© 2015 The Texas Lawbook.
By Natalie Posgate
(Feb. 9) – In June 2012, former Texan billionaire banker Allen Stanford was sentenced to 110 years in prison for defrauding thousands of investors in one of the largest Ponzi schemes in U.S. history.
Now, those investors are going after the law firms, insurance brokers and financial advisors that worked with Stanford, claiming they played heavy roles in Stanford’s ability to defraud billions of dollars from roughly 20,000 investors.
The claims against Greenberg Traurig and Hunton & Williams moved a step forward last week when a federal court in Dallas denied to dismiss the class-action lawsuit, which was filed in 2012. Until now, lawyers for the investors have struggled to move forward with the claims due to hurdles in the U.S. Court of Appeals for the Fifth Circuit and U.S. Supreme Court.
“We’re finally able to move forward and try to get some relief for our clients,” said Ed Valdespino of Strasburger & Price, one of the lead attorneys for the investors. “It’s a great win for us.”
The lawsuit, which includes plaintiffs from the U.S., Mexico and Latin America, claims that Miami banking attorney Carlos Loumiet served as a crucial middleman for Stanford because he helped him evade the law, structure company operations and create the transactions that allowed Stanford to pull off his Ponzi scheme for more than two decades.
Greenberg and Hunton are involved because Loumiet was a partner at both of the law firms during the time he was the Houston-based Stanford Financial Group’s outside general counsel. He served in that position from 1988 to 2009, the year U.S. authorities seized the company.
Both law firms deny the allegations.
“We are gratified that the court dismissed several of the claims and will continue to defend against this action which we believe was incorrectly brought against our firm,” a Greenberg Traurig spokesperson said in an email.
Hunton’s statement challenged the validity of the plaintiffs’ claims, pointing out that U.S. District Judge David Godbey’s decision to not dismiss the case “is solely based on allegations and required no evidence from the plaintiffs.
“Hunton & Williams LLP respectfully disagrees with the court’s decision and maintains its belief that the lawsuit is factually and legally baseless,” the statement said. “It’s an early step in what will be a lengthy legal process, and we maintain that the firm neither caused nor facilitated the crimes of which Allen Stanford has been found guilty. To the contrary, Hunton & Williams LLP is committed to meeting and exceeding the highest ethical standards and does not engage in, condone or counsel others to engage in unlawful activities. We will continue to vigorously defend the firm against the action.”
Hunton’s local counsel, Dick Sayles, declined to comment on the litigation. Chicago attorney Jeff Colman of Jenner & Block, Hunton’s lead counsel, did not return a phone call from The Texas Lawbook. Neither did Dallas attorney Jim Cowles, who is leading the case for Greenberg.
Valdespino, who is leading the class-action with fellow San Antonio attorney Ed Snyder, Dallas attorney Nicholas Foley and New York attorney Peter Morganstern, said the next step in the litigation will be obtaining class-action certification, which he anticipates will be granted.
Once the case goes to trial, Valdespino said the main point his team will try to get across to the jury will be the idea that Greenberg and Hunton made continued efforts “to help Stanford get around both Antiguan law and U.S. law to allow them to basically remain unchecked by any regulatory body and allow them to steal money from our clients.”
In a reply brief, Greenberg argued that only five individuals knew of Stanford’s Ponzi scheme, and Loumiet was not one of them.
“Greenberg Traurig sympathizes with the investors who lost money as a result of Allen Stanford’s criminal fraud, but the firm played no part in causing those losses,” the brief said. “Greenberg Traurig could not have conspired with or aided and abetted unlawful conduct it did not know about.”
The firm also argued that it worked with Antiguan officials to strengthen its offshore banking laws and protect against money laundering and fraud.
“GT lawyers wrote and helped Antigua enact laws and regulations that would have prevented the very frauds for which Stanford was later convicted,” the reply brief said.
Valdespino has a different view, arguing that the firms worked too closely with Stanford to have remained ignorant of his crimes.
“They were the aiders and abettors,” he said. “They were not the robbers; they didn’t go into the bank and hold the gun, but they still waited in the car, printed out a copy of the blueprints and made sure security would be cleared.”
Valdespino said since many of his clients have suffered significant losses that have been unresolved since Stanford defrauded them.
“Some have died, some have been unable to pay bills, and some are not able to educate their children,” he said.
Unlike the Bernie Madoff Ponzi scheme, which essentially defrauded investors who were exclusively wealthy, Valedspino said Stanford’s clientele was a cross section of people, including both businesspeople and blue collar, everyday people – many of whom lost all of their retirement savings in Stanford’s Ponzi scheme.
Stanford executed his Ponzi scheme by selling investors fake certificates of deposit, or CDs, and then pocketing the money in an offshore bank in the Caribbean island, Antigua. Stanford Financial sold these CDs from its Houston headquarters, as well as offices from “feeder companies” it established in other U.S. cities and other countries, including San Antonio, Miami, Caracas and Mexico City. In Antigua, Stanford bribed government officials to keep a shield from regulatory scrutiny in the countries his companies operated in, including the U.S.
On Feb. 17, 2009, the U.S. Securities and Exchange Commission charged Stanford with securities fraud and alleged his fraud was a massive Ponzi scheme.
Judge Godbey froze all of Stanford’s personal and corporate assets and placed them under Dallas receiver Ralph Janvey’s control until the SEC’s case gets resolved.
Stanford was convicted in a federal court in Houston in 2012 for multiple counts of fraud, and is serving his 110-year sentence in a federal prison in Florida. Settlements with the victims have been delayed, the latest reason being because he appealed his conviction in September 2014.
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