Since evidence surfaced in 2008 that Texas financier R. Allen Stanford may have squandered the savings of thousands of investors, the government’s high-profile case against him has relied on Assistant U.S. Attorney Gregg Costa in Houston.

Stanford’s trial is now in its fifth week before U.S. District Judge David Hittner in Houston. Costa came into the case as co-lead counsel nearly four years ago.  He began investigating Stanford’s far-flung operations on a tip that federal regulators had given his Washington-based co-lead counsel Paul Pelletier, a former Justice Department Fraud Section boss in the Criminal Division who joined Mintz Levin LLP in May.

Costa, 40, helped steer all aspects of the Stanford case from its inception: witness interviews; legal briefs; obtaining evidence and freezing assets; meddling from higher-ups in Washington; arguing in court; working with foreign governments to extradite a defendant; presenting a fair case to federal jurors in Houston; and ensuring Stanford stayed put for a trial that began Jan. 24 and is expected to last another 10 days.

Of all the possible AUSAs then available in Houston, Pelletier said he chose Costa as his co-lead counsel in 2008 because “Gregg understood the case from Day One,” and would excel at being the government’s Houston-based anchor.

“He was not only bright and got it on every level, but his written work was brilliant,” said Pelletier, a prosecutor for 27 years who is now building a white-collar defense practice.  “He was responsible for our success in keeping Stanford behind bars in pretrial detention as a flight risk.  And he kept an even keel when the front office [political appointees] asked for changes.  Gregg has been the glue that held the case together from the beginning.”

As 2008 drew to a close, the Securities and Exchange Commission, overwhelmed with fallout from failing to catch Bernard Madoff’s $50 billion Ponzi scheme, increasingly relied on federal agents and Pelletier, Costa and former Postal Inspector James Tendick to investigate Stanford and potential co-defendants.

The government’s team moved quickly.  By February 2009, federal agents raided Stanford’s offices; Pelletier and Tendick were traipsing around Antigua to obtain evidence and find potential cooperators.  They followed the money and saw the extent to which Stanford had skimmed billions of investor dollars for himself and his life of luxury on the Carribean island.

Stanford meanwhile, had tried in vain to flee the U.S. for Antigua in February, but was denied the use of his credit card as his assets and accounts had been frozen.

He was arrested on June 19, 2009, and charged in a 21-count indictment with masterminding a $7 billion Ponzi scheme involving high-interest certificates of deposit at the Stanford International Bank in Antigua.  At the heart of his operation, prosecutors said, were bribes he paid to an independent auditor in Antigua as well as the chief Antigua bank regulator. He also gave the bank regulator a supply of Super Bowl tickets.

Costa’s biggest success in Pelletier’s view has been writing briefs and making court arguments that convinced Judge Hittner to reject Stanford’s serial attempts to win release from pre-trial detention.

A few months after prosecutors charged Stanford, he sought a trial delay based on injuries from a prison beating. He then went through a series of defense counsel, who sought, and received, time to prepare his defense.

At the time of his arrest, Stanford was briefly represented by Brendan Sullivan in Washington. He then hired Houston lawyers Dick DeGuerin and Kent Schaffer, whom he later fired over personality and strategic differences. He then ran out of money to pay his next laywer, Robert Bennett, after an appeals court found that Lloyd’s of London underwriters didn’t have to honor a directors’-and-officers’ insurance policy.

He now has court-appointed counsel, Ali Fazel and Robert Scardino, who won a trial postponement to get up to speed in the case but lost attempts to get the case dismissed because their client was unfit or he was denied his speedy trial rights.

Andres narrows original case

New prosecutors came into the case, too.  Pelletier, a prosecutor for 27 years, withdrew from the Stanford case in September 2010 in preparation for his exit into private practice.  At the time, Lanny Breuer, who became chief of the DOJ’s Criminal Division just a few months before Stanford was charged, had taken a personal interest in the high-profile case, and brought in former acting Deputy Attorney General Greg Andres to review the original charges.  Andres, a mob prosecutor from the Eastern District of New York, assigned former Southern District of New York AUSA William Stellmach to replace Pelletier. Stellmach investigated Madoff in SDNY.

Breuer continues to be interested in the case.  He sat in the back of Hittner’s courtroom last week for the final two days of the government’s case. He declined to comment, citing the judge’s gag order.

Last May, at the behest of Andres, the government filed a superceding indictment that dropped seven wire fraud, mail fraud and conspiracy counts but left the original case substantially intact.

