Secrets of the Florida Bar by David Arthur Walters
Content
THE SECRETS OF THE FLORIDA BAR By David Arthur Walters It was not what regulators actually investigated but what they declined to pursue and even condoned that brought ruin to the greatest number of people. This time the entire nation was brought to the brink of disaster at the culmination of yet another reign of greed in the annals of unbridled capitalism’s sordid financial history. For example, time and time again the Securities and Exchange Commission was alerted to the fraudulent activities of Ponzi-schemer Bernie Madoff, but regulators were either sleeping on the job or sitting on their hands. And down in sunny Florida, the favored locale for American-style fraud, where Mr. Ponzi himself had retired, bank regulators stood by while fraudster Allen Stanford’s licensed brokers fleeced investors out of billions of dollars. Funds were being laundered and documents shredded right under the regulators’ noses, yet there were no “red flags” raised, because the unique laundry trust had been condoned by state banking lawyers in collaboration with Mr. Stanford’s lawyers – we would say “in collusion” if it were not for the fact that the agreement laying the foundation for the scheme was embodied in a public document. But the public was woefully ignorant. Little did the public know about that agreement, for the public relies on duly licensed lawyers to forge legal agreement, and it depends on its lawmakers to make
sure state officials are ensuring the public welfare. Thus can the rest of the public occupy itself with other tasks. While doing so, it was being defrauded. The press watchdogs were sleeping too – the bottom line ruled: newspaper chains had become the power elite’s advertising agencies in disguise. Something smelled rotten in Florida to a very few people, especially banking lawyers on both sides of the illusory fence between public and private interests. In fact the deal officials struck with Mr. Stanford’s lawyers at Greenberg Traurig, the powerful, politically connected Firm, was rotten at its core. Mr. Stanford had previously solicited Bowman Brown, a prominent Florida lawyer, to strike the fishy deal with the state, but Mr. Brown’s ethics precluded him from being retained. The deal with Florida stunk to high heaven, and several lawyers knew it, but what could they do except gossip about it among themselves? For one thing, they could have complained to The Florida Bar, the Supreme Court of Florida’s licensing and disciplinary “arm,” an official agency of the judiciary. The Florida Bar is an “integrated” or involuntary bar, meaning that Florida lawyers must belong to it in order to practice law in state courts. The bars of several states became integrated with the judicial branches when their respective courts, citing each other in a colossal exercise of judicial vanity, realized that the judiciary had always had an inherent power or natural right, corresponding to their very existence as courts, to regulate the practice of law without interference from the
legislative and executive branches. All this in contradiction to the principle elaborated by Alexander Hamilton, that the courts “were designed to be an intermediate body between the people and the legislature” but not superior to the legislature, for “the power of the people is superior to both”, and the judiciary should not act contrary to the authority delegated to it. (Federalist 78). Mind you that the American judiciary had to struggle long and hard for its independence since the days when courthouses were burned down in some places and laws were passed that anyone of good repute could practice law regardless of his training. Alexander Hamilton, for one, read the law for only three months, and a reading of Blackstone might inspire one to hang out a shingle. President Thomas Jefferson tried to use the impeachment process, which he called a political “farce” due to his own experience presiding over an impeachment trial, to smother the judiciary in its crib lest it become genuinely independent. Suffice it to say that the bar was not highly regarded among American Revolutionaries, mostly because of the experience with the British courts. A lot was done to restore the profession’s integrity thereafter, but there were still too many individualists not to mention bad apples in the barrel. The most successful concerted reaction to the assaults on the integrity of the bar was the integrated bar movement of the 1930s.
