Bankruptcy trustee in Scott Rothstein Ponzi scheme case files $20 million clawback suit against TD Bank

The clawback suit against TD Bank alleges the bank and its officials ignored clear warning signs as hundreds of millions of dollars quickly flowed through Rothstein's accounts. "Rothstein did not act alone in committing this four-year, $1.4 billion, fake settlement Ponzi scheme. One of his co-conspirators was TD Bank, which acting through its authorized agents, enabled and allowed Rothstein to use its name, facilities and accounts to deceive investors and lenders," the suit alleges. "Ignoring numerous 'red flags,' TD Bank blindly allowed RRA, through Rothstein, to open numerous accounts in RRA's name and to transfer huge sums of money between and among the accounts, which enabled Rothstein to facilitate the fraud," the suit claims.

http://articles.sun-sentinel.com
July 26, 2011

Bankruptcy trustee in Scott Rothstein Ponzi scheme case files $20 million clawback suit against TD Bank
Peter Franceschina, Sun Sentinel

The bankruptcy trustee in the Scott Rothstein Ponzi scheme has filed a clawback lawsuit against TD Bank seeking at least $20 million, alleging the bank and some of its employees were complicit in the massive investment fraud.

With a fast approaching two-year deadline to file clawback suits, there could be a stream of similar cases against other defendants in the next three months. Last week, the bankruptcy trustee filed a $2.4 million clawback suit against J.R. Dunn Jewelers, covering jewelry purchases Rothstein made there.

TD Bank spokeswoman Rebecca Acevedo said bank officials were still reviewing the suit against the Portland, Maine-based financial institution, but stated that "TD Bank plans to aggressively defend against this lawsuit." The bank has said in other legal actions that it had no knowledge of Rothstein's fraud.

The clawback suit, filed Monday in U.S. Bankruptcy Court in Fort Lauderdale, seeks damages of at least $20 million, but there are other claims in the suit for additional, unspecified damages.

Chuck Lichtman, an attorney for the trustee who is attempting to recover money for Rothstein's bilked investors, declined to say how much the trustee will ultimately seek. "We view the damages claims as substantial," he said.

Rothstein's investment scheme collapsed in fall 2009, plunging the Rothstein Rosenfeldt Adler law firm of Fort Lauderdale into bankruptcy. Rothstein defrauded investors, who believed they were buying into large legal settlements which did not actually exist, of $363 million.

The clawback suit against TD Bank alleges the bank and its officials ignored clear warning signs as hundreds of millions of dollars quickly flowed through Rothstein's accounts.

"Rothstein did not act alone in committing this four-year, $1.4 billion, fake settlement Ponzi scheme. One of his co-conspirators was TD Bank, which acting through its authorized agents, enabled and allowed Rothstein to use its name, facilities and accounts to deceive investors and lenders," the suit alleges.

"Ignoring numerous 'red flags,' TD Bank blindly allowed RRA, through Rothstein, to open numerous accounts in RRA's name and to transfer huge sums of money between and among the accounts, which enabled Rothstein to facilitate the fraud," the suit claims.

The lawsuit says Rothstein was a cherished "VIP client" whose picture was circulated among bank employees to ensure they recognized him when he came into the bank's branches. Rothstein had over $3 billion in deposits and disbursements at the bank in a period of 18 months, and moved over $1 billion through his accounts in the final three months of his scheme, the suit says.

"In a final absurdity, TD Bank permitted Rothstein to transfer $16 million of RRA's funds to a bank in Morocco. He then fled on a private jet to Morocco just as his Ponzi scheme unraveled," the suit says, adding that TD Bank then swiftly fired its regional vice president, Frank Spinosa, who was close to Rothstein and oversaw his accounts.

Rothstein, 49, is serving a 50-year prison sentence for racketeering, money laundering and fraud, although he hopes to get that reduced through his cooperation with federal authorities. Five of Rothstein's associates have pleaded guilty in the case.

One of those defendants, former Café Iguana nightclub owner Stephen Caputi, admitted he posed as a TD Bank official at local branches to dupe investors. Rothstein primarily used the bank's Weston and Fort Lauderdale branches, and secured conference rooms at the bank to woo investors.

Prosecutors have said in court documents that they expect to bring an indictment against more of Rothstein's co-conspirators in the coming months.

moc.enubirt|anihcsecnarfp#moc.enubirt|anihcsecnarfp or 954-459-2255

http://articles.sun-sentinel.com/2011-07-26/news/fl-rothstein-ponzi-td-bank-clawback-20110726_1_clawback-suit-chuck-lichtman-frank-spinosa


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