How Rothstein Says Banks Helped Run His Ponzi Scheme, Part 1: Gibraltar Bank

Categories: Broward News
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Rothstein (center), Rosenfeldt, Adler.
Update: Also check out part 2, on Rothstein's accusations on the role of T.D. Bank in the scheme.

​Both T.D. Bank and Gibraltar Private Bank & Trust Co. have settled with a group of investors in Scott Rothstein's Ponzi scheme and will pay them $130 million, according to the Miami Herald. Jury selection for the suit was set to start tomorrow.

Gibraltar, based in Coral Gables, will pay $10 million in an agreement reached yesterday. T.D. Bank will pay investors $100 million for losses and $20 million in interest, plus an additional $50 million to investors' attorneys.

The investors, collectively called the Razorback Group, had originally asked for $180 million in damages, according to the Associated Press. T.D. Bank requested that details of the settlement be kept private on Monday, and a hearing on the matter was scheduled for this Friday. Looks to be moot now. 
Both banks got plenty of shoutouts in Rothstein's ten-day deposition marathon in December, when Rothstein claimed not only that bankers at T.D. and Gibraltar knew there were shady dealings going on but that they were in many cases actively participating in them. 

Information from just the first three deposition sessions reveals much of how the banks were allegedly complicit in the billion-dollar scheme; here, in Rothstein's own words, is how Gibraltar helped him do it.

Afternoon session Dec. 12:

Investigator: How much money do you think you've moved in the Ponzi... we know your bank accounts and we know that through the T.D. account and the Gibraltar account... Do you have an idea of how much money you were stealing during this time?

Rothstein: ... It was well over a billion dollars that moved through the accounts.

Actually two billion; you're a billion shy.

A billion here, a billion there, pretty soon --

... Did you invite him over so that you guys could do something to answer Carol's demands from a couple of days before?

... We went ahead to the bank and get [sic] a letter that I was going to put on top of the account statements.

It was the standard process that we always used, not Ted and me always used, that the people involved in the Ponzi scheme always used in getting an original letter which we attached with the bank's assistance to a fake bank statement.

What did you do when you went to Weston [T.D. Bank branch] with Ted?

We gave them the bank statement. We put on what was commonly known in our firm and commonly known to T.D. Bank as the show...

And there was a cover letter with a phony bank balance for the bonds' accounts that's allegedly in your trust account?

Real cover letter, fake bank statement.

It showed 57 million or whatever the bond number was?

Right...

If you look at the actual screen shot from your computer, it would have shown $100 in that account, right?

The real one, sure...

Do you have any reason why you chose Gibraltar [Bank]?

I was actually solicited by them to come to the bank by John Harris... He was a market manager for them as best as I recall. He ran the Fort Lauderdale market for Gibraltar...

Can you summarize the activity during the time of the Ponzi at Gibraltar. Just how -- what went on there?...

Yeah. Ultra high volatility, millions of dollars going in and out on a daily basis, sometimes millions of dollars going in and out within minutes. It was a very volatile banking relationship.

By "volatile" what do you mean?

Several different things. One, it was volatile in terms of the number of transactions. I believe that we were their largest wire customer at one point in time, or certainly up there.

It was also volatile in of the amount of scrutiny we were getting from certain due diligence folks down in Coral Gables...

Now, was this bank important for your Ponzi scheme?

Critical.

And why?

Because I had John Harris in my pocket and later had [Gibraltar Chairman and CEO] Steve Hayworth in my pocket, and they were essential for me being able to do what I needed to do without having interference with the federal or state authorities...

You've got a $2 billion Ponzi. And I want to know whether having two banks is important in terms of how you operated the Ponzi?

It was important initially to have Gibraltar. It became important when I started dealing with the hedge funds and was really growing this to have a second and much larger bank because my investors, the feeder funds, wanted it. Ultimately it became a very, very smart, let's call it a smart criminal decision on my part because we ended up at a bank where we were also able to place key players into our pocket. ...

I was going to have you do this later, but my helpers say I should ask you to explain what you mean by "in your pocket" with respect to Harris and then later Hayworth, Mr. Hayworth.

