October 12, 2009 4:58 PM
Stanford Lawyers Might Finally Get Paid
Posted by Vivia Chen
Taxpayers can rejoice that alleged Ponzi schemer R. Allen Stanford is no longer a public ward--at least, not when it comes to his legal defense. On Friday, U.S. district judge David Godbey in Dallas ruled that Stanford can now use insurance proceeds from a Lloyds of London directors and officers policy to pay his legal bills.
Until the ruling, Lloyds had refused to release the proceeds after the court-appointed receiver for Stanford's businesses, Ralph Janvey of Dallas firm Krage & Janvey, challenged the jailed financier's right to the D&O policy. With his assets frozen, Stanford's criminal case was turned over in mid-September to public defender Mike Sokolow and Houston defense lawyer Kent Schaffer. Schaffer has been billing the government at the court-set rate of $110 an hour.
Since Friday's ruling, Schaffer says he's been working to get "[written] assurance" from Lloyds that the carrier will cover Stanford's legal fees. There's no pressure from the court to transfer the matter immediately to a private lawyer, Schaffer says, though U.S. district judge David Hittner wants to be sure that "Stanford has representation and that the case moves swiftly."
The impending release of the insurance proceeds now allows Stanford to hire a big gun of his own choosing--like Patton Boggs partner Robert Luskin, who represented Karl Rove in the Valerie Plame matter. Luskin and partners Christina Guerola Sarchio and John Schryber have been working on Stanford's civil and criminal case for months, though the firm has yet to collect on any bills for the work done. In a previous post in this space, Luskin told us Patton Boggs still was interested in the representing Stanford, but his firm would need a guarantee of payment to do so. "If we can resolve the issues related to the insurance policies, we will step in and fully substitute for the public defender," Luskin told us via e-mail.
With the insurance issue resolved (or close to it), the money might soon start to flow. But Patton Boggs, which plans to submit its bills to Lloyds, will have to stand in line. The firm isn't the only one with unpaid invoices. Houston big-wheel defense lawyer Dick DeGuerin, who represented Stanford for several months before Patton Boggs entered the picture this summer, says his firm will be looking for payment from Lloyds, too. "We did quite a bit of investigation [about Stanford's assets]," says DeGuerin. "I even had to pay his hotel bill." DeGuerin, who had estimated that Stanford's criminal representation could run over $20 million, won't say how much he's now owed.
So is the D&O pie big enough to go around? The amount of the proceeds is "not so simple [to calculate]," says Luskin. He adds, though, that "it's a substantial amount and that it will go a long way to address everyone's claims."
The policy, which reportedly ranges from $50 to $100 million, is substantial, but we wonder if it's enough given that it has to cover the legal fees for any directors and officers of Stanford's operations caught up in the cases. Up to 60 Stanford former executives may seek coverage from the policy, according to a report in Bloomberg. Two of the 60--former chief investment officer Laura Pendergest-Holt and former COO James Davis--are lawyered up. We're guessing they've already received some hefty legal bills.
The risk is that lawyers might have to discount their services even more than they had planned to. "I don’t know if a big firm like Patton Boggs will want this case, if there’s only $3 or $4 million on the table," quips one defense lawyer.
Patton Boggs Would Still Like to Represent Allen Stanford The Am Law Daily
No One's Getting Paid in the Stanford Case The Am Law DailyMake a comment