David Arthur Walters THE MIAMI MIRROR August 19, 2011 (updated) THE CLAWBACK COMPLAINT Kim Rothstein’s husband Scott Rothstein was in jail for fraud, and the receiver was hounding her for her shoes among other things. Herbert Stettin, the appointed bankruptcy trustee for the fraudster’s law firm, Rothstein Rosenfeldt Adler P.A., sued Kim for $1.1 million on March 10, 2010, including $880,610 she had spent over four years for personal expenses charged on the RRA credit card, plus $104,224 in reimbursed political expenses paid out of her personal account over the same period, and $153,199 in professional fees she had received over that period from the law firm’s accounts, ostensibly for managing her husband’s real estate holdings – after the scheme was exposed and the feds were in the process of seizing the ill-gotten gains, she busied herself renting out properties to create a fund to maintain the properties for the victims. Scott was

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not cheap: he himself had used the RRA card to purchased millions of dollars in jewelry alone for his wife; but that was beside the point, for those items had already been seized. The ‘Complaint Against Kimberley A. Rothstein to Avoid and Recover Fraudulent Transfers of Property’ complained that “Mrs. Rothstein knew or should have known that the Personal Expense Payment Transfers on the company credit card were improper.” The $880,610 included expenditures for “jewelry, clothing, shoes, handbags, leather goods, plastic surgery treatments, eyewear, electronics, local hotel room and spa charges, household furnishings, home gym equipment, vacations and personal travel, athletic club charges, groceries, charitable contributions, personal meals, general household and other items.” Other items reportedly included a fetish collection. Mind you that Kim was not hogging everything for herself: many of the charges made were for gifts to others as per her husband’s instructions.

The complaint was brought by the trustee for RRA “to avoid and recover fraudulent transfers pursuant to 11 U.S.C. §§ 544, 548, 550, and Fla. Stat. § 726.105 and §726.106.” §548 provides that a trustee may avoid and recover fraudulent conveyances that were made within two years of the filing of the bankruptcy petition. §550 provides that a trustee for a debtor may recover property fraudulently transferred or its value, but, most importantly, it may not recover transfers made in good faith, without knowledge of fraud, and for value, including satisfaction of an antecedent debt. And §544 provides that state law may be applied in the federal bankruptcy court; e.g. relevant Florida law, among other things, provides four years, after the fraudulent transfer, for recovery. The complaint alleged that fraudulent transfers “were made by RRA to Mrs. Rothstein with the actual intent to hinder, delay or defraud an entity by which RRA was or became, on or after the date such transfers were made, indebted.” And, “RRA received no or less than reasonably equivalent value in exchange” for the transfers. The trustee also said that her professional fees for real estate services were invalid because “Mrs. Rothstein provided essentially no meaningful services to RRA.” The Complaint asserted, as evidence of fraud, that the transfers were made from an insolvent company or a company that would become insolvent as a result – an entity engaged solely in a Ponzi scheme would insolvent by nature because the fraudulently obtained funds would be converted to personal uses instead of the promised purchase of assets. Chapter 726 of the Florida Statutes is entitled ‘Fraudulent Transfers,’ and states that, “A transfer or obligation is not voidable … against a person who took in good faith and for a reasonably equivalent value or against any subsequent transferee or obligee.” The Florida law refers to
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transfers made “with actual intent to hinder, delay, or defraud any creditor of the debtor; or without receiving a reasonably equivalent value in exchange for the transfer of obligation, and the debtor,” meaning that even if Scott had had no intention of defrauding anyone when he allowed Kim to use the firm’s credit card, the transfers to her would still be construed as fraudulent by jurists, even if fraud were not actually intended, and would be recoverable from Kim if she had not provided a reasonably equivalent value in return. We shall argue that she provided fair value. Indeed, the trustee wanted Kim’s relatively small portion of the $1.2 billion to $1.6 billion trove obtained by Scott Rothstein’s fraudulent machinations returned to RRA because, or so he said, she had given nothing in exchange for the booty including any professional services; to wit, “RRA received no or less than reasonably equivalent value in exchange” for the personal expense payments, and “the payments by RRA to Mrs. Rothstein for political contributions provided no benefit to RRA and thus RRA received no or less than a reasonable equivalent value in exchange” for the political payments, and “RRA received no or less than reasonably equivalent value in exchange” for the professional fees paid to her. Since Kim had no cash to speak of – $108,000 in a retirement account set up for her by her husband had been forfeited to the trustee. The trustee declared that “an equitable lien should be established against all personalty acquired by Mrs. Rothstein directly and indirectly traceable to the Personal Expense Payment Transfers and all proceeds of the Transfers,” and he prayed for the court to establish a constructive trust against the transfers and for damages and any other relief forthcoming. We believe that she did in fact provide fair consideration, in the form of public relations services for which she was owed, as well as the usual wifely services that entitled her an independent portion of the marital estate. But the patriarchal men, with envious women in tow, apparently considered her to be slavish sexpot owned by her husband and freeloading off his largess, and utterly devalued her professional and wifely services, emphasizing by way of contrast the treasure trove. As she was deposed about the luxury goods she had bought, Marc Nurik, who stepped down as a lawyer with Rothstein’s law firm to be his criminal defense attorney, interjected: "All the women are salivating at this table.” "I'm not wearing my wedding ring, I'm not interested in wearing anything," she told reporter Bob Norman after her husband was arrested and his property seized by the feds. "What you wear doesn't define what you are. I don't feel right about wearing anything right now. If I get the okay, based on the decisions of the federal government, then that's fine, but I'm not out to flaunt it publicly."

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Broward news columnist Michael Mayo was incensed by the fact that Kim showed up for her husband’s January 2010 guilty plea with two lawyers, a bodyguard, and a Cadillac, and that she had the gall to say that she was not enriched by her husband’s activities. “Where is she getting the money for all that?” he posed the rhetorical question in his January 28, 2010, column. Mayo, apparently a low-paid journalist seething with self-righteous resentment, wanted her to humble herself before the world. “Say what? Your whole lifestyle was built on ill-gotten OPM (Other People's Money), and you have the audacity to say you haven't been enriched by his activities? Real world to Kim: It's probably time to fire that publicist. Next time, try a little humility from the heart.” Mayo was certainly not the only unsympathetic journalist, for many journalists have humble backgrounds, and are prone to envy the rich and famous and to believe that women from humble circumstances who marry rich and powerful men are meretricious to put it nicely. Investigative journalism requires them to cast a critical eye on others, and the most of them are at least vicious enough to enjoy seeing people deprived of what they want; they want to be superior, so they put others down and rejoice mightily in their fall. Kim would try to get some of her stuff back in June 2010, claiming she had received it before her husband proceeded with his crimes. Bankruptcy lawyer Chuck Lichtman said Kim Rothstein should feel grateful if she's allowed to keep the clothes on her back. "We’re incensed that Kim Rothstein thinks she should have an entitlement to this jewelry and we are going to do everything in our powers to protect the creditors’ interests in this jewelry," Lichtman told the Sun-Sentinel for its June 22, 2010, report. "We take this matter very, very seriously." Why shouldn’t they? Kim’s bodyguard, Joe Alu, a retired police officer who was hurt in an explosion while trying to save two teenage girls from their captor, said he gave his word to Rothstein in 2008 that he would protect Kim; since a person’s word is the only meaningful thing in life, he was keeping it, working without pay. Alu, also known as Meatballs because he likes meatballs, said Rothstein was, a friend of his for twenty years, actually a nice guy who would even apologize for things that were not his fault. SHOE FETISH Lady Rothstein’s shoes, especially the expensive Jimmy Choo open-toe platform pumps, captured the attention of the press therefore the public eye. After all, the foot is an erogenous zone; the associated shoe fascinates people. In one test, an estimated 64% of the public, when asked to associate objects with the body, demonstrated a preference for footwear. Naturally the preference is most marked in extreme behavior: We recall that Jerome Henry Brudo, a mildPage 4 of 27   

