White Collar Criminal Defense Group

Law Firms Face Yet Another Suit Over Stanford Fraud

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.”

A 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.  

DOJ Files Charges In $200 Million Bank And Credit Card Fraud Scheme

On Monday, FBI agents arrested 13 people for alleged participation in a “massive international fraud enterprise” that spanned eight countries and 28 states and defrauded financial institutions and credit card companies out of $200 million.  Federal prosecutors stated that the scheme was “highly sophisticated” and involved 7,000 false identities, 80 sham companies, fraudulent identification documents, and doctored credit reports.

Federal prosecutors stated that the scheme was “highly sophisticated” and involved 7,000 false identities, 80 sham companies, fraudulent identification documents, and doctored credit reports.

The criminal complaint, which was filed in the U.S. District Court for the District of New Jersey, described the scheme as a three step process.  First, the defendants would “make up” a false identity by creating fraudulent identification documents and a fraudulent credit profile with the major credit bureaus.  Second, the defendants would “pump up” the credit of the false identity by providing the credit bureaus with false information regarding the identity’s creditworthiness.  Third, once the false identity had excellent credit, the defendants would “run up” large loans which were never repaid.

Federal prosecutors claim that the case is one of the largest ever brought by the DOJ and that over $200 million in losses have been confirmed.  According to the criminal complaint, the defendants spent the money on luxury automobiles, electronics, spa treatments, high-end clothing, and millions of dollars in gold.

A copy of the criminal complaint can be found here.