MESSAGE TO BANKS IMPLICATED IN PONZI SCHEMES: ADMIT YOUR ERRORS

This week, a Federal Judge in Florida ordered TD Bank to pay, within 14 days,  the $67m awarded in favor of Coquina Investments three years ago, in a case where the bank's role in facilitating and perpetrating the Scott Rothstein Ponzi scheme, at the expense of its victims, was painfully exposed to the public. The Bank, after exhausting all appellate remedies available to it, hung on to the bitter end, filing motions that many thought were without legal merit, and interposed purely for dilatory purposes; they were, of course, denied.

The bank's conduct during this case has not gone unnoticed; a senior bank officer's involvement, in allegedly acting as a reference for victims seeking assurance about the safety of their investment, and the bank's willful blindness to the scheme, was compounded by its blatant discovery violations, and desire to drag out the post-judgment proceeding for years. Such actions are long remembered, not only by the legal community, but by the public at large. The amount of reputation damage that the bank has sustained cannot be measured, and now both trial lawyers, and their clients, know that TD Bank will fight all claims, even those where there is little dispute about their merit, tooth and nail, and use every tool the legal system has available, to do so. This bank's culture is such that it will not settle claims; that is readily apparent here.

Since many plaintiffs do not have the bottomless war chest, for attorneys' fees, that a bank has, plaintiffs  with other claims know that they must prepare for a battle. This can only hurt the bank's image, if more of its dirty laundry is plastered on the pages of local media, in court coverage. Banks that are in the news, repeatedly, in a negative light, scare away customers.

 The lesson here: if you were burned in a Ponzi scheme that your staff did not catch, or one that was too lucrative to ignore, admit your errors, settle the case honorably, and move on. You do not need to have the public, your prospective future clients, think that you cannot concede that mistakes were made.