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Thursday, 29 November 2012

Sentence date set for ex-Stanford CFO

by Patsy R. Brumfield/NEMS Daily Journal

James M. Davis, former chief financial officer for the failed Stanford Financial Group Co., will be sentenced Jan. 22 in Houston, Texas, for his admissions in the $7.2 billion scandal.

Davis once lived in Union County and worked out of Stanford offices in Tupelo and Memphis.

 In September 2009, he admitted to his part in helping his boss, R. Allen Stanford, carry out a years-long Ponzi scheme on some 20,000 investors worldwide.

Scores of Mississippians were among the victims and have yet to receive any compensation for their losses of life savings and retirement funds invested in certificates of deposit through his Antigua-based Stanford International Bank Ltd.

Many of the investors say they were assured by local financial advisers that their investments were federally insured. They were not, and debates continue in court and on Capitol Hill about who should assist victims.

Before Davis’ sentencing, victims may send written statements or ask to speak to the court.

A court-appointed receiver seized all Stanford and other defendants’ assets to liquidate for a victims fund.

Davis faces up to 30 years in prison but said he hopes for leniency as the government’s key witness against Stanford.

Last March, a jury found Stanford guilty of masterminding the scheme in Houston, where he built his financial empire more than two decades ago.

U.S. District Judge David Hittner sentenced him to 110 years in prison. Hittner also will sentence Davis in Houston.

Laura Pendergest-Holt, a Baldwyn native, was Stanford’s chief investment officer. She admitted to obstructing a federal investigation of her employer and is serving a three-year term in prison.

Last week, another jury found guilty two other former Stanford executives. They have not been sentenced. Davis was a key witness at their trial.

Tuesday, 27 November 2012

Lawsuit by Allen Stanford's victims targets his key helpers

Loren Steffy
Published: Tuesday, November 27, 2012 at 1:00 a.m.

Allen Stanford couldn't have acted alone.

That's the idea behind a lawsuit filed last week by a group of investors he ripped off and the receiver appointed to recover assets for them.

Stanford, of course, was convicted of fraud and is serving 110 years in prison. Two top lieutenants have pleaded guilty, and two others were convicted by a Houston jury last week.

But none possessed the legal, banking and international business expertise to enable Stanford -- a former bankrupt gym owner from Mexia, Texas -- to create a fraud that spanned more than 100 countries and swindled $7.2 billion from about 30,000 investors.

"How could it be that five people alone could do this?" asked Angela Shaw, head of the Stanford Victims Coalition, which represents investors and is a party to the 172-page lawsuit.
Her answer: They had help. They had lawyers.

Stanford's Ponzi scheme, the lawsuit contends, wouldn't have grown so large and enveloped so many without the legal expertise of two law firms, Greenberg Traurig and Hunton & Williams, which collected millions in fees from their Stanford work.

Stanford's longtime outside counsel, Carlos Loumiet, worked for both firms and consistently provided the legal advice Stanford needed to perpetuate his fraud, the lawsuit alleges.

With his lawyers' help, the lawsuit alleges, Stanford hijacked the Caribbean nation of Antigua and used it as a shield for his fraudulent banking and investment businesses, which were run from Houston.

Those people who set that up in Antigua, they were with Stanford from the very beginning," Shaw said. "They precipitated in the whole thing. They set this up, saw it through, and then they all walked away."

Stanford himself acknowledged Loumiet's role, telling the lawyer in a 2006 email that "I wouldn't be where I am today without you," according to the lawsuit.

Loumiet wasn't named as a defendant in the lawsuit, but many of its allegations focus on his actions. When the lawsuit was filed last week, he issued a statement saying, "I have never represented anyone that I knew was engaged in wrongdoing. And, 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."

The suit seeks $1.8 billion in damages from the firms, which denied the allegations, saying investors are simply trying to "pry open a deep pocket" to repay their losses.

Yet the lawsuit lays out excruciating detail how Loumiet knew Stanford's business was a sham. For example, it notes that Loumiet did the legal work on a deal in which Stanford lent the Antiguan government $30 million in 1994 for a hospital. Another Greenberg partner warned Loumiet of mounting financial problems inside Stanford's bank and expressed concern that Stanford couldn't cover the amount of the loan, according to an email included in the lawsuit.

Unfortunately, this pattern is familiar. Law firms are happy to collect big fees, look the other way while companies commit fraud, then feign ignorance.

For example, Vinson & Elkins and Andrews Kurth wound up paying hefty fines -- $30 million and $18.5 million respectively -- to settle civil claims that they provided the legal grease for Enron Corp.'s fraudulent machinations.

