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Wednesday, February 22, 2012

Stanford receiver sues two area law firms

BY TED GRIGGS
Advocate business writer
February 22, 2012


The receiver for the Stanford companies has sued Adams & Reese LLP and
Breazeale, Sachse & Wilson LLP for $1.8 billion, alleging that the New
Orleans and Baton Rouge law firms helped R. Allen Stanford misappropriate
the money.

The lawsuit claims the loss was caused by the wrongful conduct of the law
firms and other defendants, who it says are liable for all the damages
caused to the Stanford group of companies, as well as reasonable attorneys'
fees.

In addition to the law firms, the other defendants in the lawsuit are Adams
& Reese attorneys Robert Schmidt and James Austin; Claude Reynaud Jr., a
partner in Breazeale and former director of Stanford Trust Co.; and former
Stanford Trust directors Cordell Haymon and Thomas Frazier.

Stanford's clients included investors in the Baton Rouge, Lafayette and
Covington areas. The company had offices in Baton Rouge.

Among other things, the federal lawsuit filed in Dallas alleges that the law
firms helped Stanford commit fraud, enabling the promoter to misappropriate
at least $1.8 billion. The total included $300 million that the lawsuit said
Baton Rouge-based Stanford Trust Co. should have held in certificates of
deposit from Stanford International Bank Ltd.

Breazeale managing partner Scott S. Hensgens said Tuesday that the
allegations in the receiver's lawsuit appear to be virtually identical to
those in a lawsuit filed in February 2011 by the Official Stanford Investors
Committee.

The major difference is that the 2012 lawsuit, unlike the 2011 one, is not a
class action, Hensgens said.

"I don't understand the legal theory under which they think we're
responsible for anything, much less the entire amount of the damages,"
Hensgens said.

Hensgens said the most recent lawsuit is likely the result of a series of
adverse rulings in the earlier lawsuit by Federal District Judge David C.
Godbey that severely affected the plaintiffs' claims.

In that lawsuit, the investors committee sued Adams & Reese and Breazeale,
Sachse for $337 million.

At the time it was filed, Hensgens described the lawsuit as frivolous and
part of a shotgun approach that included suing St. Jude Children's Research
Hospital in Memphis, Tenn., and several related charities. The investors
committee wanted $7.3 million that Stanford companies contributed to the
charities.

In a statement issued Tuesday, Hensgens said Breazeale, Sachse occasionally
represented Stanford Trust Co. on a very limited basis on issues specific to
Louisiana law, such as state and local tax and regulatory issues.

"We believe that this lawsuit is a frivolous attempt to recoup unfortunate
losses incurred by the Stanford Financial Group's investors for alleged
actions that, if they occurred, were taken by individuals far removed from
BSW and Mr. Reynaud and without anyone at BSW's knowledge," Hensgens said.

Charles P. Adams Jr., general partner at Adams & Reese, could not be reached
for comment.

The latest lawsuit says the law firms enriched themselves at their other
clients' expense by encouraging clients to invest in the alleged Ponzi
scheme.

"Through these referrals, the two firms curried favour with their powerful
new client, Stanford Financial, while enjoying the lucrative legal work that
Stanford Financial sent them to reward them for adding to Stanford
Financial's bottom line," the lawsuit says.

Hensgens said Breazeale, Sachse never referred clients to Stanford, and he
doesn't believe Reynaud did either.

Neither Breazeale nor Reynaud had any knowledge of improper or illegal
activities on behalf of the Stanford Trust Co. or R. Allen Stanford,
Hensgens said.

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