Stanford Victims Coalition Update Regarding SIPC

Dear SVC Members,

 I apologize for the gap in time between updates, but I have some very exciting news today about a project I have been working on full-time all year—a legislative remedy that should get us SIPC if the bill is passed—regardless of the outcome of the SEC vs. SIPC appeal (which could still go our way). “The Restoring Main Street Investor Protection and Confidence Act,” is being introduced in the House today with a Senate companion bill to follow. A hearing of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises is set for Thursday, November 21 (victims are encouraged to attend and I will be testifying along with another Stanford victim). A Senate Banking Committee hearing will be held as well, but a date has not been set.............

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=156

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

U.S. lawmakers seek fix to help investors file claims against brokers

Nov 20 (Reuters) - A bipartisan group of U.S. House and Senate members is seeking to make it easier for investment fraud victims to seek compensation, after investors in Allen Stanford's Ponzi scheme were deemed ineligible under current law to file claims.

The bill, introduced by Louisiana Republican Senator David Vitter, New York Democratic Senator Charles Schumer, New Jersey Republican Rep. Scott Garrett and New York Democratic Rep. Carolyn Maloney, would bestow U.S. securities regulators with greater powers to oversee the process of determining whether customers of failed brokerages qualify for compensation.

The legislative proposal comes as the Securities and Exchange Commission awaits a crucial decision from a U.S. appeals court over the fate of the Stanford victims.

The SEC is trying to get the court to force an industry-backed fund that protects investors to start court proceedings so Stanford victims can file claims to recover a least a portion of the millions they lost.

The Securities Investor Protection Corp., or SIPC, which administers the fund, has refused the SEC's request, saying Stanford investors do not meet the legal definition of "customer" under the federal law designed to protect investors if their brokerage collapses.

SIPC uses funds paid by the brokerage industry to compensate investors in the event of a bankruptcy, such as the one that occurred at Lehman Brothers in 2008.

 Allen Stanford was sentenced in 2012 to 110 years in prison for bilking investors with fraudulent certificates of deposit issued by Stanford International Bank, his bank in Antigua.

Many of the investors who purchased the products, however, did so through his Houston, Texas-based brokerage, Stanford Group Co.

SIPC argues that investors in the scheme entrusted their money to the offshore, unregulated Antiguan bank and not to the U.S. broker-dealer. Moreover, it says that Stanford's investors actually did receive their certificates of deposit, as promised, even though they turned out to be virtually worthless.

A federal district judge agreed with SIPC's legal position in July 2012, and tossed out the SEC's lawsuit.

The SEC appealed the ruling before the U.S. Court of Appeals for the District of Columbia in October, and is awaiting a decision.

 SIPC's refusal to let Stanford victims file claims has frustrated many lawmakers on Capitol Hill, including Vitter, who has been among the most vocal in fighting for the Stanford victims.

"The Stanford Ponzi scheme devastated many Louisiana families who invested their hard-earned savings in good faith that it would be there for them when they retire," Vitter said in a statement issued on Wednesday.

"Our bill will fix a key problem we've seen with the system, which currently allows SIPC's Wall Street members to benefit economically from the SIPC guarantee while denying the claims of legitimate victims," he added.

The legislative proposal by the four lawmakers will be vetted in a hearing before a subcommittee of the House Financial Services Committee on Thursday.

Among the witnesses scheduled to testify are Stephen Harbeck, the president of SIPC, a representative from Wall Street's leading brokerage trade group, and Angie Kogutt, a Stanford victim in charge of the Stanford Victims Coalition.

The 19-page bill would amend the definition of "customer" to ensure that investors who deposit cash to buy securities can still be covered by SIPC protection, even if the money is initially given to a firm that is not a SIPC member.

 It would also give the SEC more authority to force SIPC to act without the need for court approval.

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Canadian lawyer sues U.S. government over Allen Stanford ponzi scheme

Investors lost billions in the ponzi scheme orchestrated by Texas tycoon Allen Stanford, and now a Canadian lawyer believes he has an innovative legal strategy to recover funds for victims of the fraud who reside outside the United States.

Todd Weiler, who specializes in international law, believes that “unconscionable negligence and/or manifest incompetence” on the part of U.S. regulators may have breached the foreign investor protection provisions of several international trade treaties signed by the U.S. government.

