Stanford Group Co.

Federal Judge in Texas Says Law Firms Must Face Lawsuit Seeking Creditor Payments in Stanford Ponzi Fraud

Published on: June 27, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Four years after Allen Stanford’s $7 billion Ponzi scam was uncovered in 2009, investors who lost money in the scheme are still trying to recover their funds. The 65-year-old Stanford is serving 110-years behind bars for selling investors bogus high-yield CD’s through his Stanford International Bank based in Antigua. Prosecutors said he used customers’ money to fund his expensive lifestyle.

This week, U.S. District Judge David Godbey in Dallas said that law firms Proskauer Rose and Chadborne & Parke will have to contend with claims brought by a committee of these investors and Ralph S. Janvey, the court-appointed receiver for Allen Stanford’s companies.

Chadborne and Prosakuer had sought to have this lawsuit, which seeks to hold the two law firms liable for legal malpractice, dismissed. The plaintiffs contend that Thomas Sjoblom, who worked at the two firms, allegedly obstructed regulator probes into the Ponzi Scam and helped Stanford conceal the SEC’s investigation from auditors.

Now, the Texas-based judge has decided that Janvey and the investor committee can pursue claims of negligent supervision, professional negligence, civil conspiracy, and aiding and abetting fraud against the two firms. Judge Godbey stated that the allegations suggest that Sjobolm knew that Stanford was potentially running a Ponzi scam, and this awareness was imputed to both firms. Godbey said that the plaintiffs have alleged that the defendants knew that Stanford was engaged in sufficient wrongdoing.
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Two Investors’ Securities Fraud Lawsuit Against SEC Over Stanford Ponzi Scam is Dismissed

Published on: August 16, 2013 | by Shepherd Smith Edwards & Kantas, LLP

A federal judge has dismissed the securities fraud lawsuit filed by two investors against the Securities and Exchange Commission for failing to report that Allen Stanford was running a $7.2 billion Ponzi scam. According to U.S. District Judge Robert Scola, a Federal Tort Claims Act exemption that does not allow claims from deceit or misrepresentation shields the SEC from such a claim.

The plaintiffs are George Glantz and Carlos Zelaya. They contend that they collectively lost $1.6 million because of Stanford and they wanted class action securities status for investors that the latter bilked.

They argued that following four exams between 1997 and 2004 the regulator considered Stanford’s business a fraud yet did not notify the Securities Investor Protection Corp., which provides compensation to those victimized by brokerages that fail. The SEC did not sue Stanford until 2009. While Scola previously had allowed this securities fraud case against the Commission to move forward, finding that the regulator breached its duty to report Stanford’s wrongdoing, now, he says that the FTCA exemption does not give him jurisdiction over this.

US Supreme Court to Hear Appeals of Petitioners Over Stanford Ponzi Lawsuits

Published on: January 25, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Our Texas securities fraud law firm has been bringing you the latest legal news developments in the efforts of defrauded investors to recoup their losses stemming from the $7 billion Stanford Ponzi scam. While the fate of R. Allen Stanford has already been sealed-he is serving 110 years in prison, which is essentially the rest of his life-for many of his victims how and when all of them will recover their losses still remains a big question mark.

On Friday, the US Supreme Court agreed to hear three petitioners’ appeals over the sale of bogus certificates of deposits from Stanford’s Antigua bank. The requests come from insurance brokerage Willis Group Holdings Plc., which has been accused of being involved in the bogus CD sales that Stanford used to defraud his clients, and two law firms that used to represent Stanford himself. They want the court to determine whether or not under the Securities Litigation Uniform Standards Act plaintiffs can assert state-law class action claims against the petitioners.

While a federal judge said in 2011 SLUSA does preempt such state law cases, the U.S. Circuit Court of Appeals for the fifth circuit later went on to revive the securities lawsuits. Now, it will be up to the nation’s highest court to make the final call.

Texas Securities: SEC Says District Court is Mistaken In Not Forcing SIPC to Act for Stanford Ponzi Scam Victims

Published on: January 19, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Addressing the U.S. Court of Appeals for the District of Columbia Circuit, the Securities and Exchange Commission maintains that a lower court was wrong to deny the agency’s bid to compel the Securities Investor Protection Corporation to act on behalf of investors who were victimized by the Allen R. Stanford Ponzi scam. Thousands of investors sustained losses as a result of the scheme. Meantime, Stanford is serving 110 years behind bars for running the $7 billion scheme that involved certificate of deposit sales issued by his Stanford International Bank in Antigua.