In Southwest Florida, high-profile law firm Holland & Knight agreed in August to pay $25 million to settle a suit accusing it of not reporting illegal activities at Scoop Management hedge funds that Arthur Nadel operated in downtown Sarasota.

For more than 20 years, Stanford dodged almost two dozen investigations in the U.S. and elsewhere. His strategy ran the gamut from finesse to bullying.

Stanford had the charisma that all con men need, but that alone couldn't have created the global veneer of legitimacy that allowed him to fleece thousands of investors and balloon his fraud to historic proportions.

For that, he had help.

Friday, 23 November 2012

Convictions of Two Accounting Execs May Wrap Up Prosecutions for Stanford Ponzi Scheme

In federal court in Texas yesterday, prosecutors in the Stanford Financial case won convictions against Gilbert Lopez Jr., the former chief accounting officer for Stanford Financial Group, and Mark Kuhrt, the former global controller of Stanford Financial Group Global Management. The convictions appear to mark the end of the many criminal prosecutions that resulted from the massive Stanford Ponzi scheme that began to unravel in early 2009.

According to a Bloomberg report, both Lopez and Kuhrt were found guilty of 9 of 10 wire fraud counts and one count of conspiracy to commit wire fraud. Prosecutors alleged that the men helped hide the company's scheme that involved bogus certificates of deposit at Antigua-based Stanford International Bank Ltd. Sentencing for Lopez and Kuhrt is set for February 14, and they both face prison terms of more than 20 years. Lawyers for the men acknowledged that there was "massive fraud" going on at the company, but that Lopez and Kuhrt had themselves been deceived by Allen Stanford and the company's former CFO, James Davis.

Earlier this year, Allen Stanford was found guilty by a jury on thirteen counts, including charges of conspiracy, mail and wire fraud, and obstructing a Securities and Exchange Commission investigation, and sentenced to 110 years in prison (along with a personal money judgment of $5.9 billion against him). Davis pleaded guilty back in 2009 to three counts of conspiracy to commit mail, wire, and securities fraud; mail fraud; and conspiracy to obstruct an SEC investigation. He has been cooperating with the government's prosecutions of others such as Lopez, Kuhrt, and former Chief Investment Officer Laura Pendergest-Holt, and has yet to be sentenced.

With the trial of Lopez and Kuhrt now completed, all of the criminal trials from the Stanford case now appear to be wrapped up. The final Stanford scorecard looks like this:
  • R. Allen Stanford (former Chairman of Stanford International Bank): Convicted on June 14, 2012 on 13 counts (one count of conspiracy to commit wire and mail fraud, four counts of wire fraud, five counts of mail fraud, one count of conspiracy to obstruct an SEC investigation, one count of obstruction of an SEC investigation and one count of conspiracy to commit money laundering). Sentenced to 110 years in prison.
  • Laura Pendergest-Holt (former Chief Investment Officer): Pleaded guilty in June 2012 to obstructing an SEC investigation into Stanford International Bank. Sentenced in September 2012 to 36 months in prison, followed by three years supervised release.
  • James M. Davis (former CFO): Pleaded guilty in April 2009, to three counts (conspiracy to commit mail, wire, and securities fraud; mail fraud; and conspiracy to obstruct an SEC investigation). Has not yet been sentenced.
  • Gilberto T. Lopez (former Chief Accounting Officer) and Mark J. Kuhrt (former Global Controller of Stanford Financial Group Global Management): Convicted in November 2012 on 9 counts of wire fraud counts and one count of conspiracy to commit wire fraud. Scheduled to be sentenced on February 14, 2012.
  • Bruce Perraud (former global security specialist at Stanford Financial Group) and Thomas Raffanello (former global director of security at Stanford Financial Group): Perraud and Raffanello were both acquitted by the judge presiding over the case against them. Prosecutors had alleged that the men conspired to obstruct an SEC proceeding and to destroy documents in a federal investigation.

Tuesday, 20 November 2012


There is serious  concern over the Slusa Case. As you recall, some defendants have asked the Supreme Court to receive advise from the Executive over accepting or not the Slusa Case. Judge Godbey ruled for SLUSA and the case was taken to the 5th circuit were it was overuled.

IF the Supreme Court accepts the case and rules for it, all existing Class Actions will be dismissed. It will be devastating for all victims and for our legal representatives.

We have been advised that it is NOT unusual for the Court to ask the Solicitor General for his views about wether the court should entertain a discretionary appeal.

