SEC Escapes Stanford Victims' Suit Over $7B Ponzi Scheme

SEC Escapes Stanford Victims' Suit Over $7B Ponzi Scheme

Law360, New York (June 21, 2013, 9:54 PM ET) -- A Louisiana judge Friday threw out a putative class action alleging the U.S. Securities and Exchange Commission facilitated Robert Allen Stanford's $7 billion Ponzi scheme, finding the agency was shielded by a law barring suits over federal officials' discretionary choices.

U.S. District Shelly D. Dick said the discretionary function exception of the Federal Tort Claims Act applied to the case brought by victims of Stanford in part because the alleged refusal of former official Spencer Barasch in the SEC's Fort Worth, Texas, office to investigate the Ponzi scheme was a matter of choice.

“While the Court sympathizes with the losses suffered by the plaintiffs in this matter, plaintiffs have failed to identify any mandatory obligations violated by SEC employees in the performance of their discretionary duties,” Judge Dick concluded in granting the government's motion to dismiss.

“Plaintiff[s] have also failed to allege facts demonstrating that the challenged actions are not grounded in public policy considerations,” she said.

The plaintiffs argued that Barasch's alleged conduct did not fall under the discretionary function exception because the SEC has a policy of making enforcement referrals to the National Association of Securities Dealers and the Texas State Securities Board. Therefore, if a decision was made to refer Stanford, and then not followed, that decision falls outside the discretionary function exception.

But Judge Dick rejected that argument, saying that while “the alleged conduct of Barasch is disturbing ... the FTCA clearly states that the discretionary function exception applies 'whether or not the discretion involved be abused.'”

The suit, which was filed in July under the FTCA, alleged that SEC employees in Fort Worth knew as early as 1997 — only two years after Stanford Group Co. registered with the agency — that the company was likely operating a Ponzi scheme and did nothing about it.

Former SEC regional enforcement director Barasch, now an attorney with Andrews Kurth LLP, was singled out in the complaint for failing in his duties.

"In 1998 [to NASD] and again in 2002 [to TSSB] the SEC — through enforcement director Barasch and others — reached the conclusion that referrals should be made. Barasch himself was designated to perform these tasks," the complaint said. "But, in fact, these referrals were not made, with the effect that Stanford escaped scrutiny by other agencies for years, thus facilitating Stanford's scheme to defraud."

In dismissing the case, Judge Dick cited a similar decision by a Texas federal judge in another case brought against the SEC over Stanford's scheme. The plaintiffs in Dartez v. U.S. had argued that Barasch's decisions and the negligent supervision of his superiors were not protected policy considerations.

“While the [Dartez] decision is not binding on this Court, the Court can find no flaw in [its] reasoning,” Judge Dick said.

The plaintiffs are represented by C. Frank Holthaus, Scott H. Fruge, Michael C. Palmintier and John W. DeGravelles of DeGravelles Palmintier Holthaus & Fruge and Edward J. Gonzales III.

The case is Anderson et al. v. United States of America, number 3:12-cv-00398, in the U.S. District Court for the Middle District of Louisiana.

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=80

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

News Summary: SEC paying $580,000 to settle suit by former assistant inspector general

By Associated Press

SEC SETTLES SUIT: The Securities and Exchange Commission is paying $580,000 to settle a lawsuit by a former assistant SEC inspector general who accused the agency of firing him in retaliation for bringing possible misconduct to light.
RAISED CONCERNS: The fired assistant inspector general, David Weber, had raised concerns about possible inappropriate relationships between the former SEC inspector general and women he worked with on investigations of the Ponzi schemes run by Bernard Madoff and Allen Stanford. Weber also warned of a security flaw in some SEC computers that contained sensitive stock-exchange data.

REVIEW BY ANOTHER IG: A report by the U.S. Postal Service’s inspector general, provided to the SEC in September, substantiated some of Weber’s allegations.

