According to a Supreme Court ruling on Wednesday, victims of the $7 billion Ponzi scheme masterminded by former Texas billionaire Allen Stanford could seek legal actions against law firms and other third parties on claims that they have aided the massive fraud. In a 7-2 ruling written by Justice Stephen Breyer, majority of the court decided that the class-action lawsuits of Stanford's victims were allowed on a special circumstance. The Wall Street Journal noted that a 1998 federal law bars class-action claims against individuals or entities for securities fraud.
Stanford himself is currently serving the first few years of his 110-year prison sentence after he was convicted of investor fraud on a grand scale in 2012. US authorities had claimed that Stanford sold fake certificates of deposit or CDs to new investors and used the proceeds to pay off early investors while funneling to money into his personal ventures.
In the wake of the Ponzi scheme, WSJ said investors took legal action against law firms and several financial-services companies who had business and operational ties with Stanford in the hopes of recouping their investments. Investors allegedly claimed that SEI Investments Co and insurance brokers, which include Willis Group Holdings PLC's subsidiaries, had misrepresented the CDs as lower-risk investments. CD investors also sought out legal actions against Proskauer Rose LLP and Chadbourne & Parke LLP and claimed that the two law firms aided the Antigua-based bank of Stanford to avoid regulatory oversight.
WSJ said that since the allegations, both Proskauer Rose and Chadbourne & Parke stated that they did not commit any misinterpretations to the investors. Moreover, the newspaper also said that SI Investments and Willis Group also distanced itself from Stanford and claimed ignorance in the overall grand scheme of the former billionaire. The firm claimed that it only provided its affiliate back-office services, while Willis Group said it only offered to help Stanford purchase ordinary insurance policies on behalf of the billionaire's bank.