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mannered gentleman identified as the Shoe Fetish Slayer, amputated women’s feet and outfitted them with shoes from his large collection. James Lloyd, a pillar of his community who turned out to be the notorious Shoe Rapist, had more than 100 pairs of stiletto shoes in his trophy collection, all apparently taken from women he raped on their way home from nightclubs. One thing that stood out about beautiful Kim Rothstein is her pretty little feet, smaller even than an average man’s hands, and her determination to make sure they were well heeled. After all, a fine lady’s shoes are her fundamental furniture, the stage or pedestal upon which she stands. Kim is short in stature; platform shoes serve her as an elevated stage, raising her height by five inches or so. Of course the original platform shoes were “clogs,” which in modern times became a blockish casual shoe worn by Hippies or their emulators. The term may refer to an impediment, a piece of heavy lumber tied to an animal’s or prisoner’s leg to hamper movement, or to a wooden or wooden-soled, high-platform shoe, cheap shoes once worn by butchers to raise themselves above the bloody floor, or as protective gear worn by agricultural workers, mine and factory workers; today, thick-soled boots serve the purpose well. Of course we see many ancient heroes represented with feet bare, for any sort of shoe, even the military ones of the day, were considered by them a hindrance; today, running barefoot is being adopted by a growing number of amateur athletes. Not only slaves and the poor working class wore the cheap platforms in the early days, for stature is associated with status; someone lower is “looked down upon.” Greek actors wore shoes of various heights on stage to signify the status of persons represented; senators, for example, being of greater height than most others. The Roman meretrix elevated her heels for obvious reasons, as do both working girls and highly esteemed ladies to this day. The noble-born wore pattens or attached those wooden platforms to their shoes to keep them above the muck. Venetian courtesans wore platforms of such great height – sometimes nearly a yard high – that they had to have servants accompany them to keep them from tumbling to the ground, as Lady Gaga, a wildly popular Italian-American performance artist, recently did at Heathrow Airport.

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Today a fashionable pair of ladies shoes, whatever their style, must not allow a lady to do dirty work, at least not when her job is to be worshiped and shown off. A girl wanting a man of substance to care for her should not let her prospects think that she is a workwoman in want of hard labor. “The requirement of expensiveness is so ingrained into our habits of thought in matters of dress that any other than expensive apparel is instinctively odious to us. Without reflection of analysis, we fell what is inexpensive is unworthy. ‘A cheap coat makes a cheap man.’ … If, in addition to showing that the wearer can afford to consume freely and uneconomically, it can also be shown in the same stroke that he or she is not under the necessity of earning a livelihood, the evidence of social worth is enhanced in a very considerable degree,” pronounced Thorstein Veblen in Theory of the Leisure Class, Chapter Seven – Dress as an Expression of the Pecuniary Culture. THE COMEBACK KID Not that Kim was loath to work and on the take when she met Scott Rothstein. Of course she would not have been surprised if good fortune had come her way by magical means; her mom was a New Age spiritual advisor, hence Kim to this day delves in occult lore and has practiced Wicca witchcraft since a teenager. Kim may have looked like the typical Florida girl next door, a girl who aspired to look good and make good; it might be said that she was on the make like most South Floridian girls if not most American girls, known worldwide for their boldness, but she was not on the take to give nothing in return. In fact, “Kimmie” was not a typical girl at all, not even in Florida. Born Kimberly Ann Wendell, she is an only child, an elevator repairman’s daughter. Her father and her stepparents happened to hold black belts in karate. According to news reports from the 1980s, she already had a flair for showmanship and taste of fame as “the karate kid” who dazzled crowds with her Olympic-quality karate choreography when she was 6-years old and barely 4-feet tall, destined to win 350 trophies. Thus she grew up accustomed to standing ovations, already competing with adults below black belt at age 11, when she was otherwise described as a regular girl of her age, one who liked pretty dresses, giggled, watched cartoons, and munched on cookies. She had to give up karate for nearly a year at age 13 due to a bout with spinal meningitis, but she returned to the sport and won the International Karate Championships in her age division.

“It`s super when people appreciate me,” quoth Kim Wendell at age 15. “The more they cheer, the better I do.”
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She was otherwise described as a “shy, 4-foot, 8-inch tall girl, with a disarming gap-toothed smile,” a “typical teenager” who collects stuffed animals, likes designer clothes and wears miniskirts." Kim collapsed during a competition in 1986; an inoperable brain condition was found. She was scared to do anything physical. She took all kinds of medication that altered her attitude behavior. She was miserable and depressed. She went from active teen-ager to passive child. Still she was a comeback kid; she swam, got off the medications, and practiced her beloved karate for a few hours a week, still dreaming of becoming a female Chuck Norris. She graduated from high school, and almost got herself an associate’s degree at Broward Community College. She went into real estate; that did not pan out well but she kept her license active even after she married. She tended bar at the “upscale” Blue Martini lounge in Fort Lauderdale, where live entertainment with dancing can be found; 42 kinds of martinis and food are served to corporate types and others in diverse areas including the outdoor patio bar, private party rooms, and a VIP room. And let it be known that a bottle of Van Gogh Vodka goes dirt cheap to Industry Customers: $75. Of course this kind of place might be a good place to meet a gentleman. In any case, we would not blame a gentleman for pursuing Kim there, as she was then and still is known as a charming, intelligent, humble and sweet person with a never-quit attitude, not to mention her chiseled beauty.

Now we do not know if Kim deliberately placed herself at the Blue Martini or in other special circumstances because she hoped to meet and marry a rich and powerful man. Heloise criticized economic marriage in the 12th century, stating that a woman who married for money would prostitute herself to richer men, and would deserve wages and not gratitude, and that the word ‘friend’ was sweeter to her than the word ‘wife’ or, “if you will permit me, that of concubine or whore.” But would such a hope for power and riches in a mate be terribly immoral today if the invention called love were kept in mind? And what if love and money were realized at once? Do not many mothers advise their girls to marry well in terms of power and wealth, providing that love is a factor in the equation? Thus they would have the best of both worlds. Now, then, Kim met Scott Rothstein at a barbeque in 2003. He wooed her at the Blue Martini. They started dating in 2005, and married in 2008. Again, the attorney was not rich and famous when she met him, but he certainly had potential given his persuasive gift of gab augmented by his mellow tenor voice, a potential that he proceeded to realize in a big way as they dated. Even so, she had her doubts, and at one point she got cold feet despite the fact – we have this from
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witnesses – that he loved her madly, and she loved him too. She flew the coop and saw an old boyfriend, but Scott got her back and married her in 2008 at a gala in his partly owned Versace mansion in South Beach, with Governor Crist, whom he advertised as his best friend, attending.