If this had happened to Americans in Mexico, there’d be no doubt that those Americans would be bringing a NAFTA claim against Mexico

A request for arbitration and statement of claim the London, Ont. lawyer has delivered to the U.S. Department of State alleges that the U.S. Securities and Exchange Commission was aware of problems at the Stanford Group of Companies (SGC) and at Stanford Financial Group (SFG) as early as 1997. Yet in a “shocking and egregious failure,” SEC officials failed to shut Stanford down until 2009, the claim alleges.

Mr. Weiler alleges that the U.S. refused to take steps to shut Stanford down earlier because U.S. officials believed the majority of Stanford’s victims were not U.S. nationals. The Canadian lawyer argues that international trade treaties, among them the North American Free Trade Agreement, require that the U.S. government treat investors from all signatory countries equally, regardless of their residency.

“If this had happened to Americans in Mexico, there’d be no doubt that those Americans would be bringing a NAFTA claim against Mexico, and that they would deserve to win,” Mr. Weiler said in an interview. “The Americans have for 100 years used these agreements and other policies to bring other governments to heel and make sure they get this kind of protection and legal security.”

The U.S. State Department web site shows that it has received notice of legal actions Mr. Weiler has filed on behalf of Stanford victims from Guatemala, Costa Rica, Dominican Republic, Uruguay, Chile and Peru, and which are brought under various trade agreements the U.S. has signed with those countries. However, the U.S. government has not yet acknowledged on the web site that it has received the NAFTA claim that Mr. Weiler has filed on behalf of Mexican and Canadian residents. All the claims contain allegations that have yet to be proven at a hearing.

A high-flying Texas businessman who built a series of financial institutions in the United States and the Caribbean, Stanford was eventually arrested and charged with fraud in 2009. He had been known as “Sir Allen Stanford” in recognition of his services to the government of Antigua and Barbuda. He was tried in U.S. federal court and sentenced to 110 years in prison upon his conviction for fraud in 2012. His knighthood was revoked in 2010.

Investors who placed funds with Stanford International Bank received “certificates of deposit” or CDs that were supposed to be low risk investments that offered generous returns. The scheme took in more than US$7-billion. Some 21,000 investors from around the world were taken in.

SEC officials, who are responsible for protecting the investments of investors, acted with unconscionable negligence

Stanford’s activities caught the attention of U.S. regulators as early as 1997, a mere two years after the Stanford Group of Companies registered with the SEC in 1995, according to a report completed in 2010 by David Kotz, who was at the time the SEC’s inspector general. The NAFTA claim filed by Mr. Weiler relies on that report, which concluded that the SEC could have sought legal action to shut down Stanford years earlier than it did.

“SEC officials, who are responsible for protecting the investments of investors such as the claimants against criminal enterprises such as SFG, acted with unconscionable negligence and or manifest incompetence, causing millions of dollars of losses to the claimants as a result,” the claim states.

Because Mr. Weiler’s claim is structured as a proposed international arbitration, the legal action is open only to non-U.S. residents from countries with which the U.S. has signed trade agreements. Mr. Weiler says the action, which he is bringing in conjunction with several other lawyers from the United States, could include “several thousand” clients.

Other third parties have been targeted for their connection to Stanford. Liquidators of Stanford International Bank have sued Toronto-Dominion bank in Quebec and other jurisdictions on the theory that, as Stanford’s banker, TD should have known the Texan businessman was up to no good. TD denies the allegation.

Source: http://sivg.org/article/2013_Canadian_lawyer_sues_US_government_Stanford.html

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

SEC Order Against Stanford

April 25, 2013
By U.S. District Judge David C. Godbey

Securities and Exchange Commission, Plaintiff, vs. Stanford International Bank LTD., et al. Defendants. Civil Action No. 3:09-CV-0298-N

This Order addresses Plaintiff Security and Exchange Commission's ("SEC") motion for partial summary judgment [1779]. The Court grants the motion. The Court also denies Defendant R. Allen Stanford's motion for extension of time [1807].

