Court allows Stanford Ponzi scheme suits _lowres

Associated Press file photo by DAVID J. PHILLIP -- R. Allen Stanford arrives in custody in August 2010

Some 900 investors from Louisiana and three dozen other states who claimed in 2009 that Louisiana financial regulators contributed to their huge losses in the Stanford Trust Co. debacle are inching closer to their day in court — but what that trial might look like was the subject of much argument Monday.

The state Office of Financial Institutions recently filed a motion to break the trial of the class-action lawsuit into two separate phases: first a trial on the issue of liability, and if OFI is found liable, then a second trial on the issues of damages.

During a hearing on the motion in Baton Rouge state court, an attorney for the Stanford victims told a judge Monday that OFI's request would force each of the 900 class members to have individual trials before separate juries as to the amount of damages each incurred.

"The case should be tried to one jury," Phil Preis, who represents the retiree victims, argued to state District Judge Don Johnson during a Zoom hearing. "Otherwise, 900 people are not going to have their day in court."

Special Assistant Attorney General Michael Hunt, who represents OFI, argued that a "one size fits all" approach won't work if the case reaches the damages phase because individual plaintiffs could have different damages claims. He suggested the judge could create sub-classes of plaintiffs in any damages phase.

"We have every interest in streamlining the case," Hunt told Johnson. "The state has absolutely no interest in having 900 individual trials."

The judge gave each side until next Monday to submit additional written arguments and said he will rule on the matter Aug. 23.

Stanford Trust was based in Baton Rouge, and the Stanford Group Co. — another Stanford entity — had offices in downtown Baton Rouge. Victims of the Ponzi scheme invested their retirement savings as rollover IRAs in fraudulent certificates of deposit (CDs) that Stanford Trust sold in Baton Rouge.

Financial advisers for Stanford told investors their money was safely held in CDs at Stanford International Bank in the Caribbean island of Antigua. The money for the CDs, however, funded the lavish lifestyle of Allen Stanford, who took more than $7 billion from victims worldwide.

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Preis has said local victims, many of them retirees from Exxon and other plants along the Mississippi River, lost $250 million in the scheme.

The lawsuit filed in Baton Rouge by investors in 2009 alleged that SEI, an international financial services firm that administered the Stanford Group investments, performed the accounting and reporting of the IRA investments and "actively and materially aided" Stanford Trust Co. and the Stanford Group to "perpetuate the massive Ponzi scheme."

OFI was accused in the lawsuit of failing to perform its duties and turning a blind eye to Stanford's fraud scheme. OFI has stated in court documents that it does not guarantee investors in OFI-regulated companies, such as Stanford Trust, won't lose money to fraudulent conduct.

SEI denied the allegations against the company, and the case against SEI was moved to federal district court. In May a federal appeals court in New Orleans affirmed a Baton Rouge federal judge's 2019 ruling that dismissed the lone remaining defendant -- SEI -- in the federal lawsuit.

The 5th U.S. Circuit Court of Appeals disagreed with the investors' argument that SEI had the ability to stop the violations since it controlled the distribution of information on Stanford International Bank CDs to investors.

Then-state District Judge Mike Caldwell, of Baton Rouge, certified the suit as a class action in 2012 on behalf of some 1,100 Louisiana residents. His ruling survived a lengthy appeals process.

The U.S. Supreme Court in 2014 said class-action suits by Stanford's victims could go forward.

Allen Stanford was convicted of fraud in 2012 and is serving a 110-year prison term for the Ponzi scheme.


Email Joe Gyan Jr. at jgyan@theadvocate.com.