Las víctimas olvidadas de Stanford ahora disponible en español

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Friday, July 25, 2014

Dallas lawyer at center of Houston trial over whether firm owed clients a warning on fraudster Allen Stanford

Robert Khuzami, director of the division of enforcement at the U.S. Securities and Exchange Commission, left, Carlo di Florio, director of the SEC's office of compliance inspections and examinations, center, and Rose Romero, director of the SEC's Fort Worth regional office, testify at a Senate Banking Committee hearing on the agency's probe of financier R. Allen Stanford's alleged Ponzi scheme, in Washington, D.C., U.S., on Wednesday, Sept. 22, 2010. The SEC told lawmakers that in face of criticism that it bungled fraud claims against Stanford it has strengthened its investigations. Photo by Joshua Roberts/Bloomberg

WASHINGTON — A Dallas lawyer is at the center of a legal malpractice dispute unfolding in a Houston courtroom this week. The jury trial starts Monday in a $51 million suit that pits the former owners of the Houston Galleria and its attached office towers against their former lawyers, Andrews Kurth LLP, a Houston-based firm with offices in Dallas and eight other cities.

 A Harris County district court clerk said Friday the trial before Judge Bill Burke is scheduled to last two to three weeks. In it, lawyers for the former owners of the Houston Galleria will argue Andrews Kurth should have warned the real estate company that another of the law firm’s clients was under suspicion by the of SEC of massive fraud.

 Andrews Kurth represented both Walton Houston Galleria and R. Allen Stanford’s company, Stanford Financial Group, while the two companies were negotiating the long-term lease and possible purchase of the Galleria office buildings.

 Walton alleges that the law firm knew that its other client, Stanford, was under heavy suspicion of fraud by the Securities and Exchange Commission and should have warned the real estate firm that its long-term negotiations were at risk.

 To make its claim, the company has argued that the law firm knew of the SEC’s suspicions because its senior partners had spent months recruiting the chief of enforcement in the Fort Worth offices of the SEC, an attorney named Spencer Barasch.

 Andrews Kurth hired Barasch in 2005, just weeks before the SEC sent Stanford an official inquiry that would later trigger an all-out investigation. R. Allen Stanford would ultimately be convicted of fraud and be sentenced to 110 years in prison. His firm was responsible for one of the largest Ponzi schemes in U.S. history.

 Questions about Stanford Financial Group were raised repeatedly over the years, but the SEC under Barasch had declined to mount a formal investigation. A 2010 Office of Inspector General’s report by the SEC concluded that Barasch had been a key voice in scuttling inquiries into the company’s operations, which included selling certificates of deposit in a bank in Antigua.

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