Indictment in the Sir Robert Allen Stanford Case/Stanford to Be Arraigned in Houston Today

Sir Robert Allen Stanford is scheduled to be arraigned today on conspiracy, mail and wire fraud, money laundering and obstruction charges in Houston in the U.S. District Court for the Southern District of Texas. Stanford is represented by attorneys Dick DeGuerin and Sean Ryan Buckley, of the Houston firm of DeGuerin and Dickson.

According to the docket for the case, the Government obtained its 21-count indictment, which can be viewed here, last Thursday and promptly moved to seal (i.e. prevent public access to) it, and then unsealed it on Friday shortly before Stanford’s arrest.

The Court will likely revisit the issue of whether Stanford is entitled to release before trial. On Friday, the Court ordered co-defendants Mark Kuhrt and Gilberto Lopez released on a $100,000 unsecured bond. However, given Stanford’s considerable wealth and ties abroad, any amount of bond imposed in his case will undoubtedly be far higher, if Stanford is granted pre-trial release at all, that is. The U.S. District Court for the Eastern District of Virginia determined that Stanford posed a high risk of flight, and denied bond.

The case will be tried before U.S. District Judge David Hitter, a brief description of whom can be found here.

Sir Robert Allen Stanford Indicted in Alleged Second Largest Ponzi Scheme in U.S. History

The writers of Federal Criminal Defense Blog have been busy writing on other matter and apologize for the brief hiatus. Much has happened in the sphere of white collar crime even during our short absence, most notably developments in the two largest Ponzi schemes in U.S. history, and we have some catching up to do.

We’ll start with the second largest—an indictment indictment against billionaire Texas financier Sir Robert Allen Stanford, 59, was unsealed in the U.S. District Court for the Eastern District of Virginia on Friday according to the Associated Press  and the BBC. The 50-page indictment alleges that Stanford and six other defendants with allegedly perpetrated a $7 billion Ponzi-style fraud. It charges Stanford and the other defendants with 21 counts, including 7 counts of wire fraud, 10 counts of mail fraud, conspiracy to obstruct an investigation for the Securities and Exchange Commission, obstruction of an investigation by the SEC and conspiracy to commit money laundering. Defendants Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt are executives of Stanford Financial Group. Defendant Leroy King, a former bank regulator for the Caribbean island nation of Antigua and Barbuda, allegedly accepted more than $100,000 in bribes from the other defendants in order to allow the alleged scheme to continue.

The indictment alleges that the defendants sold certificates of deposit issued by Stanford International Bank, based in Antigua, to investors, promising large returns. The defendants allegedly made false claims to investors regarding the growth of Stanford Financial Group’s assets.

The scheme had approximately 30,000 investors. Stanford is alleged to have diverted more than $1.6 billion in investment funds in personal loans to himself. More than $1 billion in investment money is allegedly unaccounted for. Stanford is also charged in the indictment with allegedly conspiring to obstruct an SEC proceeding. Stanford Financial Group’s finance chief, James M. Davis, is cooperating with investigators. Davis has been charged with fraud and obstruction in a separate indictment.

Stanford was the owner of a newspaper, two restaurants, and a development company in Antigua, and was a cricket enthusiast and owner of the Stanford cricket grounds in Antigua. In 2008, Stanford staged a $20 million, winner-takes-all, match between a West Indian XI and England at the grounds. In 2006, Stanford became the first American to be knighted by Antigua and Barbuda.

Stanford is represented by attorney Dick DeGuerin, who has issued a statement to the press that Stanford is innocent of the charges. Stanford has made repeated statements as to his innocence and has alleged that no money was lost.

Stanford surrendered to the FBI on Thursday and had his initial appearance on Friday. U.S. Magistrate Judge Hannah Lauck determined that Stanford posed a flight risk and ordered him to remain in custody pending a future detention hearing in Houston. Several governments have frozen his assets. Stanford faces as much as 250 years in prison if convicted.

