DALLAS (CN) - A former partner with Proskauer Rose and Chadbourne & Parke helped the law firms participate in R. Allen Stanford's $7 billion Ponzi scheme, the court-appointed receiver claims in court.
Court-appointed receiver Ralph Janvey and the Official Stanford Investors Committee sued both law firms and Thomas V. Sjoblom, in Federal Court on Thursday.
Janvey says Sjoblom, of Virginia, was a partner at Chadbourne from 2002 to 2006 and a partner at Proskauer from 2006 to 2009.
"Defendants' legal services and other services assisted a fraudulent scheme that enabled and assisted Allen Stanford and his co-conspirators in misappropriating billions of dollars in assets from Stanford Financial companies, and therefore from the Committee as assignee from the Receiver," the 116-page complaint states.
"As a result of this conduct, defendants are directly liable for fraud."
Janvey claims the defendants' obstruction of regulatory investigations was essential to the survival of the scheme and that without it, "Allen Stanford and his co-conspirators would not have been able to execute the Ponzi scheme, and billions of dollars in damages to Stanford Financial companies ... would have been avoided."
The complaint adds: "Indeed, defendants' actions were taken to protect the Stanford Ponzi scheme and to avoid regulatory intervention so that the Stanford Ponzi scheme could continue and Stanford Financial could continue paying defendants' bills."
Janvey claims that Stanford Financial hired Chadbourne and Sjoblom in 2005 to defend and obstruct an SEC investigation.
Janvey claims Sjoblom was the "perfect fit" because he had been a high-ranking SEC attorney for 20 years and knew many of the lawyers involved in the investigation.
Despite Sjoblom's finding several red flags of fraud during his due diligence, Chadbourne agreed to represent Stanford Financial and several affiliates through all stages of the investigation, Janvey says in the complaint.
"These facts demonstrate that as of August 2005, defendant Sjoblom ... knew that Stanford Financial was, at best, committing securities fraud through an unregulated investment company based in Houston, Texas that issued securities from an offshore bank in the most corrupt fraud haven in the Caribbean. At worst, Sjoblom already knew that Stanford Financial was running a Ponzi scheme," the complaint states.
It continues: "Instead of declining the engagement, however, Sjoblom eagerly agreed to help. After concluding his due diligence, Sjoblom reported back to Talbert Navia and agreed to represent Stanford Financial. On August 23, 2005, Navia and Sjoblom executed the engagement letter on behalf of Chadbourne, agreeing to represent Stanford Financial and its affiliates SGC and SIBL through all stages of the SEC's ongoing investigation. That same day, Sjoblom called the SEC and told the Commission that SIBL [Stanford International Bank Ltd.] would not voluntarily produce any documents and that the SEC did not have jurisdiction over SIBL."
Sjoblom misrepresented material facts and law to the SEC in a 2005 letter, Janvey says in the complaint: "Sjoblom's letter flatly rejected the SEC's allegations of fraud and argued that the Commission lacked jurisdiction over SIBL's CD [certificates of deposit] program because the CDs did not constitute 'securities' under U.S. law. In short, Sjoblom stated that if SIBL became insolvent, SIBL's CD holders were 'virtually guaranteed payment in full' because they were protected by Antigua's comprehensive banking regulations and SIBL's excess capital and supplemental insurance coverage. Incredibly, Sjoblom also stated that an investment in SIBL was actually safer than investing in a U.S. bank.