TD Bank Slammed with $67 Million in Aiding Ponzi Scheme


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Dear Lawyers Who Would Like to Make a Ton of Money:

Here is a case where the guilt and liability of the Bank (read that as Deep Pocket) was predicated upon circumstantial and direct evidence — the kind of thing that you are currently ignoring in the foreclosure fraud marketplace. This case is a reminder to you that juries will come back with huge verdicts if they are presented with the right evidence and if you don’t concede your case before you begin.

The Rothstein scheme was no better and no worse than the Wall Street securitization scheme. But he only stole $1 billion whereas Wall Street titans stole trillions of dollars plus millions of homes, so far. The only thing different was the numbers.

The specific accusation here is that TD Bank employees knew of the fraud and assisted in assuring investors their money was sound. In the Fake Securitization of home mortgages scheme, the banks and non-bank entities, as well as title companies, title agents, real estate agents, appraisers, closing agents, and pretender lenders knew of the fraud and assisted in assuring people who were buying homes and assisted in assuring people who were buying mortgage bonds that they were buying a safe “investment.”

Everybody except the borrower and the investor knew the deal was cooked, that the appraisal wasn’t real, that the ratings weren’t real and that the pool couldn’t work because the investment bank had already withdrawn more money than could ever be covered, and that the house could never sustain the value used to close the deal.

Everyone knew that the money being used to pay the investors was coming from the flow of new investments and their own money — that is everyone except the person who bought bogus mortgage bonds and the person who bought a bogus loan product.

Like the fraudulent foreclosure marketplace, the Rothstein business model used people who pretended to be bank employees — in the Bank. Sounds like robo-signing and surrogate signing, doesn’t it? And the party named in the loan origination documents as the lender was pretending to be a lender when in fact the real lender was hiding behind four layers of curtains.

Accordingly, both borrowers and investors were deceived into believing and relying upon the assurances that all industry standards of due diligence, review and confirmation were being performed when in fact they were intentionally ignored for the simple reason that the schemers needed the loans to fail and the mortgage bonds to default in order to make even more money from side-bets on the guaranteed to fail deals.

The truth was that everyone in the false securitization chain was being paid to act as though the loans were securitized in communication with the investor and were paid to act as though the loans were not securitized in communications with the borrowers.

The loans were treated as though they were securitized when it suited the investment banks who created the bogus mortgage bonds and then treated as though they were not securitized when it suited them — fabricating, forging and simulating transactions in which the loan was “Sold” without any money exchanging hands, but profits were taken out of the money due investors.

Based on those “sales” they then posed as creditor lenders in foreclosures and who submitted credit bids at the auction which was conducted by their own affiliates if it was a non-judicial state or by clerks of the court in judicial states.

Rothstein is serving a 50+ year sentence. What do you need, Mister or Madame lawyer, to get off your chair and look into this. Using standard contingency fees and applying them against the $6+ trillion stolen already, there is at least $2.4 trillion in fees waiting for you to pluck off the tree on the low hanging branches. What are you waiting for?

MIAMI –  A federal jury decided Wednesday that Toronto-based TD Bank owes an investment group $67 million for its role in a $1.2 billion Ponzi scheme that was operated by a now disbarred attorney, Scott Rothstein.

The verdict came in a lawsuit filed by Coquina Investments, based in Corpus Christi, Texas. It was the first to go to trial of several pending lawsuits filed by wronged investors against the bank and others. Coquina attorney David S. Mandel said the jury “sent exactly the right message to TD Bank.”

Once a prominent South Florida attorney, Rothstein is serving a 50-year prison sentence after pleading guilty to running a massive scam involving investments in phony legal settlements that imploded in 2009. The 49-year-old lawyer has been cooperating extensively with federal prosecutors, and more people are expected to face criminal charges; seven besides Rothstein have already been charged.

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 has 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.

“This bank was integral to the fraud, and the fact is that it could not have succeeded without their active participation in the Ponzi scheme,” Mandel said. “TD Bank was Rothstein’s partner in crime.”
Spokeswoman Rebecca Acevedo said TD Bank would explore its legal options and insisted the massive fraud should be blamed squarely on Rothstein.

“We will continue to defend the bank against claims of wrongdoing,” Acevedo said.

TD Bank, a subsidiary of Toronto-Dominion Bank of Canada, operates 1,280 branches in 15 states and Washington, D.C., according to the bank’s website. It had $160 billion in total deposits and $202 billion in assets as of Oct. 31.

Mandel said key TD Bank employees knew of the fraud and assisted Rothstein in assuring investors their money was sound. In a lengthy sworn deposition in December, Rothstein claimed he gave former TD Bank vice president Frank Spinosa more than $50,000 to ignore obvious signs of illegal activity.

