$67 Million Judgment Upheld in Fla. Ponzi Case

     (CN) – The 11th Circuit this week upheld a $67 million judgment against TD Bank for its alleged role in a Florida attorney’s billion-dollar Ponzi scheme.
     Texas partnership Coquina Investments sued TD Bank in 2010, alleging that it helped South Florida attorney Scott Rothstein run a fraudulent structured-settlement ploy that collapsed in 2009.
     Coquina said that it invested $37.7 million with Rothstein and lost about $6.7 million when the scheme came to light.
     The scheme purported to secure settlements for whistleblowers and victims of sexual harassment, but to pay only a portion of the funds to the victims because they needed the money right away. The investors provided the cash for the initial payments, then collected the larger portion of the settlement later.
     Investors claimed at trial in Florida that TD Bank’s then-regional vice president, Frank Spinosa, had assisted the fraud when he assured investors that the money from the settlements had been deposited in a locked trust account, while in reality Rothstein was able to transfer the funds to himself at will.
     TD Bank argued, among other things, that Coquina’s “sophisticated” investors knew, or should have known, that the investments were “too good to be true, as they had been promised seemingly unrealistic returns between 40 and 50 percent in a matter of months.
     A federal jury eventually ruled for Coquina, finding that the bank had aided and abetted the Ponzi scheme and made fraudulent misrepresentations. The jury awarded the investors a total of $67 million in damages.
     A three-judge panel of the 11th Circuit unanimously affirmed on Tuesday.
     Among several issues on appeal, TD Bank argued that the lower court had improperly admitted a settlement agreement between Coquina and a trustee overseeing the bankruptcy of Rothstein’s law firm. The agreement said in part that Coquina had no knowledge of the Ponzi scheme.
     Calling the offending text “patently self-serving,” Judge R. Lanier Anderson found that it was unlikely to have carried “great weight with the jury, which heard mountains of evidence over a two-month period.”
     “Most significantly, Coquina presented considerable other evidence that countered TD Bank’s ‘too good to be true’ defense,” Anderson wrote for the appellate panel. “Coquina established that Rothstein’s Ponzi scheme involved hundreds of victim investors, and it argued to the jury that ‘[y]ou can’t have a fraud of that scope . . . and in the same breath call [the fraud] obvious’.”
     The panel also rejected the bank’s contention that the trial court had improperly allowed Spinosa to be called to testify despite having invoked the 5th Amendment. The bank objected as well to the trial judge’s instructions allowing jurors to consider Spinosa’s refusal to talk in determining the bank’s role in the scheme.
     “Because the only adverse inferences that could have been drawn from Spinosa’s refusal to answer the questions implicating the alleged error were essentially duplicative of other questions amply supported by properly admitted evidence, any error by the district court in allowing Coquina to ask those questions and in authorizing the jury to draw negative inferences therefore is harmless,” Anderson wrote.
     The bank also objected to the inclusion in Coquina’s damages claim of $28 million that the investors had received just prior to the law firm’s bankruptcy. Coquina agreed to pay that money back to the estate in a settlement, but recovered $25 million of it with the verdict.
     “Coquina would almost certainly be liable to the Trustee for the entire $28.1 million that it received from Rothstein within ninety days of [the] … bankruptcy filing,” Anderson wrote. “Coquina’s decision to settle with the Trustee, and to seek from TD Bank $25 million in connection therewith, was therefore patently reasonable. Furthermore, the $25 million was clearly a loss to Coquina caused by TD Bank’s tortious conduct. It was approximately $3 million less than the $28.1 million that Rothstein had transferred to Coquina pursuant to the Ponzi scheme that TD Bank aided and abetted, which amount the Trustee could have fully ‘clawed back’ from Coquina because it had been transferred within ninety days before RRA filed for bankruptcy.”

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