Stearns’ investors to recover up to 2/3 in lawsuit settlement

Brady investors swindled out of $4.5 million in a high-stakes Ponzi scheme could recover up to two-thirds of their money in a lawsuit settlement approved Tuesday. The Texas law firm Locke Liddell and Sapp has agreed to pay $8.5 million to settle a lawsuit filed against it by investors of Brian Russell Stearns, a convicted con man serving 30 years in prison for running a phony investment scam. Investors claimed Locke Liddell, which represented Stearns, helped defraud them. The settlement will be final in September. If all goes according to plan, Brady investors can expect to recoup 68 cents for every dollar lost in the scheme, said Mike Shaunessy, a lawyer for the investors. The rest of the money would go to pay lawyer’s fees and to repay investors in California and Canada. “It’s a good settlement, and the good thing is that (this money) goes a long way to making the people of Brady whole,” he said. Locke Liddell admitted no wrongdoing and settled the case to avoid lengthy and expensive litigation, said John McElhaney, a partner in the firm. “We have sympathy for the plaintiffs, and we’re sorry they lost money,” he said. Several Brady investors declined to comment, citing advice from their lawyers. Stearns, 30, was arrested in 1999 for running a $50 million investment scheme. Prosecutors say the former Austin businessman promised big money through risk-free investments. Instead, he paid off older clients with new investors’ money and kept most of the cash for himself. He left a trail of victims from Canada to Panama. When Stearns married a Brady woman, he dragged the little town into the scheme, prosecutors said. By September 1999, more than 300 Brady-area residents had invested $4.5 million. A year later, investors filed a class-action lawsuit against Locke Liddell, claiming the law firm misled investors by saying their money was protected by what turned out to be nonexistent assets. Investors also said the firm let Stearns funnel investors’ money through its bank accounts and into Stearns’ checking account. The Locke Liddell settlement comes slightly more than a year after the firm settled another fraud-related lawsuit. In April 2000, Locke Liddell agreed to pay $22 million to investors in Austin Forex International, a failed foreign currency firm run by former University of Texas football star Russell Erxleben. Investors claimed the law firm helped Erxleben defraud them. McElhaney said the firm, which has more than 400 lawyers statewide, does not condone criminal activity. “It’s hard to categorize what happened,” McElhaney said. “We certainly aren’t happy these cases came up. We don’t feel it’s anything we intended to happen.”

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