Allen Stanford Lawyer Sued by Receiver for Aiding Fraud

By Edvard Pettersson & Thomas Korosec (Bloomberg)


A lawyer who worked for convicted financier R. Allen Stanford and two law firms that employed the attorney were sued by the receiver for Stanford’s business over claims they aided his Ponzi scheme.

The court-appointed receiver, Ralph Janvey, filed a complaint yesterday in federal court in Dallas. He accuses Thomas Sjoblom, the lawyer, and Proskauer Rose LLP, where Sjoblom was a partner from 2006 to 2009, and Chadbourne & Parke LLP, where Sjoblom was a partner from 2002 to 2006, of aiding and abetting Stanford’s fraudulent scheme.

Stanford, 62, was convicted in March of stealing more than $2 billion from depositors at his Antigua bank to finance a lavish personal lifestyle that included private jets, yachts and mansions. He is serving a 110-year term in a federal prison in Florida as he appeals his conviction and sentence.
Sjoblom, in the summer of 2005, joined a conspiracy at Houston-based Stanford Financial to obstruct a U.S. Securities Exchange Commission investigation into the Ponzi scheme, according to Janvey’s complaint.

“Sjoblom, who had 20 years of experience as a senior lawyer in the SEC’s Enforcement Division, spent the next four years delaying and obstructing the investigation by lying to the SEC,” Janvey said.

Receiver’s Allegations

The receiver accuses the lawyer of falsely stating that he had personally confirmed Stanford Financial wasn’t a Ponzi scheme, instructing Stanford Financial to hide documents from the SEC, misrepresenting the existence and nature of the SEC’s investigation to Stanford Group Co.’s auditors, and offering false testimony to the SEC.

Sjoblom didn’t immediately respond to an e-mail after regular business hours yesterday seeking comment on the lawsuit.

Nick Clark, a spokesman for Proskauer, had no immediate comment, and Andrew Blum, a Chadbourne spokesman, didn’t immediately return a call seeking comment on the lawsuit after regular business hours.

The case is Janvey v. Proskauer, 13-00477, U.S. District Court, Northern District of Texas (Dallas).




For a full and open debate on the Stanford Receivership visit:

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The Stanford International Victims Group Forum

Andrews Kurth Sued for Malpractice Over Allen Stanford Work

A former client is accusing Andrews Kurth of malpractice, negligence, and breach of contract in a suit filed on Wednesday in state court in Houston.
In a 24-page complaint, Walton Houston Galleria Office, L.P., a Houston-based real estate investment firm backed by billionaire Neil Bluhm, claims Andrews Kurth neglected to inform the company about an SEC investigation into another one the firm's clients, R. Allen Stanford.

Stanford served as the head of Stanford Financial Group (SFG), a Houston-based financial services company that federal prosecutors now claim was actually a $7 billion Ponzi scheme. (Court proceedings against Stanford, who faces securities fraud and money laundering charges, were temporarily postponed in January after a judge found Stanford too mentally unstable to stand trial.)

The civil complaint states that SFG took out space in a key Walton property, the Galleria Towers in The Galleria development in Houston, and engaged in lease and sale negotiations for the property. Andrews Kurth represented both SFG and Walton in those negotiations in 2005, according to the complaint, after Walton agreed to let its lawyers advise both sides of the deal. But the transaction fell through and Stanford sued Walton in late 2005. After SFG collapsed in 2009, Walton was still tied up in the litigation and couldn't sell the property, which cost it millions in attorneys' fees and lost lease revenue, the company claims.

Walton's suit against Andrews Kurth comes one year after a report by the SEC's inspector general criticized the conduct of current Andrews Kurth corporate governance head Spencer Barasch, a former assistant director of the regulator's regional office in Fort Worth that was investigating Stanford for fraud. The report recommended Barasch face possible sanctions and disbarment for his role making decisions to "quash investigations" of Stanford's alleged crimes and then representing the accused Ponzi schemer just months after leaving the SEC. (Click here for a copy of the inspector general's report.)

