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August 5, 2009 12:07 PM

No One's Getting Paid in the Allen Stanford Case

Posted by Zach Lowe

On Monday, we wondered whether Patton Boggs had received any assurance that accused swindler R. Allen Stanford had some means to pay the firm when they signed on to replace Texas whirlwind Dick DeGuerin as Stanford's lead defense counsel. 

Turns out, the firm has no such assurance--and, because it doesn't, Patton Boggs may not want to get involved in the case after all. Even more confusing: DeGuerin, who either resigned or was fired, depending on which story you believe, may not be able to get out of the case no matter how much he might want to, according to this Bloomberg story

The trouble all stems from the fact that federal regulators and prosecutors successfully convinced a judge to freeze Stanford's assets, since most or all of them may represent proceeds from Stanford's alleged $7 billion fraud, according to court records. As a result, none of the lawyers working on the case has been paid much, if at all, for their work since the SEC filed a civil suit against Stanford in February. (Federal criminal charges came just last month.)

DeGuerin, a Texas attorney who has represented Sen. Kay Bailey Hutchinson in the past, visited Stanford in jail on July 30 and asked to be replaced unless Stanford could guarantee payment of legal fees, Bloomberg reports. Stanford dismissed DeGuerin the next day. But on Tuesday, Judge David Hittner ruled that DeGuerin can't withdraw from the case unless another lawyer agrees to represent Stanford "unconditionally"--i.e., without any guarantees about payment, according to the Houston Chronicle.

Enter Patton Boggs and partner Robert Luskin. Luskin, who represented Karl Rove in the Valerie Plame matter, agreed to take up Stanford's defense late last week. But now Luskin and Patton Boggs have indicated they will not take the case unless they receive an assurance that they will get paid. 

Meanwhile, the court-appointed receiver, Ralph Janvey of Dallas firm Krage & Janvey, and the attorneys at Baker Botts and Thompson & Knight working with Janvey also haven't been paid since starting work in February, court records show. Janvey submitted a bill in May for $20 million in total fees, including about $5.7 million for more than 100 Baker Botts lawyers tracking down Stanford's assets, working on litigation and winding down Stanford's businesses. 

The SEC has objected to that application, essentially arguing that Janvey is overbilling, court records show. Janvey on Tuesday submitted his second application for fees, this one totaling about $7.6 million for work in April and May--including $2.7 million for Baker Botts. 

If you're counting, that's about $27 million in unpaid legal and accounting fees so far, including about $8.4 million due to Baker Botts. (The firms are discounting their rates 20 percent, court records show.)

Where will the money come from? Lawyers for Stanford and the other defendants in the case say Stanford has a D&O insurance policy that could cover the bulk of the legal fees, according to the court records.

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why doesnt Stanford appoint Catherine Shelton?

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