“Stanford Securities was a Houston-based firm which sold uninsured CD’s issued by foreign firms to investors all over the world,” said Texas securities fraud attorney William Shepherd. “Its founder was tried for securities fraud in a Federal Court and was sentenced to what will be a lifetime without parole in a federal penitentiary. Little has been gotten back by investors who, unlike the victims of the Ponzi scheme perpetrated by Barnard Madoff, have not been able to recover up to a maximum of $500,000 each from SIPC.”

It was last summer that the U.S. District Court for the District of Columbia noted the preponderance of the evidence standard and found that investors that had bought CD’s from Stanford’s Antigua bank were not, under the meaning of the Securities Investor Protection Act, “customers” of Stanford Group Co., which was Stanford’s brokerage firm in the US. Had that court ruled otherwise, SIPC would have to start liquidation proceedings for the broker-dealer and some 21,000 Stanford CD purchasers could have sought reimbursement through SIPC claims.

Houston-Based Receiver Files $1.8B Class Action Filed Against Law Firms Accused of Helping R. Allen Stanford Carry Out His $7B Ponzi Scam

Published on: December 5, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Ralph Janvey, the Stanford receiver based in Houston, has filed a putative class action lawsuit against Hunton & Williams LLP and Greenberg Traurig LLP, two law firms accused of playing roles that allowed R. Allen Stanford to execute his $7B Ponzi scam. The securities complaint, which was filed in the U.S. District Court for the Northern District of Texas, is seeking $1.8 billion in damages and $10 million that it claims Stanford gave to the law firms during their years of working together. The plaintiffs are contending Texas Securities Act violations, aiding and abetting participation in a fraud scam, aiding and abetting breach of fiduciary duty, and conspiracy.

Also named as a defendant is Yolanda Suarez, who was not only a former Greenberg Traurig associate but also she served as Stanford Financial Group’s general counsel and later as chief of staff. Janvey says that Stanford could not have kept his scam going for over 20 years without these parties’ help.

Per the Texas securities case, Carlos Loumiet, an ex-Greenberg Traurig partner who later went to work for Hunton & Williams (he is now a DLA Piper partner and is not a defendant in this lawsuit), had a “very close personal relationship” with Stanford and played a part in helping the now convicted fraudster run his global scam. This included helping him establish sales and marketing offices in the US. Loumiet and Greenberg Traurig also allegedly helped Stanford set up the transactions that would allow the Ponzi mastermind to use the money he took from Stanford International Bank Ltd. in Antigua and invest them in “speculative venture capital” deals and property in the Caribbean. The law firm is also accused of giving Stanford securities law counsel and advice on a regularly basis.

US Supreme Court Considers Hearing Stanford Ponzi Lawsuits

Published on: October 3, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The Supreme Court’s justices are looking to the Obama administration for advice about an appeal made to a ruling allowing the victims of R. Allen Stanford’s $7 billion Ponzi fraud can pursue law firms, insurance brokers, and outside parties for damages. The defendants, third party firms, want the court to stop the securities lawsuits, which are based on Texas and Louisiana law. If the court were to hear the appeals, it would put to test the Securities Litigation Uniform Standards Act, which was enacted so that if a class action lawsuit comes from a misrepresentation issued “in connection” with a covered security’s sale or purchase, investors cannot go to state courts to get around federal limits placed on such claims. The appeals is asking how close that connection has to be for a state lawsuit to be barred.

Investors have been trying to get back the money they lost in Stanford’s Ponzi fraud, which involved the sale of CDs from his Antigua bank. Numerous securities lawsuits have been filed, and at Shepherd Smith Edwards and Kantas, LTD, LLP, our Texas securities fraud lawyers represent victims of the Stanford Ponzi scam and other financial schemes.

Our Texas securities fraud law firm also continues to provide updates on the different Stanford-related securities litigation on our blog sites:

Stanford Ponzi Scam Investors File Class Action Lawsuit Suing The Securities and Exchange Commission

Published on: July 25, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Accusing The SEC of negligent supervision and failure to act, a number of Stanford investors have filed a putative class action seeking damages from the Commission. In Anderson v. United States, the plaintiffs submitted an amended complaint to the U.S. District Court for the Middle District of Louisiana earlier this month. They are bringing their securities case under the Federal Tort Claims Act.