Walton's complaint against Andrews Kurth claims that Barasch told colleagues that the firm should represent Stanford in the SEC's inquiry in June 2005. That is allegedly when Andrews Kurth became aware of the Ponzi scheme, money laundering, and other illegal activities occurring at SFG. The firm continued to depict SFG as a legitimate entity to Walton, one with which it could conduct business, according to the complaint. Andrews Kurth represented Walton from 2004 until January 2008.

Walton is seeking damages of at least $10 million from Andrews Kurth for malpractice and other professional negligence as a result of allegedly concealing information about Stanford and SFG.

Thomas Ajamie, managing partner of Houston firm Ajamie, is representing Walton in the case, along with partner Dona Szak. Ajamie declined to comment on the suit. (The American Lawyer profiled Ajamie, a former Baker Botts partner, last year for his work winning a $112 million RICO claim on behalf of security company ADT.)

A spokeswoman for Andrews Kurth declined to comment on the Walton suit, citing the firm's policy of not discussing pending litigation. Murray Fogler, a partner at Houston's Beck Redden & Secrest, is representing the firm in the litigation.

Andrews Kurth has publicly defended Barasch, who remains with the firm despite the possibility of criminal charges being filed against him. Last month eight Stanford investors sued the SEC, citing the "negligent supervision of Barasch by his SEC supervisors," according to a complaint filed in that case.

"Spencer Barasch served the SEC with honor, integrity and distinction," Andrews Kurth managing partner Robert Jewell said in a statement at the time. "We disagree with the characterization of Mr. Barasch's involvement put forth by the inspector general in his report last year in regard to the [SFG] matter."

Barasch's supporters claim that he's been made a scapegoat by federal regulators under fire for not catching Stanford sooner. But he's not the only lawyer to face scrutiny following the fallout from SFG's collapse.
Adams and Reese and Louisiana firm Breazeale, Sachse & Wilson were named as defendants in February in one of several suits filed by an official investors committee working with the court-appointed receiver for SFG

Grizzlies Sued Over Stanford Funds; More Money Sought From Memphis Hospitals

The court-appointed receiver for disgraced financier R. Allen Stanford’s empire, along with an official group of Stanford investors, has added another Memphis name to the group of entities they’re suing.

They also want more money from two Memphis entities they’ve already sued.

On Thursday, Stanford receiver Ralph Janvey filed a joint suit against the owners of pro basketball teams the Houston Rockets and the Memphis Grizzlies.

That suit seeks the recovery of almost $1.6 million in allegedly sham CD proceeds from Stanford.

The suit says that investigation is continuing and that the final amount might be higher. It does not break the amount down between the two NBA teams.

Meanwhile, the Stanford Investors Committee filed suit in February against St. Jude Children’s Research Hospital; its fundraising arm, ALSAC; and the Le Bonheur Children’s Hospital Foundation.

That suit sought to recover at least $7.3 million in Stanford funds.

The same day the Grizzlies were sued, an amended complaint was filed against the hospital entities asking for more money.

The “official Stanford Investors Committee” in the amended complaint says it has now identified almost $12 million in Stanford funds paid to the ALSAC-related defendants and at least $1.5 million to Le Bonheur.

All the sides in the ALSAC-related case have met for at least one mediation session. A court form shows the April 7 session was unsuccessful.

Allen Stanford Drops Suit Against Feds For Allegedly Violating Constitutional Rights

Alleged ponzi-schemer Allen Stanford has dropped a lawsuit seeking $7.2 billion from federal law enforcement because he says they violated his constitutional rights, but indicated that he could refile once the criminal case against him concludes.

Stanford sued Justice Department officials as well as Federal Bureau of Investigation and Security and Exchange Commission agents last month for allegedly violating his Fourth, Fifth, Sixth and Eighth Amendment rights (guarding against unreasonable searches and seizures; abuse of government authority in a legal procedure; protecting rights related to criminal prosecutions; and cruel and unusual punishment, respectively).