Scandal soon erupted, spread generously all over the front pages of Florida papers. Floridians lapped it up. They are never surprised to hear of about corruption in South Florida, for its rate of corruption is only second to that of the District of Columbia; some think Florida is first. Still, Floridians take pride in their scandals and would not be without them from time to time. As for people who are supposed to be experts in investment or in detecting and preventing fraud, those who invested in the scheme or received tainted money pled ignorance while others said they suspected something was amiss all along. Forget Allen Stanford and Bernie Madoff. Florida had its own home-grown Ponzi schemer, one of the most influential and highly respected lawyers in the state: He was pal to the governor, a member of the judicial nominating committee, past vice-chair of a Florida Bar committee that hears grievances against lawyers, a contributor to political and charitable causes, and so on, not to mention that he had the most beautiful woman in the state to show as his wife. And accomplished Kim played that part so well that, when the scheme was exposed, some of the lawyers figured she was just a show wife, and would give her no credit against their claims for the value of her publicity, hounding her even for her shoes. NOT A LOT OF SHOES Yes, indeed, the bankruptcy trustee wanted to claw back Kim’s shoes along with other “personalty” to see what could be recovered in an auction. She had invested $21,000 in shoes via the company credit card over a four year period. "This happened to be a platform shoe that I liked and they had it in my size, which I can't get very often,” she explained when deposed, a concept any woman with a size 5 foot would understand very well. “I would just buy several at one time so that I would just have them," she testified. Theresa Van Vliet, her inquisitor at the deposition, marveled, "I like shoes. That's a lot of shoes." But that is not a lot of shoes for a show wife, nor would it be for your average upper class woman, who might have 100 pairs at hand, nor even for a middle class gal who likes shoes, in whose closet could be found 40 pairs – if she had the wherewithal, she would gladly spend $600 or even up to $2,000 a pair for them. A woman who attends many social events and affairs with dignitaries, private parties with her husband’s friends and business associates, must look good,
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and she certainly would not want to be seen by many people in the same dress. There is an art to dressing up; for each dress, she would need appropriate shoes, and so on. At an average of $600 per pair, $21,000 would have bought Kim a rather small collection of 35 pairs. We would be surprised by her modesty if we learned she had not paid any more than that for some pairs, perhaps up to $3,000. Kim’s shopping sprees pale in comparison to the multimillion-dollar world-shopping tours of Imelda Marcos – she said her husband Ferdinand made his fortunate legitimately, as a gold trader, accumulating 7,500 tons of the precious metal.

Lance Morrow, in a March 31, 1986, Time essay, meditated on the estimated 2,700 pairs of shoes that Imelda left behind in Malacanang Palace, considering that, if Imelda had changed her shoes three times a day, it would have taken her more than two years and five months to wear them all. Why accumulate so many shoes? How much gold is enough? “Only a sane person would think to ask. An Eskimo hunter who kills only the game necessary to feed his family would have been horrified by Theodore Roosevelt, who could not have consumed more than one ten-thousandth of the animals he slaughtered. Roosevelt loved hunting the way that Imelda loves shopping. He loved the kick of the gun and the smell of the powder. He loved the antlers. The same sportive hormones may be active in Imelda. Nature is filled with wild waste, unthinkable redundancies. Why does nature toss off a billion sperm when only one of them is necessary to fertilize a human egg? Imelda's shoes, ecologically baffling, are part of the mystery of life.” Or maybe the shoes made her step feel lighter because she had so many options. “Or were the Marcos shoes, like the billions of stolen dollars, merely grotesque? The Russian word poshlost suggests the transcendent vulgarity at work in the Marcos spectacle. Poshlost is something preposterously overdone but without self-knowledge or irony. It is comic and sad and awful.” THE LETDOWN Scott’s status had transcended his modest beginnings. He was a bit of a showman himself; he might have been better off taking up a piano bar career. He played his piano for Kim on Sundays, the only day she said she ever got to see him, singing songs in his mellifluous tenor voice. He was a generous man, protective of his family and friends most of all, and he lavished gratuities on others from his rolls of cash. His ego inflated to biblical proportion as his narcissism was abundantly supplied by grateful recipients of his largess. He had the histrionic temperament to upstage his fellow actors. He wanted to be The Man, and he became The Man. A gift of gab cultivated by the Sophist method of law-schooling served the charming and gifted liar well in this endeavor. Whereas Charles
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Ponzi had raked in a fortune and even owned his own bank selling virtually worthless postageexchange coupons before he took up selling Florida swampland, Rothstein hawked lawsuit settlements, i.e. “structured settlements.” He conducted the billion-dollar Ponzi scheme under the mantle of his law firm, offering investors up to 36% returns. But there were no settlements to be structured into investment vehicles. If someone demanded to see the details of the settlements, they were told they must be kept secret under confidential non-disclosure agreements. Not every well heeled investor was a fool – one potential mark called the F.B.I. when his request to actually see the settlements was indignantly denied. That was the beginning of the end of the colossal fraud.

Kim got a lot less than she bargained for. She was evidently shocked by the revelation of her husband’s wrongdoing; a witness said she looked like a deer caught in the headlights of an oncoming vehicle. She insisted that she was an innocent recipient of the ill-gotten gains, that she knew nothing of the scheme. By the time the authorities and lawyers got done, she had practically nothing to show for the marriage. Apparently there are no fruit jars filled with gold coins buried in a Kansas plain or diamonds secreted in a Swiss vault. Those of her fans who believe that she was defrauded of her married woman’s property rights by the lawyers can only hope that, one day, she will receive an envelope full of little checks drawn in Hebrew for presentment to the agents of the secret chabad banking system. After all, Scott was extraordinarily generous with the Fort Lauderdale branch, where Kim became a Jewess to suit her husband. Everyone close to the situation including some of Scott’s biggest victims really believed that Kim was innocent of wrongdoing, that she was duped by the suave sophist like everyone else. But she got sued anyway. The ‘Complaint Against Kimberley A. Rothstein to Avoid and Recover Fraudulent Transfers of Property’ alleged that Scott Rothstein, who prior to 2005 had been “a virtual unknown in legal, political, and charitable circles,” had used the law firm and its staff “to effectuate the fraudulent sale of structured settlements,” the proceeds of which had allowed him to grow the firm to 70 attorneys and 80 support staff by 2009, gaining it “the reputation of being a highly visible law firm making direct and indirect significant political and charitable contributions to both gain influence and give the appearance of a successful law firm.” Again, there was quite a fuss about Kim’s “prolific shoe-buying.” The shoes seemed to symbolize the conspicuous waste of the cash her husband had fleeced investors out of and converted in part to expressions of his affection for her. But she was paying dearly for those expressions in her role as his show wife. Scott was seldom home when not working his scam –
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he reportedly kept a stripper on the side at the South Beach Ritz Carlton on Lincoln Road; for her sake, we hope that is not true. Kim tried to quash her loneliness shopping, getting her hair done daily, and busying herself with her husband’s social events including charity balls and public appearances. Not only must consumption be conspicuous today, so must compassion, for conspicuously caring for others shows that we are trustworthy people, worthy of the admiration we crave. By demonstrating that we love others, we may be loved ourselves. In any event, he who gives away the most is the most godlike. And it was one of Kim’s tasks to demonstrate what a generous man her husband was. Bob Norman reported that Scott’s bodyguard Bob Scandiffio had said that Kim wanted Scott to pay attention to her, “but he never did. I think she has a lot of self-esteem issues with Scott never being home and never doing what she wanted him to. I’m sure it had to be embarrassing for her because everybody knew. All his friends knew. And she loved the guy. It was horrible.” Norman said Kim told him of “how she wanted a semblance of a normal marriage but it was impossible because her husband was never around. The woman was sort of incarcerated in Rothstein’s kingdom – and she filled the void with spending the money.” FULL CONSIDERATION In our most liberal opinion, the portion of the money she received in a fair exchange for her public relation services was rightfully hers. She had provided full consideration for that money; therefore the law firm’s estate was not depleted by the satisfaction of its obligations to her.

“In the course of economic development it became the office of the woman, observed Veblen, “to consume vicariously for the head of the household; and her apparel is contrived with this object in view…. Propriety requires respectable women to abstain more consistently from useful effort and to make more of a show of leisure than the men of the same social class. It grates painfully on our nerves to contemplate the necessity of any well-bred woman’s earning a livelihood by useful work. It is not a ‘woman’s sphere.’ Her sphere is within the household, which she should ‘beautify,’ and which she should be the ‘chief ornament.’ It is the woman’s function in an especial degree to put in evidence her household’s ability to pay. According to the modern civilized scheme of life, the good name of the household to which she belongs should be the special care of the woman; and the system of honorific expenditure and conspicuous leisure by which this good name is chiefly sustained is therefore the woman’s sphere. In the ideal scheme, as it tends to realize itself in the life of the higher pecuniary classes, this attention to conspicuous waste of substance and effort should normally be the sole function of the woman. At
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the stage of economic development at which the women were still in the full sense the property of the men, the performance of conspicuous leisure and consumption came to be part of the services required of them. The women being not their own masters, obvious expenditure and leisure on their part would redound to the credit of their master rather than to their own credit; and therefore the more obviously unproductive the women of the household are, the more creditable and more effective for the purpose of reputability of the household or its head will their life be.”

