TD Bank, Former Exec Charged in Ponzi Scam
(CN) - TD Bank and a former regional vice president lied to investors to help perpetuate now-disbarred attorney Scott Rothstein's $1.2 billion Ponzi scheme, the SEC claims in Federal Court.
From October 2005 to October 2009, Rothstein used his law firm to sell fake discounted settlements to investors, telling them he had deposited the settlement money into his attorney trust account at Commerce Bank, which later merged into TD Bank.
In a lawsuit in Miami Federal Court, the Securities and Exchange Commission claims the bank's regional vice president, Frank A. Spinosa, "made material misstatements and omissions to investors and prepared false and misleading documents that he knew Rothstein would provide to investors."
As the scheme began to unravel, the agency says, Spinosa lied to investors "concerning the safety of the investment." For example, he allegedly told them that the funds were locked into their bank accounts and could not be transferred when they could. He also told at least two investors that the trust accounts held balances totaling "hundreds of millions of dollars," the SEC says.
"This was false," it claims. "The settlements Rothstein sold to investors did not exist and the purportedly 'locked' accounts generally held no more than $100."
The Ponzi scheme collapsed in October 2009, bankrupting Rothstein's law firm, Rothstein, Rosenfeldt & Adler.
"Rothstein surrendered to federal criminal authorities shortly thereafter and revealed that the plaintiffs and defendants never existed and the settlements were not real," the SEC claims. "He had forged the settlement documents, and the trust accounts did not contain hundreds of millions of dollars."
Rothstein, 51, is serving 50 years in federal prison. He was disbarred in 2009.
TD Bank agreed to settle the claims for $15 million, without admitting or denying the allegations. It has also been sued in Newark Federal Court by investors who claim it misled them about Rothstein's scheme.
Spinosa, 50, worked for Commerce Bank from April 2006 to March 2008, and then served as TD Bank's regional vice president until it fired him in October 2009.
In May 2012, the SEC also sued two Ft. Lauderdale-area men, George Levin and Frank Preve, who it claims fed investors to Rothstein's scam.
A federal judge in February dismissed some - but not all - of the securities fraud claims against them.