Source: http://www.washingtonpost.com/business/news-summary-sec-paying-580000-to-settle-suit-by-former-assistant-inspector-general/2013/06/10/54f23066-d22f-11e2-9577-df9f1c3348f5_story.html

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

$83.5M Suit Says Willis Group Aided Stanford Fraud

A group of holders of Stanford Financial Group CD accounts claims that Willis Group Holdings Public Limited Co. helped perpetuate Robert Allen Stanford's $7 billion Ponzi scheme, according to an $83.5 million class action removed from Florida state court Monday.

The plaintiffs, 64 citizens of El Salvador, Nicaragua, Panama, the United States and Spain who claim combined losses of more than $83.5 million, say that when they made their investments in Stanford Financial CDs, they relied on "safety and soundness" letters issued by Willis asserting that Stanford International Bank and its products were protected by certain insurance policies and were highly liquid.

"In fact, the Stanford Financial CDs were not CDs at all, but unregistered, unregulated securities sold illegally from Stanford Financial's home base in the United States," the plaintiffs say in their complaint. "These investments had no insurance and were fraught with risk."

The case is not the first to lay such accusations against Willis. In 2009, a class of between 1,200 and 5,000 Venezuelan clients sought $1.6 billion over claims they were allegedly lured into the scheme by the insurance brokers' assurance that Stanford CDs were sound, insured investments. And in another suit that year, Mexican investors implicated Willis, claiming the defendants contributed to a fraud that cost them roughly $1 billion.

Stanford was sentenced in June 2012 to 110 years in prison after being convicted on charges he misappropriated billions of dollars in investor funds, including some $1.6 billion he allegedly moved to a personal account. His $7 billion Ponzi scheme was second only to Bernie Madoff's record-setting scam.

From about August 2004 through 2008, Willis provided Stanford Financial with an undated form letter that said Willis was the insurance broker for Stanford International Bank and had placed directors and officers liability insurance and a bankers blanket bond with Lloyds of London, according to the current complaint.

The letters played a crucial role in Stanford's fraud because Stanford Finanical was an offshore bank and thus not insured by the Federal Deposit Insurance Corp. Willis' letters helped Stanford get around that obstacle by claiming the CDs "were even safer than U.S. Bank-issued CDs because of the unique insurance policies Willis had obtained," the complaint says.

"The Willis letters were specifically designed to win investors' trust and confidence in Stanford Financial's fraudulent scheme," the plaintiffs say in their complaint, noting that for investors with more than $1 million in their accounts, Stanford Financial advisors could get personally addressed letters from Willis.

"Willis' message to potential investors was this: Trust us, you can invest with confidence and security in Stanford Financial CDs," they add.

All of the plaintiffs in the current case made their purchases through Stanford Financial's Miami office, which the complaint says accounted for more than $1 billion in CD sales.

Willis of Colorado Inc. filed the notice of removal of the class action on the grounds of diversity between plaintiffs and defendants, of the Securities Litigation Uniform Standards Act of 1998 and that the Northern District of Texas has exclusive jurisdiction in Stanford receivership cases.

The notice of removal also claims that defendants Willis Group Holdings Public Limited Co. and Willis Ltd., which are based in Ireland and the United Kingdom, respectively, have been fraudulently joined in an effort to defeat diversity jurisdiction. It says that the plaintiffs' claims are on letters issued only by the subsidiary Willis of Colorado and "no reasonable possibility" exists of the plaintiffs recovering damages from the other entities.

Counsel for both sides could not be reached for comment late Tuesday.

The plaintiffs are represented by Luis Delgado and Christopher King of Homer & Bonner PA and Ervin Gonzalez of Colson Hicks Eidson PA.

Willis is represented by Edward Soto of Weil Gotshal & Manges LLP.

The case is Nuila de Gadala-Maria et al. v. Willis Group Holdings Public Limited Co., case number 1:13-cv-21989, in the U.S. District Court for the Southern District of Florida.

Read the Willis Group NOTICE OF REMOVAL.

Read the Willis Group Exhibit A.

Read more: http://sivg.org/article/2013_64_victims_Say_Willis_Group_Aided_Stanford_Fraud.html

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

Stanford Judge Approves Interim Distribution to Victims

A plan by a court-appointed receiver to distribute assets recovered from R. Allen Stanford’s Ponzi scheme to investors was approved by a federal judge in Dallas.

