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September 2, 2010 |
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| November 06, 2009 |
By: Wayne Tompkins |
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nvestigators probing Scott Rothstein’s stuttering empire uncovered a folder marked “shred” containing documents from Gibraltar Private Bank & Trust. And $500 million is said to have gone missing from TD Bank accounts he opened.
The folder and other financial documents were seized by law enforcement in a late-night search of the law firm Rothstein Rosenfeldt Adler that went into Thursday morning.
So what did South Florida banks know, and when did they know it?
Both attorneys and law enforcement on the money trail of the Broward County mega-scandal are poring over documents to determine if banks violated procedures that could open them to civil and criminal charges. That, in turn, could expose them to Rothstein’s alleged victims trying to recover a portion of their funds.
Rothstein, the Fort Lauderdale attorney who rapidly built the law firm into a Broward County political powerhouse, is accused by investors of leading a scam using structured settlements. Investors who have surfaced are claiming losses of $400 million or more. The firm is in receivership. Rothstein is in seclusion and said to be cooperating with federal investigators.
“I would assume that part of that cooperation extends to ‘Where’s the money?’ ” said Gary Bagliebter, a partner in Shutts & Bowen’s Fort Lauderdale office who specializes in money-laundering issues. “Then you’re going to get the federal government moving with some dispatch, I think, to freeze whatever funds they possibly can. Mail fraud, wire fraud, bank fraud. There are a whole host of federal statutes under which the government can act to essentially freeze the money.”
Whether investors, law enforcement officials or a bank’s internal investigators, “Everybody is looking for the same thing,” Bagliebter said. “Is there a connection between the bank and the alleged wrongdoer, and is the connection innocent or not?”
In other words, did bank officials fail to use reasonable care, or were accounts throwing off enough red flags to spark an inquiry.
“Was there someone at the institution who might have been complicit?” Bagliebter asked. “Did the volume and dollar values of the transactions fall above or below the threshold that the bank or customer established for determining what its normal course of business would be?”
Rothstein’s firm reportedly had accounts at a TD Bank branch in Fort Lauderdale branch with $500 million as recently as last month but had been cleaned out by Oct. 30.
Attorney William Scherer of Fort Lauderdale’s Conrad & Scherer, who represents clients claiming to have lost almost $75 million, said some investor accounts at TD Bank had restrictions stating funds could be distributed only to designated investors. Scherer asserted those funds were improperly disbursed without those investors’ authorization.
Scherer said one of his clients received a copy of an Oct. 1 letter to Rothstein, signed by Frank Spinosa, a TD Bank regional vice president. In that letter, Scherer said Spinosa confirms restrictions on the account.
Asked if he considered the letter a smoking gun, Scherer said, “I’ll use my own words: It’s a very important piece of evidence.”
TD Bank is a unit of Canada’s TD Bank Financial. Spokeswoman Rebecca Acevedo said the bank cannot discuss a customer’s account for privacy reasons.
“TD Bank will work with the authorities to the fullest extent and as a normal course of business is conducting an internal review,” she said.
An inventory listing items seized under a search warrant at Rothstein’s firm uncovered documents from Commerce Bank — acquired by TD Bank early last year — as well as Gibraltar Private Bank & Trust, Bank of America and the old First Union Bank, which was absorbed by Wachovia and in turn Wells Fargo. Investigators noted the presence of a manila folder marked “shred” containing Gibraltar Bank documents.
Coral Gables-based Gibraltar said Thursday that the Rothstein firm maintained “traditional banking accounts” for law firm operations, including payroll.
“Gibraltar Private immediately reached out to the court-appointed receiver for the law firm, Herbert Stettin, regarding disposition of the balances of the accounts,” the bank said in a statement. “Gibraltar Private has not been contacted by any governmental agencies or authorities. However, the bank will provide full cooperation.”
Bagliebter said that while the Rothstein investors’ money may no longer be in the TD Bank accounts, there is no such thing as money simply disappearing.
“Nobody’s a magician over there,” he said. “They may not be able to trace it, but it’s somewhere.”
Money moves in a number of different forms — and can do so literally at the speed of light.
“Was one or more instruments drawn by an authorized signatory, and the bank presented an instrument to someone that constituted the proceeds of one or more accounts?” he asked.
If the money leaves the United States, Bagliebter said, “What the investigators are able to do is somewhat constrained by the host country law. I don’t know that, for example, you could get a subpoena here that could be enforced in Rabat,” Morocco.
If the money finds its way to a foreign bank, it can be time-consuming to trace if the transaction was structured to disguise its origin, he said.
“If you want to cover your tracks and if you know or someone you know knows what they’re doing, it can make tracing the money difficult — but not impossible,” Bagliebter said.
Scherer said he is hopeful the money will turn up in the United States.
“I hope there is a second bank involved in terms of where the funds were moved, and I hope it’s Gibraltar, and I hope that’s where the money is,” he said. “I don’t know that. But I’m hoping.”
Ken Thomas, an independent banking analyst based in Miami, said TD Bank’s connection to the Rothstein affair could not come at a worse time, with the bank still in the process of introducing itself to the South Florida market and a big regional expansion planned.
“Here is a bank that spent a ton of money to buy Commerce Bank, and they just came off of a very big computer snafu,” he said, referring to a recent botched systems integration that inconvenienced customers.
Thomas said it’s too early to say what role the bank might have played, noting banks often are viewed as deep-pocketed targets.
“Whenever a scandal breaks anywhere, there’s always going to be a bank involved to handle the transaction,” he said.
Wayne Tompkins can be reached at (305) 347-6645.
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