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Case 4:09-cr-00342 Document 244 Filed in TXSD on 06/09/10 Page 1 of 14

IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISON

UNITED STATES OF AMERICA §


§
v. §
§ Criminal No. H-09-342
ROBERT ALLEN STANFORD; § (J. Hittner)
LAURA PENDERGEST-HOLT; §
GILBERTO LOPEZ; §
MARK KHURT; and §
LEROY KING. §

DEFENDANT LAURA PENDERGEST-HOLT’S


MOTION FOR SEVERANCE

COGDELL & ARDOIN, LLC Flood & Flood


1401 McKinney St., Suite 1625 914 Preston, Suite 800
Houston, Texas 77010 Houston, Texas 77002
Phone: (713) 426-2244 Phone: (713) 223-8877
Fax: (713) 426-2255 Fax: (713) 223-8879

DAN COGDELL CHRIS FLOOD


State Bar No. 04501500 State Bar No. 07155700
S.D. Tex No. 3810 S.D. Tex No. 9929

JAMES ARDOIN Of Counsel for Defendant


State Bar No. 24045420 LAURA PENDERGEST-HOLT
S.D. Tex No. 571281

Attorneys in-charge for Defendant


LAURA PENDERGEST-HOLT

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Case 4:09-cr-00342 Document 244 Filed in TXSD on 06/09/10 Page 2 of 14

INTRODUCTION

LAURA PENDERGEST-HOLT (“Holt”) moves this Court, pursuant to FED.

R. CRIM. P. 14, to sever her trial from Robert Allen Stanford’s (“Stanford”) trial.

Stanford and his counsel have prejudicially impacted Holt’s right to a fair trial

based on their egregious and circus-like conduct in: the criminal case before this

Court, the insurance coverage action in the Southern District of Texas before The

Honorable Nancy F. Atlas, and the United States Securities and Exchange

Commission enforcement action in the Northern District of Texas before The

Honorable David C. Godbey. Accordingly, this Court should exercise its

discretion and grant Holt’s severance to ensure justice.

ARGUMENT & AUTHORITY

Although “[o]rdinarily, defendants who are indicted together should be tried

together” United States v. Erwin, 793 F.2d 656, 665 (5th Cir. 1986) a court “may

grant a severance if it appears that the defendants will be prejudiced by a joint

trial.” Id. (citing to FED. R. CRIM. P. 14(a)). Additionally, a severance must be

granted “if there is a serious risk that a joint trial would compromise a specific trial

right of one of the defendants or prevent the jury from making a reliable

determination of guilt or innocence.” United States v. Fernandez, 559 F. 3d 303,

317 (5th Cir. 2009) (citing to United States v. Bermea, 30 F.3d 1539, 1572 (5th

Cir. 1994)).

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In this case, there is a serious risk that Holt’s right to a fair trial will be

jeopardized if she is tried together with Stanford. This risk stems from the

ridiculous conduct of Stanford and his lead counsel, which is sufficient to justify

an exception to the Supreme Court’s general rule that co-conspirators should be

tried together. Zafiro v. United States, 506 U.S. 534, 537 (1993).1

A. The Stanford and Counsel Circus

The behavior of Stanford and his latest collection of lawyers (The Bennett-

Nguyen Joint Venture), who have flaunted court orders, set up potentially unethical

entities to practice law in Texas, have been accused of committing insurance fraud

and bankruptcy fraud, and have faked health issues in court, has made it impossible

for Holt to receive a fair trial. This ridiculous behavior has not gone unnoticed.

