Barasch stepped down not long after a five-part series published by VICE uncovered potential violations of federal conflict-of-interest laws by Barasch while representing Stanford. Meanwhile, the vast majority of American investors who got taken in by...
Spencer Barasch. Photo by James Nielsen/AFP/Getty Images
A former senior Securities and Exchange Commission official, Spencer Barasch, quietly resigned earlier this month as a partner at the Texas law firm Andrews Kurth after facing intensifying scrutiny of his legal work for Houston financier R. Allen Stanford, who is serving a 110-year prison sentence for masterminding a $7 billion Ponzi scheme.
Barasch stepped down as Andrews Kurth's head of corporate governance and securities practice not long after a five-part series published by VICE detailed previously undisclosed potential violations of federal conflict-of-interest laws by Barasch while representing Stanford and raised questions as to whether Barasch had given false and misleading testimony to federal investigators to conceal from them the nature of that legal work.
Barasch’s resignation also came shortly after the settlement of a bruising legal malpractice case against Andrews Kurth by a real estate developer. The plaintiff had alleged that his company received substandard legal advice from the law firm because of the firm’s dual representation of the developer and Stanford for the very same real estate transaction.
A person with firsthand knowledge and involvement in the matter said in an interview that more than one high-level partner at Andrews Kurth had grown increasingly concerned about Barasch’s legal work for Stanford after reading VICE’s investigative series, which detailed potentially false and misleading statements Barasch had previously given to federal investigators regarding his legal work for Stanford.
This same person said that a senior partner at the law firm independently reviewed many of the original source documents examined by VICE. The reviewer in question arrived at the conclusion that Barasch may have indeed misled the government about his legal work for Stanford. A second person involved in the matter confirmed that Andrews Kurth had sought and obtained Barasch’s resignation in the wake of the aforementioned revelations, but this person declined to give any specific details.
Barasch’s resignation from Andrews Kurth was first reported Tuesday by the American Lawyer and its affiliated publication Am Law Daily. Reporter Brian Baxter noted that “an entry for Barasch on the rolls of the State Bar is now blank, and his profile on Andrews Kurth’s website was taken down earlier this month.”
Robert Jewell, Andrews Kurth’s managing partner and the chair of the firm’s executive committee, said in a statement about Barasch’s departure: “Spencer Barasch is still a highly valued member of Andrews Kurth; however, he is in the process of transitioning his legal practice. Under those circumstances, we have agreed that it’s best not to continue to publish his website biography during the transition period. The firm continues to fully support Spence in all of his endeavors.”
Andrews Kurth gave no reason as to why the firm had pressed for Barasch’s resignation. But a person close to the matter told me in an interview that some of the partners were distressed to learn that Barasch might have given misleading testimony to federal authorities about his legal work regarding Stanford, both at the SEC and later during his tenure at Andrews Kurth. And even worse, an Andrews Kurth attorney, Dennis Ryan, later gave testimony in the civil legal malpractice case that was directly at odds with Barasch's earlier testimony. “You couldn’t leave it hanging out there that one partner was saying one thing and [another] was saying something very different under oath,” said this same person.
In January 2012, Barasch agreed to pay a $50,000 fine to settle civil charges brought by the Department of Justice, which alleged that he had violated federal conflict-of-interest laws by representing Stanford at Andrews Kurth. Earlier, while he was the top enforcement officer in the SEC’s Fort Worth regional office, Barasch had repeatedly overruled recommendations by examiners to investigate Stanford, even as they believed—rightfully, it turned out—that Stanford was running a Ponzi scheme. Federal law prohibits former regulatory officials from representing anyone as a private attorney if they played a substantial or material role in overseeing the individual’s actions while in government.
In May 2012, the SEC also banned Barasch for a period of one year from practicing before the agency, contending that he had engaged in “improper professional conduct” related to his legal work for Stanford. Barasch did not have to admit any wrongdoing when he settled with both the Justice Department and the SEC. Barasch was unavailable for comment for this story.
In settling with Barasch, the Justice Department agreed to close out a far more serious criminal investigation of the former SEC official, a decision that largely relied on testimony Barasch had given to federal authorities in which he claimed to have totally forgotten that he had done Stanford-related work at the SEC when he agreed to represent the banker before the agency. But sources close to both the Justice Department and SEC investigations say they had no idea that a law partner of Barasch’s would later give testimony raising questions as to whether Barasch had told them the truth on such a crucial issue to their case.
