Business
Column: A huge bank pleaded guilty to conspiring to launder money, so why weren't top executives charged?
By any measure, the lawbreaking by the U.S. subsidiary of Canada’s Toronto-Dominion Bank was spectacular.
The bank, which goes by the name TD Bank in the U.S., facilitated the laundering of more than a half-billion dollars by human traffickers, fentanyl dealers, a major Ponzi schemer and others. It failed to file legally mandated reports of suspicious transactions even though one of the launderers had deposited and withdrawn “more than $1 million in cash in a single day.”
All this was laid out in settlements with the Department of Justice and the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, announced on Oct. 10. The settlement will cost TD Bank more than $3 billion in penalties and includes a guilty plea to a count of conspiring to violate anti-money-laundering laws. The settlement notes sourly that the bank’s cooperation with authorities was “limited.”
A big bank engaging in criminal conduct has finally been properly punished, but failing to charge individual banking supervisors and executives is wrong and dumb.
— Dennis Kelleher, Better Markets
Noting that the bank’s slogan is “America’s Most Convenient Bank,” Atty. Gen. Merrick Garland stated, “There is something terribly wrong with a bank that knowingly makes its services convenient for criminals.”
Yet the settlement is prompting Justice Department critics to ask whether its terms are just too convenient for the bank. That’s because it lacks a critical deterrent in white collar crime cases: criminal charges against TD’s top executives who were in place while the lawbreaking was in full cry.
That was just one way that the deal allowed “this lawbreaking bank and its reckless leadership to escape the full scope of penalties … necessary to effectively deter future criminal acts,” Sen. Elizabeth Warren (D-Mass.) stated last week in a scathing letter to Garland.
The Justice Department also charged the bank with “conspiring … to launder” money rather than with money laundering itself, Warren observed — a distinction that frees the bank from a federal law that might have resulted in the loss of its banking license in the U.S.
The department’s failure to charge TD Bank’s top executives thus far, Warren wrote, is at odds with the agency’s own explicit commitment to “individual accountability,” as Deputy Atty. Gen. Lisa Monaco put it in a speech earlier this year. “Companies can only act through individuals,” she said. As of now, only two low-level TD Bank employees have been charged in the money-laundering scheme. Warren asked Garland to explain his approach to the TD Bank deal by Nov. 15.
Garland stated in announcing the settlement that his agency’s “criminal investigations into individual employees at every level of TD Bank are active and ongoing” and that he expects “more prosecutions.” He didn’t specify who was in the agency’s gunsights, but the plea agreement says the wrongdoing extended from branch-level employees, who accepted bribes to keep suspect accounts open, to “senior executive management.”
Warren is correct to point out that the failure to charge and convict the high-level executives who oversee wrongdoing, often over a period of years, is a major contributor to the persistence of corporate white collar crime. Official wrist-slaps and “wet smooches” delivered to corporate leaders by federal regulators and prosecutors are the rule, no matter how egregious the misdeed — even when it’s as bad as the Wells Fargo customer fraud.
In that case, the Securities and Exchange Commission imposed a $2.5-million penalty on John Stumpf, the bank’s ex-chairman and chief executive, who had collected about $300 million in compensation while the fraud was going on under his nose. The SEC didn’t even require him to admit his responsibility.
Over the last quarter-century, notes the corporate corruption watchdog Better Markets, the nation’s six largest banks “have been the subject of 490 legal actions against them and more than $207 billion in fines and settlements.” Nevertheless “the responsible individuals at the banks almost always walk away unpunished, with their pockets stuffed with bonus money.”
That applies to the TD Bank case. The settlement is “a big and long-overdue win for Main Street Americans and the financial system,” noted Dennis Kelleher, co-founder and CEO of Better Markets. “A big bank engaging in criminal conduct has finally been properly punished, but failing to charge individual banking supervisors and executives is wrong and dumb. “
Letting them off the hook “sends the wrong message: big banks can still buy get-out-of-jail-free cards for their executives by paying big fines and agreeing to other penalties,” Kelleher commented.