Harris was in my pocket by me supplementing his lifestyle to the extent that I changed his lifestyle. He received gifts from me. He traveled with me extensively. He was on our permanent guest list for all of our sporting events including Dolphin's [sic] stadium and the Heat. Traveled with me on charter private aircraft to all kinds of sporting events. I took him to several thousand dollar a plate smokers for the various charities I was involved in.

He was one of those people that was living the rock star lifestyle in exchange for protecting us at the bank. He also had a promise from me that at a point in time either if he had a problem with Gibraltar Bank or at the appropriate time when I needed him that he was going to come and actually work for me at a substantial salary with a participation ability in our deals to oversee all the deals...

How about Mr. Hayworth?

Hayworth was simple. He needed an investor for the bank, and I invested $5 million...

Was there ever a conversation or any conversation with any of those folks concerning your regulatory problems, compliance problems, vis-a-vis becoming a major shareholder in the bank?

Yes. I was told by Harris and by Steve Hayworth that we don't investigation [sic] shareholders of the bank.

That gave you some [incentive] to become a shareholder?

That's the one and only reason I invested...

[Regarding emails about insufficient funds between RRA and Gibraltar execs] What's going on here?

This is standard operating procedure with Gibraltar. My conversations and my deal with Harris and [Lisa] Ellis were simple. Any time there's any problem with the account, notify me, and I'll let you know how to move or where to move. That accelerated to the point where they were, I basically just told them, move what you need to move and let me know what you've done.

And did they do that?

On many occasions...

[From a line of questioning about an email appearing to be from Bank Secrecy Act compliance officer Julie Ansari to Harris, asking numerous specific questions about the "unusual" activity of Rothstein's accounts:] At any time were any of those answered or did the bank ever investigate those in detail to determine the facts surrounding paragraphs one through five?

I never provided real answers to any of these questions.

If in fact they had gotten the real answers to these questions, what would that have done to your Ponzi scheme?

It would have exploded.


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6 comments
James Madison
James Madison

To "Adolpho Hayworth":

Congratulations on your "nom de plume" ... and on your insight. You clearly you have considerable knowledge about the dealings at Gibraltar bank since what you say neatly dovetails with reported facts. I, for one, would like to see posted (on www.scribd.com for example) some of your documentation, particularly, the private placement documents for the sale of Gibraltar to the investors, the names of the investors and internal reports you may have. A Rothstein "wikilinks" type site is desperately needed here and scribd.com would be a good place to start.

Your comments on Paul Singerman and Berger Singerman controlling the bankruptcy case, and the Gibraltar settlement in particular, were dead on point. Gibraltar was clearly far more culpable than TD Bank. Paul Singerman was and is an owner of Gibraltar. He partnered with Rothstein to purchase Gibraltar and Rothstein testified that the key selling point of that purchase was that he would have clear sailing to ignore money laundering regulations.

Paul Singerman and his still undisclosed partners personally benefit mightily from the bankruptcy settlement that Paul Singerman "negotiated." Without the "settlement," not only is their equity completely wiped out but they face enormous potential personal liability for aiding and abetting Rothstein.

Rothstein testified that the scheme could not have been carried out without the cooperation of Gibraltar ... even more so than TD Bank. That statement speaks volumes.

It is a complete spectacle to have Berger Singerman running the bankruptcy case that, in its most essential part, centered on a scheme that required the close cooperation of Gibraltar. And it is a hard slap to the face to Rothstein's victims, to Floridians, and to the so shredded concept of "ethics" as practiced here in Florida, to allow Berger Singerman to continue as counsel.

You observations on the interjection of a purported "solution" to the insoluble Singerman/Rothstein/Gibraltar connection conflict — the hiring of Genovese — is right on point. The Genovese hiring was a obvious (and very successful) sop to disarm public recognition of the absurdity of having Scott Rothstein's Gibraltar purchase partner running the bankruptcy case.

Proof that the Genovese "solution" was a sham is the fact that Paul Singerman "negotiated" the giveaway.