In 2010, the SEC’s then inspector general, David Kotz, was conducting a broader investigation of the SEC’s regulatory failure in investigating and closing down Stanford before he had the opportunity to steal additional billions from unsuspecting investors. During that investigation, Kotz learned from records seized by the FBI and postal inspectors from the hard drive of Stanford's own computer that Barasch and Andrews Kurth had provided legal representation to Stanford in 2006.
Questioned by Kotz, Barasch said he had undertaken the representation because he had completely forgotten his involvement in Stanford-related matters while at the SEC: “I didn’t remember. I just didn’t remember anything,” Barasch testified. Presented with records documenting his deep involvement in making decisions as to whether or not the SEC should investigate Stanford, Barasch explained to Kotz: “Quite frankly, until you sent it all to me, I didn’t remember really any of that.”
As first reported by VICE, however, Dennis Ryan, a senior partner at Andrews Kurth who worked closely with Barasch on securing billable legal work from Stanford, contradicted the account that Barasch had no memory of the Stanford-related work he had done at the SEC while considering taking on Stanford as a client. Ryan testified in a deposition in the recent civil legal malpractice case that, during discussions with Barasch in 2005, Barasch had openly expressed to Ryan reservations about representing Stanford because of his previous work at the SEC regarding Stanford, saying such past work might make any private legal representation of Stanford illegal. Ryan also testified that Barasch had repeated these same concerns with the then-general counsel of Stanford’s bank, Mauricio Alvarado, during a conference call with Ryan and Alvarado in the summer of 2005.
When told of Ryan’s recent testimony, current and former government officials involved in the earlier investigations of Barasch and Stanford said that the Justice Department and SEC should reopen their investigation of Barasch, or open a new one to examine whether he had possibly made false statements to federal investigators or engaged in obstruction of justice.
Initially, in 2005, Barasch and Andrews Kurth turned Stanford down when he asked them to represent him before the SEC, telling him that to do so would violate federal conflict-of-interest laws. In 2006, however, Barasch ignored the legal prohibition and agreed to do so anyway.
In his deposition in the legal malpractice case, Ryan also testified that Barasch had undertaken his representation of Stanford in 2006 without Ryan knowing about it. In his sworn deposition, Ryan testified that Barasch never told him of traveling to Miami to meet with Stanford's general counsel to discuss the SEC's investigation, that Barasch had planned to go to Antigua to meet with Stanford personally, or anything else, for that matter, about the case—even thought the two law partners worked in the same office.
Within the law firm, Barasch denied any rogue representation of Stanford, saying that Ryan had encouraged him and worked with him to obtain new legal business from Stanford. Confidential Andrews Kurth emails and billing records appear to bear out Barasch’s claim: They show that Ryan and Barasch worked closely on efforts to obtain new legal business from Stanford during the time that Stanford was pressing Barasch and Andrews Kurth to help fend off the SEC.
Indeed, the firm’s confidential billing records indicate that Stanford retained Andrews Kurth for eight new legal representations in 2005 and 2006—while Stanford was pressing for Barasch to defend him before his former agency.
The recent legal civil malpractice case brought against Andrews Kurth by the real estate investment firm Walton Houston Galleria Office was settled in the midst of a hotly disputed trial in mid-June for undisclosed terms. (More information about that case can be found in this article in the Texas Lawyer and this one in the Dallas Morning News.)
In the meantime, the vast majority of American investors defrauded by Stanford are no closer to recovering even a small portion of their life savings. Only last week, a federal appeals court rejected an effort by the SEC to compel the Securities Investor Protection Corporation, a nonprofit created by Congress and funded by the securities industry to protect investors, to reimburse Stanford’s victims.
Additional reporting by Grace Wyler
Murray Waas is an editor at VICE. He is a former investigative reporter for Reuters, and before that, a writer for National Journal and the Atantic. For his previous work, Murray Waas has been a winner of the Goldsmith Prize, a finalist for the Pulitzer Prize, and a winner of the Bartlett & Steele Prize for Investigative Business Reporting.