It’s true that the Justice Department and FinCEN lowered the boom on TD Bank nearly to the maximum in their power. In addition to the financial penalties, which are the largest ever imposed on a U.S. bank in a money-laundering case, the U.S. subsidiary is forbidden for now to grow beyond the $434 billion in assets it held as of Sept. 30 and is restricted from opening more branches or offering new services without government oversight. It must employ an outside compliance monitor for at least five years.
Among the casualties of the government investigation is TD Bank’s planned $13.3-billion merger with Memphis-based First Horizon Bank. The deal collapsed in May 2023 when it emerged that the money-laundering probe would obstruct government approval of the merger.
TD Bank is the tenth-largest commercial bank in the U.S., with 1,100 branches along the Eastern Seaboard from Maine to Florida. But it has been determined to grow while keeping its focus on customer relations — an ambition that regulators say led it to shortchange its anti-money-laundering programs even as it became clear that they were increasingly unable to handle the flow of suspect transactions.
TD Bank Group, the Canadian parent holding company, hasn’t downplayed the gravity of the charges.
“We have taken full responsibility for the failures of our U.S. [anti-money-laundering] program and are making the investments, changes and enhancements required to deliver on our commitments,” Bharat Masrani, CEO of the parent, said after the settlement announcement. “These failures took place on my watch as CEO and I apologize to all our stakeholders.” Masrani is scheduled to step down in April.
To assess whether the penalties levied on TD Bank are appropriate, consider the facts as set forth in the bank’s plea agreement. Money launderers exploited what they saw as holes in the bank’s anti-money-laundering practices from January 2014 through October 2023. Three illicit networks laundered more than $600 million in ill-gotten lucre through TD Bank accounts within that period.
Perhaps the most prolific launderer, according to the governments, was Da Ying Sze, who was known to bank employees as “David” and laundered some $400 million in narcotics profits at the bank.
Sze scarcely tried to conceal his activities: He would often walk into branches carrying bags of cash. It was he who would sometimes make deposits of more than $1 million a day and withdraw it almost immediately by bank checks. The bank “failed to identify Sze” in more than 500 currency transaction reports totaling about $474 million, according to FinCEN.
One day, after witnessing Sze buy more than $1 million in bank checks with cash, according to FinCEN, a branch employee asked a bank office staff member, “How is that not money laundering?” The staffer replied, “oh it 100% is.”
Sze pleaded guilty to federal money-laundering charges in 2022.
The shortcomings of its money-laundering oversight were known to the executives directly responsible for the program and to the bank’s board, the Justice Department said. The bank’s operational response was hopelessly inattentive. Accounts involved in “David’s” network, the department said, made $168.4 million in transactions even “after the Bank determined the accounts should be closed.”
As is so often the case when an institution is found to have broken the law in a major way, this isn’t TD Bank’s first walk on the wrong side. In 2020, it reached a $122-million settlement with the Consumer Financial Protection Bureau over accusations that it charged more than 1.4 million customers illegal overdraft fees. (The bank didn’t admit to the allegations, but the settlement included $97 million in customer restitution. Four years later, the CFPB ordered the bank to pay nearly $28 million for allegedly sending inaccurate negative reports about its customers to credit reporting firms. (The bank again didn’t admit guilt, but the order included about $8 million in compensation to the affected customers.)
Last year, the bank agreed to pay $1.2 billion to settle a lawsuit accusing it of involvement in a $7-billion Ponzi scheme orchestrated by conman Allen Stanford, who is now in prison. The money is earmarked to compensate victims; the bank didn’t admit liability and asserted that it merely provided Stanford’s company with conventional banking services.
In 2017, officials at the Trump-controlled Office of the Comptroller of the Currency quietly reprimanded the bank for a Wells Fargo-like scheme in which bank employees secretly created new accounts for customers or enrolled them in services without their knowledge. The agency didn’t fine the bank or even disclose its action at the time.
As for whether the government’s action will cure TD Bank of its slipshod approach to money laundering, only time will tell.
But there’s reason to wonder if it is effectively cleaning house. Under “clawback” provisions of its executive pay policies, Masrani’s pay was reduced by about $1.245 million last year to $9.55 million, an 11.3% cut from the $10.8 million he received in 2022. (Those figures are U.S. dollar equivalents although he and other executives are paid in Canadian dollars.) Further clawbacks may be imposed on his 2024 pay. His designated successor, Raymond Chun, has been with the company since 1992.