One state judiciary after another rounded up the wagons into one circle. Part of the self-defense included improving the reputation of the profession by disbarring incompetent and unethical lawyers. Of course the critics of the integrated bar argue that the it is a monopoly constituted by judicial tyranny, that it serves to drum out of the corps anyone who refuses to goosestep according to the marching orders of its own power elite, and reference is sometimes made in Florida to the “good old white boys” of yesteryear. Too few lawyers, they say, are actually disbarred, and those are mainly small fry in comparison to the great white sharks, the powerful, politically connected law firms about which popular novels may be written – power is worshipped religiously regardless of how it is exercised. However that may be, who would better know which lawyers deserve discipline than lawyers? It takes one to know one: The code of ethics for lawyers requires them to inform on one another if they observe behavior in their colleagues that is remarkably untoward. Of course nobody ratted on likes a rat very much, and almost everyone has something to hide. The conservative or traditional theory of virtue ranks loyalty to ones aristocratic kind as the highest ethic of all, but liberal liberty demands some whistle blowing, at least in those egregious cases that might endanger the institution itself. Which leads us to wonder, now that the awful deeds have been done, now that billions of dollars have been bilked and lives ruined, thanks to the collaboration of certain private and public lawyers,
Did a single one of the lawyers who were saying “I told you so” to one another back then register any complaints or inquiries with the agency that regulates lawyers, namely, The Florida Bar? We may never know. That was back then, what was, was, so let’s move forward, and so on.. Title I Section 24 of the Florida Constitution, Chapter 119 of The Florida Statutes, and Rule 1-14 of the Supreme Court’s Rules Regulating the Florida Bar provide the public with the right of access to public documents received or created, but the law apparently does not specify how long The Florida Bar must keep certain records. The Supreme Court’s self-revealed, inherent, absolutely independent political power apparently dictates that, if The Florida Bar counsel decides not to conduct an inquiry or to recommend disciplinary action, the pertinent file is destroyed one year after his or her decision is made. On August 3, 2009, Donna F. McMahon, Case Management Administrator of the Legal Division of The Florida Bar, responded to one of my inquiries as follows: “Matters received by The Florida Bar which are pending investigation are not public information. We may acknowledge the status if there is specific knowledge of the pending matter: ‘Rule 3-7.1 (e) Authorized representatives of The Florida Bar shall respond to specific inquiries concerning matters that are in the public domain, but otherwise confidential under the rules, by acknowledging the status of the proceedings.’ The matter becomes public once a final disposition is recorded. If the matter is closed by bar counsel at staff level (declines to pursue
investigation), one year from the date of closure the matter is purged from the attorney’s record. Therefore we do not have a 10-year history of matters disposed with a finding of no probable cause (closed by staff).” If we examine the rules, we see that Rule 3-7 reads in part as follows: “3-7. PROCEDURES. RULE 3-7.1 CONFIDENTIALITY (a) Scope of Confidentiality. All matters including files, preliminary investigation reports, interoffice memoranda, records of investigations, and the records in trials and other proceedings under these rules, except those disciplinary matters conducted in circuit courts, are property of The Florida Bar. All of those matters shall be confidential and shall not be disclosed except as provided herein. When disclosure is permitted under these rules, it shall be limited to information concerning the status of the proceedings and any information that is part of the public record as defined in these rules. Unless otherwise ordered by this court or the referee in proceedings under these rules, nothing in these rules shall prohibit the complainant, respondent, or any witness from disclosing the existence of proceedings under these rules, or from disclosing any documents or correspondence served on or provided to those persons…. (e) Response to Inquiry. Authorized representatives of The Florida Bar shall respond to specific inquiries concerning matters that are in the public domain, but otherwise confidential under the rules, by acknowledging the status of the
proceedings.” (Emphasis added. See Regulating the Florida Bar for omitted text).