The Court grants the SEC's motion for summary judgment. The Court enjoins Stanford from violating the Exchange Act § 10(b), Rule 10b-5, the Securities Act § 17(a), and the Advisers Act § 206(1) and (2), enjoins Davis violating the Exchange Act § 10(b), Rule 10b-5, the Securities Act § 17(a), and enjoins SGC and SIB from violating the Exchange Act § 10(b), Rule 10b-5, the Securities Act § 17(a), the Advisers Act § 206(1) and (2), and the Investment Company Act § 7(d). The Court finds Stanford, Davis, SGC, and SIB jointly and severally liable to disgorge the $5.9 billion fraudulently acquired by Stanford's scheme. The Court adds $861,189,969.06 of prejudgment interest to this total, for a total disgorgement liability of $6,761,189,969.06. Finally, the Court imposes a civil penalty of $5.9 billion on Stanford and $5 million on Davis.

Read the complete Order of U.S. District Judge David C. Godbey.


Source: http://sivg.org/article/2013_SEC_Order_Against_Stanford.html

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Obama chooses lawmaker accused of corrupt ties with Chavez to attend funeral

Obama chooses lawmaker accused of corrupt ties with Chavez to attend funeral
By Julian Pecquet - 03/07/13 06:43 PM ET


President Obama is sending a lawmaker whose relationship with Hugo Chavez has come under scrutiny in the past to represent the United States at the Venezuelan strongman's funeral on Friday.

Rep. Greg Meeks (D-N.Y.) allegedly met with Chavez in 2006 at the bequest of one of his donors, indicted Ponzi schemer Allen Stanford, to request a criminal probe into a Venezuelan banker who had fallen out with Stanford, The Miami Herald reported in 2009. The banker, Gonzalo Tirado, was charged with tax evasion and theft a year after the meeting with Meeks.


Meeks said at the time that the trip was aimed at thanking Chavez for providing heating oil for poor Americans through Citgo, a subsidiary of the state-owned Petroleos de Venezuela. Citgo is the primary donor of heating oil to Citizens Energy, a nonprofit organization led by former Rep. Joseph Kennedy (D-Mass.) that provides discounted heating oil to poor families.

“I am honored to be a part of a delegation that will represent the United States at the Funeral of Venezuelan President Hugo Chavez on Friday, March 8,” Meeks said in a statement Thursday. “My deepest sympathies go out to the family of President Chavez and the people of Venezuela. Venezuela is an important nation to the Western Hemisphere. I remain committed to building the relationship between our nations. As always, I stand in continued support of the Venezuelan people especially at this time of mourning.”

His office did not respond to a query about his ties to Chavez.

Stanford's lawyer, Kent Schaffer, acknowledged at the time that his client had talked with Meeks about Tirado -- but denied anything improper happened, The New York Post reported.

"I know from my conversation with Allen Stanford that there's no reason to believe that anything illegal or unethical was asked of the congressman," he said.

"They were having problems with an employee they believed was stealing from the bank . . . and he simply was reporting what had happened. I'm not aware of him making any request for anything in particular."

The good-government group CREW has long accused Meeks of corruption.

“It’s one thing to accept gifts of real estate and cash. It’s a whole new level to reach out to dictators on behalf of any donor – the fact that it was Allen Stanford just makes it creepier,” CREW Executive Director Melanie Sloan said at the time the allegations first came to light. “It seems there is nothing Rep. Meeks won’t do for cash. He needs to be held accountable for his actions.”

Former Rep. Bill Delahunt (D-Mass.) will also attend Chavez's funeral, the State Department said. Delahunt met with Chavez in 2005 to strike a deal for discounted winter home heating oil for low-income Massachusetts residents, earning him accusations that he was coddling up to an anti-American dictator.

Chavez died of cancer at a Cuban hospital on Tuesday. Vice President Nicolas Maduro said he had been poisoned and expelled two American officials for allegedly plotting to overthrow the government.

State Department spokeswoman Victoria Nuland denied those accusations on Thursday.

“This is part of a tired playbook of alleging foreign interference as a political football in internal Venezuelan politics,” Nuland said. “And if we're going to get to a place that we can do better together, this kind of stuff has to stop.”

James Derham, the charge d'affaires at the U.S. embassy in Caracas, will represent the State Department at the funeral. Maduro said Thursday that Chavez's body will be permanently displayed in a special tomb.

