Two large New York law firms failed to persuade a federal judge to throw out a malpractice lawsuit seeking to force them to pay creditors of imprisoned swindler Allen Stanford for aiding the Texas financier's $7.2 billion Ponzi scheme.
U.S. District Judge David Godbey in Dallas on Tuesday said Chadbourne & Parke and Proskauer Rose must face most claims brought by Ralph Janvey, a court-appointed receiver for Stanford's companies, and a committee of Stanford investors helping him recover money for creditors.
Stanford, 65, is serving a 110-year prison term following his March 2012 conviction for scheming to sell fraudulent high-yielding certificates of deposit through his Antigua-based Stanford International Bank. Prosecutors said he used customer funds to make risky investments and fund a lavish lifestyle.
Janvey claimed that Chadbourne and Proskauer should be held liable because Thomas Sjoblom, a lawyer who worked at both firms, allegedly obstructed investigations by the U.S. Securities and Exchange Commission and other regulators into Stanford, and helped hide the SEC probe from Stanford's auditor.
Godbey said the receiver may pursue several claims including professional negligence, aiding and abetting fraud, negligent supervision and civil conspiracy.
The allegations suggest that Sjoblom "was aware that Stanford was engaged in a fraudulent enterprise, and that the enterprise was very possibly a Ponzi scheme," the judge wrote. "Because Sjoblom's knowledge is imputed to both Chadbourne and Proskauer, plaintiffs have alleged that all defendants were aware of sufficient wrongdoing on Stanford's part."
Godbey dismissed a claim alleging aiding and abetting fraudulent transfers, saying Texas law would not recognize it.
In a statement, Proskauer said that once the merits of the lawsuit are addressed, "we are confident the remaining equally baseless claims will be dismissed."
Chadbourne, a lawyer for Sjoblom, and a lawyer for Janvey did not respond to requests for comment.
Ed Snyder, a lawyer for the investor committee, said he is pleased with the decision.