Stanford Investors Claim Lawyers Enabled $7 Billion Fraud

Two of R. Allen Stanford’s former law firms were sued by defrauded investors who claim the lawyers crafted corporate structures that enabled the financier’s $7 billion Ponzi scheme for more than 20 years.

The proposed class-action, or group, lawsuit filed in federal court in Dallas by investors and Stanford’s court- appointed receiver seeks the return of $10 million in legal fees and more than $7 billion in damages from Greenberg Traurig LLP and Hunton & Williams LLP.

These law firms employed Miami attorney Carlos Loumiet, who served as Stanford’s outside general counsel, from 1988 through 2009. Yolanda Suarez, Stanford’s former chief of staff and general counsel, also worked at Greenberg Traurig before joining Stanford Financial Group Co. in 1992. Suarez, a former protégée of Loumiet described in the complaint as Stanford’s “right- hand,” is named as an individual defendant, while Loumiet isn’t.

“Stanford could not have perpetrated this global mass fraud on his own,” Edward Snyder, a lawyer for the Official Stanford Investors Committee, said in the complaint. “Loumiet’s and Suarez’s fingerprints are all over the Stanford fraud scheme from beginning to end.”

Stanford, 62, was convicted in March of orchestrating a scheme built on bogus certificates of deposit at Antigua-based Stanford International Bank Ltd. Evidence at his jury trial showed the Texas financier bribed Antiguan bank regulators and auditors and skirted U.S. securities laws and money-laundering regulations to keep cash flowing to his offshore bank.

$2 Billion

Prosecutors said Stanford took more than $2 billion in depositor funds to finance a lavish personal lifestyle of jets, yachts and cricket tournaments as well as an array of money- losing private enterprises. He is serving a 110-year term in a Florida federal prison while appealing his verdict and sentence.

Greenberg Traurig sympathizes with the investors who lost money as a result of Allen Stanford’s fraud, but the firm played no part in causing those losses,” Jim Cowles, an attorney for the firm, said in an e-mailed statement. “This is merely plaintiff’s newest attempt to pry open a deep pocket.”

Cowles said the firm’s “principal legal work” for Stanford occurred prior to 2001, “three years before the sale of the CDs involved in this suit,” when Loumiet left to join the other firm. “On limited matters in which Greenberg Traurig’s attorneys were subsequently consulted, they properly advised Stanford entities” and had no knowledge of Stanford’s fraudulent conduct, Cowles said.

Hunton & Williams said it neither caused or facilitated Allen Stanford’s fraud.

‘Legally Baseless’

“This lawsuit is factually and legally baseless and an overreach by Stanford Financial Group’s understandably frustrated investors attempting to recoup their unfortunate losses,” the Richmond, Virginia-based firm said in an e-mailed statement.

Matthew Rinaldi, Suarez’s attorney, didn’t immediately respond to a voice or e-mail message after regular business hours.

Investors said in today’s complaint that Loumiet and Suarez helped Stanford “hijack” Antigua with bribes and loans so he could “thereafter run it like a corrupt dictatorship” to provide a safe haven for his offshore banking empire.

They claim the two lawyers helped set up Stanford’s U.S. marketing, sales and trust operations to funnel billions of dollars into the Ponzi scheme without attracting the scrutiny of U.S. regulators. The lawyers also structured investments deals Stanford made with funds he stole from the bank, including his extensive Caribbean real estate and venture capital deals, according to the complaint.

“Defendants were subjectively aware of and absolutely indifferent to the risk posed by their conduct,” even when it ran the risk of breaking the law, Snyder said in the complaint.

The case is Janvey v. Greenberg Traurig, 3:12-cv-4641, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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