A national accounting firm and two law firms will pay $45 million in separate settlements over claims that they knowingly participated and assisted in the massive $7 billion Ponzi scheme perpetrated by Allen Stanford. The settlements mark a much-needed boost for Stanford's victims, who to date have received just pennies on the dollar as recovery efforts have proven difficult. Accounting giant BDO USA, LLP ("BDO") will pay $40 million in a lawsuit brought by a committee of Stanford investors, while several defendants including law firms Adams & Reese ("A&R") and Breazeale Sachse & Wilson ("BSW") will pay $5 million to court-appointed receiver Ralph Janvey. Each of the firms has maintained their innocence.
Stanford ran a massive Ponzi scheme through a banking empire that spanned several continents. Purportedly selling certificates of deposit bearing higher-than-average returns, Stanford's entities ultimately raised billions of dollars from investors. However, Stanford used investor funds to pay the advertised returns - a classic Ponzi scheme. In addition to paying fictitious returns, Stanford used investor funds to support a lavish lifestyle of a billionaire that included fleets of private jets, luxurious mansions, yachts, and even the creation of an international cricket tournament. He was arrested in 2009, convicted by a federal jury, and sentenced to a 110-year prison term in 2012.
Following the appointment of Ralph Janvey as receiver, scrutiny turned to third parties that provided legal and accounting services to Stanford. According to the lawsuit filed against BDO, the firm allegedly issued unqualified opinions on various Stanford entities' financial statements, including the broker-dealer that sold CDs to investors and the company that purportedly served as the custodian for the CDs. Additionally, BDO's employees allegedly conspired with Stanford to weaken Antigua's banking laws through participation in a task force formed by Stanford to rewrite the laws. According to the lawsuit, one of the key initiatives of the task force was to ensure that "fraud" and "false accounting" were omitted as violations of Antigua's Money Laundering Act.
Janvey sued A&R, BSW, and several related individuals in February 2012, claiming that the firms were responsible for nearly $2 billion in investor losses through assistance provided to Stanford. Janvey alleged that the law firms steered many of their clients to Stanford's operations, and that this relationship resulted in the referral of lucrative Stanford legal work to A&R and BSW. BSW was accused of delivering a letter, forged to appear from Antigua's Minister of Finance, attesting to the integrity of Stanford's operations so that Louisiana authorities would approve Stanford's acquisition of a trust company. The ruse apparently worked, as the acquisition was approved, and Stanford used the trust company to solicit investors with IRAs.
Under the terms of the settlements, BDO will pay $40 million to the investor committee. A&R and BSW will pay $1 million and $1.53 million, respectively, while the remaining defendants will pay $2.175 million. BSW will also agree to the release of nearly $200,000 being held in escrow.
The motion to approve the A&R and BSW settlement is below: