THE BLOG
05/22/2009 05:12 am ET Updated May 25, 2011

The $20 Million Ponzi Stimulus Package

In Dallas, attorneys have petitioned the courts to free $10 million of Allen Stanford's frozen assets. This sum will pay about half his legal fees. Lawyers further estimate that litigation costs will exceed $20 million by the time all the snarling stops and there is peace, or at least resolution, among the various parties. I can't help but wonder:

What's the fair cost of representation?

Twenty million dollars is a staggering amount of money. It's enough to cover the cost of 10 lawyers for more than 18 months. That's right -- 10 lawyers, 18 months. I am assuming: their average hourly rate is $610; this rate covers supplies, mail, and other miscellaneous items; and each lawyer bills 40 hours per week.

Does it require 18 months and $20 million to find justice?

If the courts approve the first $10 million, presumably there will be a multiplier effect on the Dallas economy. The lawyers will buy houses and cars and pay their support people. That's just the start as downstream payees spend money on their own needs.

Where would we be without Keynesian multipliers to make Ponzi scams work for us?

The problem, of course, is that $6 billion is missing. It takes plenty of multiplying to repair the economic damage created by the loss of these assets. There's also the matter of $1.6 billion, according to the SEC, which Stanford borrowed from his company.

Where did all the money go?

According to Bloomberg News, the US receiver expects to find hundreds of millions in assets to repay investors. Not billions. All of a sudden, the $20 million sounds like a bigger percentage of the remaining pie.

What can we do?

Play the hedge fund game with legal fees. Hedgies get 20 percent of what they earn, a success fee known as the "carry" in some circles and "hara-kiri" in others. The courts should free money for legal fees as Stanford helps locate the $6 billion in missing assets. The more assets he delivers, the more he gets for legal representation.

Poetic justice for a money man accused of fraud.

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