TD Bank Agrees to Pay $52.5M to Settle Charges Related to Rothstein Scheme

TD Bank Agrees to Pay $52.5M to Settle Charges Related to Rothstein Scheme

 WASHINGTON, D.C. — (Mealey’s) TD Bank NA on Sept. 23 agreed to pay $52.5 million to settle federal regulators’ allegations that the bank helped attorney Scott Rothstein run a $1.2 billion Ponzi scheme out of his law firm.

The Securities and Exchange Commission announced in a press release that TD Bank agreed to pay $15 million to settle the SEC’s charges in an administrative proceeding.

“The SEC alleges that TD Bank and its then-regional vice president Frank A. Spinosa defrauded investors by producing a series of misleading documents and making false statements about accounts that Rothstein held at the bank and used to perpetuate his scheme,” the SEC said.  “Spinosa falsely represented to several investors that TD Bank had restricted the movement of the funds in these accounts when, in fact, Rothstein could transfer investor money however he desired.  Spinosa also orally assured investors that certain accounts held balances totaling millions of dollars, but each account actually held zero to $100.”

FinCEN, OCC Penalties

Additionally, the Financial Crimes Enforcement Network of the U.S. Department of the Treasury (FinCEN) and the U.S. Office of the Comptroller of the Currency (OCC) yesterday announced the assessment of a concurrent $37.5 million civil penalty against the bank “for failure to file suspicious activity reports related to the massive Ponzi scheme,” FinCEN said in a press release. 

The OCC said in a press release that it found that from April 2008 to September 2009, TD Bank “failed to file suspicious activity reports (SARs) on activity in accounts belonging to Rothstein Rosenfeldt Adler, P.A., the Ft. Lauderdale, Florida law, firm through which Scott Rothstein ran a $1.2 billion Ponzi scheme.  These failures by the bank resulted in violations of the OCC’s SAR regulation (12 C.F.R. § 21.11(c) and (d)), which requires banks to file SARs in 30 to 60 days, depending on the circumstances.  The failures to file SARs were significant and egregious for a number of reasons, including the number of alerts generated by these accounts and the volume and velocity of funds that flowed through them.” 

Rothstein Rosenfeldt filed for Chapter 11 bankruptcy in November 2009.

SEC Complaint

The SEC yesterday filed a complaint against Spinosa in the U.S. District Court for the Southern District of Florida, charging him with violating Sections 17(a)(1), 17(a)(2), and 17(a)(3) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.  The SEC also charged Spinosa with aiding and abetting Rothstein’s violations of Section 10(b) of the Exchange Act and SEC Rule 10b-5.  The complaint seeks disgorgement plus prejudgment interest, financial penalties and a permanent injunction.

The SEC press release can be viewed at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539827946#.UkGNpNI3uSoThe FinCEN press release can be viewed at http://www.fincen.gov/news_room/nr/html/20130923.html.  The OCC press release can be viewed at http://www.occ.gov/news-issuances/news-releases/2013/nr-occ-2013-145.html.

The SEC is represented by Steven J. Meiner and Amie Riggle Berlin of the SEC in Miami in the suit against Spinosa.

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