Called to testify in the Coquina trial, Spinosa invoked his Fifth Amendment right against self-incrimination. His attorney has repeatedly denied Rothstein’s accusations, contending that Rothstein is falsely implicating other people in hopes of winning a sentence reduction recommendation from federal prosecutors.

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10 Responses

  1. @Nora,

    Unfortunately Mr. Paulson demanded immunity, so any chance of a sequel is out. Can’t get back in the mix when you might end up being prosecuted.

  2. @Ann, When Steven Baum began motioning the Court to withdraw all it’s Freddie Files, prior secured through Wells Fargo, I informed many attorney’s to oppose, and sue plenary for the fraud. Goodbye, Steven J. Baum, but Servicer also acted as a debt collector and never bothered notifying homeowners of this fact, they try to make both claims that Frediie owns and Wells owns. Here is the point everyone looks past: Most of the Fannie and Freddie Stuff was purchased through GSE Certificates after 2005.

    That’s right – trillions in loans were also never transferred to the former GSE’s. They also stayed with the Seller Bank, or in some cases never left the originator.

    Believe it or not, the fraud committed a Fannie & Freddie makes Dick Cheney look like a guy that had nothing to do with Haliburton or weapons of mass destruction.

    The entire Euro has already failed, and has only left an inkling of life, due to direct Fed Intervention, and IMF cash throws in excess of a trillion dollars already. The Euro will need an additional 500 billion per quarter for the next 3 years, or dissolve.

    Why won’t Americans band together and put the banks out before they socialize all the losses through FDIC and Euro facilities which feed back to reserve system banks? Have they divided us so badly already that we won’t stand up for one another?

    We need to start a petition now that makes the local congress person sign an oath that prior or after the coming election they will not sweep this under the rug, for the alleged benefit of the entire economy.

    Why won’t any commentators ask the potential candidates for President, including President Barack Obama, why the justice department is not investigating these people, what a “negative liability” on the Feds Balance sheet means in real terms? Why nobody is forcing the swap providers to pay up on sovereign debt default, and instead just changing the name? Why do we need to purchase Title Insurance any longer since we no longer know who is in Title? Finally, why can’t we indict the smaller guys so they will roll immediately and start feeding the criminality back up the corporate chain, like America always will do, when it is the regular folk involved in a scheme to defraud.

  3. @ iwantmynpv

    heh heh. I’m curiously disinterested in seeing that plot fleshed out.

  4. Mortgage Servicers Face Thicket of Force-Placed Threats
    Print Reprints Email . inShare..
    Neil posted something about this subject a week ago. Ain’t gona go away on its own either.

    Stop paying your mortgage. Sit tight. Wait. You never what tomorrow qwill bring…

    A New York probe has brought national attention to servicers’ alleged self-dealing in the sale of force-placed insurance. But the investigation is just one of many looming challenges to the practice.

    A coalition of state attorneys general is targeting force-placed insurance as part of a broader prospective mortgage-servicing settlement. Separately, proliferating class-action suits are churning out awkward-to-explain details of banks’ business practices. And a Housing and Urban Development enforcement attorney who looked into alleged kickbacks paid to banks by insurers has landed at the newly empowered Consumer Financial Protection Bureau.

    “People are talking about force-placed, people are litigating it. It’s become a topic,” says Jeff Golant, a Southern Florida solo practitioner who began filing force-placed insurance suits in 2008. At the time, he and his mother, fellow attorney Margery Golant, were the only Florida lawyers pursuing such cases. He’s since been drafted into a four-firm class action effort that includes 10 lawyers and extensive support staff.

    Challenges to force-placed insurance, in which banks buy insurance on behalf of uninsured borrowers and then tack the cost onto their mortgage debts, were virtually nonexistent two years ago. But allegations of kickbacks and a climate of distrust for mortgage servicers have already produced significant heat. American Banker first wrote about the subject in a 2010 story, “Ties to Insurers Could Land Mortgage Servicers in More Trouble.” (American Banker is a National Mortgage News affiliate.)

    How much money is at stake is unclear, though banks’ cut of force-placed premiums are almost certainly worth hundreds of millions of dollars. Specialty property insurance division of Assurant Inc, one of the biggest purveyors of the product, reports around $2 billion in revenue a year.

    While banks may eventually beat back the attacks on force-placed insurance, the issue increasingly looks like the venue for a significant legal fight. Government investigations are currently the most direct threat, given their expansive ability to demand records and the potential of regulatory remedies. A prospective national mortgage-servicing settlement made public last year sought to limit banks’ ability to collect commissions on force-placed policies, and the offices of two state attorneys general involved in the ongoing settlement talks say force-placed insurance is still on the table.