The media nationwide has become enthralled with the circus show Stanford and

his counsel have cast against this Court, Judge Atlas’ Court, and Judge Godbey’s

Court regarding the never-ending cycle of lawyers in this case.2 For example, The

                                                                                                               
1
See also United States v. Miranda, 248 F.3d 434, 439 (5th Cir. 2001).
2
This is a sampling of the media converge on this issue. See Andrew Ross Sorkin, Once
Again, Mr. Stanford Wants New Lawyers, The New York Times Dealbook, March 10, 2010,
available at http://dealbook.blogs.nytimes.com/ 2010/03/30/ once-again-stanford-seeks-new-
lawyers; David Scheer and Alison Fitzgerald, Stanford Attorneys’ Exit ‘Screams Fraud,’ Spurred
SEC (Update2), available at http://www.bloomberg.com/apps/ news?pid =20601103&sid
=arwyfUgv9leY; Mary Flood, Yet another lawyer wants to enter Stanford case, Houston
Chronicle, June 3, 2010, available at http://www.chron.com/disp/story.mpl/ business/
stanford/7035307.html; Amir Efrati, How Many Lawyers Does it Take to Defend Allen
Stanford?, The Wall Street Journal, June 7, 2010, available at http://blogs.wsj.com/
law/2010/06/07/how-many-lawyers-does-it-take-to-defend-allen-stanford; Martha Neil, How
Many Lawyers Does Constitution Allow? Onetime Billionaire Allen Stanford May find Out, ABA
Journal, April 6, 2010, available at http://www.abajournal.com/ news/article/

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Wall Street Journal took such a keen interest in this issue that it published a feature

story on it this past Saturday, and then republished a similar story the following

Monday on its legal blog complete with a “nifty” diagram”3 highlighting the

“revolving door” of different lawyers involved.4 And they are not the only ones.

Beyond the headlines, the events that took place in the trend lines on May

14, 2010, mark a starting point for tracing the escalating threat to Holt’s right to a

fair trial. Specifically on that date, Mike Essmyer (“Essmyer”), Stanford’s then

lead counsel, moved this Court to withdraw his representation. Essmyer explained

that he wanted to withdraw, even though he was unsuccessful, because of

irreconcilable differences with Stanford, alleged insurance fraud by co-counsel

Robert S. Bennett (“Bennett”), and further conflicts with Bennett—who was

thrown in jail the previous weekend for contempt of court for refusing to turn over

documents in a civil lawsuit against him over sharing legal fees the previous.5

                                                                                                                                                                                                                                                                                                                                                                   
how_many_lawyers_does_ constitution _allow_ onetime_ billionaire_ may_ find_out;
Associated Press, R. Allen Stanford again wants new attorneys, March 30, 2010, available at
http://www.khou.com/ news/local/ Texas-financier-Stanford-again-wants-new-attorneys-
89531382.html; Brenda Sapino Jeffreys, R. Allen Stanford Wants New Criminal Defense Counsel
–Again, Law.com, April 6, 2010, available at http://www.law.com/ jsp/ article.jsp?id
=1202447536864.
3
See Exhibit A, attached. The Wall Street Legal Blog Diagram.
4
Amir Efrati, Stanford Defense Turns Into Legal Circus, The Wall Street Journal Online
Top Stories in Business, June 5, 2010; same discussion published in a more condensed form
online on Monday in the law blog by the same author, Amir Efrati, How Many Lawyers Does It
Take To Defend Allen Stanford, The Wall Street Journal, June 7, 2010,
http://blogs.wsj.com/law/2010/06/07/how-many-lawyers-does-it-take-to-defend-allen-stanford.
5
On May 8, 2010, Bennett was thrown in jail for contempt of court for refusing to turn
over documents in civil lawsuit over sharing legal fees by County Civil Court at Law Judge
Jacqueline Smith. Judge Smith found that Bennett had repeatedly refused to provide documents

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These antics naturally prompted the community to react as well. For instance, one

commentator responded to coverage of this issue on the Houston Chronicle website

by describing this case as “the biggest circus I have ever seen”6—which, ironically,

was echoed days later by The Wall Street Journal. Like the media and like the

public’s outcry against these circus acts, Holt’s counsel could not agree more.

In addition, Essmyer’s attempt to withdraw reinforces the belief that

Bennett’s actions are not in the best interest of their client, and already have

undercut Stanford’s likelihood of a successful defense. Likewise, Holt believes

that Bennett’s actions are detrimental to her case—especially now with Bennett’s

role as lead counsel for Stanford as of June 9, 2010. And the situation is getting

worse by the day as four recent examples demonstrate.