U.S. District Judge David C. Godbey accepted the plan by Ralph Janvey, the receiver appointed in 2009 to marshal and liquidate Stanford’s personal and business assets, to make a $55 million interim distribution to about 17,000 claimants, or about 1 cent for each of the $5.1 billion lost in the fraud scheme.
“We will follow it up in a subsequent distribution as the money comes in,” Janvey’s attorney, Kevin Sadler of Baker Botts LLP, told Godbey at a court hearing in April.

Ponzi scheme victims of Bernard L. Madoff, who was arrested in December 2008, recovered more than $5.4 billion. Clients of the MF Global Inc. brokerage were paid about $4.9 billion after its parent, MF Global Holdings Ltd., failed in October 2011. Victims of a scheme by Peregrine Financial Group Inc. founder Russell Wasendorf, who prosecutors last year said stole $215 million, received an interim distribution of $123 million.

A federal jury in Houston last year found Stanford, 63, guilty of lying to investors about the nature and oversight of certificates of deposit issued by his Antigua-based bank. The jurors decided he must forfeit $330 million in accounts seized by the U.S. government.

The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at
aharris16@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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

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

Stanford Art Collection Nets $2.9 Million for Ponzi Victims

Stanford Art Collection Nets $2.9 Million for Ponzi Victims
Text Size Published: Wednesday, 22 May 2013 | 3:09 PM ET By: Scott Cohn
CNBC Senior Correspondent

Source: Heritage Auctions
A print from the 1983 collection of ten prints entitled "Endangered Species"Former billionaire Allen Stanford, convicted last year of running one of the biggest investment frauds in history, had particularly expensive tastes in art.

Wednesday in Dallas, an auction of some of his most prized possessions brought in just over $2.9 million. The proceeds are to be turned over to victims of the $7 billion scam, who thus far have recovered next to nothing.

(Read More: Allen Stanford: Descent from Billionaire to Inmate # 35017-183)
Stanford's art collection consisted mostly of modern and contemporary works from the likes of Picasso, Dali and Miro. The top prices went to two collections of prints by Andy Warhol. A 1983 collection of ten prints entitled "Endangered Species' sold to an unidentified bidder for $338,500. A second collection from 1985 entitled "Ads" sold to another unidentified bidder, also for $338,500.

One of the most anticipated items—an eight foot glass and steel chandelier by American artist Dale Chihuly, sold for $158,500, slightly more than expected,according to the web site of Heritage Auctioneers in Dallas, which conducted the sale.

Last year, a federal jury found Stanford ran a $7 billion scam involving bogus certificates of deposit. Prosecutors said he used most of his customers' money to fund his lavish lifestyle.

A court-appointed receiver rounding up funds to return to victims has had limited success. Earlier this year, a federal judge cleared the way for the return of some $300 million that had been tied up in foreign accounts. But that represents just pennies on the dollar.



Once the 205th richest American according to Forbes, Stanford was sentenced last year to 110 years in prison. He is appealing his convictions on 13 counts including fraud, obstruction and conspiracy.

—By CNBC's Scott Cohn; Follow him on Twitter:@ScottCohnCNBC

Source: http://sivg.org/forum/view_topic.php?t=eng&id=73

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

Stanford chandelier sells for $158,500 at auction

Stanford chandelier sells for $158,500 at auction
The Associated Press DALLAS --
A chandelier by glass artist Dale Chihuly that once belonged to former Texas tycoon R. Allen Stanford has sold at auction for $158,500 as part of an effort to compensate victims of his Ponzi scheme.

The 7-foot-tall, 6-foot-wide chandelier of cascading blue glass was sold Wednesday by Dallas-based Heritage Auctions.

Stanford was convicted last year on 13 fraud-related counts and sentenced to 110 years in prison.

The chandelier was offered through a federal court-appointed receivership overseeing the sale of assets previously owned by Stanford. A 42-foot-long sculpture by Terence Main called "Terrestrial Tale" that the receivership had also put up for auction did not sell Wednesday.

Stanford's assets have been sold at several auctions over the last few years.