Border Searches Reach Laptops, BlackBerrys, Cellphones

As set forth in a detailed article in the National Law Journal, the Fourth Circuit and Ninth Circuit Court of Appeals have recently affirmed decisions upholding warrantless, suspicionless searches of laptop computers at international airports. See United States v. Arnold, 523 F.3d 941 (9th Cir. 2008), petition for reh'g en banc filed, No. 06-50581 (9th Cir. June 2, 2008); United States v. Ickes, 393 F.3d 501 (4th Cir. 2005). Courts have compared warrantless searches of laptops in customs inspections at a border or international airport to warrantless searches of luggage, suitcases, briefcases, pockets, papers and filmsat such locations.The government's power to conduct border searches is plenary, and does not require a warrant, probable cause or reasonable suspicion. See United States v. Montoya de Hernandez, 478 U.S. 531, 538 (1985). The United States Supreme Court has suggested that only some types of searches of persons, or searches carried out in a particularly "offensive" manner, might be unconstitutional. See Montoya,at 538-40; United States v. Ramsay , 431 U.S. 606, 618 n.13 (1977). No district court has yet ruled on whether the government must possess reasonable suspicion to search electronic data at the border, since all cases thus far in which the issue has arisen have held that reasonable suspicion to search existed (all have so far involved child pornography). See United States v. Irving, 434 F.3d 401 (2d Cir. 2005); United States v. Bunty, No. 07-641, 2008 WL 2371211, at *3 (E.D. Pa. June 10, 2008); United States v. McAuley, No. DR-07-CR-786(1), 2008 WL 2387979, at *4-*6 (W.D. Texas June 6, 2008). Defendants have attempted to distinguish computers from other personal property because of the massive amounts of data they can hold, invoking the First Amendment for expressive material, so far to no avail.

Other countries including the United Kingdom, Canada, Australia and China have conducted similar searches. All these cases have caused companies growing concern about how to protect their confidential information from the prying eyes of government agents. Several are putting policies in place to limit the electronic information officers and employees may take with them when they travel.

Congress may be preparing to take action, however. In June the Senate Judiciary Committee's Subcommittee on the Constitution held a hearing on border laptop searches entitled "Laptop Searches and Other Violations of Privacy Faced by Americans Returning from Overseas Travel." Subcommittee Chairman Senator Russ Feingold of Wisconsin expressed the view that the border-search exception to the warrant requirement should be limited. Witnesses before the Subcommittee recommended legislation requiring reasonable suspicion for laptop searches and probable cause for seizure of data, limits on the duration and location of such searches, and more express policies regarding searches and seizures by  United States Customs and Border Patrol.

Qualified Immunity from a Warrantless Search-Or the Strange Case of Bates v. Harvey

        “J.T.” was a 17 year-old troubled youth who abused alcohol and drugs, as well as other persons. So troubled, in fact, that his parents obtained a civil commitment order for him from the Probate Court of Upson County, Georgia, averring that J.T. “present[ed] a substantial risk of serious harm to himself or others…” Sergeant Walker of the Upson County Sheriff’s Department was taskedwith executing the order. J.T.’s mom gave Sgt. Walker an address in Pike County, Georgia, where J.T. was staying with a friend, and Sgt. Walker enlisted the help of Deputy Harvey of the Pike County Sheriff’s Department to execute the order. Neither Sgt. Walker nor Deputy Harvey possessed a search or arrest warrant.

        It was in this way that Sgt. Walker and Deputy Harvey ended up knocking on the back door of Mrs. D’Anna Bates’ residence at 9 a.m. in the morning. Mrs. Bates’ 14 year-old daughter, “S.B.”, answered the door and, when the officers asked if J.T. was in the house, informed them that he wasn’t. Not to be deterred, the officers asked S.B. if they could come in and, when she responded “I don’t know,” walked in anyway. Sgt. Walker and Deputy Harvey proceeded to enter the bedroom of Mrs. Bates’ 18 year-old step-daughter, “H.B.”, and asked her whether J.T. was in the house. H.B. replied that she did not know, and when the officers asked if they could look around, responded “I guess so.”

             Sgt. Walker and Deputy Harvey continued their warrantless tour of the Bates residence by entering the bedroom of Mrs. Bates’ 19 year-old son, “C.L.”, where they found C.L. and the elusive J.T. asleep. The officers roused the sleeping youths and instructed J.T. to get dressed. Unfortunately for them, they also roused the formidable Mrs. Bates by shouting at the boys.