They contend that the losses they sustained in Stanford’s $7 billion Ponzi scam occurred because the SEC was negligent in supervising Spencer Barasch, who is the former enforcement director of the SEC’s Forth Worth Regional Office. They also are arguing that there was enough information available about R. Allen Stanford for the SEC to merit bringing an enforcement action or a referral to other agencies. The investors believe that an alleged failure to act by Barasch and the SEC let Stanford’s Ponzi scheme go undetected for years. They especially blame Barasch.

According to an April 2010 report by the Commission’s Office of the Inspector General, although the SEC’s Dallas office was aware as far back as 1997 that Stanford was running a Ponzi scam, it was unable to persuade the SEC’s Enforcement Division to investigate the scheme. The report also concluded that Barasch played a key part in a number of decisions to squelch the possible probes against Stanford.

After Barasch left the SEC, he represented Stanford on more than one occasion until 2006 when the SEC Office of Ethics told him that this was not appropriate. Earlier this year, he settled US Department of Justice civil charges over this alleged conflict of interest restrictions violation by paying a $50,000 penalty and consenting to a yearlong ban from SEC practice. (He did not, however, admit or deny wrongdoing.)

Now, the investor plaintiffs want the government to compensate them for their losses: Reuel Anderson is seeking $1,295,481.37, Timothy Ricketts wants $353,216.31, and Gary Greene is asking for his $443,302.09. The plaintiffs believe their class action securities complaint represents approximately 2,000 members.

This class action case comes more than a year after another group of plaintiff investors brought a similar securities lawsuit in the U.S. District Court for the Northern District of Texas. In Robert Juan Dartez LLC v. United States the plaintiffs sought to hold the government liable for losses they sustained in Stanford’s Ponzi scam. The district court, however, dismissed the case without prejudice due to lack of subject matter jurisdiction in that it found that the plaintiffs’ claims landed in the discretionary function exception of the Federal Tort Claims Act.

Approximately 30,000 investors bought fraudulent CD’s from Stanford International Bank in Antigua. That’s a lot of customers getting hurt financially by one scam.

Stanford Investors Sue SEC Over Losses, Citing Negligent Supervision, Failure to Act, Bloomberg BNA, July 16, 2012

Anderson v. United States (PDF)

Robert Juan Dartez LLC v. United States

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Ex-Stanford Group Compliance Officer, Now MGL Consulting CEO, Says SEC’s Delay Over Whether to Charge Him in Ponzi Scam is Denying Him Right to Due Process

Published on: July 24, 2012 | by Shepherd Smith Edwards & Kantas, LLP

According to Reuters, Bernerd Young, a former compliance officer for the Texas-based Stanford Group. Co., contends that the Securities and Exchange Commission’s lack of decision over whether to charge him in R. Allen Stanford’s $7 billion Ponzi scam is not only a denial of his right to due process but also has hurt his professional life. Young, who is now the CEO of MGL Consulting, also used to work as a regulator with the National Association of Securities Dealers in Dallas. NASD is now the Financial Industry Regulatory Authority.

While Stanford has already been sentenced to 110 years in prison over his use of bogus CDs from his Stanford International Bank in Antigua to defraud his victims, the SEC has been constructing cases against a number of executives and financial advisers that worked for Stanford Group. However, legal disagreements and recusals between SEC officials and commissioners have reportedly caused delays to these probes that have left not just the bilked investors but also certain possible defendants waiting for resolution one way or another.

Young maintains that he didn’t know about the Ponzi scam. He says that the SEC came after him in Houston about one year after he was told by other Stanford executives that the Antigua bank’s portfolio was comprised of at least $1.6 billion in personal loans to Stanford himself. The Commission contended that it had evidence linking his actions to investors who were wrongly led believe that their CD’s were insured. Young received a Wells notice in June 2010 notifying him that the SEC intended to recommend that charges be filed against him.

Although the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act gives the Commission six months to decide on a Wells notice, SEC lawyers are allowed to file extensions, which they have done in their potential case against Young. The Commission’s current extension of 180-days on the case will expire in September.