In general terms, the Court hears VERY FEW CASES, that are not mandatory, for example a dispute with a foreign country or a constitutional issue. Where the case involves the power of a Federal Agency with expertise in the area this is not unusual, thus the SEC has been asked for its views about whether the Court should take the case. Others also have been asked: the Receiver, the Committee, and the defendants.

Our representatives had two meetings with the SEC and the Solicitor Generals staff and explained WHY THEY BELIEVE THAT THEY SHOULD RECOMMEND AGAINST THE SUPREME COURT ACCEPTING THE CASE.

The meeting happened just last friday.

They have indicated that they will try to make a determination on their position by the end of December.


Friday, 16 November 2012

Stanford Investors Claim Lawyers Enabled $7 Billion Fraud

By Laurel Brubaker Calkins on November 15, 2012
 Two of R. Allen Stanford’s former law firms were sued by defrauded investors who claim the lawyers crafted corporate structures that enabled the financier’s $7 billion Ponzi scheme for more than 20 years.

The proposed class-action, or group, lawsuit filed in federal court in Dallas by investors and Stanford’s court-appointed receiver seeks the return of $10 million in legal fees and more than $7 billion in damages from Greenberg Traurig LLP and Hunton & Williams LLP.

These law firms employed Miami attorney Carlos Loumiet, who served as Stanford’s outside general counsel, from 1988 through 2009. Yolanda Suarez, Stanford’s former chief of staff and general counsel, also worked at Greenberg Traurig before joining Stanford Financial Group Co. in 1992. Suarez, a former protégée of Loumiet described in the complaint as Stanford’s “right-hand,” is named as an individual defendant, while Loumiet isn’t.

“Stanford could not have perpetrated this global mass fraud on his own,” Edward Snyder, a lawyer for the Official Stanford Investors Committee, said in the complaint. “Loumiet’s and Suarez’s fingerprints are all over the Stanford fraud scheme from beginning to end.”

Stanford, 62, was convicted in March of orchestrating a scheme built on bogus certificates of deposit at Antigua-based Stanford International Bank Ltd. Evidence at his jury trial showed the Texas financier bribed Antiguan bank regulators and auditors and skirted U.S. securities laws and money-laundering regulations to keep cash flowing to his offshore bank.

$2 Billion

Prosecutors said Stanford took more than $2 billion in depositor funds to finance a lavish personal lifestyle of jets, yachts and cricket tournaments as well as an array of money-losing private enterprises. He is serving a 110-year term in a Florida federal prison while appealing his verdict and sentence.

“Greenberg Traurig sympathizes with the investors who lost money as a result of Allen Stanford’s fraud, but the firm played no part in causing those losses,” Jim Cowles, an attorney for the firm, said in an e-mailed statement. “This is merely plaintiff’s newest attempt to pry open a deep pocket.”

Cowles said the firm’s “principal legal work” for Stanford occurred prior to 2001, “three years before the sale of the CDs involved in this suit,” when Loumiet left to join the other firm. “On limited matters in which Greenberg Traurig’s attorneys were subsequently consulted, they properly advised Stanford entities” and had no knowledge of Stanford’s fraudulent conduct, Cowles said.

Hunton & Williams said it neither caused or facilitated Allen Stanford’s fraud.

‘Legally Baseless’

“This lawsuit is factually and legally baseless and an overreach by Stanford Financial Group’s understandably frustrated investors attempting to recoup their unfortunate losses,” the Richmond, Virginia-based firm said in an e-mailed statement.

Matthew Rinaldi, Suarez’s attorney, didn’t immediately respond to a voice or e-mail message after regular business hours.

Investors said in today’s complaint that Loumiet and Suarez helped Stanford “hijack” Antigua with bribes and loans so he could “thereafter run it like a corrupt dictatorship” to provide a safe haven for his offshore banking empire.

They claim the two lawyers helped set up Stanford’s U.S. marketing, sales and trust operations to funnel billions of dollars into the Ponzi scheme without attracting the scrutiny of U.S. regulators. The lawyers also structured investments deals Stanford made with funds he stole from the bank, including his extensive Caribbean real estate and venture capital deals, according to the complaint.

“Defendants were subjectively aware of and absolutely indifferent to the risk posed by their conduct,” even when it ran the risk of breaking the law, Snyder said in the complaint.

The case is Janvey v. Greenberg Traurig, 3:12-cv-4641, U.S. District Court, Northern District of Texas (Dallas).

