The Ponzi Blog
by Kathy Bazoian Phelps on February 16, 2012, analyzed on the jury verdict of
$67 million in favor of Coquina Investments against TD Bank for its
participation in the Rothstein Ponzi scheme in Florida. Now two more bank settlements are being
reported in the news.
First, TD Bank has
settled with the Razorback Group of 55 investors for $170 million. Second, Gibraltar Private Bank & Trust
Co. of Coral Gables has settled with the Razorback Group for an additional $10
million. The total of these two
settlements - $180 million - is just what the plaintiffs had requested in
damages, but the investors will not likely be paid in full because a large
chunk of the settlements is most certainly designated for attorney fees.
It is likely that
TD Bank settled because it had no reason to believe that the result of a jury
trial on the Razorback Group's claims would turn out any better than the clobbering
it just suffered on the Coquina claims.
But why did
Gibraltar Bank settle? Perhaps the
answer lies in Scott Rothstein's deposition testimony of December 12, 2011:
Q: Now, was [Gibraltar] bank important
for your Ponzi scheme?
Q: And why?
I had [Gibraltar's Fort Lauderdale market manager] John Harris in my pocket and
later had [Gibraltar Chairman and CEO] Steve Hayworth in my pocket, and they
were essential for me being able to do what I needed to do without having
interference with the federal or state authorities...
Deposition Transcript, 12/12/12 p.m. session, pp. 134-35).
When asked to
explain what he meant by "in your pocket," Rothstein responded in
was in my pocket by me supplementing his lifestyle to the extent that I changed
his lifestyle. He received gifts from me. He traveled with me extensively. He
was on our permanent guest list for all of our sporting events including
Dolphin's [sic] stadium and the Heat. Traveled with me on charter private
aircraft to all kinds of sporting events. I took him to several thousand dollar
a plate smokers for the various charities I was involved in. . .
Q: How about Mr. Hayworth?
was simple. He needed an investor for the bank, and I invested $5 million...
(12/12/12 p.m. Transcript, pp. 137-38).
testified about his tactics to end questioning by Gibraltar's compliance
officers by purchasing stock in the
Q: Was there ever a conversation or any
conversation with any of those folks concerning your regulatory problems,
compliance problems, vis-a-vis becoming a major shareholder in the bank?
I was told by Harris and by Steve Hayworth that we don't investigation [sic]
shareholders of the bank.
Q: That gave you some insensitive [sic]
to become a shareholder?
the one and only reason I invested...
(12/12/12 p.m. Transcript, pp. 139).
acknowledged in his deposition that he would not provide "real answers" to
questions asked by the Bank.
never provided real answers to any of these questions.
Q: If in fact they had gotten the real
answers to these questions, what would that have done to your Ponzi scheme?
would have exploded.
(12/12/12 p.m. Transcript, pp. 168-69).
Q: As a matter of fact, was the success
of the Ponzi based in part on your ability to keep this bank at bay?
(12/12/12 p.m. Transcript, pp. 147-48).
This is potentially
strong evidence that these agents of Gibraltar Bank facilitated Rothstein's
fraud and protected it from disclosure, for their personal financial gain. From this evidence, a jury certainly could
find that the bank aided and abetted the fraud and is, therefore, liable for
the resulting damages. Despite questions
about Rothstein's credibility, this, along with the TD verdict, quite likely
motivated Gibraltar Bank to settle.
Links to the
transcripts of Rothstein's deposition taken December 12-23, 2011 are available
Kathy Bazoian Phelps is the
co-author of The Ponzi Book: A Legal
Resource for Unraveling Ponzi Schemes available for purchase at www.lexisnexis.com/ponzibook.