Bloomberg News
Victims of R. Allen Stanford’s $7 billion Ponzi scheme can sue law firms and other third parties on allegations they aided the fraud, the Supreme Court ruled Wednesday.
The court, in a 7-2 ruling written by Justice Stephen Breyer , said the victims’ class-action lawsuits were allowed even though a 1998 federal law largely prohibits state-law class-action claims for securities fraud.
Mr. Stanford is serving a 110-year prison sentence after being convicted in 2012 of defrauding investors on a grand scale. U.S. authorities alleged Mr. Stanford sold investors bogus certificates of deposit, using new CD proceeds to pay other customers and funnel money into his own businesses.
In the fraud’s aftermath, investors sued law firms and financial-services companies that had relationships with the Stanford operations. They alleged SEI Investments Co . and insurance brokers, including subsidiaries of Willis Group Holdings PLC , misrepresented the CDs as safe investments. They also brought claims against law firms Proskauer Rose LLP and Chadbourne & Parke LLP, alleging the firms helped Mr. Stanford’s Antigua-based bank evade regulatory oversight.
The law firms have said they didn’t make misrepresentations to investors. SEI Investments said it merely provided a Stanford affiliate with back-office services, while Willis Group said it helped Mr. Stanford’s bank purchase ordinary insurance policies.
The Supreme Court’s ruling affirmed a decision by the Fifth U.S. Circuit Court of Appeals in New Orleans which allowed the lawsuits to proceed.
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