As for the board of directors, who receive annual stipends of $260,000 (Canadian) per year, none of the 14 directors other than Masrani has publicly indicated any intention to step down. Eleven were in place during the 2014-23 period, when money launderers ran rampant through the bank; the longest-serving director has been on the board since 2010. If TD Bank is to get a new broom, it’s unclear where it will come from.
Business
Kanye West sues ex-employee over Malibu mansion lien
Kanye West, the rapper now known as Ye, is suing his former project manager and his lawyers, alleging they wrongfully put a $1.8-million lien on his former Malibu mansion.
The suit, filed in Los Angeles Superior Court on Thursday, alleges that Tony Saxon, Ye’s former project manager on the property, and the law firm West Coast Trial Lawyers, “wrongfully” placed an “invalid” lien on the property “while simultaneously launching an aggressive publicity campaign designed to pressure Ye, chill prospective transactions, and extract payment on disputed claims already being litigated in court.”
Saxon’s lawyers were not immediately available for comment.
Saxon, who was also employed as West’s security guard and caretaker at the Malibu property, sued the controversial rapper in Los Angeles Superior Court in September 2023, claiming a slate of labor violations, nonpayment of services and disability discrimination.
In January 2024, Saxon placed the $1.8-million “mechanics” lien on the property in order to secure compensation for his work as project manager and construction-related services, according to court filings.
A mechanics lien, also referred to as a contractor’s lien, is usually filed by an unpaid contractor, laborer or supplier, as a hold against the property. If the party remains unpaid, it can prompt a foreclosure sale of the property to secure compensation.
Ye has denied Saxon’s allegations. In a November 2023 response to the complaint, Ye disputed that Saxon “has sustained any injury, damage, or loss by reason of any act, omission or breach by Defendant.”
According to Ye’s recent complaint, he listed the property for sale in December 2023. A month later, he alleged, Saxon and his attorneys recorded the lien and “immediately” issued statements to the media.
The suit cites a statement Saxon’s attorney, Ronald Zambrano, made to Business Insider: “If someone wants to buy Kanye’s Malibu home, they will have to deal with us first. That sale cannot happen without Tony getting paid first.”
“These statements were designed to create public pressure and to interfere with the Plaintiffs’ ability to sell and finance the Property by falsely conveying that Defendants held an adjudicated, enforceable right to block a transaction and divert sale proceeds,” the complaint states.
The filing contends that last year the Los Angeles Superior Court granted Ye’s motion to release the lien from the bond and awarded him attorneys fees.
The Malibu property’s short existence has a long history of legal and financial drama.
In 2021, West purchased the beachfront concrete mansion — designed by Pritzker Prize-winning Japanese architect Tadao Ando — for $57.3 million. He then gutted the property on Malibu Road, reportedly saying “This is going to be my bomb shelter. This is going to be my Batcave.”
Three years later, the hip-hop star sold the unfinished mansion (he had removed the windows, doors, electricity and plumbing and broke down walls), at a significant loss to developer Steven Belmont’s Belwood Investments for $21 million.
Belmont, who spent more money to renovate the home, had spent three years in prison after being charged with attempted murder for a pitchfork attack in Napa County. He promised to restore the architectural jewel to its former glory.
However, the property has been mired in various legal and financial entanglements including foreclosure threats.
Last August, the notorious mansion was once again put on the market with a $4.1 million price cut after a previous offer reportedly fell through, according to Realtor.com.
The legal battle surrounding Ye’s former Malibu pad is the latest in a series of public and legal dramas that the music impresario has been involved in recent years.
In 2022, the mercurial superstar lost numerous lucrative partnerships with companies like Adidas and the Gap, following a raft of antisemitic statements, including declaring himself a Nazi on X (which he later recanted).
Two years later, Ye abruptly shut down Donda Academy, the troubled private school he founded in 2020.
