A Miami lawyer has requested that a Florida judge refer TD Bank to the U.S. Department of Justice for criminal investigation, alleging the bank produced a fraudulent piece of evidence at a civil trial that resulted in a $67-million US judgment against TD.
A federal jury made the award on Wednesday. In January, it found the bank was responsible for "aiding and abetting fraud" for its role in a $1.2-billion Ponzi scheme operated by former lawyer Scott Rothstein.
The jurors found after a 70-day trial that the bank colluded with one of its customers to defraud numerous persons and to launder the proceeds.
And now, David Mandel, the lead lawyer for plaintiff Coquina Investments, is accusing the bank of falsely hiding its internal assessment that Rothstein and his firm were a "high risk" for money laundering. He made his accusation after the jury arrived at its judgment, but before it made its award.
Rothstein is serving a 50-year prison term.
The assessment was made in an internal bank document called a "Customer Due Diligence" form from 2009. The document contained the findings of the pre-account opening inquiry by the bank of Rothstein's firm, Rothstein, Rosenfeldt and Adler.
Coquina Investments, based in Corpus Christi, Texas, alleged on March 26 that the TD perpetrated a "fraud on the court and jury" by hiding a red banner that contained the all-upper-case words "HIGH RISK."
Mandel filed a motion for sanctions against the bank and its lawyers, Greenberg Traurig, accusing them of intentionally altering the form to keep the jury from seeing the warning that Rothstein and his firm presented a high risk of money laundering.
Alteration caused by copying error
Last week, TD responded to the accusation and denied any intention of misleading the jury, saying the alteration resulted from a copying error by clerical staff.
The version of the form the bank introduced in evidence had a simple black bar as a heading.
Mandel says the actual form bears the words "HIGH RISK" emblazoned across the top, highlighted by a red background.
Mandel obtained the actual form in another case in which TD Bank is being sued.
TD also responded that Mandel knew of the high-risk designation and stressed that to the jury in his closing argument.
The bank said the altered form did not significantly influence the jury or change the trial's outcome, which was favourable to Coquina in any event.
On Monday, Mandel called the bank’s response "tantamount to a continuing fraud on the court," saying the explanation "is not credible and can't be replicated."
"Coquina attempted to replicate the defendant’s 'copying process,’ he said, "but none of our efforts resulted in the words HIGH RISK being obscured from the document."
Mandel said the jury’s award — which included $35 million in punitive damages — would have been higher "had the defendant produced the true document."
Mandel had asked the jury for an award of $140 million in punitive damages.
"The integrity of our judicial system demands that [the bank's] actions have consequences," he said.
Case offers banks 'many' lessons
Mandel said the bank used the document both in cross-examination and in closing argument to assert that Rothstein’s firm was a low-risk customer.
U.S. District Court Judge Marcia G. Cooke, the judge in the trial, has not yet acted on Mandel’s motion to refer TD for criminal investigation.
TD faces several lawsuits filed by investors who say they were victims of the Ponzi scheme.
Testimony during the trial showed that Rothstein used his TD bank account in his scheme and that one of his conspirators set up a fake TD Bank website that showed phony balances to investors.
The Association of Certified Financial Crime Specialists says the case offers many anti-money laundering and fraud control lessons to financial institutions.
The organization, which represents people in the U.S. who work to control, detect and combat financial crime, says the experience of TD Bank also "plants the seeds of headaches" for financial institutions whose employee compensation plans include bonuses for attracting "assets under management."
TD has 1,280 branches in the U.S.