Meantime, Young believes that MLG Consulting losing 20% of its clients, regulators terminating the firms’ plans to expand, and its need to file for bankruptcy is a result of the stigma associated with the Stanford Ponzi scam probe. As for the investors who were victimized by the fraud and who have expressed dismay at the SEC’s delay in deciding whether/not to charge certain ex-Stanford employees, their worry is that these same individuals could go on to defraud other investors in the meantime.

These Investors have also had to deal with a federal district judge’s recent decision to reject the SEC’s request that the Securities Investor Protection Corporation start liquidation proceedings to compensate Stanford’s victims, some of whom sustained millions of dollars in losses. SIPC had argued that it only protects customers against losses involving missing securities or cash that had been in the in custody of insolvent or failing brokerage firms members of the protection corporation. While Stanford Group was a SIPC member, Stanford International Bank in Antigua was not.

Former Stanford executive says in limbo as SEC case drags, Reuters, July 22, 2012

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CFTC Files Texas Securities Fraud Against TC Credit Services and its Houston Owner Over $1.4M Commodity Pool Scam, Stockbroker Fraud Blog, July 17, 2012

Texas Securities: SEC’s Bid To Get Stanford Ponzi Scam Victims SIPC Coverage is Denied by District Court, Stockbroker Fraud Blog, July 9, 2012

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Texas Securities Roundup: Morgan Stanley Smith Barney Sued Over Financial Adviser’s Ponzi Scam, Judge Dismisses Ex-GE Executive Whistleblower’s Lawsuit Over His Firing, & Ex-Stanford Financial Group CIO Pleads Guilty to Obstructing the SEC’s Probe

Published on: July 3, 2012 | by Shepherd Smith Edwards & Kantas, LLP

In Dallas County Court, 11 investors are suing Morgan Stanley Smith Barney and its financial adviser Delsa Thomas for bilking them in an alleged Texas Ponzi scam. They say that Thomas “took advantage of their trust in her when she suggested that they invest in Tejas Eagle Financial LLC. (She gave them the choice of investing $250,000 or $125,000.) They invested hundreds of thousand dollars of their retirement money and savings.

The plaintiffs contend that the financial firm breached its duty of care to them by allowing Thomas to give them unsuitable financial advice that “would destroy their investments.” They are seeking damages for negligent misrepresentation, fraud, negligent supervision, and vicarious liability.

In other Texas securities news, ex-Stanford Financial group chief investment officer Laura Pendergest Holt has pled guilty to charges that she obstructed the SEC’s probe into Stanford International Bank, which was owned by Ponzi scammer Robert Allen Stanford. Holt, who testified before the Commission about SIB’s investment portfolio, now admits that she did so as a “stall tactic” to impede the agencies efforts to get key information. Stanford is behind bars for running a $7 billion Ponzi scam.

Texan R. Allen Stanford Convicted on 13 Criminal Counts Over $7.2B Ponzi Fraud

Published on: March 7, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Nearly three years after he was indicted for defrauding investors in a $7.2 billion Ponzi scam involving certificates of deposit that are now worthless, a Houston jury has convicted R. Allen Stanford of 13 of 14 criminal counts, including fraud, conspiracy to commit money laundering, conspiracy to commit wire or mail fraud, wire fraud (from April 24, 2006, December 24, 2008, January 5, 2009, and February 12, 2009), mail fraud, and obstructing investigators. The only count jury members found him not guilty of was wire fraud (from February 2, 2006). Collectively, the Texas financier’s convictions carry prison sentences totaling up to 230 years.

Prosecutors depicted Stanford, 61, as a con man that used investors’ money to get very rich and pay for his businesses. (At one point, his net worth was over $2 billion.) They also say he bribed regulators so he could get away with his scam.

During his criminal trial, financial statements e-mails that were presented as evidence and ex-employees who testified helped paint a picture of the Texan as someone who spent 20 years defrauding investors by selling CDs through his bank in Antigua. James M. Davis, who served as former CFO for Stanford’s different companies, also was a witness for the prosecution. He stated that he and Stanford together falsified annual reports, bank records, and other documents to hide the fraud. Prosecutors contended that Stanford lied to depositors from over 100 nations by claiming that their cash was being invested in bonds, stocks, and other securities.