Corporate Law

BigLaw firms must face receiver's suit over client's $7B Ponzi scheme, federal judge rules

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Two BigLaw firms and an attorney who worked for both of them will be facing a federal lawsuit over a massive Ponzi scheme operated by onetime client R. Allen Stanford.

U.S. District Judge David Godbey gave a green light to most counts of the Dallas suit by receiver Ralph Janvey, finding that allegations against former partner Thomas Sjoblom were sufficient to state a claim against Chadbourne & Parke and Proskauer Rose as well as Sjoblom, the Am Law Litigation Daily (sub. req.) and Reuters report.

In addition to malpractice, surviving causes of action include aiding and abetting fraud; civil conspiracy; and negligent supervision, the articles say.

The suit accuses Sjoblom of obstructing regulatory investigations of Stanford, who is now serving a 110-year prison term for fraud. Sjoblom is also accused of hiding an investigation by the U.S. Securities and Exchange Commission from Stanford’s auditor.

Allegations suggest Sjoblom “was aware that Stanford was engaged in a fraudulent enterprise, and that the enterprise was very possibly a Ponzi scheme,” said Godbey in his written opinion. “Because Sjoblom’s knowledge is imputed to both Chadbourne and Proskauer, plaintiffs have alleged that all defendants were aware of sufficient wrongdoing on Stanford’s part.”

Sjoblom originally worked at Chadbourne, then moved to Proskauer. He is currently in practice on his own.

In a written statement provided to the Am Law publication, Proskauer said the firm is “pleased that the district court found one of the claims in the Janvey complaint so legally deficient that it was immediately dismissed” and said other claims were left standing due to the “preliminary status” of the case. “Once the merits are reached, we are confident the remaining equally baseless claims will be dismissed,” the firm says.

Chadbourne and a lawyer for Sjoblom did not immediately respond to media requests for comment.

Two other well-known law firms are facing a separate Janvey lawsuit, on behalf of investors, over their work for Stanford.

Meanwhile, a separate investor class action is also proceeding against the Chadbourne and Proskauer firms over their work for Stanford, the Reuters article notes.

Related coverage: “Stanford Verdict Could Be Bad News for Attorney and 2 Law Firms Facing Related Civil Cases” “Two BigLaw firms face $1.8B suit by receiver who alleges they aided Ponzi schemer”

See also: “Stanford Receiver Sues Greenberg and Hunton Firms, Says Lawyer’s Work Helped $7B Ponzi Scheme”

Texas Lawyer (sub. req..): “R. Allen Stanford Civil Litigation Hits the Stage”

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