Rules
We note with some interest that the Supreme Court of Florida seemingly considers its disciplinary arm’s records as private property as opposed to public property, leaving us to speculate as to whether Florida’s public records laws even applies. Whenever the law would interfere with its “inherent powers”, the Court might declare it unconstitutional, a violation of the separation of powers. Indeed, the integration of the bar in Florida is sometimes referred to by its opponents as the “privatization of the bar.” The integrated bar seems to represent a case of extreme judicial independence, one that is not conducive to the just balancing of powers among the branches of government. The Court can make up its own rules as it goes along in respect to its officers, and becomes, in effect, the prosecutor, judge and jury in all disciplinary cases, and legislator in qualifications for licenses. In other matters, it is said that the people are being made to answer to it, and not it to the people. In any case, I asked Ms. McMahon for a definition of the term “purged,” and whether or not a specific Bar rule calls for the purging of all files closed by staff. She promptly responded on September 10, 2009: “‘Purged’ means that the record is deleted and the physical file (if applicable) is destroyed.” “If there was a file that was closed with no discipline imposed, it has been one year from the date of closure and the file has purged from our records, the computer
record is deleted and the paper file (if applicable) is destroyed.” “The fact that we purge files closed with no discipline one year from closing is not a rule but, rather, a Bar policy.” We believe it is fair to say that, if politics governs the distribution of power, the term “policy” in this instance has political implications, for knowledge is power, and this particular policy is anal retentive and detrimental to the general public’s welfare even though it is an improvement on the opaque policy over the days when disciplinary matters were kept as trade secrets. It is detrimental as well to the reputation of the legal profession, which is best served by transparency in disciplinary matters, by a policy that at least keeps longstanding records of complaints for future analysis. Complaints lodged against officers of the law remain in the public records for years, so why are dismissed complaints lodged against officers of the court destroyed after a year? Consumer protection bureaus collect and publish data on complaints over several years, and the fact that a particular licensed person or business is drawing a large number of complaints gives buyers cause to beware and regulator cause to raise their eyebrows and to get off their duffs and diligently investigate complaints. The Florida Bar does not publish information about closed cases at this time on its website – one has to ask for specific information, and must do so within one year after closure. Perhaps a publisher might purchase all the information as it occurs behinds the scenes and sell it to the public, but the process would
be far more transparent and less costly if the information were published by the The Florida Bar, or if at least a summary was published, providing the names of attorneys involved, the nature of the complaints and inquiries, and the counsel’s reasoning for closing the files. I made the following public information request in re Allen Stanford and The Florida Bar on August 20, 2009: “Ladies and Gentlemen: This is a public request for records pursuant to Title I, Section 24 of the Constitution of the State of Florida, Chapter 119 of the Florida Statutes, and Rule 1-14 of the Rules Regulating the Florida Bar. Please provide me with uncertified photocopies of any document received or made in respect to any and all inquiries and complaints regarding the conduct of private practitioners and State of Florida attorneys in any way related to the allegedly fraudulent activities of Allen Stanford and his agents, representatives, and sundry entities. Of particular interest to me is any record relative to the negotiations between State of Florida officials and Mr. Stanford’s attorneys that resulted in the official approval of the purportedly unlawful foreign trust scheme that allowed the Stanford operation to bilk billions of dollars out of investors. According to investigative reporters, the “powerful” (i.e. politically connected) firm of Greenberg Traurig negotiated the deal with the State of Florida after other attorneys, such as Bowman Brown, had been approached and refused the assignment. The deal was apparently sealed on the
basis of the 1998 official legal advice of state employee David Burgess, a non-lawyer, apparently under the supervision of state banking authority Art Simon, a lawyer, who himself was reportedly advised by counsel not to approve of the deal but did so anyway. Please provide me with an estimate of the cost of providing the records, for my approval and payment of the estimated cost in advance of the shipping of the records. Respectfully, David Arthur Walters” As we have observed, the Bar could not, according to its rules, provide any documents appertaining to pending investigations, and it would have shredded or otherwise destroyed any files that had been closed for over a year. The expectation that it would have old information to turn over to me or would provide records about pending investigations was foolish, for the Stanford agreement with the State of Florida was made a decade ago, and the Stanford Fraud only became a hot topic after the fraud was belatedly investigated, so those matters would pending if not dismissed out of hand. The Bar courteously responded to my naïve request for public records, stating that Mr. Stanford was not a lawyer, so he was not subject to its jurisdiction, but if particular lawyers were named, it would see if there were any closed files available. Since the Bar does not publish information on pending or closed cases, it appears that interested parties should keep asking about certain attorneys at least once a year, lest the files be closed and destroyed. Good policy might dictate keeping a list of “pending investigations” on