Statement from Kachroo Legal Services

We are preparing another update specifically addressing the status of our lawsuit against the government and all the work we have conducted after the Court denied the government’s motion to dismiss. However, to clarify, the Court’s order was an initial ruling that allowed our lawsuit to go forward into the next stage, which is where we attempt to prove our claims against the government. It was a groundbreaking ruling because all other lawsuits were dismissed immediately upon filing and were not allowed to go forward. We are now in the next stage of the litigation where we seek documents from the other side in order to prove our claims. Our update will address the status of this stage of the litigation. If you have any other questions, please feel free to contact me directly. I am happy to speak with you via email or we can discuss over the phone. You can reach me (212) 372-8939.

The Court’s order was an initial ruling that allowed our lawsuit to go forward into the next stage, which is where we attempt to prove our claims against the government. It was a groundbreaking ruling because all other lawsuits were dismissed immediately upon filing and were not allowed to go forward. We are now in the next stage of the litigation where we seek documents from the other side in order to prove our claims.
And how long does that procedure may take

The deadline to complete this stage of the litigation (called “discovery”) is March 1, 2013. There are a few other stages of the litigation after discovery, during which each side will argue that a judgment should be entered in their favor and the case should not proceed to a trial. If the court disagrees with both sides, then it will go to a full trial. The trial date is now set for October 21, 2013.

Stanford investors, receiver file suit against two law firms

By Mike Tolson | November 15, 2012 | Updated: November 15, 2012 11:16pm

A group of investors victimized by R. Allen Stanford's $7 billion Ponzi scheme along with the court-appointed receiver tasked with obtaining Stanford's remaining assets filed a $1.8 billion lawsuit Thursday against two law firms which they claim share responsibility for the swindle.

Receiver Ralph Janvey along with several named investors filed the federal class-action lawsuit in Dallas that pointed a finger at Miami banking attorney Carlos Loumiet. Loumiet was not named as a defendant, but two law firms where he worked - Greenberg Traurig and Hunton & Williams - were alleged to have designed the "architecture" of the scheme and co-opted government officials in the Caribbean island nation of Antigua whose complicity was essential.

Offshore banking

Stanford Financial Group sold what it called certificates of deposit that provided higher rates of return than typical CDs available from American financial institutions.

The money flowed into an elaborate offshore banking enterprise that was more difficult for U.S. regulators to scrutinize. The scheme lasted for two decades before it collapsed amid a federal investigation in 2009.

Stanford himself lived on Antigua and enjoyed a lavish lifestyle unwittingly fueled by thousands of investors who believed their money was safe.

Also named as a defendant was Yolanda Suarez, a former Stanford employee characterized as Loumiet's onetime protege.

"As a partner at Greenberg Traurig and then Hunton & Williams, Carlos Loumiet helped design the basic architecture of the Ponzi scheme by helping Stanford establish and operate unlicensed foreign bank offices in the U.S. and essentially hijacking the sovereign island nation of Antigua through the use of political corruption, loans made with funds stolen from Stanford's investors, and even writing the laws that governed Stanford International Bank's operations," said plaintiff attorney Ed Snyder, who filed the complaint, in a prepared statement.

Denies impropriety

Loumiet denied any wrongdoing.

"I can say that I have never in my long career knowingly helped any client commit any wrongdoing," Loumiet said in a prepared statement. "I have never represented anyone that I knew was engaged in wrongdoing. And after years of investigations by the federal government and months of trials involving Allen Stanford and his codefendants, I have not been implicated in any wrongdoing."

Likewise, the two named law firms said they had no idea what was going on. Hunton & Williams called the suit "factually and legally baseless and an overreach by Stanford Financial Group's understandably frustrated investors."

The attorney for Greenberg Traurig, Jim Cowles, said the lawsuit is just one more in a series of legal actions intended to "pry open a deep pocket" in order to compensate victims.

"Greenberg Traurig is not responsible for the fraud committed by Stanford," Cowles said.

Janvey's suit, however, says Loumiet was not just a lawyer but a longtime Stanford confidante who was relied on to get the scheme up and running and keep it that way.

"In the final analysis Loumiet and Suarez succeeded for 21 years in enabling Stanford Financial to effectively operate free of governmental regulations and oversight and completely outside the law," the lawsuit states.

"Loumiet's and Suarez's fingerprints are all over the Stanford Ponzi scheme from beginning to end, and to tell the story of Loumiet's and Suarez's involvement with Stanford is to tell the story of the Stanford Financial Group itself."

Loumiet now works at a different law firm in Miami.

Suarez lives in Miami and could not be reached for comment.

Thursday, 15 November 2012

Stanford Accountants Helped Hide Ponzi Scheme, U.S. Argues

By Laurel Brubaker Calkins on November 14, 2012

Two former accounting executives at Stanford Financial Group Co. should be convicted of helping Texas financier R. Allen Stanford conceal the theft of billions of dollars from investors at his offshore bank, U.S. prosecutors told a Houston jury.

