Lawsuit by Allen Stanford's victims targets his key helpers

Loren Steffy
Published: Tuesday, November 27, 2012 at 1:00 a.m.

Allen Stanford couldn't have acted alone.

That's the idea behind a lawsuit filed last week by a group of investors he ripped off and the receiver appointed to recover assets for them.

Stanford, of course, was convicted of fraud and is serving 110 years in prison. Two top lieutenants have pleaded guilty, and two others were convicted by a Houston jury last week.

But none possessed the legal, banking and international business expertise to enable Stanford -- a former bankrupt gym owner from Mexia, Texas -- to create a fraud that spanned more than 100 countries and swindled $7.2 billion from about 30,000 investors.

"How could it be that five people alone could do this?" asked Angela Shaw, head of the Stanford Victims Coalition, which represents investors and is a party to the 172-page lawsuit.
Her answer: They had help. They had lawyers.

Stanford's Ponzi scheme, the lawsuit contends, wouldn't have grown so large and enveloped so many without the legal expertise of two law firms, Greenberg Traurig and Hunton & Williams, which collected millions in fees from their Stanford work.

Stanford's longtime outside counsel, Carlos Loumiet, worked for both firms and consistently provided the legal advice Stanford needed to perpetuate his fraud, the lawsuit alleges.

With his lawyers' help, the lawsuit alleges, Stanford hijacked the Caribbean nation of Antigua and used it as a shield for his fraudulent banking and investment businesses, which were run from Houston.

Those people who set that up in Antigua, they were with Stanford from the very beginning," Shaw said. "They precipitated in the whole thing. They set this up, saw it through, and then they all walked away."

Stanford himself acknowledged Loumiet's role, telling the lawyer in a 2006 email that "I wouldn't be where I am today without you," according to the lawsuit.

Loumiet wasn't named as a defendant in the lawsuit, but many of its allegations focus on his actions. When the lawsuit was filed last week, he issued a statement saying, "I have never represented anyone that I knew was engaged in wrongdoing. And, after years of investigations by the federal government and months of trials involving Allen Stanford and his co-defendants, I have not been implicated in any wrongdoing."

The suit seeks $1.8 billion in damages from the firms, which denied the allegations, saying investors are simply trying to "pry open a deep pocket" to repay their losses.

Yet the lawsuit lays out excruciating detail how Loumiet knew Stanford's business was a sham. For example, it notes that Loumiet did the legal work on a deal in which Stanford lent the Antiguan government $30 million in 1994 for a hospital. Another Greenberg partner warned Loumiet of mounting financial problems inside Stanford's bank and expressed concern that Stanford couldn't cover the amount of the loan, according to an email included in the lawsuit.

Unfortunately, this pattern is familiar. Law firms are happy to collect big fees, look the other way while companies commit fraud, then feign ignorance.

For example, Vinson & Elkins and Andrews Kurth wound up paying hefty fines -- $30 million and $18.5 million respectively -- to settle civil claims that they provided the legal grease for Enron Corp.'s fraudulent machinations.

In Southwest Florida, high-profile law firm Holland & Knight agreed in August to pay $25 million to settle a suit accusing it of not reporting illegal activities at Scoop Management hedge funds that Arthur Nadel operated in downtown Sarasota.

For more than 20 years, Stanford dodged almost two dozen investigations in the U.S. and elsewhere. His strategy ran the gamut from finesse to bullying.

Stanford had the charisma that all con men need, but that alone couldn't have created the global veneer of legitimacy that allowed him to fleece thousands of investors and balloon his fraud to historic proportions.

For that, he had help.