Baton Rouge attorney Phil Preis is taking on the Louisiana Office of Financial Institutions on behalf of 86 Stanford clients in seven states. Most of the plaintiffs, however, are from south Louisiana, including two from the Lafayette area, Troy Lillie and Thomas E. Bowden.
Many of the investors are retirees who have lost their life savings in the Stanford CD debacle. Also named as defendants are Stanford Trust Company and SEI Investments Company, a foreign entity registered to do business in Louisiana.
The suit states that Stanford Trust Company, which is owned by Stanford Group Company and Stanford Group Holdings, was an integral part of the Stanford International Bank CD scheme. Robert Allen Stanford and several of his associates are accused of running an $8 billion Ponzi scheme.
The class action petition filed Aug. 20 in state district court in East Baton Rouge Parish claims the Trust failed to follow generally accepted standards of due diligence for trust fiduciaries in evaluating investors' risks in the purchase of the CDs, and failed to make reasonable inquiry of their risks in an investment that was an affiliate of the Trust.
In claiming the state "turned a blind eye to the Stanford scheme," the suit alleges the OFI did not do an adequate job as a regulatory agency. “The State of Louisiana failed to advise Plaintiffs of the new risks it had discovered during its examination of the Trust during 2007 and 2008, and to suspend the sale of the SIB CDs in the state of Louisiana after discovering risk associated with the SIB CDs during 2007 and 2008.”
The suit also claims the OFI allowed the Trust to market the sale of the CDs to retirees of ExxonMobil and other companies who did not meet the required suitability standards. And although OFI had examined the Trust and ordered that the sales of SIB CDs be restricted and later removed from the Trust, it did not disclose the risk it perceived to each investor who purchased SIB CDs or renewed SIB CDs, according to the suit.
View a pdf of the suit here.