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=34

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

SEC, SIPC to argue in court over Stanford claims

Securities regulators are due in court on Tuesday to argue that a brokerage industry-backed protection fund should let thousands of victims of Allen Stanford's alleged Ponzi scheme file claims for compensation.
The Securities Investor Protection Corp, which has handled liquidation proceedings for Bernard Madoff's Ponzi scheme and the MF Global failure, has said the 40-year-old Securities Investor Protection law does not apply in the Stanford case.
The unprecedented legal face-off between SIPC and the U.S. Securities and Exchange Commission could have far-reaching consequences for how investors are compensated if their brokerage firm fails.
Stanford, 61, was arrested in 2009 over charges that he ran a $7.2 billion Ponzi scheme linked to certificates of deposit issued by his Antigua-based bank.
Tuesday's hearing in the U.S. District Court for the District of Columbia will come just a day after Stanford's criminal trial gets under way in another federal court in Texas.
The SEC asked the District of Columbia court in December to uphold its authority to order SIPC to help Stanford's victims after negotiations between the two entities had failed. It is unclear how soon Judge Robert Wilkins could rule.
SIPC is standing by its decision not to intervene on behalf of Stanford investors and has created a website to explain its position at http://www.stanford-antigua-sec-lawsuit.com/
It argues that it is limited by law to protecting customers against the loss of missing cash or securities in the custody of failing or insolvent SIPC-member brokerage firms.
While Stanford's Texas-based brokerage was a SIPC member, its offshore bank was not. And in any case, SIPC says it was not chartered by Congress to combat fraud or guarantee an investment's value.
"I think as a general policy matter, SIPC probably should win," said Seton Hall University School of Law professor Stephen Lubben. "If they don't, we are turning this insurance fund... into basically fraud protection across the board in all kinds of investments, which is going to be a lot more expensive."
Initially, some staff at the SEC seemed to agree with SIPC's view.
Former SEC General Counsel David Becker is quoted in a report released in September as saying "the law is the law" and that Stanford victims did not qualify.
Then in June, just one day after Senator David Vitter threatened to block the nominations of two SEC commissioners until the agency made a decision on Stanford claims, it announced that it was siding with the victims.
In a 195-page document, the SEC said that for SIPC to conclude that these customers did not actually deposit cash with Stanford Group "would elevate form over substance by honoring a corporate structure designed by Stanford in order to perpetrate an egregious fraud."
The timing of the SEC's announcement has raised some eyebrows at SIPC.
But Angela Shaw, the founder and director of the Stanford Victims Coalition, said the SEC's decision was not based on politics. It came, she said, after she turned over thousands of documents that helped convince the agency that investor money never went to the bank, but was instead spent by the brokerage.
"We have a broker-dealer that was a SIPC member that stole customers' funds," she said. "SIPC covers theft of investor funds when they are stolen by the broker-dealer, and the SEC has not alleged that this foreign bank stole our money."
TECHNICAL ARGUMENTS
It is not clear whether Tuesday's hearing will explore the merits of the arguments for or against SIPC coverage for Stanford investors.
The SEC, which has oversight authority over SIPC, plans to tell the judge that its position is "not subject to judicial review." It wants the court to simply weigh whether it has met the requirements to compel SIPC to launch a liquidation proceeding.
Stephen Harbeck, president and CEO of SIPC, rejects that argument entirely.
"I think it is fair to say that the SEC's position is as follows: The court may not look at the facts, the court may not look at the law, SIPC may not present any counter-argument, there is no appeal, and the court must do as we say," he said. "I am unaware of any jurisprudence that allows that."

SEC spokesman John Nester said Harbeck "apparently misunderstands our position, which is based on the facts and the law."

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=90

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Ex-Stanford executive gets 5 years in $7B swindle

January 22, 2013
By JUAN A. LOZANO

The star prosecution witness in the trial of convicted Texas financier R. Allen Stanford was sentenced Tuesday to five years in prison for helping to bilk investors out of more than $7 billion in one of the biggest Ponzi schemes in U.S. history.

James M. Davis had faced up to 30 years in prison after pleading guilty in 2009 to three fraud and conspiracy charges as part of an agreement with prosecutors.

"I am ashamed and I'm embarrassed," Davis said at the sentencing hearing at Houston federal court. "I've perverted what was right and I hurt thousands of investors. I betrayed their trust and also associates and neighbors and friends and my family."

Prosecutors say Stanford persuaded investors to buy certificates of deposit from his Caribbean bank, then used that money to bankroll a string of failed businesses and his own lavish lifestyle, including a fleet of private jets and yachts.