First, Bennett, who is entangled in bankruptcy,7 now is alleged to have

committed insurance fraud8 by his co-counsel Essmyer. These allegations surfaced

                                                                                                                                                                                                                                                                                                                                                                   
to the court he was previously ordered to produce. See Mary Flood, Stanford’s Lawyer Jailed
for a Night, Houston Chronicle, May 10, 2010, available at http://www.chron.com/ disp/story.
mpl/business/stanford/6999166.html; see also Lawyer for Alleged Ponzi Scheme Jailed Over
Discovery Issues, American Bar Association Legal, Legal Ethics Section, May 11, 2010,
available at http://www.abajournal.com/news/article/ lawyer_for_alleged_ ponzi_schemer_
jailed_over_discovery_issues.
6
See Exhibit B, attached. The Houston Chronicle Online Response.
7
See Chapter 7 Bankruptcy in 2009, In re Robert S. Bennett, U.S. Bankruptcy Court,
Southern District of Texas, Case No. 09-36637; see also Chapter 13 Bankruptcy in 2008-09, In
re Robert S. Bennett, U.S. Bankruptcy Court, Southern District of Texas, Case No. 08-35285-
H1-11.
8
Transcript of Record at 98-99, Laura Pendergest-Holt v. Certain Underwriters at Lloyd’s
of London and Arch Specialty Insurance Co., Case No. H-09-CV-3712 , evidentiary hearing on
June 3, 2010 before Judge Atlas, hereinafter (“Holt Transcript”); see also PACER Document

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from alleged illegal fee structures Bennett proposed with other lawyers he planned

to work with in this case.9 There is also another dimension to this issue. Bennett

and others have formed a business venture exclusively for representing Stanford.

It is unclear whether this “joint venture” is legal and who is exactly doing what in

this venture, something that Judge Atlas took great efforts to clarify in the June 3

hearing. What is clear is the ridiculous stream of people flowing in and out of the

prison to see Stanford—sometimes 20 legal assistants a day10—that immediately

raised red flags of suspicion by the Bureau of Prisons which was subsequently

expounded upon by Judge Atlas. She reinforced that the perception given off by

the actions of those involved created a noticeable issue regarding the lack of

“credibility” and “continuity,” something already established in this case thus far.11

Second, several weeks ago Bennett along with Stanford, drafted a

questionable fee agreement proposing an $80 million dollar “budget,” they

submitted to the insurance company. By almost any reasonable standard, this fee

agreement was unconscionable and an excessive fee in violation of the Texas

Disciplinary Rules of Professional Conduct.12

                                                                                                                                                                                                                                                                                                                                                                   
Number 128, Letter from Counsel for Certain Underwriters, Akin Gump Strauss Hauer & Feld
L.L.P. to Judge Atlas on June 2, 2010 and supporting documentation.
9
Id.; see also id. at 92-94 (highlighting the Underwriter’s counsel Lane discussing the
confusion surrounding the “Bennett Joint Venture” and orders from a County Court to pay into a
registry of the court.
10
Id. at 18 (citing to the Bureau of Prisons, who noted 20 different legal assistants a day).
11
Id. at 23.
12
Rule 1.04, Texas Disciplinary Rules of Professional Conduct.

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Third, Bennett has misled the courts by ghostwriting Stanford’s supposed

“pro se” correspondence to the Court. At the June 3, 2010 hearing, Judge Atlas

took issue with this confusion and confronted Bennett. He confessed, stating that

“90 percent of it is probably from my pen.”13

Fourth, Bennett also has demonstrated a penchant for being misleading by

making statements and filing documents that are not based on accurate facts.14

This occurred most recently at the June 3, 2010 hearing where Judge Atlas

criticized Bennett for doing this on three separate occasions.15 Part of the problem

is the strained relationship between Essmyer and Bennett on managing Stanford’s

defense. Not surprisingly, in reaction to this during the hearing, the Government

stated they want nothing to do with the “soap opera” between Bennett and

Essmyer.16 And neither does Holt nor her counsel moving forward in this

proceeding.