Stephen R. Cochell, a Texas-based lawyer for Stanford, wrote in a motion filed last week that the claims in the action "will be preserved without pursuit of this case at this time." A federal judge ordered the case dismissed on Monday.

In the suit, Stanford had alleged that agents of the U.S. "conspired to deprive Mr. Stanford of his civil rights by and through tactics taken under color of law, but which violate basic constitutional principles" and "used over $51,000,000 of Mr. Stanford's own money to fund their investigation" while opposing attempts by Stanford to defend himself.

Stanford alleged that he came under scrutiny because the SEC was being criticized in late 2008 and early 2009 for failing to detect misconduct by Bernie Maddoff.

A judge ruled in January that Stanford was incompetent to stand trial and recommended he undergo treatment for his reported traumatic brain injury, addiction to an anti-anxiety medication and major depressive disorder at a federal facility with suitable medical capabilities. Stanford, whose full name is Robert Allen Stanford, is currently inmate #35017-183 and is being held in Butner, N.C.

Vijay Singh's Management Firm Sued by Stanford Receiver Over Sponsor Fees

IMG Worldwide Inc., the management company for pro golfer Vijay Singh, was sued for $10.5 million by alleged swindler R. Allen Stanford’s court-appointed receiver, who seeks to recoup sponsorship fees and expenses.

Receiver Ralph Janvey sued the firm yesterday in federal court in Dallas, claiming IMG shouldn’t be allowed to keep the money paid to promote the Houston-based Stanford Financial Group of companies. Singh isn’t named as a defendant.

The financier is alleged to have led a $7 billion fraud scheme centered on the sale of certificates of deposit by his Antigua-based Stanford International Bank Ltd. He has denied the civil and criminal allegations.

“The Stanford parties were running a Ponzi scheme and paid IMG with funds taken from unwitting SIB CD investors,” attorneys for Janvey and a committee representing investors’ interests said in the complaint.

Jim Gallagher, an IMG Worldwide’s spokesman, said the company has no comment until it has had a chance to review the lawsuit.

Singh, who often played in attire emblazoned with Stanford business logos, offered to pay half of Stanford’s $100,000 bail after the financier was arrested in June 2009, according to court records. The offer was declined after Stanford was deemed a flight risk and ordered jailed until he can be tried.

The sponsorship fees and funds sought in the lawsuit were used to promote the Stanford International Pro-Am tournament and Singh, according to the complaint.

Payment Dates

Janvey claims IMG’s payments, which began in 2006, included $7.3 million in 2008 and $113,929 in the six weeks before the seizure of Stanford’s companies by the U.S. Securities and Exchange Commission in February 2009.

“IMG did not provide reasonably equivalent value for the transfers of CD proceeds to it and cannot establish that it is a good-faith transferee,” the receiver and investors alleged.

Singh, 47, has the second-highest career earnings on the PGA Tour, with $63 million, according to the tour’s website. He is ranked 73rd on the tour, down from his No. 7 PGA Tour ranking in 2008 and No. 2 ranking in 2007, according to the tour’s site.

PGA Tour golfer David Toms was also sued earlier this month by Janvey, for $905,087 in sponsorship fees he received from Stanford’s companies in 2007 and 2008.

Adam Young, Toms’s manager, said Stanford sponsored “a half-dozen other players” on the pro circuit in the two years before the SEC’s seizure of the Stanford businesses.

No Antiguan CDs

Young said Toms’s sponsorship fees were placed by the company in a Stanford Group Co. brokerage account, where they were invested in regularly traded securities. The golfer never owned any of Stanford’s Antiguan CDs, his manager said.

The case is Janvey v. IMG Worldwide Inc., 11-cv-117, U.S. District Court, Northern District of Texas (Dallas).

The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank Ltd., 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).