its website, which would also prompt people who might have information about those attorneys to come forward with it. One attorney who has been named as a person of interest in the Stanford Fraud is Carlos Loumiet. Mr. Loumiet helped Mr. Stanford establish his operation in Antigua and to make the unique foreign trust deal with Florida. Around the same time, while still a partner at the politically connected firm of Greenberg Traurig, he signed off on an audit of Hamilton Bank, which was on the hot seat with regulators. A civil complaint was brought against him by the Office of the Comptroller of the Currency, whose November 6, 2006 NOTICE OF CHARGES FOR ORDER TO CEASE AND DESIST AND NOTICE OF ASSESSMENT OF CIVIL MONEY PENALTY, Case No. AA-EC-06-102, makes the following charges: “After examination and investigation into the affairs of the Bank, the Comptroller of the Currency of the United States of America (“Comptroller”) is of the opinion that: (a) Respondent Loumiet harmed the Bank by concealing the crimes of the Bank’s chairman and CEO, Eduardo Masferrer; its president, Juan Carlos Bernace; and its CFO, John M.R. Jacobs; whom Respondent Loumiet and his former law firm, Greenberg Traurig LLP (“Greenberg”), represented while they purported to represent the Bank. The officers orchestrated unlawful transactions in order to hide the Bank’s losses resulting from the Russian debt crisis of 1998. The officers misled the Bank’s external auditor, federal regulators and public investors in the Bank’s holding company, Hamilton
Bancorp Inc. (“holding company”). The officers have been sentenced to prison for perpetrating and later misrepresenting the unlawful transactions. (b) In 2000, the Bank and the holding company retained Greenberg and Respondent Loumiet to investigate the unlawful transactions, and the credibility of the Bank’s officers. In two reports co-authored by Respondent Loumiet and his partner at Greenberg, Robert Grossman, Respondent Loumiet protected the officers by making materially false and misleading assertions, and by suppressing material evidence. Following the reports, the officers steered additional business to Greenberg and Respondent Loumiet. Greenberg collected $1.16 million of fees from the Bank and the holding company during 2001-02, and Respondent Loumiet received a share of these fees. (c) The Comptroller closed the Bank in 2002, in order to stem losses to the federal deposit insurance fund. The Bank has cost the insurance fund approximately $127 million, net of recoveries. Public shareholders lost their entire investment. The Comptroller seeks a final Order barring Respondent Loumiet from providing or participating in the provision of legal or consulting services to any insured depository institution, or serving as counsel for such an institution. Respondent Loumiet would be required to disclose a copy of the Order to any institution-affiliated parties, see 12 U.S.C. § 1813(u), who retain him to provide legal or consulting services. The Comptroller assesses a civil money penalty of $250,000 against Respondent Loumiet. Pursuant to 12 U.S.C. § 1818(i)(2)(G), the Comptroller has accounted for Respondent Loumiet’s financial resources and absence of good faith, any history of
previous violations, and such other matters as justice may require, and has fully considered Respondent Loumiet’s submissions concerning these matters. This penalty is payable to the Treasurer of the United States.” Greenberg Traurig settled similar charges against it with the Federal Deposit Insurance Corp. for $7.6 million. And Greenberg Traurig and Grossman paid $925,000 to settle the charges brought by the OCC. But Mr. Loumiet refused to make a deal, abd was found guilty by Administrative Law Judge Ann Z. Cook. An appeal was made, and the case against him was reluctantly dismissed by Comptroller or the Currency John C. Dugan at the end of July 2009 because he found insufficient evidence that Mr. Loumiet’s acts harmed the bank, one of three technical elements necessary to subject him to sanctions. Controller Dugan expressed deep regrets about Judge Cook’s “abusive” refusal to admit expert testimony regarding the professional standards of care that Mr. Loumiet should have held himself to. The press reported that cases were pending against Mr. Grossman and Mr. Loumiet at The Florida Bar in reference to the Hamilton Bank Fraud. Ms. McMahon advised me that the file regarding Mr. Loumiet, File No. 2007-70, 743, was closed on July 30, 2009, and that the Miami office would scan it for public examination. However, Mr. Grossman’s case is still pending, although it was reportedly opened prior to that of Mr. Loumiet.