From a practical point of view, there was no solution to the conflict except that Berger Singerman should have instantly been (and still should be) removed from the bankruptcy case. They never should have been appointed in the first place because Gibraltar was so critical to the Rothstein scheme.

Berger Singerman investigating and litigating for recovery, at every turn, runs into the participation of Gibraltar ... and themselves. Berger Singerman has many opportunities to protect themselves from possible civil and criminal liability. Who protects Florida, certainly not a bankruptcy judge that allows the appointment in the first place and the obvious subterfuge of then allowing Genovese come on board to fool the public into believing conflicts vanished after the public takes notice.

Nobody should trust what comes out of this thoroughly tainted bankruptcy estate and they should realize that Scott Rothstein's warped ethics are alive,  well and still dominant here in Florida.

James Madison
James Madison

To "Adolpho Hayworth":

Congratulations on your "nom de plume" ... and on your insight. You clearly you have considerable knowledge about the dealings at Gibraltar bank since what you say neatly dovetails with reported facts. I, for one, would like to see posted (on www.scribd.com for example) some of your documentation, particularly, the private placement documents for the sale of Gibraltar to the investors, the names of the investors and internal reports you may have. A Rothstein "wikilinks" type site is desperately needed here and scribd.com would be a good place to start.

I understand, because you are using a non de plume, that you are in some (realistic) fear of retaliation. Who wouldn't be after reading the horrors exposed in the Scott Rothstein deposition, which is why anonymous posting of documents will be so valuable.

Your comments on Paul Singerman and Berger Singerman controlling the bankruptcy case, and the Gibraltar settlement in particular, were dead on point. Gibraltar was clearly far more culpable than TD Bank. Paul Singerman was and is an owner of Gibraltar. He partnered with Rothstein to purchase Gibraltar and Rothstein testified that the key selling point of that purchase was that he would have clear sailing to ignore money laundering regulations.

Paul Singerman and his still undisclosed partners personally benefit mightily from the bankruptcy settlement that Paul Singerman "negotiated." Without the "settlement," not only is their equity completely wiped out but they face enormous potential personal liability for aiding and abetting Rothstein.

Rothstein testified that the scheme could not have been carried out without the cooperation of Gibraltar ... no other bank would touch him. That statement speaks volumes.

It is a complete spectacle to have Berger Singerman running the bankruptcy case that, in its most essential part, required the close cooperation of Gibraltar. And it is a hard slap to the face to Rothstein's victims, to Floridians, and to the so shredded concept of "ethics" as practiced here in Florida.

You observations on the interjection of a purported "solution" to the insoluble Singerman/Rothstein/Gibraltar connection conflict — the hiring of Genovese — is right on point. The Genovese hiring was a obvious (and very successful) sop to disarm public recognition of the absurdity of having Scott Rothstein's Gibraltar purchase partner running the bankruptcy case.

Proof that the Genovese "solution" was a sham is the fact that Paul Singerman "negotiated" the giveaway.

From a practical point of view, there was no solution to the conflict except that Berger Singerman should have instantly been (and still should be) removed from the bankruptcy case. It never should have been appointed in the first place because Gibraltar was central and essential to the Rothstein scheme.

Berger Singerman investigating and litigating for recovery, at every turn runs into the participation of Gibraltar ... and themselves. Berger Singerman has many opportunities to protect themselves from possible civil and criminal liability. Who protects Florida, certainly not a bankruptcy court that allowed the appointment in the first place.

Nobody should trust what comes out of this thoroughly tainted bankruptcy estate and realize that Scott Rothstein's memory is alive and well here in Florida.

Adolfo Hayworth
Adolfo Hayworth

Gibraltar didn’t settle to save on legal fees. Their financial statements show they spent $4 million on legal fees since the case began. So why pay another $10 million now when the trial would cost less than $1 million and they insist they did nothing wrong? Perhaps because they know they would lose? Don’t forget – settling means John Harris doesn’t get on the stand to testify and all the other Gibraltar executives’ depositions remain sealed by the court. If they were made public it would show how everything Rothstein said in his deposition was true.  Rothstein even appeared in an internal video for the bank as a bigshot customer making a huge cash deposit.

