The conviction of Allen Stanford on Tuesday for orchestrating a $7 billion Ponzi scheme could be bad news for two prominent law firms and an attorney facing civil lawsuits arising out of the Texas financier's crimes.
Attorney Thomas Sjoblom and New York-based law firms Chadbourne & Parke and Proskauer Rose are defendants in several class actions and other lawsuits brought by Stanford Financial investors, who claim they lost hundreds of millions of dollars as a result of the fraud.
Filed mostly in Texas, the lawsuits allege that Sjoblom, who worked at Chadbourne & Parke from 2002 to 2006 and at Proskauer Rose from 2006 to 2009, helped Stanford cover up the Ponzi scheme and evade authorities. Investors claim that the firms failed to properly supervise Sjoblom and were negligent in hiring him.
Sjoblom and the law firms also are defendants in a $1.8 billion lawsuit filed in January in Washington, D.C., federal court by the receiver for Stanford Financial, who alleges claims similar to those filed by the investors.
Legal experts said that Tuesday's jury verdict against Stanford on 13 counts of fraud could bolster the class actions and individual cases against the firms and Sjoblom.
“We now know there were bad actors and people suffered. The only question left is who should pay for it,” said Michael Downey, a legal malpractice attorney with law firm Armstrong Teasdale who is not involved in the Stanford matter. “The issue will be 'should we make these poor innocent investors bear the losses or the lawyers who helped make it all happen.'”
Daniel Richman, an evidence professor at Columbia Law School, said the criminal conviction does not guarantee a win in the civil actions. But the verdict could mean that information favorable to the civil cases about the scheme will “shake out,” he said.
“It may well reveal the nature of any co-conspirators,” he said.
Sjoblom did not respond to messages seeking comment. Prior to private practice, he was an attorney with the U.S. Securities and Exchange Commission's enforcement division. He is now a solo practitioner in Washington.
Proskauer Rose, which has about 650 attorneys, did not respond to a request for comment. Chadbourne & Parke, which has about 440 lawyers, declined to comment.
Stanford was accused of defrauding about 30,000 investors for more than 20 years in 113 countries with high-interest certificates of deposit at Stanford National Bank, based in Antigua. He denied the allegations, but the jury on Tuesday convicted him of fraud, conspiracy and obstructing an investigation by the SEC. He was found not guilty on one count of wire fraud. He could face up to nearly 20 years in prison.
Edward Valdespino, an attorney representing some of the investors suing the law firms and Sjoblom, said that the conviction likely will give him better access to employees at the firm who were questioned by prosecutors in the criminal case but who were unable or unwilling to talk to him.
“It puts us in a better position,” Valdespino said.
And Jesse Castillo, a lawyer representing about 350 plaintiffs in class actions against Sjoblom and the firms, said the criminal conviction “reinforces” his cases.
“It's satisfying to our clients,” he said.