Ye, the school and some of his affiliated businesses faced faced multiple lawsuits from former employees and educators, alleging they were victims of wrongful termination, a hostile work environment and other claims.
In court filings, Ye has denied each of the claims made against him by former employees and educators at Donda.
Several of those suits have been settled.
Business
The rise and fall of the Sprinkles empire that made cupcakes cool
After the dot-com bubble burst in the early 2000s, Candace Nelson reevaluated her career. She had just been laid off from a boutique investment banking firm in San Francisco’s tech startup scene, and realized she wanted a change.
From her home, she launched a custom cake service that soon morphed into an idea for a cupcake-focused bakery. Nelson and her husband — whom she met at the Bay Area firm where she had worked — then pooled their savings, moved to Southern California and together opened Sprinkles Cupcakes from a 600-square-foot Beverly Hills storefront.
The store quickly sold out on opening day in 2005, and over the next two decades, the Sprinkles brand exploded across the country, opening dozens of locations of its specialty bakeries as well as mall kiosks and its signature around-the-clock cupcake ATMs in several states.
“It was an unproven concept and a big risk,” Nelson told the Times in 2013, at which point the business had 400 employees at 14 locations and dispensed upward of a thousand cupcakes a day from its Beverly Hills ATM alone.
But now, the iconic cupcake brand is no longer.
Sprinkles abruptly shut down all of its locations on Dec. 31, leaving hundreds of retail employees across Arizona; California; Washington, D.C.; Florida; Nevada; Texas; and Utah in a lurch with little notice, no severance and scrambling to fulfill a surge of orders from customers clamoring to get their last tastes.
Candace Nelson, the founder of Sprinkles cupcakes, in Beverly Hills in 2018.
(Mel Melcon / Los Angeles Times)
Although Nelson long ago exited the company, having sold it to private equity firm KarpReilly LLC in 2012, she shared her disappointment with its fate on social media.
“As many of you know, I started Sprinkles in 2005 with a KitchenAid mixer and a big idea,” Nelson said in the post. “It’s surreal to see this chapter come to a close — and it’s not how I imagined the story would unfold.”
The company, now headquartered in Austin, Texas, made no formal announcement regarding the closures and Nelson has not said more than what she posted online. The company did share a comment with KTLA, saying “After thoughtful consideration, we’ve made the very difficult decision to transition away from operating company-owned Sprinkles bakeries.” Neither Nelson nor representatives of Sprinkles and KarpReilly responded to The Times’ requests for comment.
Sprinkles’ demise comes at a tough time for the food and beverage industry. At brick-and-mortar food retail locations, the non-negotiable ingredient and labor costs can be high. And shifting consumer sentiments away from sugar-filled sweets and toward more healthy and functional options, strained pocketbooks, as well as pushes by federal and state governments to nix artificial colors and flavoring, are creating uncertainties for businesses, those in the food industry said.
A 24-hour cupcake ATM at Sprinkles Cupcakes in Beverly Hills in 2012.
(Damian Dovarganes / Associated Press)
“Over the last 10 years the consumer has wizened up tremendously and is looking at the back of the label and choosing where to spend their sweets,” said David Jacobowitz, founder of Austin-based Nebula Snacks, an online food retailer.
At the same time, it’s also not uncommon for businesses owned by private-equity firms to close on a whim, where relentlessly profit-driven decisions might be made simply to pursue more lucrative projects. In recent years, private-equity deals have been seen to milk businesses for profit by slashing costs and quality, and have appeared to play a role in the breakup of some legacy retail brands, including Toys ‘R’ Us, Red Lobster, TGI Fridays and fabrics chain JoAnn Inc. On the flip side, private equity can help infuse much-needed cash into a business and extend its life.
Stevie León and her co-workers received a text the night before New Year’s Eve informing them the franchise Sprinkles location in Sarasota, Fla., where they worked would close permanently after their shifts the next day.
León, 33, said her position as a scratch baker mixing batter and frosting cupcakes overnight had been a dream job, since she had been searching for ways to develop baking skills without paying for expensive schooling.
“I really thought it was my forever job and it was taken away literally in a day,” she said. “I’m just taking it one day at a time.”