-- With assistance from Tom Korosec in Dallas. Editors: Charles Carter, Peter Blumberg

To contact the reporters on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com; Andrew M. Harris in Chicago at aharris16@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

Allen Stanford's Girlfriend Stoelker Sued by Receiver for Wages, Payments

Stanford's girlfriend, Andrea M. Stoelker, was sued by the indicted financier’s court- appointed receiver for $560,000 that she received in wages and other payments from the Stanford Financial Group of companies.

Stoelker’s services, including her work on Stanford’s Caribbean cricket subsidiary, were of no value to creditors, said Kevin Sadler, lead attorney for Stanford receiver Ralph Janvey, in papers filed today in federal court in Dallas.

“Any services performed by Stoelker were designed to further the operations of the Ponzi scheme and may well have assisted Stanford in attracting new victim investors,’’ Sadler said in the filing.

Stoelker, who is identified by Sadler as Stanford’s “girlfriend and/or fiancée,’’ said in her own court filings that she often accompanied Stanford on international business trips and Las Vegas vacations. She also sought, and was denied, the return of her personal belongings taken from Stanford’s yacht when his assets were frozen by court order and turned over to Janvey in February 2009.

Stanford is in federal prison in Houston awaiting a January trial on charges that he swindled investors of more than $7 billion through allegedly bogus certificates of deposit issued by Antigua-based Stanford International Bank Ltd.

Mansions, Jets, Yachts

Stanford faces parallel civil fraud allegations from the U.S. Securities and Exchange Commission, which claims he skimmed more than $1 billion in investor funds to finance a lavish lifestyle that included multiple mansions, a fleet of jets, two yachts and a private island. Stanford has denied wrongdoing.

Stoelker was “unjustly enriched’’ while serving as president of both Stanford Financial Group Global Management LLC and Stanford 20/20, according to the lawsuit. The 20/20 organization promoted a faster version of cricket, which the financier hoped would attract a wider following to the sport. Stoelker received at least $140,000 from the cricket unit and another $180,000 from Stanford personally, Janvey claims.

Stoelker previously attended many of Stanford’s court appearances. She was refused court permission to visit Stanford in prison.

The case is Janvey v. Stoelker, 3:10-cv-01272, U.S. District Court, Northern District of Texas (Dallas).

Allen Stanford Sued by American Express Over Credit Card Debt

Indicted financier R. Allen Stanford was sued by a unit of American Express Co. for $115,712.79 in back credit card debt.

Stanford, who faces 21 criminal charges that he led a $7 billion Ponzi scheme, has been incarcerated since June. American Express Centurion Bank said its lawsuit could be served on Stanford at the federal detention center in downtown Houston.

“Defendant benefited from all of the charges made to the Centurion Card account, has acknowledged receipt of those benefits, and has failed to pay for same,” Donald D. DeGrasse, American Express’s lawyer, said in papers filed in Texas state court in Houston yesterday.

Stanford was sued in February 2009 by the U.S. Securities and Exchange Commission on allegations he swindled investors through a scheme built on fraudulent certificates of deposit at Antigua-based Stanford International Bank Ltd. The judge overseeing that case froze all of Stanford’s personal and corporate assets and placed them under the control of court- appointed receiver Ralph Janvey.

DeGrasse, in a telephone interview, said he also plans to file American Express’s claim with the receivership, which is marshalling Stanford’s assets to repay investors and creditors. American Express’s suit also asks that Stanford pay $34,000 to cover the bank’s anticipated legal fees in the bad debt matter.

The government accuses Stanford of misrepresenting the nature and oversight of investor deposits in his offshore bank. Prosecutors claim the financier siphoned off as much as $1.6 billion to fund a lavish lifestyle of mansions, yachts, airplanes and a private Caribbean island.

Denies Wrongdoing

Stanford denies any wrongdoing in connection with the allegations. His criminal trial is set for January 2011.

Kent Schaffer, Stanford’s criminal defense attorney, declined to comment on the lawsuit. Janvey’s spokeswoman, Kristie Blumenschein, didn’t immediately return calls or e-mails after regular business hours seeking comment on the matter.

