The jury rendered their decision against “all” defendants, a multi-million dollar judgment in favor of the plaintiffs in March 1994 in El Paso Texas. Shortly thereafter SIPC counsel was able to successfully negotiate with Texas plaintiff’s counsel for assignment of fifty percent of the Texas judgment against Rounds “only” which was assigned to SIPC. The judgment was rendered against all defendants equally but SIPC only wanted to go after Rounds as the CEO of CIS. This allowed SIPC the opportunity to attempt to collect on the judgment against Rounds. This judgment assignment allowed the El Paso victims access to the SIPC billions to go after Rounds rather than having to spend a penny.
Rounds retain counsel to sue Berliner. The attorney he wanted who specialized in legal malpractice was not available due to his caseload. That attorney suggested alternative counsel who had no such specialty. That attorney, Brice Tondre. HRO lawyers represented the SIPC trustee who represented the estate of CIS. HRO representing the trustee and the estate of CIS also sued Berliner alleging Berliner’s failure to recognize the apparent conflicts between the parties. Moreover, two former CIS board members also sued Berliner through their counsel alleging the same conflicts that Berliner grossly failed to recognize. The matter was ultimately settled after years of colossal discovery, depositions etc. Berliner and his former firm ultimately settled for policy limits of $2 million. A large portion of Rounds’ settlement proceeds went to Tondre and Rounds’ Texas counsel, Bill Hardy, and to the McCormick’s victims. The settlement was not sufficient to satisfy the original El Paso judgment against Rounds. Rounds did insist that Tondre not settle with Berliner unless all the outstanding judgments against him were satisfied. Tondre claimed, “You can’t get more than the insurance limits.” Rounds later learned Tondre’s opinion was incorrect.
In 1994, Snyder filed a separate lawsuit in federal court in Denver against Rounds and Gary Mitchell, CPA, and his accounting firm, BDO. Mitchell was Rounds’ and CIS” CPA . The allegations against Mitchell was he advised Rounds to establish a holding company for CIS which was not an uncommon practice for broker/dealers. Tondre was retained in this matter by Rounds since he was familiar with the surrounding facts.
Tondre was aware that Rounds was stretched financially after he paid his portion of the settlement to the McCormick victims. Rounds refused to burden his family financially with his problems. Tondre did, however, agree to represent Rounds in the Mitchell litigation. Rounds later discovered Tondre failed to file a “cross claim” against Mitchell which would have been a elementary legal procedure based on the facts. Tondre was well aware that Rounds relied solely on Mitchell’s advice on all accounting and other corporate structure matters. When the trial commenced in early 1994, Tondre was ill-prepared. He did no discovery, took no depositions prior to trial and had no expert witnesses. Tondre was adamant that Mitchell would settle prior to trial and he was convinced it would all be resolved by settlement from Mitchell’s insurance carrier. Rounds trusted his advice. Mitchell did settle but midway through the trial for $3 million(one million above Mitchell’s insurance limits which the insurance company agreed to pay). Rounds was solely left in trial. The trial lasted several weeks. Rounds was Tondre’s only witness. As a result of Tondre’s malpractice Rounds suffered another multi-million dollar judgment. Tondre was incompetent and out gunned by the trustee’s savvy and well prepared lawyers at HRO funded by SIPC’s billions..
Rounds did seek to go after Tondre for legal malpractice due to this multi-million dollar judgment against him solely caused by Tondre’s “gross failure to file a cross claim” against Mitchell. SIPC however would not pursue the same claims against Tondre as representatives of the estate of CIS as it would not look good for SIPC if they went after Rounds’ attorney after just receiving a settlement from Mitchell insurance carrier of $3 million which was $1 million “over Mitchell’s policy limits and his insurance carrier paid it. Rounds was referred to an attorney who specialized in legal malpractice, Charlie Welton, who, after analyzing the trial records and other information did believe Rounds had a valid claim against Tondre and accordingly prepared a lawsuit. Rounds never aggressively perused the claim since he knew even if he prevailed SIPC he would not benefit due to his outstanding judgments against him held by SIPC. It simply made no sense that he would pay all the expense of litigation and SIPC would not extinguish the outstanding judgments against him.
Rounds needed to make a living. He began wholesaling (an industry term for promoting products to broker/dealers, RR’s and other professionals i.e. CPA’s). Wholesaling generally does not require a securities license since it does not involve dealing with the public. Rounds had a vast experience in due diligence as the former CEO of CIS and in energy and energy-related products. Consequently, Rounds worked as an independent wholesaler with both public and private oil and gas companies. Rounds again was making big money.
The SIPC Trustee’s lawyers got wind of Rounds making money and notified the SEC. The SEC is the enforcement arm of the securities industry. SEC once again came after Rounds. The SEC filed a civil action alleging Rounds was offering securities without a license. Rounds retained John Head, a local Denver attorney, who was referred by a friend. After months of discovery, depositions by the SEC and thousands of dollars in legal fees spent by Rounds, Rounds was jinxed again with yet another inept attorney. John Head did no discovery, took no depositions and made no rebuttal argument to the SEC one witness. It was endless loop for Rounds. Head did, however, fax his monthly bills exactly on the first of each month to Rounds. It was evident that Rounds could not win against the government with this lawyer. Moreover, his family had endured enough legal battles. The government had no evidence that any of the transactions involving Rounds were transactional based (commission) which would have constituted selling a security. Rounds had no choice but to settle with yet another bungling lawyer. Rounds settled with the SEC without admitting or denying any guilt. All litigation was finally over. However, Rounds still was left with millions in judgments against him.
Rounds had no firm, no securities licenses and hefty judgments against him. Rounds and his family were worn from years of litigation from SIPC, the trustee and the SEC. In a non-governmental world, all this litigation would have been settled and ended years earlier but with SIPC’s billion-dollar bank account the litigation train was unstoppable.
At this point, Rounds’ reputation in the industry was tarnished but still well respected. His wife, Joan, had spent over $350,000 defending the legal attacks against her and her estate by SIPC, the trustee and his attorneys. These attacks were precipitated by nothing more than the fact she was married to Rounds. In fact, Mrs. Round’s attorney strongly advised her to divorce him. She did ultimately settle with SIPC with no loss of her assets except Stanford Square Management Co. which she owned 100% controlling interest. As part of her stipulation of settlement and before SIPC could take control of Stanford, however a vote of the Stanford investors had to take place to vote for a replacement GP and manager. SIPC trustee lost the investor vote to Lewis Graham (a former Stanford investor through Floworks, LLC). Graham subsequently gained control as manager and subsequently misappropriated the investors’ money (Google SEC vs. Lewis Graham) (1). However, from Mrs. Rounds’ settlement with SIPC, the SIPC trustee retained the economic interest which Stanford Square Management Co. owned and the portion of Stanford Square that Mrs. Rounds owned individually. SIPC spend incredible sums and years seeking to collect it’s interest but after receiving nothing finally turned the matter over to the SEC(Google SEC vs. Lewis Graham) This matter should have been handed over to the Justice Department to file criminal charges against Graham. The SEC grossly failed do to so.
(1) SEC Complaint Lewis E. Graham II and Floworks, LLC, defendant
Next Page