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October 5, 2009 12:25 PM

Another Greenberg Traurig Headache: Allen Stanford

Posted by Brian Baxter

UPDATE: Oct. 5, 4:40 p.m. The last three paragraphs of this post have been updated with a statement from Greenberg Traurig and information from another Miami Herald story that ran last week.

As if Greenberg Traurig hasn't had enough trouble over the past several years, a report this past weekend in the Miami Herald asks whether several current and former firm partners aided R. Allen Stanford in running his alleged $7 billion Ponzi scheme.

According to the Herald, lawyers from the firm helped Stanford set up a special trust in the late nineties in Miami that allowed millions in assets to be moved offshore without making any disclosures to the federal government.

Stanford also turned to Greenberg lawyers to draft changes to the Caribbean island's banking system, the Herald reports. The move came after the U.S. Department of the Treasury considered imposing tough restrictions on financial institutions operating out of Antigua following a series of money laundering investigations in the late nineties.

Stanford's proposed changes ultimately became law. Passed in 1998, the legislation created a regulatory agency effectively controlled by Stanford, who was given a position as a board member. Even after Stanford stepped down from the board, the Herald reports he used to agency's powers to avoid oversight and stifle competition from other offshore investment institutions.

The Greenberg partners named in the Herald story are Patrick O'Brien, a former U.S. Customs chief now based in Fort Lauderdale, and Carlos Loumiet, who left the firm in 2001 and took Stanford's business with him to Hunton & Williams. Another Greenberg lawyer, Yolanda Suarez, left the firm to become Stanford's in-house legal counsel and chief of staff.

This isn't the first time that Loumiet's name has been linked to scandal. In June 2008 a federal judge ruled that there was no evidence that Loumiet helped cover up a fraud at now-defunct Hamilton Bank--a Loumiet client while he was at Greenberg. While the firm and another partner paid almost $1 million in fines to a banking regulator without admitting guilt, Loumiet, a former head of Greenberg's international banking practice, refused to settle.

A court-appointed receiver in the Stanford case, Ralph Janvey of Dallas's Krage & Janvey, is seeking documents from Greenberg and Hunton & Williams relating to work done for Stanford entities.

The Herald reports that Loumiet and Hunton have agreed to turn over documents relating to Stanford's U.S. companies, but are fighting to keep confidential details of their former client's ventures in Antigua and other foreign jurisdictions.

In a statement to The Am Law Daily, a Greenberg spokeswoman said that "no governmental agency in the U.S. or abroad has subpoenaed or asked [the firm] to provide any documents relevant to this situation [and] we know of no governmental investigation relating to Greenberg Traurig. The information or documents addressed in the [Miami Herald] article involved work performed more than eight years ago."

Greenberg isn't the only firm to be targeted for its Stanford work. In late August, sibling publication The National Law Journal reported that a group of Stanford clients had filed a class action against Proskauer Rose and partner Thomas Sjoblom, accusing both defendants of participating in Stanford's alleged scheme. (Sjoblom has also been sued by a senior Stanford executive.)

In a separate story than ran last week, the Herald reported that Holland & Knight has been the target of a malpractice suit filed by Ponzi victims in Florida, raising questions about how much due diligence firms must perform on clients. As one lawyer previously told The Am Law Daily, Florida's liberal debtor protection and tax laws make the state a natural place for Ponzi schemes to propagate.

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