    There is also a possibility for the new Consumer Financial Protection Bureau to wade into force-placed insurance. Last summer, the Department of Housing and Urban Development transferred its authority to enforce the Real Estate Settlement and Procedures Act to the CFPB, along with much of its enforcement staff. Among those who jumped to the new agency was Anthony Romano, an attorney who in his former job had contacted Jeff Golant about a possible force-placed insurance investigation.

    Neither Romano nor the CFPB responded to a request for comment regarding whether the agency might be looking at force-placed products. But Edward Mills, a Washington policy analyst for FBR Capital Markets, says force-placed is an obvious candidate for a bureau investigation. Such a review could be undertaken quickly in coordination with state enforcement officials, potentially allowing the fledgling agency to produce quick results.

    “The bureau is going to be looking at things they can do which will benefit the average American, and obviously one of the concerns in DC is the practices of servicers during the foreclosure process,” he says. “In many ways it’s just a natural progression.”

    While private litigation is generally a slower process than government reviews, class action attorneys have had a head start. Minneapolis-based Nichols Kaster filed the first against JPMorgan Chase & Co. in early 2010, alleging that the company had forced home-equity borrowers to obtain excessive amounts of flood insurance.

    Golant’s team followed up with a case against Wells Fargo in April of 2011, and other firms have entered the fray since. At least 10 force-placed cases are now in progress against Bank of America, Wells Fargo & Co, JPMorgan Chase & Co, RBS Citizens Bancorp, and U.S. Bancorp.

    The suits are generally in their early stages. But the only one to have advanced past class certification, Hofstetter v. Chase Home Finance LLC, suggests serious trouble for banks.

    In depositions made public following the defense’s failure to properly request confidentiality from the court, Chase employees described a system in which Chase collects hefty commissions on force-placed insurance — yet does no work in relation to the policies.

    “What function does Chase Insurance Agency, Inc. perform with respect to flood insurance?” the plaintiffs’ attorney asked in a deposition.

    “I would say no function,” Chase’s employee responded.

    Things didn’t improve from there. According to the depositions, Chase gives force-placed insurer Assurant Inc. full control over underwriting, customer service, and even the production of letters on Chase letterhead.

    One Chase employee testified that, despite Chase Insurance Agency Inc.’s name, the division employs absolutely no insurance agents. That could potentially raise legal concerns, in that RESPA and some state laws restrict both unearned fees and referral payments to unlicensed insurance agents.

    “[Chase] does not monitor or track flood insurance coverage, does not issue flood insurance coverage, and does not obtain flood insurance coverage,” plaintiffs’ attorneys stated in a class certification brief.

    Chase declined to speak about the case. In a statement to American Banker, Assurant said that it was not directly involved in the Hofstetter case and couldn’t comment on either the litigation or the New York investigation.

  5. @Chas404,

    The house isn’t free.

    We paid forward the minute Paulson and Bush betrayed the capitalist mindset by bailing out the banks and AIG. We paid even more when Obama, handed that rotten, hot potato that had already cost us an enormous amount of money, felt unable to allow those same banks to collapse after having already cost us so much.

    The house was paid with the forthcoming elimination of Social Security and Medicare. It was paid for with the elimination of teachers, firefighters and police departments. It was paid for with the lifes lost by unsuspecting drivers when they engaged on the bridge in disrepair and on the brinks of collapsing. It was paid for by the hundreds of thousands of jobs lost in the past 10 years and not replaced for want of investment into research and development.

    The house was paid for by 10 years of wars the American people did not want to engage in and were thrown into in the most underhanded fashion any war has ever been engaged into. It was paid for by the thousands of soldiers who lost their life as a result.

    The house is not free. It was paid forward 10 years ago. And we have kept on paying it over and over.

  6. Your honor I agree with your worry that someone will recieve a ‘free house’. That is why I am here defending my client the homeowner. We want to ensure that Fannie Mae dissolved trust XYZ 2005-4 and its Belgian investors who long wrote off the house as a tax loss and further compensated via MBIA insurance, CDS contracts, the Fed and the ECB don’t end up with a ‘free house’ which they obviously do not want.

    On the other hand my clients are willing to maintain and continue to invest in this depreciating asset known as a ‘free house’ after already sinking down payment, upgrades, sweat equity, junk fees, 6 yrs of interest payments, inflated taxes during the boom, and high insurance cost.

    ‘Free House’ indeed.

    There are NO free houses. Not even Oprah gives away free houses.

  7. There is no Such Thing As A FREE HOUSE and why there are no foreclosure trail appellate decisions.
    January 19th, 2012 | Author: Matthew D. Weidner, Esq.
    I have had an extraordinary number of my foreclosure cases dismissed in the last year. The number is frankly staggering. The foreclosure mills started dismissing or dropping them in January 2011 and they just keep on dismissing them right up until today. This fact is a recognition of what I’ve been saying all along that their cases are so fatally flawed that dismissal is the only responsible and legally appropriate thing for the to do.

