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.

Stanford Investors Claim Lawyers Enabled $7 Billion Fraud

By Laurel Brubaker Calkins on November 15, 2012

 

 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).

Stanford investors, receiver file suit against two law firms

By Mike Tolson | November 15, 2012 | Updated: November 15, 2012 11:16pm

A group of investors victimized by R. Allen Stanford's $7 billion Ponzi scheme along with the court-appointed receiver tasked with obtaining Stanford's remaining assets filed a $1.8 billion lawsuit Thursday against two law firms which they claim share responsibility for the swindle.

Receiver Ralph Janvey along with several named investors filed the federal class-action lawsuit in Dallas that pointed a finger at Miami banking attorney Carlos Loumiet. Loumiet was not named as a defendant, but two law firms where he worked - Greenberg Traurig and Hunton & Williams - were alleged to have designed the "architecture" of the scheme and co-opted government officials in the Caribbean island nation of Antigua whose complicity was essential.

Offshore banking

Stanford Financial Group sold what it called certificates of deposit that provided higher rates of return than typical CDs available from American financial institutions.

The money flowed into an elaborate offshore banking enterprise that was more difficult for U.S. regulators to scrutinize. The scheme lasted for two decades before it collapsed amid a federal investigation in 2009.

Stanford himself lived on Antigua and enjoyed a lavish lifestyle unwittingly fueled by thousands of investors who believed their money was safe.

Also named as a defendant was Yolanda Suarez, a former Stanford employee characterized as Loumiet's onetime protege.

"As a partner at Greenberg Traurig and then Hunton & Williams, Carlos Loumiet helped design the basic architecture of the Ponzi scheme by helping Stanford establish and operate unlicensed foreign bank offices in the U.S. and essentially hijacking the sovereign island nation of Antigua through the use of political corruption, loans made with funds stolen from Stanford's investors, and even writing the laws that governed Stanford International Bank's operations," said plaintiff attorney Ed Snyder, who filed the complaint, in a prepared statement.

Denies impropriety

Loumiet denied any wrongdoing.

"I can say that I have never in my long career knowingly helped any client commit any wrongdoing," Loumiet said in a prepared statement. "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 codefendants, I have not been implicated in any wrongdoing."

Likewise, the two named law firms said they had no idea what was going on. Hunton & Williams called the suit "factually and legally baseless and an overreach by Stanford Financial Group's understandably frustrated investors."

The attorney for Greenberg Traurig, Jim Cowles, said the lawsuit is just one more in a series of legal actions intended to "pry open a deep pocket" in order to compensate victims.

"Greenberg Traurig is not responsible for the fraud committed by Stanford," Cowles said.

Janvey's suit, however, says Loumiet was not just a lawyer but a longtime Stanford confidante who was relied on to get the scheme up and running and keep it that way.

"In the final analysis Loumiet and Suarez succeeded for 21 years in enabling Stanford Financial to effectively operate free of governmental regulations and oversight and completely outside the law," the lawsuit states.

"Loumiet's and Suarez's fingerprints are all over the Stanford Ponzi scheme from beginning to end, and to tell the story of Loumiet's and Suarez's involvement with Stanford is to tell the story of the Stanford Financial Group itself."

Loumiet now works at a different law firm in Miami.

Suarez lives in Miami and could not be reached for comment.