We are looking forward to examining File No. 200770, 743, as there is considerable speculation about the reasons for its closure. Finally, we shall take Ms. McMahon’s cue, and ask her or someone at The Florida Bar to make a Rule 3-7.1 statement as to the status of any pending cases relevant to the Stanford Fraud.
Miami Mirror September 12, 2009
sure state officials are ensuring the public welfare. Thus can the rest of the public occupy itself with other tasks. While doing so, it was being defrauded. The press watchdogs were sleeping too – the bottom line ruled: newspaper chains had become the power elite’s advertising agencies in disguise. Something smelled rotten in Florida to a very few people, especially banking lawyers on both sides of the illusory fence between public and private interests. In fact the deal officials struck with Mr. Stanford’s lawyers at Greenberg Traurig, the powerful, politically connected Firm, was rotten at its core. Mr. Stanford had previously solicited Bowman Brown, a prominent Florida lawyer, to strike the fishy deal with the state, but Mr. Brown’s ethics precluded him from being retained. The deal with Florida stunk to high heaven, and several lawyers knew it, but what could they do except gossip about it among themselves? For one thing, they could have complained to The Florida Bar, the Supreme Court of Florida’s licensing and disciplinary “arm,” an official agency of the judiciary. The Florida Bar is an “integrated” or involuntary bar, meaning that Florida lawyers must belong to it in order to practice law in state courts. The bars of several states became integrated with the judicial branches when their respective courts, citing each other in a colossal exercise of judicial vanity, realized that the judiciary had always had an inherent power or natural right, corresponding to their very existence as courts, to regulate the practice of law without interference from the
legislative and executive branches. All this in contradiction to the principle elaborated by Alexander Hamilton, that the courts “were designed to be an intermediate body between the people and the legislature” but not superior to the legislature, for “the power of the people is superior to both”, and the judiciary should not act contrary to the authority delegated to it. (Federalist 78). Mind you that the American judiciary had to struggle long and hard for its independence since the days when courthouses were burned down in some places and laws were passed that anyone of good repute could practice law regardless of his training. Alexander Hamilton, for one, read the law for only three months, and a reading of Blackstone might inspire one to hang out a shingle. President Thomas Jefferson tried to use the impeachment process, which he called a political “farce” due to his own experience presiding over an impeachment trial, to smother the judiciary in its crib lest it become genuinely independent. Suffice it to say that the bar was not highly regarded among American Revolutionaries, mostly because of the experience with the British courts. A lot was done to restore the profession’s integrity thereafter, but there were still too many individualists not to mention bad apples in the barrel. The most successful concerted reaction to the assaults on the integrity of the bar was the integrated bar movement of the 1930s.
