TD Bank, Greenberg Traurig Sanctioned Over Documents

Toronto-Dominion Bank (TD) was sanctioned by a federal judge in Miami for “willfully” concealing evidence relevant to a trial over whether it aided a $1.2 billion Ponzi scheme by disbarred attorney Scott Rothstein.

U.S. District Judge Marcia Cooke also sanctioned Greenberg Traurig LLP, a law firm for the bank, for “negligently” failing to turn over documents to Coquina Investments, which won a $67 million verdict against the bank on Jan. 18. Coquina claimed after that verdict that TD Bank, Canada’s second-largest lender, and Greenberg Traurig withheld documents they were required to disclose.

Cooke said the bank and the law firm abused the exchange of evidence known as discovery, which was unfair to Corpus Christi, Texas-based Coquina. She ordered TD Bank and Greenberg Traurig to pay Coquina’s attorney’s fees on its sanctions motion, and made other factual findings against the bank.

“The discovery violations in this case resulted in Coquina’s diminished ability to prove that TD Bank’s actions were unreasonable and it had knowledge of fraud,” Cooke said yesterday in a 30-page ruling. “This sanction serves to compensate Coquina for the added expense caused by Greenberg Traurig’s and TD Bank’s discovery violations and abusive conduct.”

Rothstein, co-founder of the now-defunct Fort Lauderdale- based firm Rothstein, Rosenfeldt & Adler, is serving a 50-year sentence for conspiracy to commit fraud. Investigators say his $1.2 billion Ponzi scheme is the largest in Florida history. Rothstein sold investors stakes in sex- and employment- discrimination cases that turned out to be non-existent.

Rothstein Fraud

After briefly fleeing the country when the scheme collapsed in October 2009, Rothstein has been cooperating with investigators. At least eight associates of Rothstein have been accused of helping him defraud investors.

Cooke said she found a “pattern of discovery abuses before, during, and after trial.” She declined to sanction individual lawyers at Greenberg Traurig whose “handling of this case left much to be desired.” Their errors in producing documents were “simply incredible,” yet they didn’t act willfully or in bad faith and don’t deserve sanctions, Cooke ruled.

“TD Bank respectfully disagrees with the court’s order and will appeal it and the underlying jury verdict at the appropriate time,” Maria Leung, a spokeswoman for Toronto-based TD Bank, said in an e-mail. “We do not believe that the record before the court supports the findings that were made regarding willfulness or the sanctions that were imposed.”

Leung said the bank would continue to defend itself.

Regret ‘Deficiencies’

“We will comply with Judge Cooke’s ruling,” Lourdes Brezo Martinez, a Greenberg Traurig spokeswoman, said in an e-mail. “We regret the deficiencies that gave rise to this order.”

Cooke, who held several days of hearings on Coquina’s motion, said Greenberg Traurig had more than 200 attorneys involved in the case, with separate teams handling banking issues, document production and pretrial and trial practice. TD Bank hired another firm as well, “but the firms did not have any mutual coordination,” the judge said.

“It often times appears that this litigation was conducted in an Inspector Clouseau-like fashion,” Cooke wrote. “However, unlike a ‘Pink Panther’ film, there was nothing amusing about this conduct and it did not conclude neatly.”

The firm, she said, failed to conduct an adequate search to determine whether a document known as a “Standard Investigative Protocol” existed so that it could be turned over to Coquina. The document provided guidance on “reportable and non- reportable suspicious activity,” according to the judge.

‘Heavily Contested’

“Whether this particular document existed became a heavily contested issue at trial after Greenberg Traurig’s late production of some key documents brought the issue to the fore,” the judge wrote.

Cooke said “the evidence is clear” that the firm had a copy of the document before trial and “failed to conduct a thorough search” for it.

The bank, she wrote, “was so firmly rooted in its belief that the document did not exist that it failed to conduct a comprehensive search to find it.”

One bank employee’s failure to open all of the documents attached to his e-mail “compounded with the bank’s refusal to even consider the validity of Coquina’s request resulted in continued denial, deception and delay,” Cooke said.

During the January trial, Donna Evans, a lawyer who then worked for Greenberg Traurig in Boston, told Cooke that the bank didn’t have a “Standard Investigative Protocol,” according to a transcript of proceedings on Jan. 13.

E-Mail Attachments

In yesterday’s decision, Cooke said Evans had received an e-mail with four attachments, including the “Standard Investigative Protocol.”

“It is unclear whether Evans reviewed the printouts or what she did with those documents,” Cooke said.

Evans couldn’t immediately be reached by telephone yesterday at a phone number listed in the Boston area.

Cooke also faulted TD Bank’s general counsel’s office, saying it had access to information that its outside lawyers did not.

“TD Bank willfully concealed relevant evidence from its trial counsel,” Cooke wrote. “In doing so, TD Bank prevented trial counsel on both sides from fully and accurately presenting the issues in this case, and interfered with the judicial process.”

She ordered a finding that the bank’s fraud alerts and monitoring systems were “unreasonable and that TD Bank had actual knowledge of Rothstein’s fraud.” She said the sanction “will prevent further prejudice to Coquina in an eventual appeal on that issue.”

The case is Coquina Investments v. Rothstein, 10-cv-60786, U.S. District Court, Southern District of Florida (Miami).

To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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