Law Offices of David G. Arganian, Seattle, WA

The Next Round: Defense Team Sees Appellate Issues Aplenty in Stanford Case

R. Allen Stanford won't be sentenced until June, but his criminal-defense attorneys say Stanford's competence to stand trial leads a list of numerous grounds for appeal. Last week jurors convicted Stanford on 13 of 14 criminal counts. The federal jury also ordered the forfeiture of $330 million in 29 foreign bank accounts connected to Stanford companies.

On March 8, Houston lawyers Robert Scardino and Ali Fazel, partners in Scardino & Fazel who were appointed by the court to represent Stanford, said another big issue for appeal is whether the defense team had enough time to prepare for the trial.

"There's a lot of things why we weren't ready," Fazel said, noting some of those issues are referenced in sealed motions the defense team filed prior to the trial in United States v. Stanford , which began on Jan. 24.

"We did the best we could with what we had," Scardino said.

Scardino cautioned that the defense team could not say much because of a gag order in effect since Sept. 30, 2010. He reminded reporters after the trial concluded on March 8 that the defense team only had about a month for trial preparation with Stanford after Senior U.S. District Judge David Hittner in December 2011 declared Stanford competent to proceed to trial. Prior to that, Stanford spent about nine months in 2011 in a U.S. Bureau of Prisons medical facility after Hittner found Stanford incompetent to stand trial until he could be weaned off prescription anti-anxiety medication given to him while in federal custody.

Stanford — the former chairman of Houston's Stanford Financial Group (SFG) — faced the criminal charges in connection with an alleged conspiracy to defraud investors who bought about $7 billion in certificates of deposit sold through Stanford International Bank (SIB).

On Feb. 29, during closing arguments, prosecutors and defense attorneys painted very different pictures.

Saying it "wasn't OK for Allen Stanford to lie, cheat and steal for 20 years," prosecutor William Stellmach of the U.S. Department of Justice in Washington, D.C., asked jurors to find the Houston financier guilty of all 14 criminal counts against him.

But defense attorney Fazel argued to jurors that the case was about "assumptions, presumptions, guesses and reasonable doubt" instead of lies.

Stellmach told jurors during closing arguments that Stanford lied to people who purchased certificates of deposit from Antigua-based SIB by failing to tell them, among many things, that he used billions in deposits for business ventures in the Caribbean and personal expenses. "He flushed it away on a bunch of failing businesses, yachts and cricket tournaments," Stellmach argued.

But Scardino told jurors that Stanford put together a financial empire over 25 years that employed 5,000 people and managed as much as $50 billion for investors. He argued that no one who purchased CDs from SIB lost money until the U.S. Securities and Exchange Commission filed a civil suit against Stanford and others and a judge appointed a receiver over SFG assets. "Every person who bought a certificate of deposit, until the receiver came in, was paid every penny of their money," Scardino told jurors.

During his closing arguments, Scardino questioned the reliability of testimony from the government's main witness, James Davis, the former chief financial officer for SFG who pleaded guilty to three criminal charges and agreed to cooperate with the government.

In a rebuttal argument, prosecutor Gregg Costa, an assistant U.S. attorney in the Southern District of Texas, cautioned jurors against believing the defense's version of the facts. "For more than 20 years, Mr. Stanford was able to con thousands of people out of their life savings. Don't let him pull one more con," Costa told jurors. "He was never a rich person — he's a thief," Costa told jurors near the end of arguments that lasted most of the last day of February.

The jury of four women and eight men started deliberations on Feb. 29. But on March 5, jurors told Hittner they could not agree. Hittner gave them an Allen charge, which urged the jury to continue deliberations, which it did.

On March 6, the jurors found Stanford guilty of 13 counts, including one count of conspiracy to commit mail fraud; four counts of wire fraud; five counts of mail fraud; one count of conspiracy to obstruct a Securities & Exchange Commission proceeding; one count of obstruction of an SEC proceeding; and one count of conspiracy to commit money laundering. Jurors found Stanford not guilty of one count of wire fraud.

Because the jury found Stanford guilty of at least one count, the jury also heard a civil proceeding to decide if $330 million on deposit in 29 non-U.S. bank accounts should be forfeited. On March 8, the jury found that the contents of those accounts were proceeds of a conspiracy and of a "scheme to defraud," and all of the money should be forfeited to the government. That money will go to victims of the fraud.