If Stanford is complicit with the questionable actions taken by Bennett, then

it is likely that these issues will be grounds for additional 404(b) evidence that the

Government could introduce at trial against Stanford. Indeed, this will further

prejudice Holt’s right to a fair trial. Therefore, it is imperative that this Court sever

                                                                                                               
13
Id. at 24-25.
14
Holt Transcript at 114-117.
15
Id.
16
Id. at 115.

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Holt’s trial from Stanford’s trial to avoid a spillover effect that would violate her

fundamental rights.

B. The Existing and Potential Prejudice from Stanford and Counsel’s


Circus Has Created an Unacceptable Risk to Holt’s Right to a Fair
Trial

The Sixth Amendment and the Due Process Clause of the Fourteenth

Amendment guarantee a defendant the right to a fair trial. A defendant’s

innocence or guilt is determined exclusively by admissible evidence and not by

“other circumstances not adduced as proof at trial.” Holbrook v. Flynn, 475 U.S.

560, 567 (quoting Taylor v. Kentucky, 436 U.S. 478, 485 (1978)).

When a defendant challenges their right to a fair trial because of inherent

prejudice in the court arrangement, they need not “prove with particularity wherein

[s]he was prejudiced,” Estes v. Texas, 381 U.S. 532, 544 (1965). Rather, under

Holbrook, a defendant must demonstrate “an unacceptable risk . . . of

impermissible factors coming into play.” Holbrook, 475 U.S. at 570 (quoting

Estelle v. Williams, 425 U.S. 501, 505 (1976)). In addition, the district court

should give careful attention to the toxic nature of the potential prejudice created

by the co-defendant. United States v. Mannie, 509 F.3d 851, 856-57 (7th Cir.

2007).

Here, Stanford and his counsel’s antics fall squarely in line with the

unacceptable and prejudicial risk factors set forth in the Supreme Court’s Holbrook

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line of jurisprudence. Building upon this foundation, a more recent Seventh

Circuit case provides this Court with the most applicable guidance for deciding this

severance motion. Mannie, 509 F.3d at 851. Although this Seventh Circuit case is

persuasive and not binding, it is important to direct this Court’s attention to the

fundamental principles and teachings from the similar issues and fact patterns

between Mannie and this case which provide key insight.

More specifically, in Mannie, the Seventh Circuit held that a defendant was

denied a fair trial because the trial court’s limiting instructions and extensive voir

dire were insufficient to overcome the prejudice caused by the co-defendant’s

repeated and violent outbursts. Id. The court explained that in most cases a trial

court’s primary weapon to combat bias and prejudice was jury instructions and

jury interviews. Id. at 857.

But there are always exceptions where the normal safeguards prove

ineffective. Id. This is what the Mannie case is about. From a macro-perspective,

Mannie teaches that when serious questions of prejudice arise at the outset of trial,

immediate action should be taken by the trial court. This action should not include

a passing acknowledgement of the issue, or tedious efforts after violent outbursts

have occurred. Id. at 853-857. Instead, when the mere hint of prejudice surfaces, a

trial court should give careful attention to the potential for future prejudice and act

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immediately before irreparable damage occurs to a co-defendant’s right to a fair

trial. See id.

In Mannie, the trial court’s efforts were insufficient to shield the peaceful

co-defendant from the prejudice of the toxic defendant. This was even after: (1)

the toxic defendant’s lawyer warned the court about the escalation of violence and

prejudice that was certain to come; (2) the lawyer tried to resign from representing

the toxic defendant—parallel to this case; (3) the lawyer’s identical description to

the case as a “circus”—which is also the identical adjective used to describe this

instant case. Id. at 856.

Here, applying the lessons from Mannie—with the eerie similarities to

events that have transpired in this case already—this Court now has an opportunity

to do the exact opposite of the lower court in Mannie and protect Holt’s

fundamental rights before things get even worse.