One state judiciary after another rounded up the wagons into one circle. Part of the self-defense included improving the reputation of the profession by disbarring incompetent and unethical lawyers. Of course the critics of the integrated bar argue that the it is a monopoly constituted by judicial tyranny, that it serves to drum out of the corps anyone who refuses to goosestep according to the marching orders of its own power elite, and reference is sometimes made in Florida to the “good old white boys” of yesteryear. Too few lawyers, they say, are actually disbarred, and those are mainly small fry in comparison to the great white sharks, the powerful, politically connected law firms about which popular novels may be written – power is worshipped religiously regardless of how it is exercised. However that may be, who would better know which lawyers deserve discipline than lawyers? It takes one to know one: The code of ethics for lawyers requires them to inform on one another if they observe behavior in their colleagues that is remarkably untoward. Of course nobody ratted on likes a rat very much, and almost everyone has something to hide. The conservative or traditional theory of virtue ranks loyalty to ones aristocratic kind as the highest ethic of all, but liberal liberty demands some whistle blowing, at least in those egregious cases that might endanger the institution itself. Which leads us to wonder, now that the awful deeds have been done, now that billions of dollars have been bilked and lives ruined, thanks to the collaboration of certain private and public lawyers,
Did a single one of the lawyers who were saying “I told you so” to one another back then register any complaints or inquiries with the agency that regulates lawyers, namely, The Florida Bar? We may never know. That was back then, what was, was, so let’s move forward, and so on.. Title I Section 24 of the Florida Constitution, Chapter 119 of The Florida Statutes, and Rule 1-14 of the Supreme Court’s Rules Regulating the Florida Bar provide the public with the right of access to public documents received or created, but the law apparently does not specify how long The Florida Bar must keep certain records. The Supreme Court’s self-revealed, inherent, absolutely independent political power apparently dictates that, if The Florida Bar counsel decides not to conduct an inquiry or to recommend disciplinary action, the pertinent file is destroyed one year after his or her decision is made. On August 3, 2009, Donna F. McMahon, Case Management Administrator of the Legal Division of The Florida Bar, responded to one of my inquiries as follows: “Matters received by The Florida Bar which are pending investigation are not public information. We may acknowledge the status if there is specific knowledge of the pending matter: ‘Rule 3-7.1 (e) Authorized representatives of The Florida Bar shall respond to specific inquiries concerning matters that are in the public domain, but otherwise confidential under the rules, by acknowledging the status of the proceedings.’ The matter becomes public once a final disposition is recorded. If the matter is closed by bar counsel at staff level (declines to pursue
investigation), one year from the date of closure the matter is purged from the attorney’s record. Therefore we do not have a 10-year history of matters disposed with a finding of no probable cause (closed by staff).” If we examine the rules, we see that Rule 3-7 reads in part as follows: “3-7. PROCEDURES. RULE 3-7.1 CONFIDENTIALITY (a) Scope of Confidentiality. All matters including files, preliminary investigation reports, interoffice memoranda, records of investigations, and the records in trials and other proceedings under these rules, except those disciplinary matters conducted in circuit courts, are property of The Florida Bar. All of those matters shall be confidential and shall not be disclosed except as provided herein. When disclosure is permitted under these rules, it shall be limited to information concerning the status of the proceedings and any information that is part of the public record as defined in these rules. Unless otherwise ordered by this court or the referee in proceedings under these rules, nothing in these rules shall prohibit the complainant, respondent, or any witness from disclosing the existence of proceedings under these rules, or from disclosing any documents or correspondence served on or provided to those persons…. (e) Response to Inquiry. Authorized representatives of The Florida Bar shall respond to specific inquiries concerning matters that are in the public domain, but otherwise confidential under the rules, by acknowledging the status of the
proceedings.” (Emphasis added. See Regulating the Florida Bar for omitted text).
Rules