Costa, who was nominated for a federal judgeship in the Southern District of Texas in Galveston, continues to refer to Pelletier as his co-lead counsel in the Stanford case. Pelletier, citing a gag order in the case, declined to comment about any role he might continue to play in the case.

Stanford pleaded not guilty to the revised 14-count indictment filed last May and blamed any illegal conduct and cover-up activity on the prosecution’s star witness, James Davis, Stanford’s former chief financial officer.

Current prosecutors in Houston and Washington credited Costa with skillfully navigating the kinds of institutional pressures that often kill cases. As one of the prosecutors said, Costa kept “the Stanford case from falling apart when bosses in Washington stuck their noses into it and tried to improve the original case.”

At trial, which began Jan. 24 beore Hittner, Costa promised jurors they would get the “ultimate inside story” from Davis, who had also been Stanford’s college roommate and who could get up to 30 years in jail for his role in the scheme. Costa presented Davis as a shy friend whom Stanford relied on to do his bidding. Davis witnessed and participated in the criminal scheme and subsequent cover-ups, Costa told jurors.

Costa followed his team’s trial script to the letter, current and former prosecutors said. He did so without so much as a glitch, they said. Although  Hittner issued a gag order in the case barring lawyers from public comment, three prosecutors say the government’s chances of winning a Stanford conviction look good.

Adam Gershowitz, an associate law professor at the University of Houston Law Center, likened the government’s trial strategy against Stanford to one more commonly seen in organized crime cases where longtime family members or friends turn against each other to get leniency.

“The theory is jurors are more apt to believe someone who has firsthand knowledge,” Gershowitz said in an interview last week.

Stanford unrelated to financial collapse

Gershowitz also said recent attempts by Breuer, to cite the Stanford trial as an example of  the Justice Department going after perpetrators of criminal activity that caused the financial collapse, are misguided.

At a Feb. 8 panel discussion at New York University Law School, Breuer said, “I just don’t accept the fact that we haven’t done anything,” related to the meltdown and cited Costa’s team of lawyers in the Stanford case.

“The funny thing about that is the Stanford case is a one-off fraud trial, like Bernie Madoff’s $50 billion Ponzi scheme or Raj Rajaratnam’s big insider trading case,” Gershowitz said.  “They get a lot of press because they have unusually big value. But these cases do not stem from the financial collapse. And it’s misleading to treat them as if they’re related to it.”

A Democrat who clerked for Rehnquist

Born in Baltimore, Costa graduated in 1994 from Dartmouth College, where he was acting president and vice president of the Dartmouth College Democrats. In college he volunteered for the presidential campaigns of Democrats Bill Clinton and Bob Kerrey and interned for the Democratic National Committee.

After college, he enrolled in a non-profit Teach for America program and taught grade school in Sunflower, Miss., for two years before entering the University of Texas School of Law. He graduated in 1999 and  clerked for D.C. Circuit Court of Appeals Judge A. Raymond Randolph. In 2001 and 2002 he clerked for Chief Justice William Rehnquist, who led the conservative wing of the U.S. Supreme Court.

After his clerkships, Costa joined the Houston office of Weil Gotshal & Manges LLP in 2002 as an associate. He left private practice to become an AUSA in 2005.

In May 2009, he was contacted by a co-chair of a judicial selection committee established by Rep. Al Green (D-Tex.) to recommend federal judge nominees.

Costa received bipartisan support.

Texas Republican Sens. John Cornyn and Kay Bailey Hutchinson sent a letter to President Obama last July recommending Costa for the judicial slot created when Judge John David Rainey took senior status in June 2010. “His skill and work ethic as an assistant U.S. attorney in Houston have earned him high praise from the Texas legal community,” the senators wrote.

President Barack Obama nominated Costa for the Galveston-based judicial seat last September. His nomination remains pending in the U.S. Senate. [Read his Senate Judiciary Committee questionnaire here.]

From billionaire to nothing

After taking Stanford jurors through documents and accounting records to support charges that Stanford was skimming investor money, Costa called Davis to the witness stand on Feb. 2.  Davis told jurors over four days that Stanford  often joked with him that he’d blame him if he ever got caught.  As predicted, Stanford’s defense blamed the entire scheme on Davis.

Stanford’s lawyers have told jurors their client was a victim of an overly aggressive investigation: “They seized everything–and when I say everything, I mean everything,” the defense lawyers said.  “They even took his underwear.  From a billionaire to nothing.”