Ben Barnes Sued for $5 million by Stanford Receiver

Democratic lobbyist and former Texas Lieutenant Gov. Ben Barnes has been slapped with a $5 million lawsuit over lobbying and consulting services he provided to R. Allen Stanford, the indicted financier accused of running a multibillion-dollar Ponzi scheme.

The suit was filed on Mar. 15 by Ralph Janvey, the receiver appointed by the court to recoup the investors’ losses. It alleges that Barnes raked in millions doing consulting and lobbying work for Stanford’s fraudulent investment empire since 2005. Stanford is accused of bilking tens of thousands of investors out of nearly $8 billion, in one of the largest phony investment schemes of all time.

Barnes’s attorney, Jay Madrid, said that the lawsuit was baseless because his client was unaware that Stanford’s businesses were illegitimate at the time the services were provided. "This lawsuit is without merit and creates a dangerous precedent for service providers in all fields," said Madrid in a written statement. "This is particularly true of those who deal in good faith with entities that have all the characteristics of legitimate enterprises but who after-the-fact become subject to receiverships, bankruptcies or similar business failings."

But the lawyer for the court-appointed receiver said that that argument does not absolve Barnes of responsibility. "In a fraudulent transfer action, lack of knowledge of the fraud is not a defense," attorney Kevin Sadler told the NLPC over email. He said that Barnes must prove that he was both unaware of the fraud and that the services he provided to Stanford were equivalent in value to the fees he collected.

"Barnes will not be able to establish the affirmative defense of objective good faith and reasonably equivalent value. His services left creditors of the Stanford entities with nothing of value," wrote Sadler.

The lawsuit alleges that in many cases Barnes’s company "performed services [for Stanford] that simply furthered the Ponzi scheme." This work reportedly included consulting Stanford on how to reduce his personal federal income taxes through the Virgin Islands tax incentive laws and providing investment advice. The lawsuit also says that marketing work done by Barnes for Stanford’s businesses "had the unfortunate effect of attracting new victims to [Stanford’s] fraudulent investment scheme."

Barnes, a heavy-hitter in Democratic political circles, is no stranger to financial scandals. While serving as Texas Lt. Gov. the early 1970s, allegations that Barnes and other state politicians accepted bribes for political favors surfaced in an incident known as the Sharpstown scandal. Barnes was never charged, but the episode helped contribute to his exit from career politics.

Now a successful lobbyist, Barnes is still very much involved in the political arena. Last September, he hosted a Democratic Congressional Campaign Committee fundraiser for House Speaker Nancy Pelosi (D-CA) at his home in Austin, TX. Barnes and his wife have given $249,800 in political contributions in 2010, with 100 percent of those contributions going toward Democratic candidates, according to Open Secrets.

Click here to download a 14-page pdf of the Complaint.

Toronto-Dominion Sued Over Stanford Investments

Toronto-Dominion Bank, Canada’s second-biggest bank, was accused in a lawsuit of negligence and knowing assistance for allegedly helping R. Allen Stanford, who is accused of swindling investors of more than $7 billion, the National Post reported.

The lawsuit, filed in Ontario Superior Court Aug. 26 by Bennett Jones LLP, seeks C$17 million ($15.5 million) for five Canadian investors who say Toronto-Dominion’s role as a correspondent bank increased the credibility of Stanford’s investments, the Post said. The investors claim they lost money in certificates of deposits based on recommendations made by a financial adviser who worked for the Stanford Group of companies, the Post said.

Toronto-Dominion conducted its business in an “appropriate and lawful manner,” Susan Webb, a spokeswoman at the bank, told the newspaper.

Stanford, who faces 21 criminal charges, denies all wrongdoing tied to what the government says was a scheme to pay early investors “improbable if not impossible” returns with funds taken from later investors in Antiguan certificates of deposit. He is being held without bail until he can go on trial.