Greenberg Traurig Faces Flak on Allegations of Protecting Ponzi King

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On Thursday, Greenberg Traurig is facing a contempt hearing at a federal court in Miami for failing to turn over key documents in a trial involving investors devastated by convicted Ponzi king Scott Rothstein. In January, federal jurors in Miami found that the TD Bank collaborated with Rothstein and kept assuring victims that their money was secure while Rothstein drained their trust accounts. The bank, which has been ordered to pay $67 million, had hired Greenberg Traurig to represent it. A lawyer for a group of victims of the Ponzi scheme accused both Greenberg Traurig and TD Bank of failing to submit incriminating financial documents and producing ‘doctored’ paperwork that made Rothstein appear as a low-risk customer when they knew he was ‘high-risk’ and needed scrutiny.

Rothstein, the disbarred Fort Lauderdale lawyer is currently serving a 50-year sentence for his $1.2 billion investment scam involving fabricated legal settlements and their sale.

The case by the victim’s group has resulted in the first civil verdict in the U.S. for “aiding and abetting fraud.” The court is now going to find out whether TD Bank and Greenberg Traurig lawyers violated the discovery rules. If proven guilty, the concerned lawyers can be sanctioned, fined or held in contempt of court. It is also possible that U.S. District Judge Marcia Cooke may strike every pleading made by Greenberg Traurig and TD Bank in the matter, thus crippling the ability of the bank to appeal against the $67 million penalty.

  

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The victim’s group has held that the matter be turned over to the U.S. attorney’s office for a criminal investigation over ‘fraud’ committed by the parties involved. Attorney David Mandel, representing the Coquina group said, “Throughout this litigation…has engaged in a calculated course of conduct designed to impede and obstruct the discovery process … TD Bank has buried documents, produced them out of order, late, or outright failed to produce them entirely.”

Both TD Bank and Greenberg declined to comment on the matter. Experts say that if the allegations are proved then it could lead to financial sanctions on TD Bank and possible malpractice claims against Greenberg Traurig.

TD Bank is already trying to distance itself from Greenberg Traurig and has fired it as its counsel in the matter. It is now represented by McGuireWoods. Donna Evans, one of Greenberg’s attorneys who worked with Miami lawyers of the firm has left Greenberg.

In late April, Greenberg lawyers admitted to the court that TD Bank possessed documents about its anti-money laundering policy that the bank and its lawyers had said did not exist while the matter was on trial.