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

Political Contributions

Last Updated 5/16/2013
As part of the Receiver’s efforts to recover assets for the Receivership Estate, the Receiver analyzed political contributions made by Stanford International Bank, Ltd., Stanford Group Company, Stanford Capital Management, LLC, R. Allen Stanford, James M. Davis and Laura Pendergest-Holt and certain entities they own or control.
As a result of that effort, shortly after the inception of the Receivership, the Receiver sent letters to each recipient of these political contributions requesting that they be returned to the Receiver.
The Receiver has also pursued litigation to recover certain political contributions. As of May 16, 2013, the Receiver had received $1.8M in returned contributions. A list of contributions returned voluntarily or as a result of litigation is below:

Shelby for US Senate $14,000
Barney Frank for Congress Committee $1,000
Arcuri for Congress $4,000
Neugebauer Congressional Committee $2,000
Marsha Blackburn for Congress $1,000
Friends for Harry Reid $8,000
David Scott for Congress $1,500
Freedom Funds - Mike Crapo, Honorary Chairman $1,000
Chris Dodd for President $11,500
Friends of Chris Dodd $16,000
Friends of Mark Warner $2,500
Minnick for Congress $2,300
Lloyd Doggett for Congress $2,000
Alexander for Senate 2014, Inc. $3,000
Collins for Senator $2,500
Friends of Jay Rockefeller $5,000
Campaign Account of Robert Wexler $2,500
Mel Watt for Congress $3,000
Friends of John Boehner $5,000
Pete Olson for Congress $3,300
Charles Boustany Jr. MD for Congress $1,500
People for Patty Murray $2,000
Dave Camp for Congress $2,000
Wicker for Senate $8,800
Tiberi for Congress $2,000
Friends of Max Baucus $1,000
McCaul for Congress $1,000
Boccieri for Congress $2,300
Every Republican is Crucial-ERIC PAC $3,000
John McCain 2008, Inc $2,300
Friends of Bennie Thompson $2,500
Friends of John Tanner $2,500
Evan Bayh Committee $2,000
Friends of Mary Landrieu $2,500
Bachus Reelection $2,000
Friends of Senator Schumer $4,000
Halvorson for Congress $2,300
Putnam for Congress $2,500
Mike McMahon for Congress $2,550
Hatch Election Committee $2,100
Bill Nelson for U.S. Senate $9,100
Friends for Gregory Meeks $6,600
Charles A. Gonzalez Congressional Campaign $5,000
Democratic Senatorial Congressional Committee $950,000
National Republican Congressional Committee $238,500
Democratic Congressional Campaign Committee $202,000
Republican National Committee $128,500
National Republican Senatorial Committee $83,345

Total $1,764,995


In February 2010 and May 2011, the Receiver sent letters to those recipients of political contributions who had yet to return them, requesting that they return an aggregate of $1.3 million in contributions as soon as possible. A list of the contributions that still remain outstanding is below:

OUTSTANDING REQUESTED AMOUNTS AS OF MAY 2013
New Jersey Democratic State Committee $10,000
Representative Pete Sessions (R-TX) $10,000
Senator John Cornyn (R-TX) $6,000
Americans for a Republic Majority PAC $5,000
Delegate Donna Christensen (D-USVI) $5,000
KPAC (affiliated with Senator Kay Bailey Hutchinson of Texas) $5,000
Lone Star Fund $5,000
Senator Barack Obama (D-IL) (presidential campaign) $4,600
Representative Dan Maffei (D-NY) $4,550
Representative Richard Neal (D-MA) $4,000
Greg Davis for Congress $3,500
Leadership PAC 2006 $3,000
Representative James E. Clyburn (D-SC) $3,000
Representative Rahm Emanuel (D-IL) $3,000
Representative Eric Massa (D-NY) $2,550
Former Senator John Sununu (R-NH) $2,500
Representative John Lewis (D-GA) $2,500
Representative Paul Kanjorski (D-PA) $2,500
Representative Timothy Johnson (R-IL) $2,500
Senator Gordon Smith (R-OR) $2,500
Senator Mitch McConnell (R-KY) $2,500
Senator Richard J. Durbin (D-IL) $2,500
LEADPAC $2,000
Representative Donald Payne (D-NJ) $2,000
Representative Ileana Ros-Lehtinen (R-FL) $2,000
Representative Kevin Brady (R-TX) $2,000
Representative Vern Buchanan (R-FL) $2,000
Senator Jack Reed $2,000
Senator Patty Murray (D-WA) $2,000
Representative Kendrick Meek (D-FL) $1,500
Representative Peter King (R-NY) $1,500
Representative Sam Johnson (R-TX) $1,500
Representative Steve Cohen (D-TN) $1,500
Former Senator Elizabeth Dole (R-NC) $1,000
Representative Joe Barton (R-TX) $1,000
Representative Shelley Moore Capito (R-WV) $1,000
Senator Byron L. Dorgan (D-ND) $1,000
Senator Maria Cantwell (D-WA) $1,000
Senator Pat Roberts (R-KS) $1,000