Ivy Hernandez, 27, the general manager at the Sarasota store, said that after the news was delivered to her boss, the franchise owner, they rushed to learn their options to keep the store afloat but quickly learned it could be legally precarious to continue operating. The store had been open less than a year.
A nearby corporate store, Hernandez said, had been in disarray for months, with employees contending with broken fridges and lapsed ingredient shipments, as managers implored higher-ups to pay the bills so the business could operate properly.
“It really felt like they were trying to do everything they could to screw everyone over as hard as possible until the end,” Hernandez said.
Sprinkles did not respond to questions about the franchise program or allegations of mismanagement in the lead-up to the closure.
A person walks by Sprinkles on the Upper East Side in New York City in 2020.
(Cindy Ord / Getty Images)
The obsession with tiny cakes in paper cups traces back to an episode of “Sex and the City” aired in 2000 showing Miranda and Carrie savoring cupcakes on a bench outside a West Village bakery called Magnolia’s Cupcakes.
“Big wasn’t a crush, he was a crash,” Carrie says to Miranda as she peels down the wrapper on a cupcake topped with bright pink buttercream frosting. She punctuates the quip by taking a big bite, leaving a glob of frosting on her face.
The scene sparked a tourism phenomenon for the bakery — which went on to create a “Carrie” line of cupcakes — and helped propel the burgeoning cupcake industry and companies like Sprinkles Cupcakes, Crumbs Bake Shop and Baked by Melissa to new heights.
Within a decade there was already talk of a “Cupcake Bubble,” coined by writer Daniel Gross in a 2009 Slate article where he argued that the 2008 economic recession laid the groundwork for a proliferation of cupcake stores across America, because a lot of people could figure out how to make tasty cupcakes cheaply and scale up without a huge capital investment.
Amid the decimation of many other local retail businesses, one could take over storefronts in heavily trafficked areas for cheap. As a result, “casual baking turned into an urban industry,” Gross said.
The cupcake fervor hit its peak when Crumbs, which had started as a single bakery on Manhattan’s Upper West Side in 2003, went public in a reverse merger worth $66 million in 2011. The wildly popular mini-cakes were selling at $4.50 a pop. But it became clear very quickly that it had grown too large, too fast. It closed in 2014 after it lost its stock listing on Nasdaq and defaulted on about $14.3 million in financing.
Analysts at the time said consumers were cooling on opulent desserts and suggested tougher times were ahead for bakeries that focused solely on cupcakes.
But Baked by Melissa has thus far proved those analysts wrong. The company has remained privately owned, and according to its founder, is focused on nationwide e-commerce operations — and on expanding the brand beyond sweets. Founder Melissa Ben-Ishay has gained a following on social media by sharing recipes for nutritious, easy-to-make meals.
“Businesses that prioritize quick value increases to get acquired often crash,” Ben-Ishay told Forbes last year. “We’re committed to maintaining product quality and steady, long-term growth.”
Before its unceremonious and sudden closure, Spinkles company leadership had pushed to diversify its business as part of a strategy to recover from a pandemic-era lull.
Chief Executive Dan Mesches told trade publication Nation’s Restaurant News in 2021 that comparable sales had grown since pre-pandemic years. He said the company had ramped up its direct-to-consumer and off-premises offerings and created a line of chocolates made to look like the tops of their cupcakes. The company also introduced a new franchise program with the goal of opening some 200 locations in the U.S. and abroad over three years.
“Innovation is everything for us,” Mesches said.
Sprinkles was known for, among other things, inventive and somewhat corny methods of customer delivery. Besides the trademark ATMs, the company’s vending machines found at many airports made loud, attention-drawing jingles, drawing dramatic complaints and jokes from TikTok travelers. In the 2010s, the company debuted a custom-built truck — “the Sprinklesmobile” — to deliver cupcakes to cities without physical locations.
Frances Hughes, co-founder of online wholesale marketplace Starch, said there’s no question that gourmet sweet treats are still in vogue. But brick-and-mortar locations are much more risky, with more unpredictability. Having large fixed costs makes a business “extremely sensitive to small changes in traffic or frequency,” while online or e-commerce models can be more flexible.
