Judge reduces lawyer's bill to $20M in Stanford case

Sep 11, 2009 @ 8:58 am

By Associated Press

The attorneys trying to track down billions of dollars the government said went missing in a massive pyramid scheme allegedly run by Texas businessman R. Allen Stanford will get paid at least $20 million for three months of work, a federal judge ruled Thursday.

That's about $7 million less than what court-appointed receiver Ralph Janvey had requested for his law firm and the team of attorneys and consultants he hired.

Judge David C. Godbey rejected about $2.1 million in fees and expenses for some accountants and consultants Janvey hired. He also held back 20 percent of Janvey's bill and said he would consider releasing that money later.

In court papers, Janvey defended the fees and said he and the firms he hired already were working at a 20 percent discount.

"Stanford has been at this for 20 years," Kevin Sadler, Janvey's attorney, said Thursday. "A complex empire like this wasn't built overnight, and it won't be dismantled overnight."

The Securities and Exchange Commission has accused Stanford and some of his top executives of running a $7 billion scheme by promising inflated returns to more than 20,000 investors on certificates of deposit at his bank in Antigua. Instead of investing the money, Stanford, who faces additional criminal charges in Houston, paid off old investors with deposits from new investors, according to the government.

Mounting fees for attorneys and accountants threaten to swallow up what Janvey has been able to recover for investors. The $20 million bill Godbey approved represents about one-fourth of the $81 million Janvey has under his control. Janvey and the allegedly defrauded investors get paid from the same pot of money.

Stephen A. French of Legalbill, a consultant company that analyzes the cost of legal work, said Janvey's initial bill was "a very inefficient use of the money" and out of line with typical legal costs in receivership cases. Receiver fees usually eat up about 20 percent of the overall estate, he said. Janvey had been asking for 34 percent.

Janvey and his team are getting paid for their work from mid-February, when the SEC filed suit against Stanford, to the end of May. SEC attorney David Reece said he expects Janvey to file an additional fee request next week for another $15 million, covering work for June, July and August.

Reece asked the judge to help bring Janvey "under control" out of concern his fees could eventually exhaust what money is left to pay back investors.

Godbey did so, ordering Janvey to prepare a budget and work with the SEC on reducing future expenses.

"Every dollar that goes to the professionals will not be available to divide among the investors" or returned to Stanford if he is found not guilty, Godbey said.

The SEC, which recommended Janvey for the job, and just about every other stakeholder in the case opposed Janvey's bill. The SEC's public opposition is considered unusual by securities experts, who say a receiver and the agency usually work together.

Sadler defended his client's fees and expenses, saying the task of winding down Stanford's businesses and chasing the missing money was an expensive and complicated job.

"We didn't create this ... but we are working hard to sort it out," Sadler said.

Besides the civil case in Dallas, Stanford and four executives of his now defunct Stanford Financial Group are accused in a criminal indictment in Houston of orchestrating the alleged fraud. Investigators said Stanford secretly diverted more than $1.6 billion in investor funds as personal loans to himself.

Stanford and executives Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt pleaded not guilty to various criminal charges in Houston, including wire and mail fraud, in a 21-count indictment issued June 18. The three executives are free on bond while Stanford himself remains jailed in the Houston area.

James M. Davis, Stanford's former chief financial officer, pleaded guilty to three counts: conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct the investigation. Davis struck a deal with the Justice Department in exchange for a possible reduced sentence.


What do you think?

View comments

Recommended for you

Upcoming Event

Nov 19


New York Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video


Female leaders highlighted as future of financial advice

InvestmentNews recognized 20 Women to Watch for their efforts to advance the financial advice industry.

Latest news & opinion

Finra panel dismisses $100 million case involving drop in Merrill Lynch stock

Former brokers bringing charges related to stock losses during financial crisis have had 15 cases proceed, four stopped so far.

Principal-Wells Fargo retirement deal would be among largest ever

Acquisition would be in line with trend of record keepers seeking to gain scale to combat fee reduction.

Finra panel dismisses $100 million case involving drop in Merrill Lynch stock

Former brokers bringing charges related to stock losses during financial crisis have had 15 cases proceed, 4 stopped so far.

ESG options scarce in 401(k) plans

There's growing interest among plan participants, but reluctance to add funds that take into account environmental, social and governance factors persists.

Ameriprise getting ready to launch its bank

Firm's advisers will soon have access to lending products such as mortgages.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print