It used to be said, when our culture was thoroughly patriarchal, that behind every successful man stands a woman, and sometimes more than one. In most states she now stands faultlessly by his side as an equal partner but with an independent property interest, and she is not responsible for his crimes if she did not participate in them. Kim was not only backing husband and household, but she was out and about, backing his law firm as well, with professional services rendered. The law firm was in part his fraud front or robot in regards to its trust accounts utilized for the Ponzi scheme, but the firm had legitimate income from the practice of law. If his partners were as ignorant of the fraud as they professed, they were his zombies in respect to the fraud. In any case, Kim’s appearances on his behalf at balls and other functions were certainly of considerable value to the firm albeit perhaps not quite as valuable as an appearance by Paris Hilton, who was knocking down $75,000 or more for less for less than an hour’s appearance at events held before the Great Recession took hold. Surely the value of Kim’s appearances to Scott Rothstein, Esq. and his law partners exceeded $1.3 million, which the trustee should have recognized as fair value received to offset the defunct law firm’s clawback claim against her. We estimate the value of her services including public appearances at $15,000 per week – over four years that would come to $3.1 million. Of course her personal appearances were far more conservative than those of Paris Hilton, and we have discounted the bill accordingly.

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We see no clawback of monies received by the public relations firm that helped Scott become rich and famous and his firm large and influential. Scott’s other partners got away with millions in compensation for services rendered. Why should Kim be scorned and her contributions deemed worthless if she was unaware that the money she received had been fraudulent obtained and if she had given reasonably equivalent value in exchange by virtue her role as show wife or public relations representative? Alas, our argument that Mrs. Rothstein provided more than full consideration for what she received from RRA would not wash in court despite women’s relative liberation. In fact we would be laughed out of court for presenting it; that is not to say that she did not provide fair value, that her service was essentially worthless. Alas, the circumstantial evidence simply provides inadequate support for our theory. Everyone knows that fraudsters hand property off to their wives and family members and relatives to keep ill-gotten trove out of reach of the persons defrauded; that is why transfers to wives and relatives are considered to be “badges of fraud.” To wit, the transfers to Mrs. Rothstein looked suspicious to begin with. The amounts she charged to the company credit card would have been charged as a draw against Scott’s partnership profits, but the firm was insolvent in respect to its legitimate activities and was being propped up with proceeds from the criminal activity, so Scott’s company was really insolvent and his draw account was nothing more than a slush fund filled with stolen money. Mrs. Rothstein was invoicing neither Scott nor his firm for her public relations services, nor was she reporting the income as earned on her tax returns. She might have formed a limited liability company of her own and made sure that the transactions appeared to be made at arm’s length. The whole thing simply does not look good.