“I think cupcakes as a product still have demand. But the novelty paths that support that rapid retail expansion have passed,” Hughes said.
When Nelson, the Sprinkles founder, posted her somber message about the closure, she asked people to share memories of the company. Many offered heartfelt responses, her comments flooded with stories, for example, of poor college students making the trek to the Beverly Hills location for a limited number of first-come, first-served free cupcakes.
But many of the comments also criticized Nelson’s sale to private equity.
“You sold it to PE and expected it to not close?? What planet are you living on? I don’t begrudge you for selling as that’s entirely your choice but to think any PE firm cares about a company in the slightest is insanity,” one Instagram user said.
Nicole Rucker, an L.A.-based pastry chef and owner of Fat+Flour Pie Shop, said she didn’t observe a decline in the quality of the product after the private-equity takeover. She has been a longtime admirer of the company, driving up from San Diego to sample the cupcakes when its store opened. The simple attractiveness of the box and the logo, and the consistency in the way cupcakes were decorated, “was inspiring,” she said.
“It had a strong hold on people for years,” Rucker said.
Rucker said however that when a private-equity-owned business shutters, she doesn’t feel sadness: “I would rather give my money to a fellow small-business owner, because I would rather know that every dollar and every sale matters.”
Michelle Wainwright, the owner and founder of Indiana-based bakery Cute as a Cupcake! said that although the niche cupcake industry may no longer be in its heyday — with “Sex and the City” no longer airing and competitive baking show “Cupcake Wars” (which Candace Nelson served as a judge on) now canceled — they are still versatile treats, with great potential for creativity.
And they are sentimental to her, because she uses her grandmother’s recipe.
“Cupcakes are still a winner,” Wainwright said. “It’s my belief that a life with out cupcakes is a life without love.”
Business
Bay Area semiconductor testing company to lay off more than 200 workers
Semiconductor testing equipment company FormFactor is laying off more than 200 workers and closing manufacturing facilities as it seeks to cut costs after being hit by higher import taxes.
The Livermore, Calif.,-based company plans to shutter its Baldwin Park facility and cut 113 jobs there on Jan. 30, according to a layoff notice sent to the California Employment Development Department this week. Its facility in Carlsbad is scheduled to close in mid-December later this year, which will result in 107 job losses, according to an earlier notice.
Technicians, engineers, managers, assemblers and other workers are among those expected to lose their jobs, according to the notices.
The company offers semiconductor testing equipment, including probe cards, and other products. The industry has been benefiting from increased AI chip adoption and infrastructure spending.
FormFactor is among the employers that have been shedding workers amid more economic uncertainty.
Companies have cited various reasons for workforce reductions, including restructuring, closures, tariffs, market conditions and artificial intelligence, which can help automate repetitive tasks or generate text, images and code.
The tech industry — a key part of California’s economy — has been hit hard by job losses after the pandemic, which spurred more hiring, and amid the rise of AI tools that are reshaping its workforce.
As tech companies and startups compete fiercely to dominate the AI race, they’ve also cut middle management and other workers as they move faster to release more AI-powered products. They’re also investing billions of dollars into data centers that house computing equipment used to process the massive troves of information needed to train and maintain AI systems.
Companies such as chipmaker Nvidia and ChatGPT maker OpenAI have benefited from the AI boom, while legacy tech companies such as Intel are fighting to keep up.
FormFactor’s cuts are part of restructuring plans that “are intended to better align cost structure and support gross margin improvement to the Company’s target financial model,” the company said in a filing to the U.S. Securities and Exchange Commission this week.
The company plans to consolidate its facilities in Baldwin Park and Carlsbad, the filing said.
FormFactor didn’t respond to a request for comment.
FormFactor has been impacted by tariffs and seen its growth slow. The company employs more than 2,000 people and has been aiming to improve its profit margins.
In October, the company reported $202.7 million in third-quarter revenue, down 2.5% from the third quarter of fiscal 2024. The company’s net income was $15.7 million in the third quarter of 2025, down from $18.7 million in the same quarter of the previous year.
FormFactor’s stock has been up 16% since January, surpassing more than $67 per share on Friday.
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