    The foreclosure files currently pending in courtrooms all across this state are a mess of improper legal pleadings and sometimes fraudulent and misrepresented facts. The more the banksters try to cover up and avoid their lies and the problems they’ve caused themselves the worse things get. And so the only way out, the only responsible, ethical, proper thing to do is dismiss the cases. Most are doing this, but increasingly some cases are going to trial. Now I recently wrote that there are very few appellate decisions in foreclosure that come from trial and I wondered why this was the case. I recognize now a big part of the reason…..

    A “win” for a defendant in a foreclosure trial is not a “win” at all.

    That’s right, in yet another example of the absolute unfairness and proof that there are two sets of laws, one for those with money and power and one for all the rest of us, I have discovered that even if we have a trial in a foreclosure case and even if we “win” that foreclosure case, all the Plaintiff has to do is turn around and refile the case the very next day. It’s just maddening and entirely mind boggling and totally frustrating. We can work for months to prove up the banksters and their fraud and the lies and the incompetence and the crimes and all they’ve got to do is shrug their shoulders, dust themselves off and start all over again. I’m afraid part of this analysis will come into play in the Florida Supreme Court’s decision in the pending Pino case.

    But back to the “FREE HOUSE” analysis here on the ground. Recently a transcript of a foreclosure trial hit the blogosphere. (You really must read it here.) No matter what the problems on the bank side, no matter how many errors or flaws or questionable documents or facts, the court just could not fathom finding for the Defendant in the case because the court absolutely could not stomach giving the defendant a ‘FREE HOUSE”.

    Well, I have to wonder, how would that judge’s analysis have changed if the defense attorney had merely explained to the judge that there is no free house, that there is no windfall for the consumer, that the banks can get away with whatever they want and then just turn around and call ‘DO OVER’ whenever they want? I should think this would make the judge a whole lot less concerned about issuing a verdict for the defense….after all, there is no real “harm”….harm in the sense that the banks will suffer no real consequence for their improper actions.

    This understanding must make it’s way all across this state’s court system. We must all understand that the only way to get chopping through this heavy thicket of a quagmire of a mess of a garbage dump that is most of the pending foreclosures is to chop through all the garbage, throw all the cases into the wood chipper and do them over, correctly.

    Read the attached case carefully and think about the larger implications…..I see this as the ultimate response to the “FREE HOUSE” argument, and a very powerful tool for our judges. As much as I hate the opinion and think that it is very wrong, it allows our judges the freedom to execute good judicial discretion without the ‘NUCLEAR’ option of the dreaded, ‘FREE HOUSE’!

    Now, the problem with the opinion is it tosses key legal principles of Res Judicata and Double Jeopardy completely out the window, but hey, we’re all well aware that there are a second set of rules for the banks anyway…..right?


  8. @Iwantmypvn,

    You named the same guys I always do: Paulson, Geithner and Dimon (for some reason, I hardly ever thing of Moynihan or other banks CEOs. Dimon, the arrogant liitle b…, on the other hand, always makes the list. Go figure!

    Nayway, I thought those things didn’t happen in Canada? Wasn’t something posted here recently about Canada being the new promised land?

  9. Something is very wrong with my mortgage and my deed.How could be three title policies.And one loan? I paid Fidelity Title in 02 for a title policy. In my possesion are additional loan documents on my home.With Web Title,First American Title. Thankfully. My fFidelity Title policy is still in effect.
    What is being done.In Suffolk County NY. Homes are being funded on variations of the sect.dist.blk and lot numbers.Also variations in the purchasers and sellers name format. John & Jean Smith,to Bill & Barbara Jones, next Smith to Jones next John & Jean Smith to Bill Smith ll .Adding zeros & spacers to property descrptions. Decimal points moved.Plain Algebra.

  10. Steal a millions and you go to jail, steal billions and your employees go to jail, steal trillions and Oliver Stone makes a movie for you to paint you in a better light to the public. The indictments should start direct with Paulson (former treasury secretary, Goldman Guy) and Geithner, treasury secretary, former NY FRC Chief,BONY Mellon Guy).

    “We couldn’t have known there was systemic risk”, said Paulson. Geithner quickly retorts, “the people will eventually see that the banks never conveyed anything other than cash flow and had already siphoned off the assets, plus they are short all the pools through strike price contracts and they have S&P in the bag, when they start downgrading the banks are going to make a killing”

    Paulson smacks Geithner repeatedly, “Get a hold of yourself man, we are going to get the collateral back through MERS and the deleverage will be complete by 2012” “Have them dry out liquidity on the Euro and we will blame the Greeks and the homeowners for the mess” “That should work” smiles Geithner.

    The both share a long deep kiss while Jamie Dimon films the event! Run credits.

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