Total Campaign Contributions Requested Be Returned $117,700

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 Charges Traders in Massive Kickback Scheme Involving Venezuelan Official

The Securities and Exchange Commission today charged four individuals with ties to a New York City brokerage firm in a scheme involving millions of dollars in illicit bribes paid to a high-ranking Venezuelan finance official to secure the bond trading business of a state-owned Venezuelan bank.

According to the SEC's complaint filed in federal court in Manhattan, the global markets group at broker-dealer Direct Access Partners (DAP) executed fixed income trades for customers in foreign sovereign debt. DAP Global generated more than $66 million in revenue for DAP from transaction fees - in the form of markups and markdowns - on riskless principal trade executions in Venezuelan sovereign or state-sponsored bonds for Banco de Desarrollo Económico y Social de Venezuela (BANDES). A portion of this revenue was illicitly paid to BANDES Vice President of Finance, María de los Ángeles González de Hernandez, who authorized the fraudulent trades.

"These traders triggered a fraud that was staggering in audacity and scope," said Andrew M. Calamari, Director of the SEC's New York Regional Office. "They thought they covered their tracks by using offshore accounts and a shadow accounting system to monitor their illicit profits and bribes, but they underestimated the SEC's tenacity in piecing the scheme together."

The SEC's complaint charges the following individuals for the roles in the kickback scheme:

.- Tomas Alberto Clarke Bethancourt, who lives in Miami and is an executive vice president at DAP. Known as "Tomas Clarke," he was responsible for executing the fraudulent trades and maintaining spreadsheets tracking the illicit markups and markdowns on those trades.
.- Iuri Rodolfo Bethancourt, who lives in Panama and received more than $20 million in fraudulent proceeds from DAP via his Panamanian shell company, which then paid Gonzalez a portion of this amount.
.- Jose Alejandro Hurtado, who lives in Miami and served as the intermediary between DAP and Gonzalez. Hurtado was paid more than $6 million in kickbacks disguised as salary payments from DAP, and he remitted some of that money to Gonzalez.
.- Haydee Leticia Pabon, who is Hurtado's wife and received approximately $8 million in markups or markdowns on BANDES trades that were funneled to her from DAP in the form of sham finders' fees.

In a parallel action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against Gonzalez as well as Clarke and Hurtado.

According to the SEC's complaint, the scheme began in October 2008 and continued until at least June 2010. BANDES was a new customer to DAP brought in by DAP Global executives through their connections to Hurtado. As a result of the kickbacks to Gonzalez, DAP obtained BANDES' lucrative trading business and provided Gonzalez with the incentive to enter into trades with DAP at considerable markups or markdowns without regard to the prices paid by BANDES. Gonzalez used her senior role at the Caracas-based bank to ensure that its bond trades would continue to be steered to DAP. As the scheme evolved over time, the traders deceived DAP's clearing brokers, executed internal wash trades, inter-positioned another broker-dealer in the trades to conceal their role in the transactions, and engaged in massive roundtrip trades to pad their revenue.

