Adams and Reese Sued over Advice to Alleged Ponzi Schemer Stanford
The law firm Adams and Reese is facing a $300 million lawsuit over its legal advice to accused Ponzi schemer R. Allen Stanford.
The would-be class action suit was filed by an investors committee working with the receiver for Stanford’s company, the Stanford Financial Group, according to the Am Law Daily. The suit was filed on behalf of investors who owned individual retirement accounts that bought suspect certificates of deposit from an Antigua bank owned by Stanford.
The complaint (PDF) alleges that the Stanford Financial Group hired Adams and Reese after another law firm, Jones, Walker, Waechter, Poitevent, Carrère & Denègre, wrote a legal opinion raising questions about using onshore trust offices to sell the CDs to IRAs. The Jones Walker firm had said the plan was allowed by government regulations, but it could run afoul of Louisiana state law barring self-dealing.
“Not happy with the danger to its new IRA-CD business, Stanford decided to retain more compliant legal counsel,” the suit says. “Therefore, Stanford turned to the Louisiana law firm Adams & Reese.” The suit, filed in federal court in Dallas, was one of several filed by the investors committee seeking to recover investor money.
The suit also names as a defendant the law firm Breazeale, Sachse & Wilson, hired because Stanford needed “connected” counsel in Louisiana to obtain approval to buy a trust company that would sell the CDs, the suit says. The firm helped Stanford despite knowledge that he had previously tried to run illegal sales offices for his offshore banks in the United States, according to the allegations. Breazeale, Sachse & Wilson denied any impropriety and said that its work for Stanford Trust was occasional and limited. “BSW’s representation of Stanford Trust was limited to legal issues specific to Louisiana, such as state and local tax issues and local regulatory issues,” said managing partner Scott N. Hensgens in a statement. “The Official Stanford Investors Committee admits in its Complaint that Houston, Texas—not Baton Rouge, Louisiana—was the administrative nerve center and principal base for all Stanford Financial operations.”
Also mentioned in the suit—but not named as a defendant—was the law firm Greenberg Traurig, which set up a special trust office in Miami to sell the Antigua bank’s CDs, primarily to South American investors.
Adams and Reese and Greenberg Traurig did not respond to a request for comment when contacted by the Am Law Daily. Adams and Reese released a statement to the ABA Journal by managing partner Charles Reese Jr. “Adams and Reese has no comment other than to say that the firm has obtained a copy of the suit and looks forward to vindicating itself in court,” Reese said.
Last updated at 2:50 p.m. to include statement by Scott N. Hensgens.