At Stanford's trial last year, Davis - the former chief financial officer of Stanford's companies - portrayed his ex-boss as the leader of the fraud who burned through billions of CD deposits. He testified that he and Stanford faked the bank's profits and fabricated documents to hide the fraud.

Stanford, a one-time billionaire, was convicted in March on 13 of 14 fraud-related counts. He was sentenced to 110 years in prison and is serving his sentence in a Central Florida prison.

Many of the dramatic details at Stanford's fraud trial - including testimony about bribes and blood oaths - came from Davis.

Stanford's defense attorneys accused Davis of being behind the fraud and tried to discredit him by calling him a liar and tax cheat. Davis, who was Stanford's roommate at Baylor University for a semester in 1973, said he realized he was party to fraud when he was asked to lie to a potential investor to say the bank had insurance.

Davis said he was "one of those liars" who faked the bank's numbers but that Stanford was "the chief faker."

Another top executive in Stanford's now-defunct empire - former chief investment officer Laura Pendergest-Holt - was sentenced to three years in prison in September after pleading guilty to one count of obstruction of a U.S. Securities and Exchange Commission proceeding.

Two other ex-executives - Gilbert Lopez, the ex-chief accounting officer, and Mark Kuhrt, the ex-global controller - were convicted in November of conspiracy to commit wire fraud and nine counts of wire fraud. They are set to be sentenced Feb. 14.

A former Antiguan financial regulator was also indicted and awaits extradition to the U.S.

Read more: http://sivg.org/article/2013_ExStanford_executive_gets_5_years.html

For a full and open debate on the Stanford Receivership visit the SIVG official forum http://sivg.org/forum/               

STANFORD PONZI SCHEME VICTIMS TO RECOVER ONE PERCENT OF LOSSES

January 11, 2013
By U.S. Receiver (Ralph Janvey)

The Receiver requests that the Court order a first interim distribution of funds from the Receivership Estate for the benefit of defrauded investors in certificates of deposit ("CDs") issued by Stanford International Bank, Ltd. ("SIB"). These investors were the primary source of both the funds that fueled the Stanford Ponzi scheme and the funds recovered by the Receiver. They are also the primary victims of the Stanford fraud by both value and number of claims.

Treatment of Claims under the Interim Plan.

1. The Interim Distribution Amount shall be apportioned among Investor CD Claimants on a pro rata basis. Such Investor CD Claimants shall receive payments equal to a percentage (the "Distribution Percentage") of their Allowed Claim Amounts as reflected in their Notices of Determination. The Allowed Claim Amounts shall be based on the Investor CD Claimants' Net Losses. Any future distributions to Investor CD Claimants shall likewise be pro rata based on Investor CD Claimants' Allowed Claim Amounts.

2. The Distribution Percentage equals the Interim Distribution Amount divided by the sum of: (a) all Allowed Claim Amounts for non-deficient Investor CD Claims as of the filing of the Motion (the "Investors' Allowed Claim Amounts"), and (b) the Receiver's estimate of the Allowed Claim Amounts for all Investor CD Claims that are deficient (the "Investors' Deficient Claim Amounts"). The Distribution Percentage can be represented mathematically as:

Interim Distribution Amount
____________________________________________________________
(Investors' Allowed Claim Amounts) + (Investors' Deficient Claim Amounts)

3. As of January 2, 2012, the aggregate of the Investors' Allowed Claim Amounts equaled $4,237,737,851.75, and the aggregate of the Investors' Deficient Claim Amounts equaled $893,487,080.90. The Distribution Percentage, therefore, is calculated as follows:

$55,000,000.00
________________________ = 1%
$5,131,224,932.65

4. Investor CD Claimants will receive distributions under the Interim Plan equal to their Allowed Claim Amounts as reflected in their Notices of Determination multiplied by the Distribution Percentage. The amount of a given Investor CD Claimant's interim distribution can be represented mathematically as:

(Particular investor's Allowed Claim Amount) x (Distribution Percentage)

5. If an Investor CD Claimant serves and files a timely objection to a Notice of Determination, the Investor CD Claimant is not disqualified from receiving a distribution under the Interim Plan. However, the Investor CD Claimant shall participate in this interim distribution based initially on the original Allowed Claim Amount in the Notice of Determination. If the Investor CD Claimant ultimately succeeds in increasing the Allowed Claim Amount (either by stipulation with the Receiver or by Court order sustaining the Investor CD Claimant's objection), the claimant shall receive a supplemental payment representing 1% of the difference between the Allowed Claim Amount in the Notice of Determination and the Allowed Claim Amount after final resolution of the claimant's objection.

