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.


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.

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.


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.


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).