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Still, Kim was undoubtedly of good service to her husband in his rapid rise to fame and fortune during their marriage; she should be entitled at least to whatever was in her personal possession, at least to her accounts and personal items including all shoes and jewelry, if not half of the trove. The trustee eventually did have some pity for the poor woman, and handed her a pittance in May 2011. Her attorney had argued that some of the items in question were conveyed to her prior to her husband’s fraudulent activities. In legalese, that argument would be pursuant to an old principle of American law, based on an interpretation of the Elizabethan law of fraudulent conveyances, recognized by the U.S. Supreme Court for example in Sexton v. Wheaton 21 U.S. 229 decided 1823 (see Note 1), and eventually incorporated in modern fraudulent transfer statutes, which holds that a “voluntary conveyance”, a conveyance where there is no consideration but marriage or blood, to a wife or relative innocent of conspiracy in fraud, is not void as to “subsequent creditors”, i.e. those who became creditors after the transfer was made. Whether or not that rule governed any part of the irrational and inequitable settlement in our case, Kim was allowed to have some bottles of wine, some shoes, some jewelry, a pair of sunglasses, some household items, and other things including a Sarah Palin costume. She gave up everything else including all her formal wear and her husband’s suits. FORMER WIFE ALLOWED TO KEEP LOOT We turn to a fascinating case, recently decided in New York, which lends some credence to our theory that innocent Kim had a marital right to the proceeds of her husband’s fraud, therefore we would fain discuss it at length at risk of boring the reader. On June 23, 2011, in CFTC v. Walsh, the New York State Court of Appeals ruled that Janet Schaberg, former spouse of Stephen Walsh, could keep proceeds from a divorce agreement, even though those proceeds were the illgotten gains of a financial fraud perpetrated by her ex-husband. Stephen Walsh was a defendant in related actions brought by plaintiffs Commodity Futures Trading Commission and Securities and Exchange Commission alleging violations of the antifraud provisions of the Commodity Exchange Act and the Securities Exchange Act. The agencies claimed that, between 1996 and 2009, Walsh and his codefendant, Paul Greenwood, misappropriated more than $550 million from funds they managed for various public and private institutional investors. The agencies also pursued disgorgement efforts against Ms. Schaberg, who was not accused of participating in the crime, seeking to recover any proceeds she held of the fraud perpetuated by Walsh. Schaberg did not have outside employment during the marriage, but she volunteered at a number of charitable organizations. In 2004, Schaberg and Walsh separated and divorce proceedings were initiated in early 2005. They entered into a "Stipulation of Settlement and Agreement" in November 2006 pursuant to Domestic Relations Law § 236 (B). Section 236, by the way, defines "marital property" as "all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held." The court acknowledged that a separation agreement can constitute a conveyance from a marital estate to an individual; that individual’s right in the estate exists undivided before the settlement. Schaberg moved to Florida in 2007 after the divorce and remarried a year later. The District Court granted the Agencies' requests for preliminary injunctions freezing six of Schaberg's
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brokerage and bank accounts containing approximately $7.6 million. The court also prohibited Schaberg from transferring any real property, jewelry or artwork without court approval thereby effectively freezing the bulk of her assets. Schaberg contended that the transfers were not to her, but rather to her and Walsh together, and the money, even after the transfers, was not her individual property, but rather part of the marital estate. Schaberg asserts that this money was transferred to her only by the separation agreement she executed with Walsh. She contended that, because she relinquished valuable claims to the Walsh marital estate in this negotiated and arms-length separation agreement, she holds whatever she derived from the agreement as a good faith purchaser for value. The government agencies had invoked New York’s fraudulent transfer statute, § 278 of the New York Debtor Creditor Law, which provides that a creditor whose claim has matured may have a conveyance set aside "against any person," other than a good faith purchaser for value, defined as "a purchaser for fair consideration without knowledge of the fraud." Schaberg contended that she meets this definition because the assets were transferred to her without notice of their source, and she paid "fair consideration," which is defined by DCL § 272 as given when "in exchange for . . . property, . . . as a fair equivalent therefor, and in good faith, property is conveyed or an antecedent debt is satisfied." Schaberg argued that she paid "fair consideration" because, in return for the receipt of her property in the agreement, she agreed that she would "never . . . seek through court proceedings or otherwise a distributive award or an award of equitable distribution with respect to" any other property acquired by her husband over the course of their marriage. Federalism, the states rights’ doctrine that state law holds sway in some disputes, is still blessed in federal courts – state laws addressing many fundamental issues are gradually rendered uniform throughout the nation in accordance with what is considered the best reasoning of jurists wherever they are found. The U.S. Circuit Court of Appeals, Second Circuit, stating that, “the parties' legal arguments raise difficult policy questions, requiring us to weigh the competing interests of the original owners of funds stolen in a fraudulent scheme against the innocent former spouse of the defrauder,” decided to put two questions to the New York Court of Appeals, New York’s high court, to determine what the state law was as far as the justices of that court were concerned. Question: “Does ‘marital property’ within the meaning of New York Domestic Relations Law § 236 include the proceeds of fraud?” Answer: Yes. “We must decide,” stated the New York court, “whether the dictates of Domestic Relations Law § 236 and the purposes of equitable distribution permit the transfer of marital assets to a recipient spouse who is unaware that some or all of those assets were illegally acquired by the other spouse. The statute expansively defines marital property to encompass all property acquired by either spouse during the course of the marriage and there is a presumption that all property, unless clearly separate, is deemed marital property. Furthermore, the term ‘acquired’ does not require that property be segregated by its methods of acquisition; it merely means that a person gains possession. Given that we have repeatedly held that the scope of marital property is to be construed broadly, we conclude that the proceeds of fraud can constitute marital property as
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defined in Domestic Relations Law § 236 and answer the first certified question in the affirmative. It is therefore possible under the Domestic Relations Law to transfer assets derived from fraud to an innocent and unknowing spouse in a divorce proceeding.” (Citations and internal quotations omitted) “The Legislature adopted the Equitable Distribution Law in 1980,” the court explained, “to replace the existing system of distribution, which had depended, in large measure, on the traditional common-law title theory of property. In recognition that marriage represents an economic partnership to which both parties contribute as spouse, parent, wage earner or homemaker, the Equitable Distribution Law was designed on an entirely new theory which considered all the circumstances of the case and of the respective parties to the marriage. The comprehensive regime reflects an awareness that the economic success of the partnership depends not only upon the respective financial contributions of the partners, but also on a wide range of non-remunerated services to the joint enterprise, such as homemaking, raising children and providing the emotional and moral support necessary to sustain the other spouse in coping with the vicissitudes of life outside the home. (Citations and internal quotations omitted) Question: “In her separation from Walsh, Schaberg relinquished future claims to an equitable distribution of marital property that -- it is alleged -- consisted almost entirely of the proceeds of fraud. Schaberg did not have a legitimate claim to the property while she was married to Walsh, and the issue in contention is whether the transfer to her individually served to create a legitimate interest where none existed before. Accordingly, we certify a second question to the New York Court of Appeals: Does a spouse pay ‘fair consideration’ according to the terms of New York Debtor and Creditor Law § 272 when she relinquishes in good faith a claim to the proceeds of fraud?’ Answer: Yes. “The Agencies argue that, putting aside the language of Domestic Relations Law § 236 and focusing on public policy considerations favoring the return of stolen property to its rightful owner, we should carve out an exception to the broad definition of marital property for the proceeds of fraud. They suggest that where, as here, it is alleged that the property transferred in a divorce proceeding was itself derived from stolen funds, a court should not reach the issue of fair consideration (the topic of the Second Circuit's second certified question) because it is simply irrelevant whether fair consideration was given. In their view, the original owner – a victim of embezzlement and not a mere creditor – should have an absolute right to seek disgorgement of the previously distributed property from the transferee-spouse. Although these contentions have appeal, we are unable to agree. It has long been the law of this State that money obtained by fraud or felony cannot be followed by the true owner into the hands of one who has received it bona fide and for a valuable consideration in due course of business. This principle is premised on the recognition that, in contrast to chattels, money has no earmark and cannot be identified. Note that, by comparison, an owner may seek recovery of identifiable stolen property, such as a piece of artwork, from an innocent good faith purchaser for value. “At its core,” the court continued, “our rule favoring innocent transferees of stolen funds over defrauded owners is rooted in New York's concern for finality in business transactions. We have explained that to permit in every case of the payment of a debt an inquiry as to the source from
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which the debtor derived the money, and a recovery if shown to have been dishonestly acquired, would disorganize all business operations and entail an amount of risk and uncertainty which no enterprise could bear. Similar concerns are relevant in the matrimonial realm. Ex-spouses have a reasonable expectation that, once their marriage has been dissolved and their property divided, they will be free to move on with their lives. To hold that the proceeds of fraud acquired by one spouse unbeknownst to the other cannot be subject to equitable distribution or conveyed through a settlement agreement as marital property would undermine one of the fundamental policies underlying the equitable distribution process, namely finality. The exception proposed by the Agencies would effectively undo court orders and settlement agreements for an indeterminate time after the winding up of the parties' economic affairs and subvert the policy of upholding settled domestic relations . . . in divorce cases. (Citations and internal quotes omitted) Again, on the question fair consideration: “Schaberg contends that the District Court erred in holding, as a matter of law, that she lacked a legitimate claim to the frozen funds. She argues that she provided fair consideration in exchange for the allegedly fraudulent proceeds and thereby became a good faith purchaser for value through her execution of an arms-length separation agreement. She also claims that there is no evidence that she had knowledge of her ex-husband's illegal conduct, particularly since he had a history of being a successful entrepreneur and securities trader, nor did she engage in collusion in the divorce proceeding to deprive the defrauded parties recovery of their investments. The Agencies counter that, as a matter of law, Schaberg could not have given fair consideration because, in exchange for acquiring assets that were later determined to be derived from fraud, she only gave up a claim to a larger portion of the marital estate, which also consisted of Walsh's proceeds of fraud and, as such, her consideration was illusory. Again, both parties raise compelling arguments…. The first step is to determine whether the spouse relinquished rights to other untainted assets in the marital estate. Clearly, this would constitute fair consideration. Second, a court needs to look beyond the tangible marital property at issue because New York recognizes other forms of legitimate consideration, including nonmonetary consideration. For example, New York courts have found fair consideration where a spouse releases a claim for maintenance…. Indeed, based on the myriad types of consideration that arise in the unique context of marital dissolution, courts have repeatedly stated that transfers made pursuant to a valid separation agreement incorporated into a divorce decree are presumed to have been made for fair consideration… We therefore reformulate the second question to read as follows: Is a determination that a spouse paid 'fair consideration' according to the terms of New York Debtor and Creditor Law § 272 precluded, as a matter of law, where part or all of the marital estate consists of the proceeds of fraud? As reformulated, and under our analysis, we answer this question in the negative.” (Citations and internal quotes omitted) To recapitulate: “In sum, we are not unsympathetic to the interests of parties who were fraudulently deprived of their investments and who, understandably, seek the return of a portion of their stolen monies. Most definitely, the victims of fraud are entitled to pursue disgorgement where it is demonstrated that the transferee spouse was aware of or participated in the fraud or otherwise failed to act in good faith. One example of bad faith would be where the parties entered into a collusive divorce arrangement designed to conceal stolen money from its rightful owner. And even where the recipient executed a settlement agreement in good faith and without knowledge of the source of the ill-gotten gains, the defrauded parties may still recover if the spouse did not give fair consideration for the property under Debtor and Creditor Law § 272. But
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we believe that an innocent spouse who received possession of tainted property in good faith and gave fair consideration for it should prevail over the claims of the original owner or owners consistent with this State's strong public policy of ensuring finality in divorce proceedings. Accordingly, the first certified question and, as reformulated, the second certified question should be answered in accordance with this opinion.” RETROACTIVE CONFISCATION Unfortunately, Ms. Schaberg had to make her roundabout legal argument because marital property does not actually exist at law until the marriage is dissolved and the property issue settled. Alas, no one knows exactly what a marriage is, but we know that jurists have said that it is a partnership of the highest kind, transcendental to particular agreements because it has at its end the ultimate good of humankind; therefore, its legal terms are a matter of public policy hopefully evolving towards that good. Courts in chancery i.e. of equity may recognize that marriage is a sort of partnership to which each spouse makes a different but equally important contribution, but the equitable distribution is not realized until the so-called partnership is dissolved. A non-wage earning, non-asset owning spouse will most likely wind up in a better legal and economic position following divorce than during an ongoing marriage. It certainly is ironic that, in common law property states if not in community property states, public policy only recognizes the principle of spousal sharing and the concept of marriage as an economic partnership when the marriage is no longer viable. It is equally ironic that Mrs. Rothstein and other wives can have their interest in property, which they have purchased in good faith through performance of their marital duties, confiscated retroactively because their husbands, unbeknown to them, happened to be fraudsters. This tradition endures because a transfer to a wife without concrete evidence of the receipt of fair value in return is one of the so-called badges of fraud since a man might convey property to which he has title to his wife, to keep it out of reach of his creditors, while he retains control over it even to the extent of selling it to someone else. A voluntary transfer of property, that is, a transfer of property to spouses and relatives without reasonable consideration, may be valid but is suspect. The problem is that a wife’s services have traditionally been devalued or not recognized at all at law. In Mrs. Rothstein’s case we have no evidence of ‘covinous’ i.e. collusive transfer, yet her personal property such as jewels, dresses, jewels and the like are construed by lawyers as fraudulently obtained with tainted money. We believe that the argument made in Ms. Schaberg’s case, that claims upon the spouse are released as fair consideration at divorce, should be unnecessary, because the property belonged to the other spouse all along. That is, we believe that the definition of marital property should not have to wait for a divorce settlement. During marriage each spouse should have a legally defined and substantial right in the acquisitions of the other spouse, and the law whether common or statutory should recognize as ‘marital property’ property acquired during marriage. The basic principle of justice, namely equity, dictates that an innocent spouse, by virtue of the fact of marriage, receives and is entitled to an equal share of all property, for good and valuable consideration presumed, obtained by the other spouse in any manner during the marriage but by
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inheritance and gift. Therefore fraudulent transfer claims against the innocent spouse should be invalid. For example, in cases for recovery of fraudulently obtained money and property, the innocent spouse’s claim to half of the marital estate should have preference over all creditors including the government, and she should be allowed to immediately retain her personal possessions up the value of that half – we used the feminine pronoun because the male is usually the fraudster and his wife another defrauded victim, and one traditionally cheated of her rights by the patriarchy. The 5th Chapter of the Statutes of the Thirteenth Year of Elizabeth’s Reign (1571), upon which the modern American fraudulent transfers acts are based, provided that a conveyance, "upon good consideration and bona fide lawfully conveyed or assured to any Person or Persons, or Bodies Politick or Corporate, not having at the Time of such Conveyance or Assurance to them made, any Manner of Notice or Knowledge of such Covin, Fraud or Collusion," shall not be voidable as a fraudulent conveyance. We believe that Queen Elizabeth I when in her riding boots would want Lady Rothstein to have her moiety, i.e. half the marital estate including the booty contributed by her husband. And with that we rest temporarily our case albeit it is a rather weak one given current law.

