R. Allen Stanford, ranked by Forbes magazine last year as the 205th richest American, with a reported net worth of $2 billion, says he has no money for a lawyer to fend off charges that could imprison him for life.
Stanford is charged with leading a $7 billion Ponzi scheme, which he denies. The U.S. Securities and Exchange Commission in a civil suit in February got a court order freezing his assets. The judge in the case said the financier can’t touch the money unless he proves it’s untainted by wrongdoing.
“Any effort by him to challenge civilly or criminally what the government’s got comes with a risk of exposing himself and forfeiting his rights,” said former federal prosecutor Eric Sussman, who’s not involved in the case. “Obviously, it puts him in a bind,”
Stanford, 59, is caught between two constitutional rights. One guarantees legal counsel. Another protects a defendant from being forced to testify against himself.
To show his assets are untainted, thus allowing him to pay for legal representation, Stanford would have to testify, defense lawyer Dick DeGuerin told U.S. District Judge David Hittner in Houston. Anything he revealed about his finances could be used against him in the criminal prosecution.
Stanford is accused of leading a fraud scheme involving the sale of certificates of deposit through Antigua-based Stanford International Bank Ltd. He pleaded not guilty and has been in custody without bail since June 18.
Coercion Tool
Stanford has one defense lawyer seeking to be relieved as counsel and another unwilling to commit without a guarantee of payment. His next court appearance will be at a Sept. 10 conference on the criminal case.
The financier isn’t the first white-collar defendant hobbled by a court-imposed asset freeze. Arthur Nadel, the jailed hedge-fund adviser, is preparing for a fraud trial in New York with the help of a court-appointed defender following the freeze of his assets in a parallel SEC lawsuit.
“The seizure of assets pending resolution of a complex case that will likely last for years is incongruous with the presumption of innocence,” Steven Molo, a New York white-collar defense lawyer, said by e-mail. “But prosecutors don’t hesitate to use it as a powerful tool to effectively coerce defendants.”
Stanford and DeGuerin, whose former clients include ex- U.S. Representative Tom DeLay, tried to part ways after the lawyer demanded an assurance of payment. The case may cost as much as $20 million to defend, DeGuerin said.
Stanford said July 31 he was replacing DeGuerin with Robert Luskin of Washington-based Patton Boggs LLP, who has represented Karl Rove, adviser to ex-U.S. President George W. Bush.
Must Be Paid
Luskin told Hittner he won’t sign on to the case until he and his firm know they’ll be compensated for their work. He declined to estimate the cost of Stanford’s defense.
“We’ll step in only if we can mount the kind of defense Mr. Stanford needs,” Luskin said. “It will take more resources than we can support on a pro bono basis.”
Hittner said he won’t release DeGuerin from the case until another lawyer is ready to replace him without preconditions. The judge has yet to rule on Stanford’s request for access to his money.
“The U.S. government and parties acting under its authority have coordinated an attack on Mr. Stanford’s constitutional rights,” DeGuerin said in a July 6 filing.
Allowing Stanford to use $10 million of his fortune to pay for lawyers would be like letting a bank robber use money he stole to pay for a defense, the government replied.
Government’s Stance
“Given the clear lack of any constitutional violations, there is no basis for the relief Stanford seeks,” prosecutors said in court papers.
A court-ordered asset freeze almost forced indicted former Illinois Governor Rod Blagojevich, who faces federal corruption charges, to use court-appointed counsel, as Stanford may have to do if he cannot gain access to his assets.
U.S. District Judge James Zagel in Chicago in May granted the impeached former governor the right to tap $2.3 million in frozen campaign funds, provided he pay his private lawyers no more than the U.S. court-appointed counsel rate of $110 per hour. The judge reasoned that taxpayers would end up footing the bill for Blagojevich if the campaign money wasn’t used.
Marjorie Meyers, who leads the federal public defender’s office in Houston, said that if the Stanford case was assigned to her office, “we’d handle it.”
“If any court-appointed lawyer gets a big case that requires significant resources, if there’s not enough money in the federal public defender budget or the appointed-counsel budget, there is a case-budgeting process,” Meyers said.
Asking for Funds
She would go before the judge hearing the case, present an analysis of defense needs, and request funding to meet them, Meyers said.
Sussman, the former prosecutor, said federal public defenders are sometimes hamstrung by a lack of resources.
“They’ve got a limited number of lawyers and usually an unlimited number of clients,” said Sussman, now a Chicago partner of New York’s Kaye Scholer LLP.
“It becomes very difficult for a lawyer to engage in a lengthy trial and still represent the other clients he or she represents.”
Judges therefore assign some case to private-firm lawyers, Sussman said.
Federal defenders he opposed in court as a prosecutor were “outstanding” lawyers, the ex-prosecutor said.
“A lot of defendants make the mistaken assumption you get what you pay for,” Sussman said. “In terms of quality, they get much more than what they pay for.”
Fight Over Insurance
Stanford, as he tries to pry loose some of his fortune, is also fighting with federal officials over using liability insurance to pay for his defense costs.
Ralph Janvey, the receiver appointed by U.S. District Judge David Godbey in the Dallas SEC case to marshal the assets of Stanford and his firms and repay investors, estimated their directors’ and officers’ insurance coverage is worth at least $50 million.
Stanford and about 60 of his former employees including co- defendant and former Chief Investment Officer Laura Pendergest- Holt, have asked Godbey for access to the insurance proceeds to pay their lawyers. The judge hasn’t ruled on the request.
The receiver’s reluctance to let Stanford use the insurance isn’t unusual, said Kevin LaCroix, a Beachwood, Ohio, lawyer who heads OakBridge Consulting Services LLC and counsels public companies on directors’ and officers’ insurance issues.
“The receiver has got to try to collect every nickel that he can,” LaCroix said. “‘It’s not a surprise to me that he tried to glom onto the proceeds.”
Policy Priorities
Most director and officer policies contain a clause saying an individual’s claim will be paid ahead of those of the company, LaCroix said.
“The individuals should be able to access the policy proceeds to have their legal fees paid,” he said.
Depending on the size of the law firm involved, defense costs could range from $250 to $700 an hour, said Doug Burns, a former federal prosecutor now a white-collar criminal defense lawyer in Westbury, Long Island.
“Big firms are not only charging $600 to $700 per hour, but they’re staffing cases with three or four attorneys” at that rate, Burns said. “What you’re seeing in these big white- collar cases is that you obviously get tremendous manpower if you have the money to pay for it.”
Quality lawyers from firms with fewer than 100 lawyers often charge $400 to $450 per hour, Burns said.
Outside Experts
To fight the government with comparable resources, firms must hire outside help including forensic accounts, asset valuators and expert witnesses, who command high fees.
“If you’re going to fight City Hall in a case like Stanford’s, you’re going to get into the millions pretty quickly,” Burns said.
The cases are U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston) and SEC v. Stanford International Bank Ltd., 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas).
Source: http://www.bloomberg.com/apps/news?pid=20601103&sid=a3g23ZdvSwZg #
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