Legal News

The Stanford Affair: Another Bad Day for Proskauer?s Tom Sjoblom

By Amir Efrati

It’s not every day that a well-recognized name in the white-collar defense world — and a former SEC veteran to boot — finds himself in the crosshairs of a major fraud investigation.

But that might be happening to Proskauer Rose’s Tom Sjoblom in what LB readers know as the Stanford Affair.

Today’s development in the case — a guilty plea by Stanford Financial Group’s former CFO, James Davis — provided an indication that they may be setting their sights on Sjoblom, who was outside counsel for Stanford International Bank starting in 2005. (A prior post on Sjoblom’s troubles is here.)

Sjoblom, who served as an assistant chief litigation counsel in the SEC's enforcement division for 12 years before going into private practice, is mentioned repeatedly in the plea agreement, unveiled today, between DOJ prosecutors and Davis. In the agreement, Davis appears to implicate Sjoblom in a conspiracy to obstruct an SEC investigation into the bank, largely, Davis alleges, by reiterating falsehoods to the SEC. Click here for the agreement, which is a good read and includes a mention of a “blood oath” ceremony between Stanford CEO Allen Stanford and a Caribbean banking regulator.

For starters, Sjoblom comes across in the agreement as a fervent defender of Stanford International Bank as early as 2006. Davis agreed that the government could prove that in 2006 “Outside Attorney A” (Sjoblom) contacted the SEC, which had started an investigation of the bank, to tell the agency that it had “no basis” to request documents concerning the bank’s investment portfolio, and that he “had spent 15 years investigating fraud for the SEC and was ‘well-equipped’ to recognize the ‘hallmarks of fraud.’”

But the allegations relate to events from a couple years later. In 2008, the plea agreement says, Sjoblom was informed that the bank’s CD investment portfolio included a tier of illiquid investments valued at $6 billion and that it wasn’t disclosed to investors. (The tier later turned out to be mostly fictitious.) Also, Sjoblom learned that the bank’s chief investment officer Laura Pendergest-Holt, didn’t manage that part of the portfolio.

But Sjoblom, in a meeting in January of this year with SEC lawyers who were investigating the CD investment portfolio, according to the plea, “falsely maintained” that the company’s chief executive and chief financial officer didn’t “micro-manage” the CD investment portfolio and falsely maintained that Holt would be in the best position to talk about it. Sjoblom then “falsely informed the SEC attorneys at this meeting that [the bank] was ‘not a criminal enterprise.’”

Later, in February, Sjoblom allegedly learned at a Miami meeting with Stanford execs that the bank was, according to the plea agreement, likely insolvent because the CD investment portfolio was essentially fictitious. The chief executive, Allen Stanford, later told him that the bank’s “assets and financial health had been misrepresented to investors.”

A few days later, on Feb. 10, Sjoblom sat by Holt’s side as she told SEC lawyers under oath that “she was unaware of the assets and allocations of assets” in the $6 billion tier, despite the fact that both Holt and Sjoblom had allegedly been given details about the tier in the Miami meeting with Stanford execs. On Feb. 14, Sjoblom resigned from representing the bank and sent a note to the SEC, saying, “I disaffirm all prior oral and written representations made by me and my associates to the SEC staff.”

Sjoblom’s lawyer, James Cole, didn’t return the Law Blog’s call for comment.

Full post as published by Law Blog - WSJ.com on August 27, 2009 (boomark / email).