Law Firms Face Yet Another Suit Over Stanford Fraud

Posted On Friday, February 8, 2013

The attacks just keep coming against two law firms accused of helping Robert Allen Stanford create a $7 billion Ponzi scheme.

“Lawyers have a duty to provide diligent zealous advocacy and to maintain confidentiality of client information, and potential litigation could have a chilling effect on how they perform those duties.”

suit filed last week in the Northern District of Texas accuses Proskauer Rose LLP and Chadbourne & Parke LLP of engaging, through attorney Thomas V. Sjoblom, in a “shell-game strategy to obstruct the SEC’s investigation” of Stanford.

The suit comes just weeks after the U.S. Supreme Court granted certiorari on the question whether another group of suits against the law firms can go forward under the Securities Litigation Uniform Standards Act.

Proskauer told Law360 in a statement that the claims asserted are “identical” to ones the plaintiffs brought in a complaint a year ago in Washington, “and they continue to be meritless. Should it become necessary, Proskauer will seek to dismiss these claims at the earliest opportunity.”

Law360 couldn’t reach Chadbourne for comment, but the firm has said of previous Stanford suits: “Prior litigation against our firm regarding Stanford was dismissed, and we do not believe these latest attempts should be any more successful.

Proskauer and Chadbourne are far from alone in facing litigation over clients’ malfeasance.  Vinson & Elkins paid $30 million to settle with Enron’s bankruptcy estate over claims that the firm helped bring about the energy giant’s implosion.  Down in Miami, Shook, Hardy & Bacon finds itself fending off allegations that it aided and abetted University of Miami booster Nevin Shapiro in a $930 million Ponzi scheme.  In a statement to The Miami Herald, the firm said: “We will diligently defend ourselves in this case, and will continue our commitment to resolve any issues that arise in a reasonable, judicious and professional manner.”

These suits and others like them highlight the difficult tightrope lawyers walk when dealing with clients who engage in behavior that comes close to or crosses ethical lines.  Lawyers have a duty to provide diligent, zealous advocacy and to maintain confidentiality of client information, and potential litigation could have a chilling effect on how they perform those duties.

If nothing else, these cases show that when schemes collapse, law firms need quality representation no less than their clients.