We note with some interest that the Supreme Court of Florida seemingly considers its disciplinary arm’s records as private property as opposed to public property, leaving us to speculate as to whether Florida’s public records laws even applies. Whenever the law would interfere with its “inherent powers”, the Court might declare it unconstitutional, a violation of the separation of powers. Indeed, the integration of the bar in Florida is sometimes referred to by its opponents as the “privatization of the bar.” The integrated bar seems to represent a case of extreme judicial independence, one that is not conducive to the just balancing of powers among the branches of government. The Court can make up its own rules as it goes along in respect to its officers, and becomes, in effect, the prosecutor, judge and jury in all disciplinary cases, and legislator in qualifications for licenses. In other matters, it is said that the people are being made to answer to it, and not it to the people. In any case, I asked Ms. McMahon for a definition of the term “purged,” and whether or not a specific Bar rule calls for the purging of all files closed by staff. She promptly responded on September 10, 2009: “‘Purged’ means that the record is deleted and the physical file (if applicable) is destroyed.” “If there was a file that was closed with no discipline imposed, it has been one year from the date of closure and the file has purged from our records, the computer
record is deleted and the paper file (if applicable) is destroyed.” “The fact that we purge files closed with no discipline one year from closing is not a rule but, rather, a Bar policy.” We believe it is fair to say that, if politics governs the distribution of power, the term “policy” in this instance has political implications, for knowledge is power, and this particular policy is anal retentive and detrimental to the general public’s welfare even though it is an improvement on the opaque policy over the days when disciplinary matters were kept as trade secrets. It is detrimental as well to the reputation of the legal profession, which is best served by transparency in disciplinary matters, by a policy that at least keeps longstanding records of complaints for future analysis. Complaints lodged against officers of the law remain in the public records for years, so why are dismissed complaints lodged against officers of the court destroyed after a year? Consumer protection bureaus collect and publish data on complaints over several years, and the fact that a particular licensed person or business is drawing a large number of complaints gives buyers cause to beware and regulator cause to raise their eyebrows and to get off their duffs and diligently investigate complaints. The Florida Bar does not publish information about closed cases at this time on its website – one has to ask for specific information, and must do so within one year after closure. Perhaps a publisher might purchase all the information as it occurs behinds the scenes and sell it to the public, but the process would
be far more transparent and less costly if the information were published by the The Florida Bar, or if at least a summary was published, providing the names of attorneys involved, the nature of the complaints and inquiries, and the counsel’s reasoning for closing the files. I made the following public information request in re Allen Stanford and The Florida Bar on August 20, 2009: “Ladies and Gentlemen: This is a public request for records pursuant to Title I, Section 24 of the Constitution of the State of Florida, Chapter 119 of the Florida Statutes, and Rule 1-14 of the Rules Regulating the Florida Bar. Please provide me with uncertified photocopies of any document received or made in respect to any and all inquiries and complaints regarding the conduct of private practitioners and State of Florida attorneys in any way related to the allegedly fraudulent activities of Allen Stanford and his agents, representatives, and sundry entities. Of particular interest to me is any record relative to the negotiations between State of Florida officials and Mr. Stanford’s attorneys that resulted in the official approval of the purportedly unlawful foreign trust scheme that allowed the Stanford operation to bilk billions of dollars out of investors. According to investigative reporters, the “powerful” (i.e. politically connected) firm of Greenberg Traurig negotiated the deal with the State of Florida after other attorneys, such as Bowman Brown, had been approached and refused the assignment. The deal was apparently sealed on the
basis of the 1998 official legal advice of state employee David Burgess, a non-lawyer, apparently under the supervision of state banking authority Art Simon, a lawyer, who himself was reportedly advised by counsel not to approve of the deal but did so anyway. Please provide me with an estimate of the cost of providing the records, for my approval and payment of the estimated cost in advance of the shipping of the records. Respectfully, David Arthur Walters” As we have observed, the Bar could not, according to its rules, provide any documents appertaining to pending investigations, and it would have shredded or otherwise destroyed any files that had been closed for over a year. The expectation that it would have old information to turn over to me or would provide records about pending investigations was foolish, for the Stanford agreement with the State of Florida was made a decade ago, and the Stanford Fraud only became a hot topic after the fraud was belatedly investigated, so those matters would pending if not dismissed out of hand. The Bar courteously responded to my naïve request for public records, stating that Mr. Stanford was not a lawyer, so he was not subject to its jurisdiction, but if particular lawyers were named, it would see if there were any closed files available. Since the Bar does not publish information on pending or closed cases, it appears that interested parties should keep asking about certain attorneys at least once a year, lest the files be closed and destroyed. Good policy might dictate keeping a list of “pending investigations” on
