The claims against the law firms further complicates the issues involving Allen Stanford.
The receiver for Allen Stanford’s alleged $7 billion Ponzi scheme claims two Louisiana law firms helped Stanford misappropriate more than $1.8 billion, by giving false opinions to authorities and referring clients to Stanford in exchange for benefits.
Ralph Janvey, the court-appointed receiver, sued New Orleans-based law firm Adams & Reese and Baton Rouge-based Breazeale Sachse & Wilson, in Federal Court. Janvey also sued Adams & Reese attorneys Robert Schmidt and James Austin, Breazeale Sachse & Wilson attorney Claude Reynaud and Stanford Trust Co. directors Cordell Haymon and Thomas Frazier.
In a 84-page federal complaint, Janvey accuses the defendants of negligence, breach of fiduciary duties, aiding and abetting or participating in breaches of fiduciary duty, aiding and abetting or participating in a fraudulent scheme, aiding and abetting or participating in fraudulent transfers, aiding and abetting or participating in conversion, civil conspiracy and negligent retention or supervision.
“From the mid 1980s through February 2009, R. Allen Stanford – a former bankrupt gym owner from Mexia, Texas – built a financial service empire that at its height boasted 30,000 customers in 130 countries managing billions of dollars in investment funds,” the complaint states.
“The empire was comprised of over 140 companies from across the globe, all of which were ultimately owned by Stanford himself. The companies operated under the brand name ‘Stanford Financial ‘with their worldwide headquarters located in Houston, Texas.”
Stanford’s primary product was certificates of deposit issued by Antigua-based Stanford International Bank Ltd., whose CD holdings peaked at $7.2 billion in February 2009.
“The ultimate reality of Stanford Financial is that it was, at all times, a Ponzi scheme based out of Houston, Texas. Stanford Financial, acting through its international network of companies and FAs: (i) lured money from investors; (ii) gave them a virtually worthless ‘IOU’ piece of paper called a ‘Certificate of Deposit’ in return; and (iii) then diverted the investors’ money to support Allen Stanford’s lavish lifestyle, prop up other Stanford Financial entities, and acquire various illiquid and high-risk assets, including unsecured, fictitious personal ‘loans’ to Allen Stanford and massive amounts of Antiguan real estate,” the complaint states.
“None of the investors’ money was segregated. Instead, investor money was commingled within Stanford Financial and then spread among all the various companies that comprised Stanford Financial to fund the group’s operations.”
Janvey says the defendant law firms “embarked on their own campaign to enrich themselves at their other clients’ expense,” and that while providing legal services to Stanford Financial they referred their own clients to Stanford.