TRAGIC POSTSCRIPT Alas, that Kim Rothstein claims she had nothing to do with her husband’s fraudulent activities, yet she was deprived of any benefit for performing valuable services that should have entitled her to a portion of the loot if only fraudulent conveyance laws were not so archaic, discriminating against the rights of spouses, especially wives, to be independent in their business from their mates. Alas, indeed, now that she has been accused of taking the law into her own hands. The press reported in September 2012 that she grabbed and hid for herself over $1 million in jewels, watches and coins rather than turning them over to federal agents in 2009. Moneylaundering conspiracy, obstruction of justice, and witness tampering were among the federal charges brought against her, her friend Stacie Weisman, and Scott F. Saidel, her lawyer. Like many similarly situated wives, she apparently hoped to salvage at lease a ring, in this instance a 12.08-carat yellow diamond ring valued at $450,000, which her friend allegedly sold for her and turned over to her $175,000 in proceeds. ## APPENDIX:
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A. FOR LOVE’S SAKE Scott was not yet rich and powerful when Kim met him, but she fell in love with him nevertheless. An excursus on love is definitely called for in this best of all possible worlds. Love gradually entered the marriage picture legally as females were discovered to be equal to men, to be free and independent persons with inalienable natural rights, say, to half the marital property in communist states, and perhaps that much in capitalist states if they have expensive lawyers and liberal judges. Liberal philosophers identified marriage with male control of private property and with slavery, women being merely unpaid tools for the satisfaction of men’s wants. Locke gave lip service to the idea of voluntary marriage compact between equals while declaring the man to be the ruler. Even where marriages are arranged, some kind of love, although it may not come with equal property rights or rights to so-called equitable distribution of marital property may factor in some time later. One can learn to love a gorilla, if he is lived with long enough, and get plenty of food and affection as a consequence. Indeed, there is always the Stockholm syndrome whereby females learn to love their captors. However that may be, Christian holy texts sanction marriage because it is the lesser of two evils, the worst one being fornication. Paying the marriage debt of sex seals the partnership of a common life and ensures procreation and fidelity. According to Kant, marriage is a contract that personalizes the mutual sex-objectification of the partners so that each becomes an end as well as a means. Moreover, monogamous marriage puts women under the protection of men hence frees women from oppression and restrains men from otherwise oppressing women. Hegel believed that ethical love could not exist outside marriage; he disdained the contractual notion, stating that marriage is a unity that transcends contracting individuals, the unity that is the nucleus of the state for which the family is microcosm. Marriage is obviously what we make of hence beyond exhaustive definition. Today the institution of marriage is considered respectable whether one marries for love, sex, protection, status or money. It is improper to call a woman a whore for marrying a man for his power and money. In any case, it is better for a woman to be legally married to one man and hope for true love in this enduring patriarchal culture of ours than to be exploited and utterly ruined by a hundred.

We must mention here the kind of love that was the occupational disease of a medieval leisure class, the romantic love sung by troubadours, a love that cannot be consummated in carnal knowledge, hence the poet sings to a married woman who cannot be had by him, hoping to
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receive some small sign from her, perchance a glance, any token that would permit him to suffer forever in his lack. The masochistic knight-poet places his beloved on a pedestal; he kneels before her in perpetual submission, wanting to suffer every pain conceivable, even the agony of death, for his pain is his joy, in hopes of finally receiving the impossible, her salvational mercy. The relation between lover and beloved was feudal:

“Noble lady, I ask nothing of you save that you should accept me as your servant. I will serve you as a good lord should be served whatever the reward may be. Here I am, then, at your orders, sincere and humble, gay and courteous. You are not, after all, a bear or lion, and you will not kill me, surely, if I put myself between your hands.” (Non es meravilha s’ieu chan, stanza 7, Anthology, Hill and Bergin, p.39). It is not unusual for a romantic young woman to believe that she deserves everything including love just because she graces this planet. For example, Tracey Flagler, a true character in my living novel, Tracey Flagler, wished to meet rich and famous people after arriving in South Florida and taking jobs in “upscale” restaurants. Tracey’s expectations were so high after being inculcated with capitalist mores and watching Oprah shows and getting hooked on the occult and coke that she took her own life when reality fell short of the highly advertised cultural mark. She thought she might be befriended by rich and famous celebrities at the fabulous party hotels where she worked. No, she was not a meretricious woman; she believed in romantic love. Magic, not sex, would mysteriously bring her the money. A rich and famous man would no doubt fall in love with her. Her foot would fit the proverbial glass slipper. After that, she supposed, life would be a ball. By virtue of her association with celebrities, she would enjoy celebrity status herself, and then others would hang on her every word instead of she on theirs. Mind you that she wanted her own property, and to be independent of the man who would love her unconditionally. She soon became quite impatient with her magical means: “Right now I am really mad,” the nice girl next door had scribbled furiously in her diary shortly before I smelled her remains in her South Beach studio. “I want a million dollars right away. I want to be independently wealthy so that I do not have to do anything. My life just seems to be so stupid sometimes that I no longer want eternity. Who wants eternal stupidity? Eternity sounds so exhausting! I want amazing things to happen. I want to see myself as amazing. I am angry that I have to work tonight. I am mad that I have to support myself. I just don’t want to do anything anymore. I wish I were DEAD. I want to be free right now, and I mean right NOW, or DEAD.” B. ON A MARRIED WOMAN’S PROPERTY RIGHTS
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The Kim Rothstein affair raises the question of a married woman’s property rights. When a woman came under cover of her husband’s protection in the old days, she became a femmecovert or covered woman under English law and its American derivative. The rule of coverture was applied, meaning that her separate legal existence disappeared in respect to her property.

