On the heels of a jury's $67 million verdict against TD Bank
for aiding and abetting Scott Rothstein's fraud, Platinum Estates' aiding and
abetting claim against TD Bank has been dismissed for failing to state a
claim. On March 7, 2012, District Judge Kenneth
A. Marra found, "[T]he Complaint fails to include sufficient facts which would
support a finding of actual knowledge, only facts that support an insufficient
finding that Defendant 'should have known' about the alleged fraud. Accordingly,
Count II fails for failing to satisfy the actual knowledge requirement of
aiding and abetting fraud." The judge also found, "Count II also fails under
the 'substantial assistance' prong of aiding and abetting fraud." Platinum
Estates, Inc. v. TD Bank, N.A., 2012 U.S. Dist. LEXIS 30684 (S.D. Fla. Mar.
Unfortunately for those of us who follow these matters
closely, the opinion contains little more than these conclusory findings and
does not review or analyze what Platinum Estates' complaint did allege. In addition, the opinion makes no effort to
address why its result should be different than the result that District Judge Marcia
Cooke of the same court reached on TD Bank's motion to dismiss Coquina's aiding
and abetting claim. See Coquina Investments v. Rothstein, 2011 U.S. Dist. LEXIS 7062
(S.D. Fla. Jan. 20, 2011).
Was Platinum Estates' complaint inadequate? Judge for yourself. Here are the key aiding and abetting allegations
of the complaint:
22. TD Bank was the
financial nucleus of the Rothstein Ponzi scheme as hundreds of millions of
Ponzi scheme dollars flowed through RRA's TD Bank trust and operating accounts.
23. Rothstein's scheme
was entirely dependent on the legitimacy TD Bank bestowed upon him. Indeed, TD
Bank treated Rothstein as a VIP customer and afforded him unprecedented
privileges and access.
24. For example, TD
Bank lulled investors, including Plaintiffs, into a false sense of security by
providing written assurances that settlement funds existed in separate accounts
and could only be disbursed directly to the investor(s).
25. TD Bank further
legitimized Rothstein by permitting him to use conference rooms at its branches
to have meetings with the very investors he was defrauding and by TD Bank participating
in staged procedures during those meetings such that the investor would be led
to believe that their investment would be safe with TD Bank's involvement.
* * *
27. TD Bank
misrepresented to investors that the settlement funds for Rothstein's clients
were "irrevocably locked" in special accounts.
28. Senior officers of
TD Bank also met with investors to reassure them about the investments.
29. TD Bank supposedly
opened separate accounts for each investor's funds. TD Bank represented to
Plaintiffs that settlement funds existed and could only be disbursed directly to
57. Defendant knew or
should have known that Rothstein was engaged in fraud.
58. Defendant knowingly
joined, participated in, and/or ratified Rothstein's fraud in the following
(a) Defendant permitted hundreds of
millions, of Ponzi dollars to flow through RRA's TD Bank escrow, trust, and
operating accounts in violation of applicable laws, regulations and internal
policies and procedures.
(b) Defendant lulled investors,
including Plaintiffs, into false senses of security by providing verbal and/or
written assurances that settlement funds existed and could only be disbursed
directly to the investor;
(c) Defendant permitted Rothstein to use
conference rooms at its branches to have meetings with investors and TD Bank
employees assisted RRA in arranging meetings with investors;
(d) Defendant mobilized employees to
participate in "presentations" or "shows" for Rothstein investors at TD Bank branches;
(e) Defendant misrepresented to
investors that the settlement funds for Rothstein's clients were "irrevocably
locked" in special accounts;
(f) Senior officers of TD Bank
frequently met with investors to reassure them about the investments;
(g) TD Bank represented to Plaintiffs
that settlement funds existed and could only be disbursed directly to the
substantially and materially assisted Rothstein in committing fraud.
Fortunately for the plaintiffs, Judge Marra did grant an
opportunity to amend the complaint, so it remains to be seen whether the aiding
and abetting claim will get past the pleading stage. As can be seen from the recent jury verdict
against TD Bank in the same Ponzi scheme case, a jury can have a very different
assessment of the facts than can a judge on a motion to dismiss.
View the Platinum Estate's complaint
against TD Bank.
On March 15, 2012, 12:00-1:00 pm EDT, Kathy Bazoian Phelps
will be speaking at an AML Services International Training Web Seminar, "The
Costly Collision of Financial Institutions with Ponzi Schemes." Register to hear her speak about topics such
as: how to do due diligence to detect Ponzi schemes, red flag warnings, and
liability exposures of the bank. You will get critical insights from recent
real life cases, and see court documents showing missteps made by banks
involved in costly lawsuits because they were allegedly banking Ponzi
fraudsters. There is a special discount code for Blog
readers: 15% off (only $85). Code: TEMP232. Register at: www.nomoneylaundering.com.
Read more articles at The Ponzi Blog
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.
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