MIAMI (1/20/12)--A $67 million verdict Wednesday against a bank for allegedly aiding in a $1.2 billion Ponzi scheme is rare, but should serve as a cautionary note for credit unions and other financial institutions on the importance of compliance with the Bank Secrecy Act and its anti-money laundering provisions.
The verdict means that a Miami, Fla., jury decided that TD Bank helped a now-disbarred Fort Lauderdale lawyer, Scott Rothstein, defraud a group of Texas businessmen, Coquina Investments, by turning a blind eye on procedures meant to stop fraud and money laundering activities (South Florida Business Journal, Jan. 18).
Rothstein was sentenced to 50 years in prison for luring investors into his $1.2 billion Ponzi scheme. He created fictitious pre-lawsuit settlements for sexual harassment and whistle-blower lawsuits and told investors they were buying interest in the settlements. To succeed at the scheme he needed bankers who would not ask questions about overdrafts or why he was moving large sums quickly between attorney trust accounts, said the article.
Coquina was awarded $32 million in compensatory damages and $35 million in punitive damages in the decision, which is being seen by some analysts as a signal to other victims of other possible Ponzi schemes that they could seek relief from the financial institutions involved--knowingly or unknowingly-- in funds related to Ponzi schemes. the article said.
Coquina had maintained in the lawsuit that the bank failed its responsibility to know its customers and detect fraud under BSA's anti-money laundering provisions and failed to stop the scheme at several points in the process. The bank maintains it was merely Rothstein's bank and that it was he who committed the frauds.
In March, TD Bank will face another trial related to a second set of Rothstein Ponzi scheme victims called the Razorback group. The group seeks $200 million from the bank and other defendants.