The trial between a group of Texas investors defrauded in Scott Rothstein's $1.4 billion Ponzi scheme and the bank they claim helped Rothstein facilitate his scheme, TD Bank, is scheduled to begin October 24th. The victim, Texas-based investment partnership Coquina Investments, filed the suit in May 2010 alleging that TD Bank played a "crucial and pivotal role" in Rothstein's scheme. The case will proceed without Coquina's claims based on the Racketeer Influenced and Corrupt Organizations Act ("RICO"), which were recently dismissed by United States District Judge Martha Cooke, the presiding judge on the case. Judge Cooke stated that Coquina failed to show that TD Bank benefited from the alleged fraud and had failed to show a pattern of racketeering activity. RICO claims are alluring to plaintiffs in that they allow recovery of treble damages.
Coquina's complaint centers on the role of several TD Bank employees, including Frank Spinosa, a former regional vice president who allegedly provided substantial assistance to Rothstein that included making false verbal statements to investors, providing false and misleading documents, and actively concealing the fraudulent activity. In his role as vice president, Spinosa is alleged to have provided documents to investors purporting to restrict funds in a TD Bank account for the sole control of Coquina, when in fact there was no restriction enacted and fictitious account balances were generated. Through the actions of Spinosa and other employees, Coquina alleges that investors were provided with a false sense of security and assurances that Rothstein was operating a legitimate operation peddling structured settlements:
Defendant ROTHSTEIN through and with the assistance of TD BANK and other co-conspirators used the funds obtained from victim-investors in various ways to conceal the true nature of the fraud and to provide an air of legitimacy to attract additional investments by Coquina and others.
From April 2009 to September 2009, Coquina purchased nineteen fictitious structured settlement agreements from Rothstein for a total of $37.7 million. Coquina was told that, upon investing a specified amount, an account would be opened at TD Bank solely for Coquina's funds which could only be transferred to Coquina through the use of a "lock letter" purportedly executed by Rothstein. According to the complaint, Spinosa later met with Coquina, confirming that there existed "irrevocable restrictions on the Coquina Account that limited disbursements only to Coquina." However, when Rothstein disappeared and was subsequently arrested in late 2009, there were no funds in the Coquina account, and questions existed as to whether the funds had ever been transferred into the account.
The third count of Coquina's complaint alleges that TD Bank aided and abetted fraud by actively providing substantial assistance to Rothstein's scheme through the use of numerous bank accounts to perpetrate the scheme, the provision of fictitious account statements, and vouching for the legitimacy and safety of the investments with Rothstein. While proving such a claim is difficult, Coquina has already survived an attempt by TD Bank to dismiss the count, with Judge Cooke finding that Coquina had successfully alleged that TD Bank had knowledge of the scheme and had provided substantial assistance through Spinosa's actions.
The suit is seeking compensatory and punitive damages against TD Bank, along with Coquina's costs and fees incurred in prosecuting the action.
A copy of Coquina's complaint against TD Bank is here.