TD Bank agrees to pay $1.2B to settle Ponzi scheme case

TD Bank, one of Canada’s biggest lenders which is in the process of buying Tennessee’s biggest bank, said Monday it had agreed to pay $1.2 billion to settle claims arising from a giant Ponzi scheme involving Stanford Financial, a scandal that erupted 14 years ago and cost ordinary investors about $7 billion.

The bank said it reached the settlement with the Stanford Financial receiver, who is trying to recoup funds for investors, “to avoid the distraction and uncertainty” of protracted litigation. In a statement, TD, as TorontoDominion Bank is known, said it denied any wrongdoing or liability for having provided banking services to Stanford’s offshore bank in Antigua.

The deal with TD was the largest of several settlements reached with other banks, including Trustmark National, Société Générale, HSBC and Independent Bank, formerly Bank of Houston, according to the Stanford Financial receiver.

In all, the deals with the five banks, which provided services to Stanford Financial during its two decades in operation, totaled $1.6 billion. The settlements came as the receiver was preparing to go to trial with some of the banks.

The settlement is a major victory for the courtappointed receiver, Ralph Janvey, who has struggled for years to recover money for the 18,000 customers of Stanford Financial who invested in high-yielding certificates of deposit issued by Stanford’s offshore bank. The CDs ended up largely worthless because the bank did not have enough assets to back them up, and the deposits were not guaranteed by any federal bank insurance program.

Before the settlement with the banks, Janvey and lawyers from Baker Botts had recovered $1.1 billion, with $680 million going to customers and investors.

“This is an extraordinary result for the victims of the Stanford fraud,” Kevin Sadler, a partner at Baker Botts, said in a prepared statement. “Given all the challenges faced by the receivership since 2009, this is nothing short of a monumental recovery.”

Stanford Financial collapsed in February 2009, amid investigations by the Securities and Exchange Commission and other agencies, and after a news report had focused on whether the returns on the company’s CDs were too good to be true.

Federal prosecutors ultimately charged R. Allen Stanford, the firm’s founder, with engineering a longrunning scheme to divert investors’ money to invest in real estate and finance a lavish lifestyle. Stanford was convicted in 2012 at trial in federal court in Houston, where Stanford had its U.S. headquarters.

Stanford, 72, was sentenced to serve 110 years in a federal prison. He is being held at a U.S. penitentiary in Sumterville, Florida.

TD Bank has agreed to buy First Horizon Bank, the biggest bank in Tennessee, for $13.4 billion. Pending final regulatory approval, the purchase is expected to be finalized this spring and TD Bank will begin to convert the First Horizon bank locations to the TD Bank brand next year.