In the first jury trial related to the Scott Rothstein Ponzi scheme, that began earlier this week, U.S. District Judge Marcia Cooke in Miami issued an order to the defendant, TD Bank, to provide information about how it handled suspicious activity reports (SARs) pertaining to customer accounts run by Rothstein. The lawsuit, filed by Melvyn Klein and his company, TX-based Coquina Investments, seeks to collect $27 million from TD Bank, which represents the company's alleged losses in the fraud.  TD Bank is accused of having aided and abetted the Rothstein fraud. While TD Bank officials had previously acknowledged that its fraud detection systems generated 21 internal fraud alerts on customer accounts that Rothstein controlled, they repeatedly have denied that the bank had any personal suspicion that Rothstein was scamming investors or laundering money. Coquina requested the bank to produce a report documented its SAR activity, but the bank apparently never responded.  This apparently led Judge Cooke, in her 11/18/11 order, to say that the bank was supposed to seek advice from the Office of the Comptroller of the Currency about producing a report or redacting it. Cooke's order further said the bank failed to provide any evidence that it has taken appropriate steps to obtain an expedited review by the Comptroller's office and now should detail its communications (by 11/22).  And by 11/28, the bank has been told to have a response from the Comptroller's office or at least be ready to discuss the issue with her. Scott Rothstein, who was sentenced to 50 years, clearly operated a criminal enterprise and used bank accounts to transfer money from investors and fund a lifestyle that involved luxury homes, cars and jewelry. TD Bank, which is a subsidiary of Canada's Toronto Dominion Bank, had not been in the news before about SAR violations. However, South Florida institutions have been cited for such violations, resulting in significant penalties, such as the following:

• Pacific National Bank was fined $7mn in March for not having conducted sufficient due diligence and audit procedures, nor filing related SARs, pertaining to high risk transactions.
• In 2010, Wachovia (now owned by Wells Fargo) agreed to pay a $50mn fine and forfeit $110mn that represented proceeds of illegal narcotic sales laundered through the bank.  [So. Fla. Business Journal, 11/22/11]