6. To the extent a claimant receives one or more collateral recoveries, the Receiver will reduce payments to such a claimant to the extent necessary to ensure that all the Investor CD Claimants are treated equally with respect to the percentage of their Allowed Claim Amounts they recover from all sources as of the date of the payments.

7. Each Investor CD Claimant's interim distribution shall be based solely on his Investor CD Claims and not on his other types of Claims, if any.

8. Nothing in this Order shall preclude future distributions to Investor CD Claimants or other Claimants under a different plan. Nor shall anything in this Order restrict the Receiver's authority to compromise and settle any Claim, or resolve any objection to a determination, at any time, as appropriate, without further order of this Court.

Read more: http://sivg.org/article/2013_stanford_victims_to_recover_1_percent.html

For a full and open debate on the Stanford Receivership visit the SIVG official forum http://sivg.org/forum/               

THE SECURITIES AND EXCHANGE COMMISSION APPEAL AGAINST SIPC

January 11, 2013
By SEC

The Commission has shown that SIPC should be required to file an application for a protective decree as to Stanford Group Company in the District Court for the Northern District of Texas.

In denying the Commission's application, the district court made two reversible errors:
First, it incorrectly applied a heightened preponderance standard of proof to the Commission's application rather than the more appropriate probable cause standard. Congress created in SIPA a specific process, within the context of a SIPA liquidation, in which investors must prove their claims for coverage under the Act, including their "customer" status, by a preponderance of the evidence. It makes no sense to apply the same standard to the Commission in proving "customer" status on behalf of investors in this preliminary, summary proceeding.

Moreover, Congress's overarching goals of promoting investor confidence in the securities markets by providing speedy relief for investors indicate that a lesser standard of proof should apply to the initial question of whether SIPC should initiate a liquidation. Indeed, perhaps in recognition of this, SIPC itself is held to a lesser standard when it applies to begin a liquidation. The district court was therefore incorrect in applying a higher standard of proof to the Commission, which is SIPC's plenary supervisor.

The district court's error in this regard was based upon the mistaken belief that the application of the provisions of the Exchange Act to SIPA shows a congressional intent to apply the preponderance standard. But there is no sound basis to analogize plenary proceedings under Exchange Act Section 21(e)—used to finally determine whether a permanent injunction should be granted—to this preliminary, summary proceeding used to determine whether SIPC should be required to apply to begin a liquidation proceeding.

Second, the district court incorrectly interpreted SIPA's customer definition to exclude investors who, because of the unusual operation of the Stanford companies, should be deemed to have deposited cash with SGC. The record here provides at least probable cause to believe that the purported legal separateness of SGC and SIBL should be disregarded, such that, by depositing cash with SIBL, SGC accountholders who purchased SIBL CDs through SGC were effectively depositing cash with SGC. Courts facing similar circumstances have disregarded the corporate separateness of SIPC members and non-member affiliated companies, with SIPC's support. The district court's contrary approach improperly elevates form over substance by strictly adhering to the corporate boundaries of the Stanford entities which were designed to perpetrate an egregious fraud.

Even apart from the lack of genuine separateness of the corporate entities, SIPA's "customer" definition includes those who can be deemed to have deposited cash with a broker-dealer under the Old Naples and Primeline cases. Those cases rejected the notion that "customer" status requires that cash be deposited directly with the broker-dealer, and held that investors in certain circumstances fell within the "customer" definition. Those cases are materially indistinguishable from this one, and the district court's belief otherwise was based on a misunderstanding both of those cases and of the record here.

Finally, the Commission's interpretation of SIPA's "customer" definition is the correct one and is, at the very least, a reasonable one entitled to deference under Chevron. The district court declined to give such deference because it perceived an inconsistency between the interpretation and certain past statements of the Commission. The Commission's past statements, however, clearly state only a general presumption and are fully consistent with the Commission's interpretation in this matter.

Read more: http://sivg.org/article/2013_SEC_APPEAL_AGAINST_SIPC.html

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