A beautiful English author by the name of Caroline Elizabeth Sarah Norton did much to advance women’s legal rights to custody of their children and property in the Mother Country, although she maintained her belief that women are inferior to men by God’s will, therefore she “never pretended to the wild and ridiculous doctrine of equality.” Her husband was a failed lawyer given to drunkenness and violent fits, for whom she had secured a lucrative post as a Metropolitan Police Commissioner, thanks to her friend, Lord Melbourne (Charles Lamb). Robert Norton frequently brutalized her, sometimes strangling her. Besides his bad temper, it has been noted that her quick tongue and obstinateness were aggravating factors. She could no longer brook the physical abuse after he threw her down the stairs one day, causing her to miscarry, so she left him for good – the law then would have permitted him to find and abduct her. Robert Norton would eventually try to blackmail Lord Melbourne, Queen Victoria’s great friend when she took the throne, and then he sued him for criminal conversation. That so-called heartbalm tort action, an archaic claim for civil adultery, sought to sooth the anguish suffered for interference with the sanctity of marriage. The tort originated in the notion that a man’s wife is his personal property, and that he should be compensated for the loss of a sexual benefit enjoyed by another. At that time only the husband could bring the action, but either spouse could make the complaint after the Married Women’s Property Acts were passed. Mr. Norton lost the case despite suggestive but not probative testimony from The Help, but it terribly scandalized Caroline and Melbourne—the public was greatly titillated over testimony as that he had entered her chambers through the back door. Melbourne swore on his death bed that Caroline and he were just friends. Notably, he would be accused twice of criminal conversation in his career, and today we hear rumors that he conducted spanking sessions with aristocratic ladies; it was his popularity that saved his government in that relatively prudish, Victorian age. Mr. Norton had seized Caroline’s children, which he was legally entitled to do, and laid claim with her publisher to her copyright to her writings. He eventually reneged on a separation agreement providing her with a fixed allowance; he laughed when she objected, and pointed out that a contract between man and wife was invalid under existing law since man and wife was in effect one person with the male covering. There was little she could do about her husband’s conduct except refer a creditor, her carriage-maker named Thrupp, to her husband, out of spite and on advice of counsel, although she had ample income from elsewhere, and devote her writing to complaining to Queen Victoria and Parliament and anyone else who would listen
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about the fact that a married woman was non-existent under existing English law, writing “in the hope that the law may be amended; and that those who are at present so ill-provided as to have only Truth and Justice on their side, may hereafter have the benefit of Law and Lawyers." “If HE [Sir Samuel Romilly] were here,” she lamented, “if he were here, who so loved the wedded companion of his own home, that when she died he sank, scathed by her loss as by lightning, he would not answer with contented apathy, "IT IS THE LAW," when women complain of injustice! He would stand for the right now, as he stood in those other days, when he nobly strove, and patiently planned, to make Law what it should be, a means of protection, not an engine of oppression, to the weak. Is there no one with heart great enough to fill his place?” (English Laws for Women in the Nineteenth Century) Women had their champions: the result of Caroline Norton’s campaigning was the Custody of Infants Act of 1839 and the Matrimonial Causes Act of 1857. Other valiant women and their champions would take up their pens and positions in legislatures on both sides of the pond, advancing the cause of equality under the law, i.e. justice, and Married Women’s Property Acts were passed. But the state statutes differed among the United States; not all provided separate property rights to women. As Dewitt C. Moore put it on Page 105 of the first volume of A Treatise on Fraudulent Conveyances and Creditors’ Remedies at Equity and Law (1908): “Earnings, services, and savings of wife.—The common law rule that the wife's earnings belong to the husband, and that he cannot give or voluntarily relinquish them to her, or invest them, or permit her to invest them, in property in her own name, and thus withdraw them or the property from the claims of his existing creditors, still prevails, in the absence of statute, and the earnings of the wife while cohabiting with her husband are not made her separate property by the Married Woman's Acts in the absence of express provision in such acts.” Moore cites numerous federal and state cases to that effect, beginning with Seitz v. Mitchell, 94 U.S. 580. (See Note 2) Eventually, however, the U.S. laws on the issue became more or less uniform, and a married woman and her children and property in the United States were no longer legally owned or controlled by her husband in civilized countries. Theoretically, at least, a married woman has an independent ‘self’ with all the rights of a man’s self. One of those rights is an interest in the marital property. In Mrs. Rothstein’s case, you might say that it is too bad her husband stole the property conveyed to their accounts, because his crime made a victim out of her too, for she is apparently not entitled to stolen property even if she is innocent of criminal conduct and contributed her wifely services for it. Some countries let the innocent recipients of stolen property keep it if they paid for it, but this is the United States.

