TD Financial institution to pay US$1.2 billion to settle Stanford Ponzi plan lawsuit

TORONTO — TD Bank Team mentioned Monday it will pay back US$1.2 billion to settle a lawsuit connected to one particular of the premier Ponzi schemes ever orchestrated.

The bank, alongside with a number of other economical establishments, was about to face demo in the case in Texas for its alleged role in the $7 billion scheme operated by the Stanford Money Group.

In agreeing to the settlement, TD denied any legal responsibility or wrongdoing and taken care of that it acted thoroughly at all moments. The financial institution mentioned it selected to settle the situation to stay away from the distraction and uncertainty of continuing a extended lawful proceeding.

TD experienced presented correspondent banking products and services to Stanford Global Financial institution Ltd., an offshore financial institution in Antigua, and had confronted allegations of knowing help and negligence associated to the Ponzi scheme.

In a parallel case in opposition to the bank in Ontario, the courtroom dominated in TD’s favour. The ruling was backed up by the Ontario Court docket of Attraction, while the plaintiffs are making an attempt to attraction the scenario to the Supreme Courtroom of Canada.

Below the phrases of the U.S. agreement, TD has settled with the receiver, the official Stanford Traders Committee and other plaintiffs in the litigation.

TD, which is scheduled to report its first-quarter success on Thursday, said that as a end result of the settlement it will get a charge of about C$1.2 billion right after tax in the quarter.

The settlement comes as TD works its way through two key acquisitions in the U.S., the US$13.4-billion Initially Horizon and US$1.3-billion Cowen Inc. deals, although also experiencing better funds anticipations from regulators and investors.

Nationwide Bank analyst Gabriel Dechaine explained that although the settlement could force the lender beneath the funds buffer anticipated by investors, he does not anticipate TD would need to have to promote shares to make up the shortfall.

The lender could depend both on interior cash era, or promote down its Charles Schwab Corp. holdings to make up any shortfall, while if it did elect to elevate fairness it would necessarily mean only about a just one for each cent dilution to latest shares superb, he mentioned.

Barclays analyst John Aiken explained that the settlement resolves the overhang of the scenario and that he expects the information to be favourable for the bank’s outlook.

“Whilst the absolute greenback total is sizeable, we believe that it was far significantly less than the worst-case situation envisioned by some in the industry,” he reported in a observe.

The settlement is the most recent main demand recorded by Canadian banking institutions from U.S. lawsuits.

CIBC reported before in February that it would fork out US$770 million to settle a lawsuit introduced versus it by Cerberus Funds Management L.P. connected to finance transactions joined to the 2008 money crisis.

In November, BMO took a US$1.1 billion charge similar to a independent Ponzi plan in Minnesota after a jury awarded damages of about US$564 million towards the bank. BMO claimed at the time it would attractiveness the final decision.

The Ponzi scheme in the TD settlement was operate for 20 yrs by Allen Stanford and included far more than 30,000 accounts. Stanford was sentenced to 110 a long time in jail for its orchestration.

This report by The Canadian Press was 1st printed Feb. 27, 2023.

Firms in this story: (TSX:TD)

Ian Bickis, The Canadian Press