Many executives at Gibraltar warned CEO Steve Hayworth the Board of Directors (which included Adolfo Henriques – who was Chairman during the biggest part of the Ponzi) and Boston Private (they had four representatives on Gibraltar’s Board) about Rothstein and Harris for YEARS before the Ponzi blew up. Most of the executives left Gibraltar since then – only Hayworth’s two buddies are left. One of them, Executive VP Chris Damian, was the original recipient of the vintage Rolex watch from Rothstien. But then Berger Singerman warned Damian how Rothstein was a bad guy (9 months before he was arrested). Damian gave it back and Harris ended up with it.

Gibraltar is the only bank where the CEO made decisions about when to report suspicious activity to the government based on how influential the customer was. Even TD Bank filed several reports about Rothstein over the years. Gibraltar filed ZERO reports on Rothstein until a year after his arrest and only after the bank regulators forced them to.

Gibraltar lied in the press about doing nothing wrong. In 2010 federal regulators put the bank under a Cease and Desist Order for money laundering violations of law. Those violations aren’t detailed in the Order but the confidential examination report lists HUNDREDS of violations specifically about Rothstein’s accounts. That’s also why the federal regulators have been conducting a secret fraud investigation into Gibraltar, Hayworth, Harris and the Board for over a year now. And Rothstein is only one of several frauds being investigated.

The funniest part of the past month was Gibraltar attorney Stearns saying in news articles how banks can’t be expected to know their customers’ businesses and banking habits because “the whole system would break down.” What nonsense!!! The fundamental concept underlying money laundering laws for the past 20 year is “KYC” which stands for Know Your Customers. Banks are required by LAW to know their customers. So either Mr. Stearns was LYING or he’s a really BAD attorney.

Gibraltar and Stearns also lied when they said in court they would be seized by the regulators if they paid a settlement over $10 million. Banks don’t get seized until their capital ratio falls below 2%. Gibraltar could pay over $60 million and still have over 5% capital – high enough to be above the regulatory minimum for being “Well Capitalized”. Let’s not forget how bankruptcy trustee Stettin used Berger Singerman to negotiate a sweetheart deal for Gibraltar. Berger Singerman was Gibraltar’s largest depositor and was given the highest deposit interest rates in the whole bank for years. And Berger Singerman’s top partners STILL own 5% of Gibraltar!!! When the judge finally found out, Stettin had to get a law firm with no connection to Gibraltar – Genovese Joblove. Except now we know John Genovese was a long time client of Gibraltar and friend of Steve Hayworth. Genovese’s wife still has accounts at Gibraltar under her maiden name and Gibraltar has donated close to $100,000 to charities she is a director of.

The people who got it the worst are the investors who gave Hayworth the funds to buy the bank. They were told in writing how there was no significant exposure to losses from Rothstein. But they were also told in writing how Henriques would be Chairman of the Board, but then he resigned right after the deal closed to stay on the Board of the seller (Boston Private). Come to think of it, the investors documents never disclosed how Henriques was also on the seller’s Board. Henriques didn’t even invest in Gibraltar until he returned last year to try to clean up the mess.

When will the feds get off their butts and actually indict the bankers who made the Ponzi possible?

IrvingFeiner
IrvingFeiner

I wish I could live the rockstar lifestyle.  If I could, my life would be complete and everything would be perfect.  Unless my name was Davey Jones.

If you look at the pic, you see big feces eating grins on Rothstein and Rosenfeldt.  But Adler?  He has that hopeless, melancholic face of the man who knows he is likely to die in prison.  Or at least grow old there. 

Guess the other two clowns are pure 100% pure US Grade A sociopaths.  

KennyPowersII
KennyPowersII

and the dirty little secrets will remain hidden while the perps walk. Morality, ethics and appropriate sanctions be damned. Criminal activity morphs into a civil settlement, as i it never happened. What a country.

LawyerUp
LawyerUp

50 million to investor's attorneys?!  I'm in the wrong business...

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