Hittner scheduled Stanford's sentencing for June 14. Stanford faces up to 230 years in prison.

Stanford was tried separately from his co-defendants — Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt, who worked with Stanford at SFG. Hittner set their criminal trial for Sept. 10. All three have pleaded not guilty.

The defense team asked Hittner to lift the gag order, but Hittner said it would remain in effect because the other defendants have not gone to trial.

Many Lawyers Involved
A long line of criminal-defense attorneys have represented Stanford since he was indicted in June 2009 along with three other former SFG executives and a bank regulator in Antigua, who has not been extradited.

Initially, Dick DeGuerin of Houston's DeGuerin & Dickson represented Stanford. In September 2009, Hittner allowed DeGuerin to withdraw from representation and the judge appointed the federal public defender's office. DeGuerin wanted assurance he would be paid, which he couldn't get since Stanford's assets had been seized by a court-appointed receiver.

In October 2009, Hittner removed the federal public defender's office from Stanford's legal team and changed the designation of appointed counsel Kent A. Schaffer to retained counsel. That change came after U.S. District Judge David Godbey of the Northern District of Texas, who is presiding over a civil suit filed against Stanford, ruled that he would not bar Lloyd's of London from disbursing proceeds from three policies to fund directors' and officers' defense costs under terms of the policies. George "Mac" Secrest, a partner in Houston's Bennett & Secrest, joined Schaffer of Houston's Bires Schaffer & DeBorde on the defense team.

By April 2010, Hittner granted a motion filed by Schaffer and Secrest to withdraw from the case on the ground their relationship with Stanford had deteriorated. The judge appointed Houston lawyers Michael Essmyer and Bob Bennett.

By May 2010, Essmyer and his firm, Essmyer, Tritico & Rainey, had filed a motion seeking to withdraw from the case because of "irreconcilable differences" between them and Bennett over litigation strategy and "other matters." Hittner denied that motion in June 2010. But the judge vacated that order in October 2010, allowing Essmyer out of the case. Hittner also permitted Bennett, of Houston's Bennett Nguyen Joint Venture, to withdraw.

Essmyer now is a shareholder in Essmyer & Daniel in Houston.

Hittner then appointed Scardino and Fazel. The judge ruled that they would be paid with funding through the Criminal Justice Act because Stanford is indigent. Stanford needs court-appointed lawyers because U.S. District Judge Nancy Atlas of the Southern District of Texas issued an order in a coverage case that allowed insurance companies holding SFG officers-and-directors policies to deny coverage for Stanford's and two other former executives' legal fees.

In March 2011, solo John Parras and Kenneth McGuire of the McGuire Law Firm were added to the defense team.

In January, shortly before trial, the defense lawyers filed a motion asking Hittner to allow them to withdraw from the case.

The four Houston lawyers alleged in their motion that their investigation was incomplete due to "funding constraints" for experts and litigation support, and they would not be ready for trial.

Hittner denied the motion, and Stanford went to trial with Scardino, Fazel, Parras and McGuire on his defense team.

The Strategy
Assistant U.S. Attorney Costa declined comment after both verdicts.

But Matt Orwig, a partner in Jones Day in Dallas who is a former U.S. attorney in the Eastern District of Texas, says changing attorneys as many times as Stanford did is "not ideal," but he notes that Stanford had a "lot of very capable attorneys looking at his file."

Orwig says the fact that the jury found Stanford not guilty of one count of wire fraud suggests jurors weighed all of the evidence.

"That's a good indication that they had very good counsel and got a very good trial," Orwig says.

Stanford did not testify at trial, a decision three criminal-defense attorneys — Orwig and Houston lawyers Rusty Hardin of Rusty Hardin & Associates and Philip Hilder of Hilder & Associates — say they cannot question.

"If you look at most of the successful high-profile criminal cases, the defendant rarely testifies. There's just too many things to trip him up," Hardin says. "I don't know a lawyer who would have put him on the stand."

Hilder also notes that having Stanford not testify preserves the issue of Stanford's competence on appeal.

On March 8, Scardino said he and Fazel may not handle the appeal. It is in Stanford's best interest to have another lawyer review their work for appellate reasons, Scardino said.

"We are going to request to have another lawyer look at what we did. . . . That would mean we are out of the case," Scardino said.

It would be up to Hittner to decide who will handle Stanford's appeal, Scardino added.

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