11th Circuit Court Judge Lanier Anderson
11th Circuit Court Judge Lanier Anderson (Zach Porter/Daily Report)

Frank Spinosa, a TD Bank officer allegedly bribed by law firm chairman Scott Rothstein in pursuit of his Ponzi scheme, was front and center during appellate arguments Thursday on the bank’s challenge to a $67 million verdict won by money-losing investors.

The Cherry Hill, N.J.-based bank wants the court to reverse the award to Texas-based Coquina Investments LLC, which poured $32 million into Rothstein’s scam. At the hearing in Miami before the U.S. Court of Appeals for the Eleventh Circuit, Coquina’s attorneys argued Spinosa shouldn’t have been allowed on the stand during the trial.

Spinosa invoked his Fifth Amendment right not to incriminate himself 193 times before U.S. District Judge Marcia Cooke in Miami. He has not been charged in Rothstein’s fraud and has proclaimed his innocence.

Bank attorney Lawrence Robbins, a partner at Robbins Russell Englert Orseck Untereiner & Sauber in Washington, said Spinosa’s appearance allowed Coquina’s attorney to put into the record Rothstein’s deposition claim that he paid Spinosa a $50,000 bribe.

“There is a not a whisper of corroborating evidence, not a whisper,” Robbins said.

Judge R. Lanier Anderson, one of three jurists on the panel, didn’t seem to buy into Robbins’ argument, saying, “There is overwhelming evidence that TD Bank knew of the fraud.”

Spinosa has not been charged with a crime and has claimed his innocence through his attorneys.

Video FraUd

During trial, Coquina’s lawyer, David Mandel, zeroed in on Spinosa, telling jurors, “Frank is the bank.” He offered up evidence that Spinosa wrote “lock letters” to Rothstein’s investors giving them empty assurances about the safety of their money in Rothstein Rosenfeldt Adler accounts.

Rothstein, serving a 50-year prison sentence, also used TD Bank branches to conduct investor shows to keep money flowing to his $1.2 billion fraud.

Renowned appellate attorney Miguel Estrada, a partner at Gibson Dunn in Washington, represented Coquina. He said Mandel asked questions of Spinosa in good faith and backed them up with emails and other documents.

Estrada said the bank would have the appellate panel believe Mandel was “making up stuff, knowing Spinosa would take the Fifth.

Estrada also cited bank surveillance video of Rothstein’s shows for investors at the bank. “This is the first fraud caught on video,” he said.

The appellate panel actively queried both Robbins and Estrada.

Anderson said several times he was considering affirming the verdict and allowing U.S. District Judge Marcia Cooke, who oversaw the contentious trial, to sort out lingering issues.

Others on the panel were two visiting district judges: Ronald G. Gilman from Memphis and Inge Johnson from Florence, Ala.

Robbins resurrected TD Bank’s trial argument that Coquina never had standing to sue.

“Coquina was a mere pass-through,” he said. “It was used in this case as a mail drop.”

He also noted Coquina will get $12.5 million through the law firm bankruptcy, inferring the investors could get a double windfall.

But Estrada shot back that there is an agreement to pay back the trustee if Coquina ever gets its civil award. “They are trying to pull a fast one on the court,” he said.

Anderson again said such issues would be best handled by Cooke, not the appellate court.

At one point Robbins responded to a question from Johnson by saying Coquina investors knew from the get-go Rothstein was up to no good. He was promising interest rates of up to 600 percent in his settlement financing fraud. “Our central defense was the investors knew it was too good to be true,” he said.

With such high-interest rates, Johnson said, “They should have known there was something fishy about it.”

Robbins said if the court did anything in favor of his client, it needed to address the post-verdict sanctions handed down by Cooke that he contended were unfair to TD Bank.

Anderson said Cooke may have overstepped in sanctioning the bank and its Greenberg Traurig attorneys after finding TD Bank’s corporate counsel purposely kept its private counsel in the dark in some areas, but in the end those mistakes probably amounted to harmless error.

Cooke specifically made a finding that TD Bank aided and abetted Rothstein’s fraud.

Robbins said the sanctions had a lingering effect on regulatory consequences for TD Bank and on the reputation of the civil trial attorneys.

“These sanctions are shackles around my client’s ankles,” Robbins said.

Gilman asked if he was trying to put the blame solely on the Greenberg Traurig attorneys, but Robbins conceded his client was not “flawless.”

Anderson concluded the hearing by praising the attorneys for their arguments. “It’s a highly fact-intensive and complex case, and we want to try to get it right,” he said.