Disgraced financier Allen Stanford’s alleged $7 billion Ponzi scheme is said to have ruined the livelihoods of thousands of victims. Now it could result in a seven-figure loss for one more party: his own defense team.
A group of financial experts from the mega New York accounting firm Marcum was hired last year by Stanford on a $3.2 million budget in the lead up to his trial.
But in a series of documents filed in recent weeks as the case rolled forward in a federal court in Houston, those same experts said they may be stiffed out of at least $1.9 million by the time the jury reaches its verdict.
The issue arises because a powerful federal judge blocked the experts from getting paid for work they had already done and then ordered them to do even more without any guarantee they would be compensated for it.
Legal observers tell TPM the judge’s actions are surprising and could create a opening for Stanford to appeal his case if found guilty on charges related to the collapse of the Stanford Financial Group.
“That’s pretty unusual,” said Sam Buell, a law professor at Duke University and former federal prosecutor. “It potentially creates an appellate issue.”
The problem, according to the accounting firm, is that their work is being bankrolled by the federal government. After a series of events that included Stanford’s assets being frozen or seized following his 2009 arrest, the former billionaire cricket mogul was left with no money to pay for his own defense.
That left it up to the feds to pay for all the lawyers and financial experts needed to ensure Stanford would get a fair trial.
It also meant that anyone hired to help him would have their spending monitored by powerful US Appeals Court Judge Edith Jones, who, among her other duties, oversees the budgets of federal courts in Mississippi, Louisiana and Texas.
After a series of delays and turnovers on Stanford’s defense team, the accountants from Marcum were hired last June. A giant company with $250 million in annual revenue, offices throughout the world and no previous connection with the Stanford case, Marcum was picked to comb through millions of documents that could be used as evidence from the ex-financier’s international business dealings.
Court documents show the firm negotiated a budget with defense lawyers and David Hittner, the Houston judge overseeing the case. The figure they settled on was $3.2 million.
The sum was far greater than what most needy defendants would get to spend on experts, but Marcum insisted that it was less than its accountants would get paid for the work under normal circumstances.
Court records show their efforts seemed to be going fine for the first few months. Marcum submitted bills for June, July and August and got paid on time for each one.
But after submitting a bill for September, the checks stopped coming. The firm dropped its rates once again and did more work for October and November, but still nothing came.
Court records are somewhat vague about what happened next. Most of filings that document the back-and-forth over the payments were sealed at the request of the defense so that prosecutors would not be able to get a glimpse of their strategy.
Likewise, no one from Marcum or the rest of the defense team was willing to speak for this story. Jones, the judge who called the shots on the budget, did not return TPM’s call seeking comment.
But this much is clear: On Dec. 30, with less than four weeks to go before Stanford’s trial, Marcum said it was resigning from the case for lack of payment.
Then on Jan. 4, Jones made an extraordinary order. She said she would approve $205,000 for work done from September to November — less than a quarter of the $845,000 Marcum said it was owed.
On top of it, the judge told the accountants they were not allowed to resign from the case. They would have to keep working through the trial and she would decide when it was all over whether to pay them anything more.
“It would be neither feasible nor economical to obtain a replacement to perform the services Marcum was expected by counsel to provide,” she wrote.
Nick Martin is an associate editor at TPM in New York City. He came to the site in 2011 as a reporter for TPMMuckraker. Previously, he worked in Arizona, first as a staff reporter for a local newspaper and later as a freelance journalist. He also ran the news blog Heat City. Contact him: nick [at] talkingpointsmemo.com