February 18, 2011 3:55 PM
Adams and Reese Among Targets of Suits Filed by Stanford Plaintiffs
Posted by Brian Baxter
Adams and Reese has been named as a defendant in one of several civil suits filed in recent days by an official investors committee working with the receiver for Stanford Financial Group, the Houston-based financial services company that law enforcement officials claim was actually a $7 billion Ponzi scheme.
SFG's namesake, disgraced financier R. Allen Stanford, made news of his own on Thursday when he sued federal prosecutors, FBI agents, and SEC lawyers, claiming all had engaged in "abusive law enforcement" against him. A federal court found Stanford mentally incompetent to stand trial last month and ordered that the defendant receive further evaluation.
But the task of recovering funds for victims of Stanford's alleged $7 billion Ponzi scheme continues. Ralph Janvey, a name partner at Dallas's Krage & Janvey who is serving as the court-appointed receiver in the matter, last month sued the Miami Heat for $1.3 million in allegedly ill-gotten gains that Stanford and his associates paid the NBA team. Janvey has been working in conjunction with the Official Stanford Investor Committee, which last year received court approval to sue third parties.
Plaintiffs' lawyers representing the official investor committee hit several defendants on Thursday with "fraudulent transfer" suits that seek the return of gifts and other payments made by Stanford and SFG. Among those named as defendants: former Houston Mayor Lee Brown, St. Jude Children's Research Hospital, the Golf Channel, and the national security minister of Antigua, the Caribbean island nation that Stanford made a focal point of his offshore financial empire.
Besides the fraudulent transfer cases being pursued with Janvey, Edward Snyder, a name partner at San Antonio firm Castillo Snyder who is working with the receiver, says that his firm is working with others to bring estate and class action claims on behalf of the official investors committee.
Adams and Reese and Louisiana law firm Breazeale, Sachse & Wilson were named in one of those suits--a putative class action--filed on Thursday. According to the 55-page complaint filed in U.S. district court in Dallas, the plaintiffs allege that Adams and Reese gave legal opinions to Stanford and SFG that blessed their business practices.
"Allen Stanford was trying to figure ways that he could have U.S. offices where he could sell these bogus, offshore bank [certificates of deposit] that were the lifeblood of his whole Ponzi scheme," Snyder says. "Because it was an offshore bank, he couldn't really do that, but [Stanford] would set up these trust offices in places like Baton Rouge to act as the trustee for IRA accounts."
Snyder says that sales of the CDs to investors' individual retirement accounts ended up being worth about $330 million. According to the complaint, in 2000, former SFG general counsel P. Mauricio Alvarado tapped Jones, Walker, Waechter, Poitevent, Carrère & Denègre partner Ted Martin to write a legal opinion giving the green light to Stanford's desire to sell CDs to IRA accounts.
While Martin determined that IRS regulations would not prevent such actions, Snyder says that he also found they "wouldn't pass the smell test on the prudence standard of an IRA." Offshore bank CDs are not regulated or registered in the U.S., and Snyder says that after Martin and Jones Walker balked, SFG fired them. (Jones Walker is not named as a defendant in the plaintiffs' complaint; Alvarado resigned from SFG in February 2009.)
In 2001, according to the complaint, Adams and Reese began doing work for Stanford and gave their blessing to his trust company. Six years later--at a point when that trust company had come under regulatory scrutiny in Louisiana--the firm blessed the Stanford initiative a second time, according to the complaint. Employee benefits partner Robert Schmidt and banking and finance partner James Austin in Baton Rouge are identified in the complaint as the Adams & Reese lawyers who worked on the Stanford matter. Neither immediately responded to requests for comment, nor did a firm spokeswoman.
"What's missing in their legal opinion where they tell Stanford, 'Yeah, this is totally legitimate, you can do this,' is the little extra caution that Jones Walker added saying, 'Technically you might be able to do this, but you shouldn't," Snyder says. "So in our view, Adams and Reese blessed this business practice and model, which ended up being a complete Ponzi scheme."
Stanford plaintiffs represented by Snyder are seeking at least $300 million in compensatory damages and punitive damages in the suit against Adams & Reese, which also names the Breazeale firm and a litigation partner in its Baton Rouge office, Claude Reynaud, Jr., as defendants.
In addition to Snyder from Castillo Snyder, other lawyers representing the putative plaintiffs class include Peter Morgenstern of New York's Morgenstern & Blue and Douglas Buncher and Nicholas Foley of Dallas's Neligan Foley.
The name of another Am Law 100 partner does appear in the plaintiffs' complaint, but not as a defendant. Former Greenberg Traurig partner Carlos Loumiet, who once served as lead outside counsel to Stanford entities in the United States, is cited in the context of recounting the history of Stanford's businesses.
Contacted Friday by The Am Law Daily, Loumiet and Greenberg Traurig declined to comment on the suit or on the firm's work for Stanford; click here and here for previous posts on Loumiet and Greenberg Traurig.
Snyder declined to comment specifically on the reasons for mentioning Loumiet, who joined Hunton & Williams in 2001, and Greenberg Traurig in the complaint. He did say that he plans to continue filing civil suits on behalf of Stanford plaintiffs', noting that the recent flurry of litigation is tied to the two-year anniversary of the SEC's charges against Stanford and SFG.
"We were trying to get in under a two-year statute of limitations, but there are three- and four-year limitation periods as well," Snyder says. "And we are looking at other defendants that are not urgent right now."Make a comment