The government asked jurors to reject claims by ex-Chief Accounting Officer Gilbert Lopez, 70, and former Global Controller Mark Kuhrt, 40, that they were duped by Stanford and his finance chief into creating false financial statements, which investors relied on to buy $7 billion of fraudulent certificates of deposit from Antigua-based Stanford International Bank Ltd.

“Gil Lopez and Mark Kuhrt were faced with the same choice over and over again, to either help Allen Stanford lie to his customers and misuse their money or say ‘I don’t want to be part of it,’” prosecutor Jeffrey Goldberg said during closing arguments today. The men chose to “keep it secret and actively work to keep others from finding out about it.”

Lopez and Kuhrt, who went on trial on Oct. 17, are the last two Stanford executives to be criminally tried for their roles in a Ponzi scheme built on bogus CDs. Early investors were paid above-market returns with funds taken from later investors, and the accountants helped cover up the Stanford bank’s insolvency for years before U.S. securities regulators seized the operation in early 2009 on suspicion of fraud, prosecutors said.

Appealing Verdict

Stanford, 62, was convicted in March of masterminding the fraud scheme and is serving a 110-year sentence at a federal prison in Florida. He is appealing the verdict and his sentence.

Federal prosecutors told jurors that Lopez and Kuhrt meticulously tracked about $2 billion that Stanford “sucked out” of the bank to fund risky private ventures including Caribbean airlines, resort developments and international cricket tournaments. The accountants didn’t disclose these loans or additional funds that Stanford took to underwrite a lavish personal lifestyle of private jets, yachts and waterfront mansions, the government said.

Stanford told CD buyers their money was invested in conservative liquid assets and overseen by international money managers. Evidence at his jury trial showed that Stanford and his top deputy, finance chief James M. Davis, secretly controlled more than 80 percent of the bank’s investments, much of which was loaned to Stanford or used to underwrite his other businesses.

‘Massive Fraud’

“There’s no doubt whatsoever there was a massive fraud going on, but it was a Stanford and Davis fraud, not a Lopez and Kuhrt fraud,” Richard Kuniansky, Kuhrt’s lawyer, told jurors today. Stanford and Davis “withheld everything that was obviously criminal from their so-called partner in crime,” he said.

Jack Zimmermann, Lopez’s lawyer, also made the argument that Lopez and Kuhrt weren’t in the loop.

“Was there one witness who came here and told you Gil Lopez had access to the real numbers?” Zimmermann asked.

Jurors heard Lopez, Kuhrt and Davis testify during the four-week trial. Davis pleaded guilty to his role in the scheme in 2009, testified against Stanford at his trial and is awaiting sentencing.

Goldberg showed the jury two Power Point slides of what he claimed were lies Lopez and Kuhrt told under oath. All of these lies, he said, were told to protect “the hot secret, the criminal secret” that “the source of Mr. Stanford’s money and lifestyle was the bank” and the $2 billion of investors’ money the financier took for personal use.

The accountants’ lawyers said their clients testified truthfully and urged jurors not to believe Davis, whom Kuniansky called “one of the most despicable human beings.”

‘Trusted Them’

“The government is trying to attach criminality to all these complicated accounting issues,” Kuniansky said. “Looking in hindsight, of course there are things he should’ve done differently. But at that point in time, he trusted them.”Zimmermann asked jurors to question why the government didn’t cross examine Lopez when he testified, “especially since they believed he was lying.”

“A lying defendant is a prosecutor’s dream, but they didn’t ask him one question,” Zimmermann said. “Why not try to trip him up?”

Lawyers for Lopez and Kuhrt told jurors the accountants relied on investment returns provided by Stanford and Davis and never intended to create false financial records or break any laws. The accountants also lobbied Davis to disclose Stanford’s borrowings to investors and were overruled, they said.

‘Accounting Principle’

“Gil Lopez didn’t believe it was illegal not to disclose”loans Stanford took from the bank, as he considered it an internal dispute over accounting principles, Zimmermann said.“A violation of an accounting principle or practice is not a violation of criminal law.”

The accountants’ lawyers said Stanford was consolidating the private ventures he funded with investors’ cash onto the bank’s balance sheet in late 2008 and early 2009. The accountants were prevented from completing the rollup by the government seizure of Stanford’s companies, their lawyers said.

If convicted of all charges, each of the men faces a possible sentence of more than 20 years in prison.

The case is U.S. v Lopez, 4:09-cr-0342, U.S. District Court, Southern District of Texas (Houston).