HOUSTON (CN) - Dozens of investors who say they were fleeced by Allen Stanford's $7 billion Ponzi scheme claim a Proskauer Rose attorney aided and abetted the fraud by "obstructing an SEC investigation" of Stanford's operations.
In three nearly identical 95-page complaints filed in Harris County Court, the investors sued Proskauer Rose LLP, its attorney Thomas Sjoblom, Chadbourne & Parke LLP and Antigua-based C.A.S. Hewlitt & Co. Ltd.
Both Proskauer Rose and Chadbourne & Parke are based in New York City.
Stanford Financial Group's owner R. Allen Stanford was charged in February 2009, and indicted in June 2009, on allegation of running a $7 billion Ponzi scheme by selling certificates of deposit at Stanford International Bank on Antigua, with promises of substantial, but unreal, returns.
"From the mid 1980s through February 2009, R. Allen Stanford ('Stanford') - a former bankrupt gym owner from Mexia, Texas - built a financial service empire that at its height boasted 30,000 customers in 130 countries managing billions of dollars in investment funds," according to a class action filed this week against Proskauer Rose by lead plaintiffs Cesar Garza and Patrick Kane.
"The empire was comprised of over 140 companies from across the globe, all of which were ultimately owned by Stanford himself. The companies operated under the brand name 'Stanford Financial' and their worldwide headquarters were located in Houston, Texas," according to the complaint.
The plaintiffs, who live in Mexico, say Stanford's scheme was fueled by sale of certificates of deposit issued from Stanford International Bank in Antigua. Stanford Financial established offices throughout Latin America to solicit investors in the CDs, according to the complaint.
The plaintiffs claim by 2009 Stanford International Bank's "vast network of domestic and foreign offices had sold over $7.2 billion in CDs."
The scheme fueled Stanford's rise to the ranks of the world's richest people; he appeared on the Forbes list with a personal fortune valued at $2.2 billion.
The plaintiffs claim that according to a March 31, 2010 report from the SEC Office of Inspector General the SEC suspected Stanford Financial was running a Ponzi scheme as early as 1997.
"The SEC just didn't have the solid evidence it needed to prove the fraud due to Stanford's crafty construction and implementation of his scheme, centered as it was around Antigua-based SIBL," according to the complaint.
It adds: "The bottom line is that between 1997 and 2005, every person at the SEC who looked at Stanford, including examination staff and enforcement staff, had determined that Stanford was operating some kind of fraud or Ponzi scheme."
The plaintiffs say SEC investigators referred the Stanford case to the agency's enforcement division in April 2005.
At that point, "defendant Tom Sjoblom, with 20 years experience as a high level SEC enforcement lawyer, entered the scene and spent the next four years delaying and obstructing the SEC's investigation of Stanford by lying to the SEC, telling the SEC that he himself had checked Stanford out and that it was not a Ponzi scheme, advising Stanford to hide documents from the SEC, and even omitting to disclose the existence of the formal SEC investigation in audit response letters at Stanford's request," according to the complaint.
The complaint claims that Sjoblom, practicing first at Chadbourne & Parke then at Proskauer Rose, worked feverishly to "justify SIBL's refusal to turn over information about its investments to the SEC," by claiming that Antiguan confidentiality laws prevented Stanford International Bank from turning over documents about its CDs to the SEC.
The plaintiffs seek class certification and actual and punitive for aiding and abetting violations of the Texas Securities Act, breach of fiduciary duty, fraud, conspiracy, negligence, and illicit acts under Mexican law.
They are represented by Edward Castillo of the San Antonio firm Castillo Snyder.
On Dec. 22, 2011 a federal judge in Houston ruled that Stanford was mentally competent to stand trial on charges that he ran Stanford Financial Group's Ponzi scheme.
Stanford was declared incompetent in January 2011 because of an anti-anxiety drug addiction he developed while jailed in Houston. He spent more than 8 months at a federal prison in Butner, N.C., getting treatment for his addiction, and being evaluated for any long-term injuries from a 2009 jailhouse fight, according to news reports.
Stanford claimed he cannot remember some of the events in his life before the 2009 prison fight. But U.S. District Judge David Hittner didn't buy it and set Stanford's trail for Jan. 23.Follow @cam_langford
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.