Saturday, July 20, 2013


A settlement of a claim against it, and a final settlement, with the trustee charged in assembling assets for victims of the Scott Rothstein Ponzi scheme, in the respective amounts of $54m and $72m,  bring the total amount of reported payments, court settlements, and settlements with the trustee to over $500m, for TD Bank. The bank was allegedly the primary financial institution for Rothstein's artful $1.2bn Ponzi scheme, where he fabricated, and sold, interests in bogus court, and out-of-court settlements for sexual harassment and employment discrimination and it is accused of aiding and abetting the fraud.

A half a billion dollars, the total cost to the bank, certainly the largest amount that a bank has been damaged in Florida, due to a Ponzi scheme, and an abject lesson to any banker who is mesmerized by the high volume of business, and lets the money get in the way of compliance. Good clients must always be checked periodically, just to insure that their wealth is legitimate.

Also, there is no way to compute the actual cost of reputation damage, meaning customers who have exited the bank, lost new clients, and other opportunities that will not visit the bank, due to the bad press it has received. TD Bank shareholders, whomever they are, will lose, due to a shrinking profit picture; bank clients may experience increased costs. Whether branches will be closed is anybody's guess, but it certainly will take the bank some time to adjust to the staggering cost.

The question remains; why didn't someone in the bank's compliance department notice, and report, the obvious red flags of Ponzi ?


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