TD Bank to pay $52.5 million in U.S. settlements over Ponzi scheme

Reuters

By Jonathan Stempel

(Reuters) - Toronto-Dominion Bank (TD.TO) will pay $52.5 million to settle U.S. civil regulatory charges that it failed to report suspicious activity in accounts linked to a Ponzi scheme by Florida lawyer Scott Rothstein, who is serving a 50-year prison term.

The Canadian lender's TD Bank NA unit was fined $37.5 million by the Financial Crimes Enforcement Network (FinCEN) and Office of the Comptroller of the Currency (OCC), and $15 million by the U.S. Securities and Exchange Commission.

Regulators said that from April 2008 to September 2009, TD Bank violated the federal Bank Secrecy Act by failing to uncover and report in a timely manner suspicious activities in accounts belonging to the law firm where Rothstein ran his $1.2 billion fraud.

The SEC brought separate civil charges against Frank Spinosa, a former TD Bank regional vice president, in the U.S. District Court in Fort Lauderdale, Florida.

It said the bank, through Spinosa, "told outright lies to investors," falsely representing that TD Bank had restricted the transfer of funds in Rothstein's accounts while assuring that the funds were safe.

"Financial institutions are key gatekeepers in the transactions and investments they facilitate and will be held to a high standard of accountability when their officers enable fraud," Andrew Ceresney, co-director of the SEC enforcement division, said in a statement.

FinCEN said it was not until after a 2011 review that TD Bank filed five reports identifying $900 million of suspicious activity involving Rothstein.

"In the face of repeated alerts on Mr. Rothstein's accounts by the bank's anti-money laundering surveillance software over an 18-month period, the bank did not do enough to prevent the pain and financial suffering of innocent investors," FinCEN Director Jennifer Shasky Calvery said in a statement.

Based in Toronto, TD is Canada's second-largest bank. It did not admit or deny wrongdoing. A spokeswoman, Rebecca Acevedo, said: "TD Bank is pleased to resolve these regulatory concerns and to put the Rothstein matter behind us."

Samuel Rabin, a lawyer for Spinosa, said in a statement his client will defend against the charges, is being "vilified" for the bank's compliance deficiencies, and has declined a settlement offer because "Mr. Spinosa is a victim in this massive fraud."

TD is appealing a separate $67 million jury verdict from January 2012 relating to its Rothstein dealings.

Rothstein, 51, pleaded guilty in January 2010 to five counts including wire fraud and conspiracies to commit fraud and money laundering, and agreed to forfeit assets including expensive homes and a fleet of foreign luxury and sports cars. He was sentenced in June of that year.

The OCC and FinCEN are part of the U.S. Department of the Treasury. FinCEN said its civil monetary penalty is the first by its new enforcement division, created in a June reorganization.

The cases are In re: TD Bank NA, SEC Administrative Proceeding No. 3-15512; and SEC v. Spinosa, U.S. District Court, Southern District of Florida, No. 13-62066.

(Reporting by Jonathan Stempel in New York; Additional reporting by Sarah N. Lynch in Washington, D.C.; Editing by Gerald E. McCormick and Richard Chang)

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