             Mrs. Bates came to investigate and, upon discovering the officers, demanded to see a search warrant. Deputy Harvey retorted that he had a court order, which Mrs. Bates demanded to see, however, the order had been left in Sgt. Walker’s patrol car. Mrs. Bates then demanded that the officers leave her home. Deputy Harvey then threatened to arrest Mrs. Bates for obstruction of justice if she continued to impede the officer’s execution of the civil commitment order.

             When Mrs. Bates would not desist in her demands that the officers show her a search warrant or leave her home, Deputy Harvey made the mistake of grabbing Mrs. Bates and attempting to handcuff her. However, Deputy Harvey’s cuffs got caught on his watch, and Mrs. Bates freed herself and ran for the bathroom. Deputy Harvey overtook Mrs. Bates, grabbed her and struck her in the face. Sgt. Walker joined Deputy Harvey and pinned Mrs. Bates to the floor.

             At this point, Gary Bates arrived home through the front door to the spectacle of two officers pinning his wife face-down on the floor. In the same instant, Deputy Harvey caught a glimpse out of a window of J.T. running across the field behind the Bates’ home. Deputy Harvey, who had had the foresight to call for back up on this challenging assignment, instructed an officer to remain with Mrs. Bates, while he rushed off on foot in pursuit of J.T.

             Mrs. Bates managed to slip out of one of the handcuffs and move freely about the home, while her husband called Pike County Sheriff Thomas, with whom he was acquainted, and informed him of the happenings at his home.

             Meanwhile, Deputy Harvey’s foot chase of J.T. came up empty-handed, and Deputy Harvey headed back to the Bates residence with the intention of arresting Mrs. Bates for obstruction of justice. Mr. and Mrs. Bates were talking in the driveway and, upon noticing Deputy Harvey’s approach, went inside the home. Deputy Harvey entered the Bates residence a second time and handcuffed and arrested Mrs. Bates. Mrs. Bates was booked and released on bond later that day. J.T. was later found sitting by the side of a road by another officer.

             Mrs. Bates filed an internal affairs complaint against Deputy Harvey. Deputy Harvey proceeded have a warrant sworn out for Mrs. Bates’ arrest for allegedly violently kicking him in the groin during the incident at the Bates residence. Mrs. Bates was arrested a second time, and the Pike County Grand Jury indicted her on one count of felony obstruction of a law enforcement officer, in violation of O.C.G.A. § 16-10-24(b). A jury ultimately acquitted her of the charge.

             Mrs. Bates responded by filing an action against Deputy Harvey pursuant to 42 U.S.C. § 1983, alleging that he falsely arrested her. The district court denied Deputy Harvey’s motion for summary judgment based upon qualified immunity, and he appealed. Which brings us to the Eleventh Circuit Court of Appeals’ decision in Bates v. Harvey, No. 07-10570, 2008 WL 565774 (11th Cir. 2008), which sets forth the preceding facts.

            In determining whether Deputy Harvey was entitled to summary judgment on the basis of qualified immunity, the Court held that that Deputy Harvey’s warrantless search of the home could not be justified under the consent exception to the warrant requirement by Mrs. Bates’ daughter’s equivocal statement “I guess so,” or that the commitment order’s statement that J.T. “present[ed] a substantial risk of serious harm to himself or others…” provided exigent circumstances to search the home, and concluded that “his warrantless entry, search and arrest in Mrs. Bates home, he violated Mrs. Bates's constitutional rights under the Fourth and Fourteenth Amendments.” Id. at *12. However, the Court stopped just short of finding entirely for the profoundly wronged Mrs. Bates by holding that:

[A] reasonable officer could have believed, at the time Deputy Harvey acted, that the averments in the civil commitment order about a person presenting a substantial imminent threat of danger to himself or others presented a sufficiently emergent situation, justifying the warrantless entry and search of a third party's home for that person. Because the contours of the exigent circumstances exception were not sufficiently clear, prior to this case, to give a reasonable officer fair and clear warning that a warrantless entry and search such as this one was not justified, Deputy Harvey is entitled to qualified immunity.

Id. at *14.

Mrs. Bates' only relief against an egregious Fourth Amendment violation of home and hearth by roving officers was apparently an alleged kick in the groin.