May 15, 2012
By: ACFCS Staff
Facing an unprecedentedly grave hearing on Thursday, May 17, before federal district Judge Marcia G Cooke at which she will consider punishment of TD Bank and its former lawyers at Greenberg Traurig for doctoring and withholding damaging evidence, employees of the two huge organizations have begun lawyering up.
TD Bank lost a high-stakes jury trial in January to a corporate victim of a $1.2 billion fraud perpetrated by its customer, the disbarred, incarcerated attorney, Scott Rothstein, who is serving a 50-year prison term. An eight-person jury took 15 minutes after a 72-day trial to decide that the huge institution was liable to the victim, Coquina Investments, of Texas. It took four hours to settle on the damages, which it calculated as $32 million in actual damages and $35 million more in punitive damages.
Theory of the case sends ominous warning to other institutions
The major significance of the case is that it stands for the proposition that a financial institution that “onboards” a customer it considers “high risk” and then ignores the anti-money laundering warnings that its systems are blaring and fails to supervise employees that have gotten cozy with the fraudster-customer is liable to the customer’s fraud victims.
The theory of the case: “aiding and abetting fraud,” a previously untested “cause of action” against financial institutions, which creates an ominous precedent for other institutions in this modern era of major fraud.
TD Bank and the Greenberg Traurig lawyers face accusations lodged by the lawyer for Coquina Investments, David Mandel, of Mandel & Mandel, in Miami, that they doctored crucial evidence, withheld vital proof and made false statements to the court at trial.
‘Lawyering up’ by TD employees and Greenberg lawyer underway
“Notices of Appearance” filed last week reveal that three lawyers with the national firm Buchanan Ingersoll & Rooney are representing TD’s Senior Vice President of Global AML, Vincent Auletta. The bank’s AML Manager, Amanda Spencer, is represented by an attorney at another national firm, Duane Morris.
A TD Bank spokesperson said Auletta and Spencer are still employed by the bank but declined further comment, citing pending litigation. The spokesperson would not indicate if the bank has hired, and is paying the fees of, the new lawyers. The entry of the lawyers underscores the serious consequences the May 17 hearing could produce for the bank, its individual employees and former lawyers.
Coquina verdict on appeal, but bad news for TD Bank continues
The bank has appealed the $67 million judgment to the 11th Circuit Court of Appeals, in Atlanta, but that has not affected the accusations of misconduct by TD and Greenberg Traurig during the trial. Motions for sanctions by David Mandel have asked for monetary penalties, referral of the bank to the Justice Department for inquiry and to the Florida Bar for possible ethical violations by the lawyers.
Judge Cooke, on her own, entered an order two weeks ago requiring the lawyers at Greenberg Traurig to show cause why they “should not be held in contempt for making incorrect representations to this Court” regarding a document called the “Standard Investigative Protocol.”
At trial, TD Bank said the document did not exist. In a January 12 declaration, TD Bank Senior Vice President for Global Anti-Money Laundering, Vincent Auletta, testified that “to my knowledge, there is not a document titled ‘Standard Investigative Protocols’ which was utilized by the AML… Departments.”
Auletta presented a document he authored called “Standard Investigative Tools,” which listed resources an investigator could use when looking at transactions. He said it was not considered “procedure, policy or protocol.”
Bank recants false statements of former lawyer
On April 24, TD Bank disclosed it had found the Protocol and produced it to Mandel without explanation of how it was found. The bank also withdrew erroneous statements about the protocol made in court by Greenberg lawyer, Donna Evans. Evans left the firm soon after the disclosure that the investigative protocol had not been produced to the plaintiffs.
TD has hired the national firm, McGuireWoods, and Marcos Jimenez, of Kasowitz Benson Torres & Friedman, in Miami.
On January 13, Evans had told the court at trial that, “Mr. Mandel… seems to have created a document that doesn’t exist, there is no document called ‘standard investigative protocol,’” adding that Spencer had remembered the name incorrectly in her December testimony but meant to say the “standard investigative tools.”
A source familiar with the case, who asked not to be identified because it might jeopardize existing relations, informed ACFCS.org that Evans, the former “relationship partner” at Greenberg for the TD Bank representation, has retained criminal defense attorney Hector Flores of Miami. At the time of this post, he has not filed his appearance with the court. A Greenberg spokesperson in Boston declined to comment on why she left the firm. Attempts to reach Evans were unsuccessful.
TD Bank, employees face further liability in sanctions hearing
In addition to the $67 million Coquina verdict, TD Bank recently settled with another Rothstein victim, Razorback Group for $170 million. The bank is also facing “aiding and abetting fraud” claims, plus triple-damage civil racketeering charges, in a case by another Rothstein victim, Emess Capital, which is also represented by Mandel.
(The ACFCS International Financial Crime Conference, Sept. 13-15, 2012, in New York, with Charles Intriago as MC, will probe the compliance, regulatory and enforcement aspects of the landmark TD Bank fraud-money laundering case. Two of the speakers will be David Mandel, who has won a $67 million verdict against TD Bank for “aiding and abetting fraud,” and Mark Nurik, lawyer for imprisoned fraudster Scott Rothstein. To register and for information, please click here or call Alex Garcia at 786-517-2702.)