TD to pay $52.5M US in fines over Ponzi scheme
Toronto-Dominion Bank will pay $52.5 million US in civil penalties to settle charges by U.S. regulators that it violated securities laws in connection with a Ponzi scheme conducted by Florida lawyer Scott Rothstein, who is now serving a 50-year prison term.
TD was fined $37.5 million by the Financial Crimes Enforcement Network and the Office of the Comptroller of the Currency, and $15 million by the U.S. Securities and Exchange Commission..
Rothstein, a disbarred lawyer and the former CEO of Rothstein Rosenfeldt Adler law firm, operated a Ponzi scheme in New York, southern Florida and a Venezuela that financed a lavish lifestyle.
He used TD Bank to launder the money from the $1.2 billion scheme.
In a lawsuit by some of those bilked by Rothstein, lawyer David Mandel,accused the bank of falsely hiding its internal assessment that Rothstein and his firm were a "high risk" for money laundering.
The U.S. enforcement agencies noted TD Bank's lack of adequate training for both the anti-money laundering and business staff.
Bank 'did not do enough'
“In the face of repeated alerts on Rothstein’s accounts by the bank’s anti-money laundering surveillance software over an 18-month period, the bank did not do enough to prevent the pain and financial suffering of innocent investors,” FinCEN director Jennifer Shasky Calvery said in a press statement.
“Financial institutions must do a better job of protecting our financial system and citizens from such harm. It is not acceptable to have a poorly resourced and trained staff overseeing such a critical function.”
The OCC said TD Bank failed to file suspicious activity reports to the government and the SEC said the bank deceived investors by saying that it had restricted Rothstein's transfers of money in the accounts.
The Canadian bank said it was "pleased" to resolve the case with regulators.
"TD works very closely with our regulators to ensure that it complies with all applicable laws and regulations," the bank said in a brief statement.
In January 2012, a U.S. federal jury ruled TD Bank owed Coquina Investments $67 million for the Canadian bank's role in the Ponzi scheme in the first of several lawsuits filed by wronged investors against the bank and others.
TD took $285M provision in 2012
TD took a $285-million provision in its first quarter of 2012 related to lawsuits it was facing in connection with the case. The bank said at the time that it would defend itself vigorously, but that the provision for litigation provision was the prudent move.
Once a prominent South Florida lawyer, Rothstein pled guilty to running a massive scam involving investments in phoney legal settlements that imploded in 2009.
The scheme was one of the largest frauds in South Florida history and triggered the failure of the once high-flying Fort Lauderdale law firm Rothstein Rosenfeldt Adler.
Rothstein had boasted about paying bribes to unnamed politicians, judges and law enforcement officials and he raised thousands of dollars for the campaigns of many state and national politicians.
Testimony and court documents show that Rothstein used an account at a TD Bank branch as an integral part of the scheme. Conspirators in his scheme allegedly posed as TD Bank employees, and one of Rothstein's associates devised a fake TD Bank website on which fake account balances were posted for investors.