Stanford Sues U.S. Prosecutors, SEC and FBI Agents

Indicted financier R. Allen Stanford
Indicted financier R. Allen Stanford. Photographer: F. Carter Smith/Bloomberg

R. Allen Stanford, the indicted financier, sued U.S. prosecutors and agents of the FBI and Securities and Exchange Commission, accusing them of “abusive law enforcement” and seeking $7.2 billion in damages.

Stanford, who has been held without bail since being indicted in 2009, filed the lawsuit late yesterday at the U.S. courthouse in Houston. He is accused of leading a $7 billion securities fraud scheme and has pleaded not guilty.

“Mr. Stanford contends the named and unknown agents undertook illegal tactics to prosecute Mr. Stanford, starting with a civil prosecution by the SEC,” according to the complaint. The SEC sued him two years ago today.

The Texas financier alleges the federal government has used more than $51 million of his own assets to pursue the cases against him. “The agents have engaged in unfair, abusive law-enforcement methods and tactics,” he alleged.

Kevin Callahan, an SEC spokesman, declined in an e-mail today to comment on Stanford’s lawsuit. Citing a court-imposed gag order in the criminal case, Laura Sweeney, a Justice Department spokeswoman, also declined to comment.

Shauna Dunlap, public information officer for the FBI’s Houston office, where the Stanford investigation is based, didn’t immediately return calls to her office and cell phone.

Stanford’s 39-page complaint names as defendants 12 individuals working for the SEC, FBI and the Justice Department including attorney Stephen Korotash who leads the SEC’s civil suit and criminal case prosecutors Gregg Costa and Paul Pelletier.

He didn’t sue any of those U.S. agencies directly.

Constitutional Rights

The financier claims the individual defendants violated his constitutional rights, arguing they launched the civil enforcement action solely to gather evidence for his criminal prosecution, prevented him from using his own money to fund his defense and took his away his property and personal belongings.

“Mr. Stanford is entitled to fair compensation for all property and assets taken,” according to the complaint signed by Houston lawyer Stephen R. Cochell. Many of Stanford’s assets and holdings have been liquidated by a Dallas federal court-appointed receiver in the SEC case.

That appointment was made at the outset of the suit and without Stanford’s participation, according to the complaint.

“Through the receiver, the SEC agents successfully stripped Mr. Stanford of all his personal and corporate assets worldwide, which were valued in the billions of dollars,” Cochell wrote.

‘Uphill Battle’

“A lawsuit like that is very much an uphill battle,” said Douglas T. Burns, a Manhattan criminal defense lawyer and former federal prosecutor. Burns, interviewed by telephone today, is not involved in the Stanford litigation.

“The lawsuit is going to be immediately met with immunity-based defenses, that the agents are immune for their legitimate conduct in the case,” he said.

Claims such as those lodged by Stanford “are only successful if somebody is off on a lark, outside the scope of their employment,” Burns said.

Houston lawyer Brian Wice, who is tracking the Stanford cases, agreed, saying the case is unlikely to succeed.

“Stanford is running out of people to sue,” said Wice, noting a prior case filed by the financier seeking to enforce directors’ and officers’ insurance coverage and disagreements with several of his now-former criminal defense attorneys.

“Suing the U.S. government is the next logical step on Sir Allen’s highway to hell,” Wice said. “Stanford’s claim is monumentally absurd on its face.”

The case is R. Allen Stanford v. Stephen Korotosh, 11cv582, U.S. District Court, Southern District of Texas (Houston).

The criminal case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank Ltd., 09cv298, U.S. District Court, Northern District of Texas (Dallas).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE