BATON ROUGE, La. – The receiver for the Stanford companies has sued Adams & Reese LLP and Breazeale, Sachse & Wilson LLP for $1.8 billion, alleging that the New Orleans and Baton Rouge law firms helped R. Allen Stanford misappropriate the money, the Baton Rouge Advocate reports.
The lawsuit claims the loss was caused by the wrongful conduct of the law firms and other defendants, who it says are liable for all the damages caused to the Stanford group of companies, as well as reasonable attorneys’ fees.
In addition to the law firms, the other defendants in the lawsuit are Adams & Reese attorneys Robert Schmidt and James Austin; Claude Reynaud Jr., a partner in Breazeale and former director of Stanford Trust Co.; and former Stanford Trust directors Cordell Haymon and Thomas Frazier.
Stanford’s company had offices in Baton Rouge.
Among other things, the federal lawsuit filed in Dallas, Texas, alleges that the law firms helped Stanford commit fraud, enabling the promoter to misappropriate at least $1.8 billion. The total included $300 million that the lawsuit said Baton Rouge-based Stanford Trust Co. should have held in certificates of deposit from Stanford International Bank Ltd.
Breazeale managing partner Scott S. Hensgens said Tuesday that the allegations in the receiver’s lawsuit appear to be virtually identical to those in a lawsuit filed in February 2011 by the Official Stanford Investors Committee.
The major difference is that the 2012 lawsuit, unlike the 2011 one, is not a class action, Hensgens said.
“I don’t understand the legal theory under which they think we’re responsible for anything, much less the entire amount of the damages,” Hensgens said.
Hensgens said the most recent lawsuit is likely the result of a series of adverse rulings in the earlier lawsuit by Federal District Judge David C. Godbey that severely affected the plaintiffs’ claims.
In that lawsuit, the investors committee sued Adams & Reese and Breazeale, Sachse for $337 million.
At the time it was filed, Hensgens described the lawsuit as frivolous and part of a shotgun approach that included suing St. Jude Children’s Research Hospital in Memphis, Tenn., and several related charities. The investors committee wanted $7.3 million that Stanford companies contributed to the charities.
In a statement issued Tuesday, Hensgens said Breazeale, Sachse occasionally represented Stanford Trust Co. on a very limited basis on issues specific to Louisiana law, such as state and local tax and regulatory issues.
“We believe that this lawsuit is a frivolous attempt to recoup unfortunate losses incurred by the Stanford Financial Group’s investors for alleged actions that, if they occurred, were taken by individuals far removed from BSW and Mr. Reynaud and without anyone at BSW’s knowledge,” Hensgens said.
Charles P. Adams Jr., general partner at Adams & Reese, could not be reached for comment.
The latest lawsuit says the law firms enriched themselves at their other clients’ expense by encouraging clients to invest in the alleged Ponzi scheme.
“Through these referrals, the two firms curried favor with their powerful new client, Stanford Financial, while enjoying the lucrative legal work that Stanford Financial sent them to reward them for adding to Stanford Financial’s bottom line,” the lawsuit says.
Hensgens said Breazeale, Sachse never referred clients to Stanford, and he doesn’t believe Reynaud did either.
Neither Breazeale nor Reynaud had any knowledge of improper or illegal activities on behalf of the Stanford Trust Co. or R. Allen Stanford, Hensgens said.
R. Allen Stanford is on trial in Houston for 14 counts, including mail and wire fraud, and could be sentenced to more than 20 years in prison if convicted. Once considered among the U.S.’s wealthiest people with an estimated net worth of more than $2 billion, he has been jailed without bond since being indicted in 2009.The Advocate reported that about $1 billion of the more than $7 billion in losses occurred with investors in the Baton Rouge, Lafayette and Covington areas, Baton Rouge attorney Phillip W. Preis and state Rep. Bodi White, R-Central, estimated.
Many of the investors have hired lawyers in an attempt to recover some of their lost investments. The investors have turned to federal officials in an attempt to have the federal government step in to help those who have lost large sums of money invested with Stanford companies.
Stanford’s defense attorneys have tried to show the financier was a savvy businessman whose financial empire, headquartered in Houston, was legitimate. They said he was trying to reorganize his businesses to pay back investors when authorities seized his companies.
The latest lawsuit claims Reynaud helped Stanford Financial, the Houston-based administrator for all Stanford businesses, get the Louisiana Office of Financial Institutions’ approval to buy Baton Rouge-based Southern Trust Co.
Reynaud allegedly submitted a letter from Antigua’s finance minister testifying to the integrity and professional competence of Stanford Financial even though, the lawsuit claims, Reynaud knew the letter was actually written by Stanford Financial. The lawsuit also claims Reynaud knew of Stanford’s suspicious activities in Montserrat.
Southern Trust became Stanford Trust Co., eventually funneling hundreds of millions of dollars into Stanford Financial, the lawsuit says.
The lawsuit says Adams & Reese issued a legal opinion letter to the Office of Financial Institutions that essentially approved of Stanford Trust’s relationship with Stanford International Bank and Stanford Group Co. — a relationship that the lawsuit says was “incestuous and deeply conflicted.” The lawsuit alleges that the opinion helped Stanford hold OFI at bay and enabled Stanford to commit the fraud that cost investors at least $300 million.