Compliance January 6, 2010
Broker, Bank off the Hook for Allegedly Assisting Ponzi Schemer
A federal appeals court overturned a ruling against a bank and a broker accused of helping to keep a Ponzi scheme alive.
Reported by Ellie Behling
The Ponzi scheme involved CDs and was operated by Chester, Pennsylvania businessman Robert Bentley, who pleaded guilty to securities fraud.
The receiver for Bentley’s company then accused third parties of having liability in the case. In a civil suit, David Marion, the receiver, claimed that Bentley’s scheme would have unraveled sooner if not for the help Peninsula Bank of Delray Beach, Florida, and its former vice president, Joseph Marzouca, as well as Southeastern Securities Inc., of Miami, and its president, Theodore Benghiat.
Marion’s theory was that Marzouca and Benghiat, in concert with Bentley, “had harmed the corporation by saddling it with additional liability to the scheme’s victims,” the court opinion said.
The complaint alleged that the defendants allowed the scheme to succeed for as long as it did by failing to properly supervise Bentley “in the face of a duty to do so” and by infusing the scheme with additional cash “despite knowledge of the precarious financial condition of BFS and its inability to honor its investment contracts,” according to the opinion.
A jury said that Peninsula and Marzouca should pay $13.1 million, and Southeastern Securities and Benghiat should pay nearly $19.7 million.
In an appeal, attorneys for the bank and broker argued that Marion’s accusations of liability were fatally flawed. Specifically, they argued that Marion was pursuing claims that could only be pursued by investors.
The 3rd Circuit Court of Appeals sided with the defense, ruling that Marion did not have the right to pursue such claims. Although, according to the opinion, it is undisputed that Benghiat and Marzouca, whether intentionally or unintentionally, helped the scheme stay afloat.
The receiver for Bentley’s company then accused third parties of having liability in the case. In a civil suit, David Marion, the receiver, claimed that Bentley’s scheme would have unraveled sooner if not for the help Peninsula Bank of Delray Beach, Florida, and its former vice president, Joseph Marzouca, as well as Southeastern Securities Inc., of Miami, and its president, Theodore Benghiat.
Marion’s theory was that Marzouca and Benghiat, in concert with Bentley, “had harmed the corporation by saddling it with additional liability to the scheme’s victims,” the court opinion said.
The complaint alleged that the defendants allowed the scheme to succeed for as long as it did by failing to properly supervise Bentley “in the face of a duty to do so” and by infusing the scheme with additional cash “despite knowledge of the precarious financial condition of BFS and its inability to honor its investment contracts,” according to the opinion.
A jury said that Peninsula and Marzouca should pay $13.1 million, and Southeastern Securities and Benghiat should pay nearly $19.7 million.
In an appeal, attorneys for the bank and broker argued that Marion’s accusations of liability were fatally flawed. Specifically, they argued that Marion was pursuing claims that could only be pursued by investors.
The 3rd Circuit Court of Appeals sided with the defense, ruling that Marion did not have the right to pursue such claims. Although, according to the opinion, it is undisputed that Benghiat and Marzouca, whether intentionally or unintentionally, helped the scheme stay afloat.