The long-awaited trial date for a class-action lawsuit in the Stanford Trust Ponzi scheme is a little more than two weeks away, and the presiding judge has to decide how much of it should be argued in open court.
Chief Judge Donald Johnson of the 19th Judicial District will have to weigh a “wave of perspectives,” he said during a July 1 hearing inside his Baton Rouge courtroom.
Louisiana’s Constitution guarantees the public’s right to access judicial proceedings. But a provision in state law says banking records reviewed by Louisiana’s financial regulatory agency are confidential.
The trial set to begin July 22 is nearly 15 years in the making. And one of the final pretrial hurdles opposing attorneys are haggling over is should the press and public at large be allowed inside the courtroom when those confidential financial records are discussed.
Read more: Here's the full story on the lawsuit and why it matters.
It’s a complicated legal question in a case that, at its core, is closely tied to the second-largest Ponzi scheme in U.S. history. More than 900 Louisiana retirees who bought or renewed fraudulent Stanford International Bank certificates of deposit through its Baton Rouge arm, the Stanford Trust Company, are plaintiffs in the class-action lawsuit.
The claimants contend the Louisiana Office of Financial Institutions, a state agency that regulated Stanford Trust, failed to protect investors for years after OFI discovered signs of a $7 billion embezzlement scheme by the company’s founding chairman, R. Allen Stanford. OFI’s inaction enabled the victims to deposit their nest eggs into rollover IRA accounts with Stanford Trust.
Officials estimate at least $400 million in collective damages will be at stake during the trial and hundreds of plaintiffs will pack into the courtroom for the proceedings.
Phil Preis, the lead attorney representing the class of plaintiffs, said it could create serious logistical issues if the trial is closed to the public.
“There are a bunch of them that are going to be here,” he said during a July 1 hearing in Judge Johnson’s courtroom. “How’s the court going to handle that; are you going to put airport security guards at the front of the trial and make them have ID to check in each day? Almost a class-action by definition means that it’s a public trial.”
OFI denies any wrongdoing or liability. The agency maintains it had no oversight over the Stanford International Bank based in Antigua and only limited authority to regulate Stanford Trust Company in Baton Rouge. The state regulators insist they didn’t become aware of the Ponzi scheme until the FBI and U.S. Securities and Exchange Commission notified them of Allen Stanford’s fraudulent practices in 2008.
After listening to arguments from both sides, Judge Johnson told attorneys he would make a ruling on the matter at a later time.
“The records are relevant to support the defense or support the counter to the defense,” he said. “So the records are fundamental to a jury’s determination. The jury’s going to have it. To what extent is the public allowed to have access to that information?”