C. The Unique and Severe Double Prejudice from Stanford and Counsel
Provides Twice the Justification for Severing Holt’s Trial from
Stanford’s Trial

As set forth in Mannie, the potential for prejudice in this case renders the

primary weapons against prejudice and bias inapplicable. This case, however, is

more unique and departs from jurisprudence in this area. The key difference in this

case is the existence of double prejudice. Instead of the normal one dimensional

prejudice created solely by one defendant against another in a proceeding, as noted

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in most cases, here we have a double prejudice created: (1) by the defendant, and

(2) by his lead attorney. Therefore, severance is an even more just resolution to

ensure Holt’s fundamental rights are not violated.

I. Defendant Prejudice

Turning first to the prejudice of the defendant, like the toxic defendant in

Mannie, Stanford’s prejudicial behavior has been obvious from the beginning. Id.

at 853. First, in one court proceeding, Stanford bit his tongue and spat blood into a

cup to concoct a medical condition to fool everyone into believing he had internal

bleeding that needed immediate treatment. Second, Stanford has remained

combative and uncooperative in his disregard for the legal system by burning

through eleven different law firms in a circus like manner. Third, in a recent

proceeding, Stanford took a disrespectful, combative, and hostile tone in mocking

the legal process on his Sixth Amendment rights. This conduct required the Court

to halt proceedings and order him to sit down and remain quiet. These antics are

only the beginning of Stanford’s charades, and are certain to get worse as trial

approaches.

II. The Counsel Double Prejudice

Next, turning to the prejudice created by Stanford’s lead counsel, Bennett

now doubles the prejudice in this case of unacceptable factors that will destroy

Holt’s right to a fair trial. For example, the ridiculous demand made on the

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insurance company by Bennett for an $80 million budget to defend Stanford. This

is significant because the same carrier provides defense costs for all defendants in

this case. This stunt has two serious implications. First, this unconscionably high

figure has the potential to interfere with any chance Holt may have to negotiate a

settlement for future funding to support her defense through trial. Second, these

actions have an offsetting effect that may place Holt’s Sixth Amendment right to

choice of counsel in peril if there is no funding to provide for her defense.

The Court cannot standby and let Stanford and his counsel’s course of

conduct continue to interfere with Holt’s right to a fair trial. No limiting

instructions and no pre-trial interventions that the Court may try can ensure that

Holt will obtain a fair trial. Accordingly, this Court should exercise its discretion

and sever Holt’s trial from that of Stanford.

CONCLUSION

Based on the reasons stated above, Defendant Laura Pendergest-Holt prays

that this Court grant her motion and sever her trial from that of co-defendant

Robert Allen Stanford’s trial.

DATED: June 9, 2010.

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Respectfully submitted,

COGDELL & ARDOIN, LLC


1401 McKinney St., Suite 1625
Houston, Texas 77010
Phone: (713) 426-2244
Fax: (713) 426-2255

/s/ Dan Cogdell___________


DAN COGDELL
State Bar No. 04501500
S.D. Tex No. 3810

/s/ James Ardoin__________


JAMES ARDOIN
State Bar No. 24045420
S.D. Tex No. 571281

Attorneys in-charge for Defendant


LAURA PENDERGEST-HOLT

Flood & Flood


914 Preston, Suite 800
Houston, Texas 77002
Phone: (713) 223-8877
Fax: (713) 223-8879

/s/ Chris Flood_________


CHRIS FLOOD
State Bar No. 07155700
S.D. Tex No. 9929

Of Counsel for Defendant


LAURA PENDERGEST-HOLT

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Case 4:09-cr-00342 Document 244 Filed in TXSD on 06/09/10 Page 14 of 14

CERTIFICATE OF CONFERENCE

I hereby certify that I conferred with AUSA Gregg Costa who stated that he

was OPPOSED to the relief sought by the Defendant in this motion.

/s/ James Ardoin__________


JAMES ARDOIN

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the above and foregoing was

served upon all counsel of record via the CM/ECF system.

/s/ James Ardoin_______


JAMES ARDOIN

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