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Investors, receiver sue law firmsFederal suit in Texas alleges Greenberg Traurig and Hunton & Williams hid 'offshore Ponzi bank' from regulators
Greenberg Traurig and Hunton & Williams are defendants in a federal suit filed Nov. 15 by investors in R. Allen Stanford?s failed companies and a court-appointed receiver.
Greenberg Traurig and Hunton & Williams are defendants in a federal suit filed Nov. 15 by investors in R. Allen Stanfords failed companies and a court-appointed receiver.
The complaint in Ralph S. Janvey, et al. v. Greenberg Traurig, et al. alleges that the firms helped Stanford shield his "offshore Ponzi bank" from regulatory scrutiny and deceived Stanford customers into believing his investment business was legitimate.
Jim Cowles, a partner in Dallas Cowles & Thompson who represents Miami-based Greenberg Traurig in the case, says his client denies all of the allegations in the complaint, which he refers to as "blarney."
Cowles says, "I told the plaintiffs' lawyer Ed Snyder that he's a great wordsmith. But the plain facts are that these are not correct allegations, and when you start looking at the facts, you see that," Cowles says.
Jeff Colman, a partner in Chicago's Jenner & Block who represents Richmond, Va.-based Hunton & Williams, did not return a call seeking comment.
But in response to a call seeking comment, Hunton & Williams released a written statement denying the allegations in the complaint: "This lawsuit is factually and legally baseless and an overreach by Stanford Financial Group's understandably frustrated investors attempting to recoup their unfortunate losses."
In March, a federal jury found Stanford, former chairman of Stanford Financial Group, guilty of 13 of 14 criminal counts against him. Jurors found him not guilty of one count of wire fraud. He was charged in connection with an alleged conspiracy to defraud investors who bought about $7 billion in CDs sold through Stanford International Bank (SIB).
In June, Senior U.S. District Judge David Hittner of the Southern District of Texas sentenced 62-year-old Stanford to 110 years in prison. He is currently serving his sentence at the U.S. Penitentiary II in Coleman, Fla. Stanford has filed an appeal with the 5th U.S. Circuit Court of Appeals.
The civil suit also names as a defendant Yolanda Suarez, a Florida solo who was formerly general counsel of Stanford Financial Group and later Stanford's chief of staff.
Suarez could not be reached for comment at a number listed for her on the Florida State Bar website or at a number found in an online telephone directory.
The complaint is filed in U.S. District Court for the Northern District of Texas in Dallas.
'$7 billion Ponzi scheme'
The complaint's allegations center around the actions of Carlos Loumiet, a former partner in Greenberg and later in Hunton, who allegedly served as the "outside general counsel" to the Texas-based Stanford Financial Group for more than 20 years.
Loumiet is not named as a defendant in the case. The complaint alleges that he provided "the architectural structure for Stanford to pull off his $7 billion Ponzi scheme." Among other things, the complaint alleges that Loumiet, along with Suarez, enabled "Stanford Financial to effectively operate free of government regulations and oversight and completely outside the law."
"In short, Loumiet's and Suarez's fingerprints are all over the Stanford Ponzi scheme from beginning to end," the petition alleges.
Loumiet, who is now a partner in the Miami office of DLA Piper, did not immediately return a call seeking comment. In a prepared statement, Loumiet declines to specifically address the allegations in the complaint. "However, I can say that:
(1) I have never in my long career knowingly helped any client commit any wrongdoing,
(2) I have never represented anyone that I knew was engaged in wrongdoing, and
(3) 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," Loumiet says in his statement.
The complaint also alleges that Greenberg knew Stanford was violating U.S. securities law and assisted Stanford to consolidate his influence over Antiguan officials, where Stanford based his banking operations, among other things.
It alleges that Hunton also knew that Stanford was evading U.S. regulation and also assisted in quashing political dissent in Antigua, among other things.
In their complaint, the plaintiffs have alleged, among other things, negligence and aiding, abetting or participation in breaches of fiduciary duties. The plaintiffs have also alleged they are entitled to disgorgement of proceeds paid to the defendants by Stanford under the doctrine of unjust enrichment. The petition also alleges that Greenberg and Hunton are liable for the acts of their former employee and that the plaintiffs are entitled to at least $7 billion in damages.
Loumiet helped Stanford "operate the unlicensed and unregulated sales branches of his unregulated offshore bank in the United States. And, No. 2, he basically helped Alan Stanford take over and control the corrupt government of Antigua that thereafter served as Allen Stanford's haven where he was able to carry out his fraud," says Ed Snyder, a partner in San Antonio's Castillo Snyder, who represent the Stanford investors in the case.
'Couldn't have known'
Cowles claims that neither Greenberg nor Loumiet knew of Stanford's wrongdoing until after the fact.
"He didn't know about it, couldn't have known about it," Cowles says of Loumiet. "He couldn't be the architect. He was a banking lawyer."
Cowles says, "As a matter of fact, we tried to point out where he [plaintiffs' lawyer Ed Snyder] claimed Greenburg Traurig remolded the Antigua bank statutes, laws and regulations to make it easy for Stanford to develop his Ponzi scheme fraud. That is just exactly wrong. And that is not in dispute. You can look at the laws, and they would have prevented any Ponzi scheme, had they been enforced. These are statutes and laws that Greenberg was hired by Antigua to prepare and get passed by Antigua and they did. That is not in any sense aiding and abetting fraud. It is actually setting it up to prevent it."
The statement by Hunton and Williams says, "Hunton & Williams LLP neither caused nor facilitated the crimes of which Allen Stanford has recently been found guilty," the release states. "To the contrary, Hunton & Williams LLP is committed to meeting and exceeding the highest ethical standards and does not engage in, condone or counsel others to engage in unlawful activities. Hunton & Williams LLP will vigorously defend itself against this action."
Janvey, a partner in Dallas' Krage Janvey, did not immediately return a call for comment. Neither did his attorney, Nicholas Foley, a partner in Dallas' Neligan Foley.
John Council writes for Texas Lawyer of Dallas, a Daily Report affiliate.