09/23/2013 03:31 EDT | Updated 11/23/2013 05:12 EST

TD Bank Ponzi Scheme Fine Set At $52.5 Million


WASHINGTON - TD Bank (TSX:TD) is paying US$52.5 million to settle U.S. civil charges after regulators accused the bank of failing to report suspicious activity in accounts linked to a US$1.2-billion Ponzi scheme.

The settlements were announced Monday by the U.S. Securities and Exchange Commission and the Office of the Comptroller of the Currency.

The OCC said TD Bank failed to file suspicious activity reports to the government on the accounts of Scott Rothstein, a former Florida lawyer now serving a 50-year prison sentence for the Ponzi scheme.

The SEC said the bank deceived investors by saying that it had restricted Rothstein's transfers of money in the accounts.

"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," said Andrew Ceresney, co-director of the SEC's enforcement division.

TD Bank is paying a US$37.5-million penalty to the OCC and a $15-million penalty to the SEC.

The Canadian bank said it was "pleased" to resolve the case with regulators.

"TD works very closely with our regulators to ensure that it complies with all applicable laws and regulations," the bank said in a brief statement.

In January 2012, a U.S. federal jury ruled TD Bank owed Coquina Investments $67 million for the Canadian bank's role in the Ponzi scheme in the first of several lawsuits filed by wronged investors against the bank and others. The ruling is under appeal.

TD took a $285-million provision in its first quarter of 2012 related to lawsuits it was facing in connection with the case. The bank said at the time that it would defend itself vigorously, but that the provision for litigation provision was the prudent move.

Once a prominent South Florida lawyer, Rothstein pled guilty to running a massive scam involving investments in phoney legal settlements that imploded in 2009.

The scheme was one of the largest frauds in South Florida history and triggered the failure of the once high-flying Fort Lauderdale law firm Rothstein Rosenfeldt Adler.

Rothstein had boasted about paying bribes to unnamed politicians, judges and law enforcement officials and he raised thousands of dollars for the campaigns of many state and national politicians.

Testimony and court documents show that Rothstein used an account at a TD Bank branch as an integral part of the scheme. Conspirators in his scheme allegedly posed as TD Bank employees, and one of Rothstein's associates devised a fake TD Bank website on which fake account balances were posted for investors.

— With files from The Canadian Press

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