Kenneth Rijock

Kenneth Rijock

Wednesday, April 18, 2012

APPEALS COURT SAYS STANFORD CLAIMANTS CAN PURSUE CLASS ACTION AGAINST STANFORD'S LAWYERS



The lawyers who allegedly assisted convicted Ponzi schemer Allen Stanford by delaying  Federal investigations of Stanford Bank have been dealt a setback. The Fifth Circuit Court of Appeals* has held that Federal laws that prohibit state court class actions involving securities did not prevent the filing of  a case seeking to recover damages for losses arising out of Stanford's Ponzi scheme.

The Court found that securities were only "tangentially related" to the fraudulent scheme that resulted in massive losses. The bogus Certificates of Deposit, which were issued offshore, were not covered by Federal Securities Law.



The underlying cases involve actions against two major law firms. It is alleged that a former SEC attorney  representing Stanford helped him cover up his crimes by aiding and abetting his fraud, specifically by:

(1) Delaying and obstructing SEC investigations.
(2) hiding documents from the SEC.
(3) Omitting to disclose the existence of a formal SEC investigation.
(4) Hiding behind Antigua's confidentiality laws.

These class-action cases, pending in state court in Texas, can now proceed. Since these are intentional torts, will there be a denial of coverage by the law firms' insurors ?  And just how much in the way of monetary damages will be the result ? The moral is, know your client. If you think that he's a Ponzi schemer, you had better withdraw from representation forthwith.
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*Roland v. Green et al,  Case No.: 11-10932, Fifth Circuit Court of Appeals, __F.3d __, 2012 WL 898557 (5th Cir. 2012). 

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