Just Doing Their Jobs? Professionals Facing Criminal Charges In Ponzi Scheme Cases

Posted by Kathy Bazoian Phelps

Two recent criminal trials highlight the risks in working for what turns out to be a Ponzi scheme perpetrator. Not only might you lose money, or be hit with a large civil judgment, but landing in prison is becoming a reality for some as well.

Accountants in the Stanford Financial Ponzi Scheme

In the Ponzi scheme of Stanford Financial Group Co., two accountants at the firm, ex-Chief Accounting Officer Gilbert Lopez, 70, and Global Controller Mark Kuhrt, 40, are standing trial in connection with charges that they helped R. Allen Stanford conceal his Ponzi scheme by creating false financial statements.

At trial, prosecutors told the jurors that Lopez and Kuhrt had carefully tracked approximately $2 billion that Stanford had taken out of the bank for risky private ventures and for personal use. Lopez and Kurht described their role as involving complicated accounting issues and that they trusted Stanford’s top deputy, finance chief James M. Davis, who himself pleaded guilty for his role in the Ponzi scheme and is awaiting sentencing. The defense for Lopez and Kurht stressed that the accountants relied on information provided by Stanford and Davis and that they did not intend to create false financial records or break any laws.

If convicted, Lopez and Kuhrt face more than 20 years in jail.

Lawyer for New Point Financial Services, Inc.

A former securities partner in the firm of Nixon Peabody, David Tamman, 45, was found guilty of 10 criminal counts in connection with his participation in a Ponzi scheme in Los Angeles, California. The Ponzi scheme, run by John Farahi and his company, New Point Financial Services, Inc., involved the loss of up to $20 million taken from defrauded investors largely in the Persian Jewish community in Los Angeles. Tamman had served as New Point’s corporate securities counsel while at Nixon Peabody and while at his previous firm, Liner Grode Stein Yankelevitz Sunshine Regensreif & Taylor.

A Justice Department press release announcing the conviction stated, “As New Point's lawyer, Tamman helped John Farahi violate the most basic investor protection law—that you tell investors the truth.” The charges against Tamman were, among other things, that he interfered with the SEC probe by altering and backdating documents, removing documents, and lying to the agency personnel in sworn testimony. Farahi pleaded guilty to 41 criminal counts last year. The press release further stated, “This verdict demonstrates that there are severe consequences when an attorney crosses the line between vigorous representation of a client and obstruction of an SEC investigation.”

If convicted, Tamman faces a maximum prison sentence of 190 years, although the actual sentence is expected to be lighter than that.