Accountant appointed to investigate Stanford companies

Accountant appointed to investigate Stanford companies
By Tahna Weston - Tuesday, April 2nd, 2013.


ST JOHN’S, Antigua – An accountant has been appointed to look into the business affairs of companies of former financier R Allen Stanford.

Hordley Forbes of Forbes & Associates, Chartered Accountants, will conduct investigations into Stanford Development Company (SDC) Ltd and three other affiliated companies who are registered owners of property in Antigua.

Attorney General Justin Simon QC on March 5 obtained a court order for the investigation.

Forbes has been empowered to enter into SDC’s owned or operated properties to demand and examine books, documents, correspondence, contracts, corporate and accounting records.

He will also be seeking the co-operation of directors, managers, former directors, accountants, and legal counsel, all of whom are under an injunction not to interfere with or prevent the inspector from conducting his investigation.

“The application was filed in October 2012 on a number of grounds including that SDC and the other companies may have been formed and managed for a fraudulent and unlawful purpose and in particular to defraud customers of Stanford International Bank. That its obligation to pay severance to ex-employees remains outstanding despite disposition of real property, and the management of the company is questionable with the sole shareholder and director having been sentenced to 108 years imprisonment for massive fraud.

“The investigator is to report back to the court within 30 days of his appointment. The order was served on the registered office of the companies and personally on Barbara Streete and Andrea Stoelker with a Penal Notice attached,” Simon told OBSERVER media.

In January this year, SDC applied to the High Court for leave to file a claim against the Registrar of Companies for her refusal to accept and file documents, which seek to appoint Barbara Streete, a director and to amend the company’s Articles of Association to allow persons who do not hold shares in the company to be appointed directors.

The registrar was reportedly not satisfied with the authenticity of the documents presented. The application was heard on February 28 and decision has been reserved.

Following the filing of that case in June 2010, Andrea Stoelker resigned as director in August 2010, and obtained a power of attorney from R Allen Stanford, which he subsequently revoked.

SDC in September 2012 filed an application against Stanford International Bank Ltd. (SIBL), which is in liquidation.

The High Court ruled on January 21, 2013, that Barbara Streete and Hugh Marshall Jr lacked the authority to conduct affairs on behalf of SDC.

It was also found during the ruling that the company “has no properly constituted Board of Directors and as such it has no legal capacity to conduct the business of SDC”, and that “Ms Barbara Streete is not a director of SDC and should cease holding herself out as such.”

That decision is being appealed by SDC.

(More in today’s Daily OBSERVER)

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - 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

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