Receiver Goes after Law Firms

October 5, 2009
By Hazra C Medica

Court-appointed receiver Ralph Janvey has turned the spotlight on two law firms. The Miami Herald reported over the weekend that Janvey, who has been working with federal agents, is now pressing for more information directly from Stanford's lawyers.

The receiver has made a request for legal files provided to R Allen Stanford by Greenberg Traurig and another firm, Hunton & Williams. The Herald listed this latest move by Janvey as "one of the most aggressive moves waged by the receiver to search for assets from Stanford's far-flung banking network".

While Greenberg Traurig is not under criminal investigation, the firm is facing a legal review of its actions in Antigua. Ross Gaffney, a former FBI agent who investigated Stanford, was quoted as saying: "I'm sure one of the things they will look at is what did Greenberg Traurig know, and when did they know it, and did they have any liability?"

According to the article, Greenberg Traurig's effort to assist Stanford in 1998 was but one move in a series which saw the Florida law firm rescuing Stanford from crisis and propelling his business interests. The Herald sought interviews with five lawyers who represented Stanford while working for the firm. Two of the five declined to comment, but assured that they were simply providing legal support and were not aware of any illegal schemes by Stanford.

The article spoke of a "money pipeline" between Miami and Antigua which Greenberg lawyers helped Stanford create. It went on to describe Stanford's creation of a trust office in downtown Miami which could move millions overseas without reporting anything to the government.

According to the article, "The unusual arrangement -- created over the objections of Florida's chief banking lawyer -- let Stanford open the office without submitting to fraud checks or money-laundering requirements. Over the next decade, the Miami center sold millions in Stanford's key investments -- certificates of deposit -- the checks stuffed in pouches and sent in jets to Antigua."

The article also chronicled the changes in Antigua's banking system and Stanford's effort to "keep the pipeline alive". The US Treasury, the article explained, was considering blacklisting all of Antigua's offshore institutions because of money laundering and fraud. In response, Stanford met with then prime minister, Lester Bird and agreed to pay out of his own pocket for a task force to rewrite the banking laws.

This task force, the article said, which included Greenberg lawyer Carlos Loumiet, met in Miami and St John's to examine ways to avoid a shutdown of the banks. According to the article, the 1998 legislation gave birth to a new regulatory agency - with Stanford on board - which would give protection to the investor from regulators for the next decade.

The Herald pointed to a particular incident which highlighted the power Stanford gained in Antigua by owning the largest bank. It spoke of the new regulatory agency requesting all of the island's secret offshore banking records. The head regulator, Althea Crick, refused. The agency waited until Crick had left for the day before seizing the filing cabinets containing the records and taking them to another building.

According to the story, the February 1999 takeover was approved by the new regulatory board, including an advisor to Bird, Errol Cort. The Herald rebutted statements which suggested that the takeover "was not done under the cover of darkness". According to the article, records show that Cort was a director of Stanford Trust Company and one of Stanford's Antigua lawyers.

International pressure from US and British authorities would later force Stanford to step down from his position and Antigua officials agreed to change the laws crafted by the task force. However, according to the article, "the momentum was in motion to help Stanford's bank for years to follow."

It noted, "With the new regulatory agency enforcing new banking rules, most of the 56 offshore banks on the island were eliminated, swatting away much of his competition." It also explained that court records show that Stanford's own bank was fabricating financial reports at the same time he was taking over the regulatory agency.

With millions of dollars coming into the Antiguan bank, Stanford switched to Hunton & Williams, after Loumiet joined the firm in 2001. In 2002, regulator Crick was replaced by Leroy King, who has been accused of taking more than $200,000 in bribes.

Loumiet and Hunton & Williams have agreed to turn over records of legal work for Stanford's US companies to Janvey. But they are fighting to keep secret the details of Stanford's businesses in Antigua and other foreign countries.

A spokeswoman for Hunton & Williams, Eleanor Kerlow, was quoted as saying: "There are legal issues regarding jurisdiction and client privilege that must be resolved before we proceed further."

According to the Herald, it is anticipated that Houston Judge David Godbey will decide whether the firm must meet Janvey's demands. Kristie Blumenschein, an attorney with the receiver's firm, has indicated that they are ready to fight for the records. According to Blumenschein, Janvey will not only search for assets, but the actions of the lawyers, dating to the 1990s, will also be under review.

It is being suggested that Janvey can demand lawyers be coerced into testifying about what they knew, since any conversations they had with Stanford about his ongoing crises are not protected by attorney-client privilege.


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