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Receiver Attorneys Awarded $15.5M in Fees in Stanford Ponzi Scheme

February 1, 2019 | Posted in : Contingency Fees / POF, Fee Agreement, Fee Award, Fee Award Factors, Fee Request, Hourly Rates

A recent Law 360 story by Reenat Sinay, “Attys Awarded $15.5M in Fees After Stanford Ponzi Deal,” reports that a Texas federal judge has awarded fees of nearly $15.5 million to the attorneys representing a court-appointed receiver and a group of investors in their suit against Proskauer Rose LLP over its former partner's participation in R. Allen Stanford's $7 billion Ponzi scheme.  A team of lawyers from Castillo Snyder PC, Clark Hill Strasburger PLC and Neligan LLP led the investors to a $63 million settlement with Proskauer in August, bringing six years of litigation to a close.

U.S. District Judge David C. Godbey said that the award, which represents 25 percent of the settlement amount, was warranted due to the "extraordinarily complex" litigation involved in the case.  "The court finds that the 25 percent contingency fee agreements between plaintiffs and plaintiffs' counsel is reasonable and consistent with the percentage charged and approved by courts in other cases of this magnitude and complexity," Judge Godbey said.  "The attorneys' experience, reputation and ability also support the fee award."

The court-appointed receiver for the investors, Ralph S. Janvey, and the official Stanford investors committee had Proskauer in their sights because Thomas V. Sjoblom, a former attorney with the firm, allegedly helped R. Allen Stanford's bank hide his shady dealings from the U.S. Securities and Exchange Commission beginning in 2005.  The former financier defrauded tens of thousand of investors in a $7 billion Ponzi scheme in which he misused or misappropriated certificates of deposit purchased by investors and administered by Stanford International Bank.

Stanford Financial Group retained Sjoblom, then a partner at Chadbourne & Parke LLP, to represent several Stanford-affiliated entities in connection with the SEC investigation.  Sjoblom joined Proskauer in August 2006 and continued to represent Stanford Financial until February 2009, when the SEC accused R. Allen Stanford of running the multibillion-dollar fraud.  Sjoblom left Proskauer in September 2009. Stanford was convicted in 2012 and is serving a 110-year prison sentence.

Judge Godbey pointed to the "nature and length" of the investors' relationship with their counsel as further justification for the requested attorneys’ fees.  The investors' lawyers have collectively invested more than $16 million and more than 14,600 hours of work in the Stanford case overall since 2009, according to the order.

"Plaintiffs' counsel have represented the receiver, the committee and investor plaintiffs in numerous actions pending before the court in connection with the Stanford receivership since 2009," the judge said.  "The Stanford receivership and the litigation are extraordinarily complex and time-consuming and have involved a great deal of risk and capital investment by plaintiffs' counsel as evidenced by the declarations of plaintiffs' counsel submitted in support of the request for approval of their fees," Judge Godbey said.

Judge Godbey also held that the requested fees were far less than what many firms would have asked for in a similar situation.  "The 25 percent fee requested is also substantially below the typical market rate contingency fee percentage of 33 percent to 40 percent that most law firms would demand," Judge Godbey said.

The case is Janvey et al. v. Proskauer Rose LLP et al., case number 3:13-cv-00477, in the U.S. District Court for the Northern District of Texas.