its website, which would also prompt people who might have information about those attorneys to come forward with it. One attorney who has been named as a person of interest in the Stanford Fraud is Carlos Loumiet. Mr. Loumiet helped Mr. Stanford establish his operation in Antigua and to make the unique foreign trust deal with Florida. Around the same time, while still a partner at the politically connected firm of Greenberg Traurig, he signed off on an audit of Hamilton Bank, which was on the hot seat with regulators. A civil complaint was brought against him by the Office of the Comptroller of the Currency, whose November 6, 2006 NOTICE OF CHARGES FOR ORDER TO CEASE AND DESIST AND NOTICE OF ASSESSMENT OF CIVIL MONEY PENALTY, Case No. AA-EC-06-102, makes the following charges: “After examination and investigation into the affairs of the Bank, the Comptroller of the Currency of the United States of America (“Comptroller”) is of the opinion that: (a) Respondent Loumiet harmed the Bank by concealing the crimes of the Bank’s chairman and CEO, Eduardo Masferrer; its president, Juan Carlos Bernace; and its CFO, John M.R. Jacobs; whom Respondent Loumiet and his former law firm, Greenberg Traurig LLP (“Greenberg”), represented while they purported to represent the Bank. The officers orchestrated unlawful transactions in order to hide the Bank’s losses resulting from the Russian debt crisis of 1998. The officers misled the Bank’s external auditor, federal regulators and public investors in the Bank’s holding company, Hamilton
Bancorp Inc. (“holding company”). The officers have been sentenced to prison for perpetrating and later misrepresenting the unlawful transactions. (b) In 2000, the Bank and the holding company retained Greenberg and Respondent Loumiet to investigate the unlawful transactions, and the credibility of the Bank’s officers. In two reports co-authored by Respondent Loumiet and his partner at Greenberg, Robert Grossman, Respondent Loumiet protected the officers by making materially false and misleading assertions, and by suppressing material evidence. Following the reports, the officers steered additional business to Greenberg and Respondent Loumiet. Greenberg collected $1.16 million of fees from the Bank and the holding company during 2001-02, and Respondent Loumiet received a share of these fees. (c) The Comptroller closed the Bank in 2002, in order to stem losses to the federal deposit insurance fund. The Bank has cost the insurance fund approximately $127 million, net of recoveries. Public shareholders lost their entire investment. The Comptroller seeks a final Order barring Respondent Loumiet from providing or participating in the provision of legal or consulting services to any insured depository institution, or serving as counsel for such an institution. Respondent Loumiet would be required to disclose a copy of the Order to any institution-affiliated parties, see 12 U.S.C. § 1813(u), who retain him to provide legal or consulting services. The Comptroller assesses a civil money penalty of $250,000 against Respondent Loumiet. Pursuant to 12 U.S.C. § 1818(i)(2)(G), the Comptroller has accounted for Respondent Loumiet’s financial resources and absence of good faith, any history of
previous violations, and such other matters as justice may require, and has fully considered Respondent Loumiet’s submissions concerning these matters. This penalty is payable to the Treasurer of the United States.” Greenberg Traurig settled similar charges against it with the Federal Deposit Insurance Corp. for $7.6 million. And Greenberg Traurig and Grossman paid $925,000 to settle the charges brought by the OCC. But Mr. Loumiet refused to make a deal, abd was found guilty by Administrative Law Judge Ann Z. Cook. An appeal was made, and the case against him was reluctantly dismissed by Comptroller or the Currency John C. Dugan at the end of July 2009 because he found insufficient evidence that Mr. Loumiet’s acts harmed the bank, one of three technical elements necessary to subject him to sanctions. Controller Dugan expressed deep regrets about Judge Cook’s “abusive” refusal to admit expert testimony regarding the professional standards of care that Mr. Loumiet should have held himself to. The press reported that cases were pending against Mr. Grossman and Mr. Loumiet at The Florida Bar in reference to the Hamilton Bank Fraud. Ms. McMahon advised me that the file regarding Mr. Loumiet, File No. 2007-70, 743, was closed on July 30, 2009, and that the Miami office would scan it for public examination. However, Mr. Grossman’s case is still pending, although it was reportedly opened prior to that of Mr. Loumiet.
We are looking forward to examining File No. 200770, 743, as there is considerable speculation about the reasons for its closure. Finally, we shall take Ms. McMahon’s cue, and ask her or someone at The Florida Bar to make a Rule 3-7.1 statement as to the status of any pending cases relevant to the Stanford Fraud.
Miami Mirror September 12, 2009