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But we respond that you are speaking of tangible, identifiable goods, while we speak of a form of money that is difficult to specifically trace and identify with particular activities when in circulation. How much of the currency in your pocket or the money in your bank was at one time stolen by someone or used in criminal activities? So where fraud is at play, if you can show that you received it or the goods it purchased in an honest transaction with fair consideration, then the buck stops with you; you can keep it. As for the stolen gold coins you purchased from the thief, we shall come after them with a writ of replevin; even so we may have trouble proving those particular coins were the ones stolen from us. C. OLD EXAMPLE OF ABSENCE OF FRAUDULENT CONVEYANCE BETWEEN HUSBAND AND WIFE SEXTON V. WHEATON, 21 U. S. 229 (1823): parcel of land was conveyed to Sally Wheaton on March 21, 1807, by outside parties for valuable consideration, and a house was built upon it. Her husband Joseph Wheaton subsequently represented to New York commercial house Sexton & Wilson that in addition to other assets he had real estate valued at $20,000, and that he needed goods to go into business in the city of Washington. His wife, after she had read his misrepresentation, told him that he was exaggerating his wealth to the potential creditor, advised him to correct his statement, and trusted him to do so. Sexton & Wilson advanced the goods wanted by Joseph Wheaton and he defaulted. The inventory still on hand was recovered and sold off, but there was a deficiency due after paying off the preferred creditors, so Sexton & Wilson sued the Wheatons, praying that the real estate Sally Wheaton held title to be seized and sold in order to satisfy her husband’s debt because, it was alleged, the house had been purchased by her while knowing that her husband would go into debt, hence the conveyance was fraudulent. However, Chief Justice John Marshal, best known for helping to establish the Supreme Court as a third branch of government and for his Constitutional law constructions, opined for the Court that Sexton & Wilson had failed to prove that the house had been purchased with fraud on a future creditor in mind, nor was there proof that Mrs. Wheaton had tried to deceive Sexton & Wilson as to her husband’s wealth; indeed, her statement that she had advised her husband to correct his exaggeration tended to exonerate her in that respect. “The case is very different from one in which the wife herself makes a misrepresentation or hears and countenances the misrepresentation of her husband. The person who acts under such a misrepresentation acts under his confidence in the good faith of the wife herself. He has a right to consider that faith as pledged, and if he is deceived, he may complain that she has herself deceived him. But in this case the plaintiff acted solely on his confidence in the husband. If he was deceived, the wife was not an accessory to the deception. She contributed nothing towards it.” Sexton & Wilson did not allege that Joseph Wheaton was indebted at the time the house was purchased. The defendant’s alleged that Sally Wheaton had purchased the property with her own profits and savings while her husband was serving as Sergeant of Arms to the House of Representatives. Since there was no proof that she had provided that consideration, so it was assumed for the sake of argument that the conveyance was a “voluntary” one, that is, made
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without consideration, as if her husband had given her the means to make the purchase, which raised the question, would the conveyance hold good against subsequent creditors, in this case Sexton & Wilson, who extended credit after the conveyance was made? Yes, it would hold good; the creditors could not have the house and lot sold to cover monies owed. The Court’s opinion was based on its interpretation of the Elizabethan statute: ‘The law which is considered by the plaintiff's counsel as limiting this power in the case at bar is the statute of 13 Eliz. Ch. 5. against fraudulent conveyances, which is understood to be in force in the County of Washington. That statute enacts that "for the avoiding and abolishing of feigned, covinous [conspiratorial], and fraudulent feoffments [grant of land to be held in fee] . . . which feoffments . . . are devised and contrived of malice, fraud, covin, collusion, or guile, to the end, purpose, and intent to delay, hinder, or defraud creditors and others of their just and lawful actions . . . not only to the let or hindrance of the due course and execution of law and justice, but also to the overthrow of all plain dealing, bargaining, and chevisance [enterprise] between man and man. Be it therefore, declared . . . that all and every feoffment . . . made to or for any intent or purpose before declared and expressed shall be from henceforth deemed and taken only as against that person . . . whose actions . . . shall or might be in any wise disturbed . . . to be clearly and utterly void.” In construing this statute, the courts have considered every conveyance not made on consideration deemed valuable in law as void against previous creditors. With respect to subsequent creditors, the application of this statute appears to have admitted of some doubt. In the case of Shaw v. Standish, 2 Vern. 326, which was decided in 1695, it is said by counsel in argument "that there was a difference between purchasers and creditors, for the statute of 13 Eliz. makes not every voluntary conveyance, but only fraudulent conveyances, void as against creditors, so that as to creditors it is not sufficient to say the conveyance was voluntary, but must show they were creditors at the time of the conveyance made, or by some other circumstances make it appear that the conveyance was made with intent to deceive or defraud a creditor." Although this distinction was taken in the case of a subsequent purchaser, and was therefore not essential in the cause which was before the court, and is advanced only by counsel in argument, yet it shows that the opinion that a voluntary conveyance was not absolutely void as to subsequent creditors prevailed extensively.” (Emphasis added) Chief Justice Marshall discussed other cases on the subject, noting that nearly two years had elapsed between the conveyance of the land and house, and that there was no sign that Joseph Wheaton intended to go into business at the time of conveyance. He further observed that, “In this district, every deed must be recorded in a place prescribed by law. All titles to land are placed upon the record. The person who trusts another on the faith of his real property, knows where he may apply to ascertain the nature of the title held by the person to whom he is about to give credit. In this case, the title never was in Joseph Wheaton. His creditors therefore never had a right to trust him on the faith of this house and lot.” D. OLD EXAMPLE OF FRAUDULENT CONVEYANCE BETWEEN HUSBAND AND WIFE In SEITZ v. MITCHELL, 94 U.S. 580 (1876), The complaint alleged that George Seitz conspired with his wife, Mary Seitz, to defraud a creditor by using his own money, the sum of $1,000, to which his wife allegedly had no right at all, to make a down payment in order to buy
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and have conveyed to her a certain lot in the City of Washington, giving the seller a note, signed by both of them, and a trust deed (similar to a mortgage except a third party holds the title in trust until the debt is satisfied) signed by both of them to secure the balance due over time. Mr. Seitz then used money received from an insurance company to buy and have conveyed to his wife a second lot, giving the lender a note signed by him and his wife, as well as trust deeds signed by them, on both lots in order to help secure payment on the second lot. All this was allegedly done to hinder, delay, and defraud the creditor. But the wife answered that she had used her very own money, which she averred that she had earned by virtue of her efforts, to make the $1,000 down payment on the first lot as well as subsequent payments, and she had used her own credit to buy the second lot, her husband acting merely as her agent when negotiating the deals, co-signing the notes and the trust deeds at the request of the creditor simply as his assurance that he had consented to his wife’s purchases. Her husband, covering her under the rule of coverture, which forges man and wife into one person, the woman being the man’s rib, may arguably have been responsible for the payment of her debts, but it was asserted that the creditor could not have the property for which the titles were put in trust as security, even though she had signed the deeds of trust, for it was her separate property, to which she was entitled by the married women’s property act that had been passed by Congress for the District of Columbia. That argument was lost in the lower court. Now we may wonder today why such absurd pettifoggery was even taken up by the Supreme Court, but such are the mysteries of the law. Even if we know nothing about the tricks of the legal trade, we know what justice requires in this case, an affirmation of the lower court’s finding for the creditor. The reader should know, however, that we have not examined the record of the court below, hence there may be some detail in that record that would cause us to understand why it was worthy of being deemed one of the most important cases in the nation i.e. worth of the high court’s review. In any case, we have the opportunity to examine the somewhat mysterious process of legal reasoning at its apex, whereby the earnings of a married woman are not to be considered her property where creditors are concerned unless the statute passed to protect her property explicitly specifies that those earnings are included in its definition. It would follow from that reasoning that, even absent creditors, a wife’s “earnings” are not her “property” but are rather her husband’s property if not “property” at all! Justice William Strong, formerly an abolitionist member of the U.S. House of Representatives and then a judge sitting on the Pennsylvania Supreme Court, rendered the Supreme Court’s opinion. Although it would have made no difference to the Court if Mrs. Seitz had any money from her own earnings, for that would have been the property of her husband’s and not hers, at least whenever the rights of creditors are at issue, Justice Strong noticed that no evidence had been offered that Mrs. Seitz had “any separate property or any means or money of her own with which to pay the purchase money of the lot conveyed to her,” and that it appeared that the only money she could have laid her hands on would have been her husband’s money. It follows that the money used to make further payments on the first lot belonged to her husband as well. “In a contest between the creditors of the husband and the wife there is, and there should be, a presumption against her which she must overcome by affirmative proof. Such has always been the rule of the common law, and the rule continues, though statutes have modified the doctrine
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that gave to the husband absolutely the personal property of the wife in possession, and the right to reduce into his possession and ownership all her choses in action.” By “choses in action” was meant “things” due to her by operation of law, such as money owed. Unfortunately for the women of the City of Washington who thought that the revolutionary married women’s property act gave them a right to their earnings, earnings were not expressly included as property: “The earnings of the wife,” said Justice Strong, “while cohabiting with her husband are not, by the Revised Statutes relating to the District of Columbia, made her separate property. She can have them only by his gift, and it is not protected against his creditors.” The statute quoted hereunder must be read very carefully by judges and lawyers familiar with the common law rule that a wife’s earnings belong to her husband in order to understand that “property” does not mean a married woman’s earnings; indeed, the statute does not mention the wife’s earnings: "In the District, the right of any married woman to any property, personal or real, belonging to her at the time of marriage or acquired during marriage in any other way than by gift or conveyance from her husband, shall be as absolute as if she were unmarried, and shall not be subject to the disposal of her husband nor be liable for his debts." Several cases on the subject were cited from which the governing principle was divined: “Many of these cases relate to the ownership of the wife's earnings, and nowhere, so far as we are informed, has it been adjudged that her earnings or the product of them, made while she is living with her husband and engaged in no separate business, are not the property of the husband when the rights of his creditors have been asserted against them. Certainly the acts of Congress respecting the rights of married women in this District do not assure such property to the wife.” Wherefore: “Applying the principles settled by the authorities we have cited to the pleadings and proofs in the present case, it is free from doubt. The answer does not aver that Mrs. Seitz paid for either of the lots conveyed to her out of her separate property. It does not aver that she had any separate property, nor does the proof show that she had any.” (Emphasis added) In the final analysis, it did not matter if Mrs. Seitz’ allegation, that she had paid purchase money from her own earnings, were true: “But were it true, it would not avail her unless she paid it with her own separate property. She avers that she paid it with means and money earned and procured wholly by herself. Of that there is no proof nor attempt to adduce proof, though if the fact were so, the means of proving it must have been peculiarly within her knowledge and power, and we have already observed that money procured by her earnings belonged to her husband, and was not her separate property. To hold that conveyances thus taken and thus paid for are sufficient to protect the property against creditors of an insolvent husband would be making fraud both profitable and easy. Decree affirmed.”

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