January 11, 2012 / 12:21 AM / 6 years ago

Exclusive: Ex-SEC lawyer said to settle Stanford-linked case

WASHINGTON (Reuters) - Former Securities and Exchange Commission attorney Spencer Barasch is expected to settle Department of Justice civil charges that he inappropriately represented alleged Ponzi schemer Allen Stanford, people familiar with the matter told Reuters.

Under the terms of the planned settlement, expected to be announced later this week, Barasch will pay a $50,000 fine, these people said, who were not authorized to speak on the case.

He will also settle a disciplinary action before the SEC under which he is expected to agree to a 6-month ban from practicing before the commission, one of the individuals said.

The SEC is tentatively scheduled to vote on the matter behind closed doors on Thursday. Barasch is expected to settle the matter without admitting any wrongdoing.

Barasch, a former head of enforcement for the SEC’s Fort Worth, Texas, office, is now a partner at the law firm Andrews Kurth in Dallas. He has been at the center of a Justice Department probe since at least 2010.

That year, SEC Inspector General David Kotz released a report that found Barasch played a role in decisions to quash investigations of Stanford while at the SEC, and then later repeatedly tried to get permission to represent Stanford after leaving his SEC post.

The SEC turned down his request each time, but Barasch persisted and eventually did provide some legal counsel to Stanford in the form of roughly 7 billable hours for travel and for reviewing a document on regulators’ inquiry into Stanford’s business, the report found.

In a statement issued last year, however, Andrews Kurth’s managing partner Bob Jewell said he did not feel Barasch violated any conflict of interest rules and disagreed with the findings in Kotz’s report.

Federal conflict of interest laws bar former government employees for life from communicating or making an appearance before the U.S. government under certain conditions, such as being substantially involved in the matter while in government.

The Justice Department is likely pursuing a civil settlement because a criminal conflict-of-interest case usually requires the prosecutors prove the former employee contacted the government on behalf of the defendant. Kotz’s report did not find evidence of such contact.

The government can bring civil actions to resolve conflict-of-interest allegations, and issue a penalty of up to $50,000 per violation.

A lawyer for Barasch, the SEC, and the Justice Department declined comment. Barasch and his law firm, Andrews Kurth, did not respond to repeated requests for comment.

The settlements come as federal prosecutors prepare for a criminal trial of Stanford, who is accused of running a $7.2 billion Ponzi scheme and deceiving thousands of investors into buying certificates of deposit from his Antiguan bank.

Stanford was arrested in June 2009 and is being held without bail. He has denied the charges. Jury selection in the case is scheduled on January 23.

He is also facing civil charges from the SEC over the alleged Ponzi scheme.


SEC officials disclosed the Justice Department’s probe into Barasch’s conduct last May during a congressional hearing. SEC Enforcement Director Robert Khuzami told lawmakers he felt the conflict-of-interest rules “clearly prohibited” Barasch from representing Stanford.

Kotz and Khuzami both said they had referred the matter to the criminal authorities as well as the Texas and Washington, D.C. bars.

Kotz’s report outlined in detail how Barasch attempted on three occasions to represent Stanford despite being told he had a conflict of interest.

The third time, he pressed the SEC to give him permission on the same day the agency filed its civil suit against Stanford.

When the inspector general’s office asked Barasch why he was so insistent on representing Stanford, Barasch replied, “Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines,” according to Kotz’s report.

Reporting By Sarah N. Lynch and Aruna Viswanatha; Editing by Tim Dobbyn, Bernard Orr

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