For example, the SEC alleges that in January 2010, the traders and Gonzalez arranged for two fraudulent roundtrip trades with BANDES as both buyer and seller. These trades - which lacked any legitimate business purpose - caused BANDES to pay DAP more than $10 million in fees, a portion of which was diverted to Gonzalez for authorizing the blatantly fraudulent trades.

The SEC further alleges that, giving rise to the adage of no honor among thieves, Clarke and Hurtado frequently falsified the size of DAP's fees in their reports to Gonzalez, which enabled the traders to retain a greater share of the fraudulent profits.

The SEC's complaint charges Clarke, Bethancourt, Hurtado, and Pabon with fraud and seeks final judgments that would require them to return ill-gotten gains with interest and pay financial penalties.

The SEC's investigation, which is continuing, was conducted by Wendy Tepperman, Amanda Straub, and Michael Osnato of the New York Regional Office. The SEC's litigation will be led by Howard Fischer. An SEC examination of DAP that that led to the investigation was conducted by members of the New York office's broker-dealer examination staff. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.

Fort Worth SEC staff have been criticized in report on Stanford. The Securities and Exchange Commission made public the failure of enforcement staff in Fort Worth to act on findings by SEC examiners, who inspect the health of banks and other financial companies of Stanford.

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

What The SEC-SIPC Lawsuit Is All About

Source: Securities Investor Protection Corporation

What The SEC-SIPC Lawsuit Is All About

• The SEC has brought an unprecedented lawsuit demanding that the Securities Investor Protection Corporation ("SIPC") guarantee the value of offshore certificates of deposit ("CDs") issued by the Stanford International Bank Ltd. in Antigua.
• SIPC disagrees with the SEC’s position because it is in conflict with the Securities Investor Protection Act, the legislation that created SIPC and has guided it for the last 40 years.
• SIPC 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. SIPC was not chartered by Congress to combat fraud or guarantee an investment’s value, and its protections also do not cover investments with offshore banks or other firms that are not SIPC members.

Why The Securities Investor Protection Act Does Not Cover The Stanford-Antigua Situation

---

• This case is about investments in certificate of deposits ("CDs") issued by the Stanford International Bank Ltd. in Antigua. Stanford International Bank Ltd. is an offshore bank: it is not a SIPC-member brokerage firm and has never been a SIPC member.
• The Securities Investor Protection Act only covers the custodial function of a SIPC-member brokerage, by offering limited protection to customers against the loss of missing cash or securities when a SIPC-member brokerage firm is holding cash or securities for an investor but fails financially.
• The Act does not authorize SIPC to protect monies invested with offshore banks or other firms that are not SIPC members. The Act also does not protect investors against a loss in value of a security, including because of mismanagement or fraud.
• In addition, this case involves CDs that were delivered, not a situation in which a SIPC-member brokerage firm had custody of securities but failed before delivery could occur.

The Facts

• This case is about investments in CDs issued by the Stanford International Bank Ltd. in Antigua. Stanford International Bank Ltd. is a chartered bank formed under the laws of Antigua and Barbuda. This Antiguan bank is in liquidation in Antigua under the administration of liquidators in Antigua.
• Stanford International Bank Ltd. advertised interest rates that were higher (often much higher) than banks in the U.S., but its CDs now have the value, if any, of a debt instrument issued by a failed bank.
• Stanford International Bank Ltd. is not a SIPC-member brokerage firm and has never been a SIPC member.
• Investors received Disclosure Statements from Stanford International Bank Ltd. stating that these investments were not “covered by the investor protection or securities insurance laws of any jurisdiction such as the U.S. Securities Investor Protection Insurance Corporation….”

SIPC Letter of August 14, 2009 to Ralph S. Janvey, Receiver, Stanford Financial Group Receivership

Stanford - Madoff: The Key Differences

SIPC protection is available for investors who had brokerage accounts directly at Bernard L. Madoff Investment Securities LLC (“Madoff Securities”). Madoff Securities was a SIPC-member brokerage firm. Customer cash and securities were placed in the custody of Madoff Securities and were missing from the customer’s accounts when the firm failed. SIPC protection is thus available to protect customers, within limits, against the loss of their net equity balances.
By contrast, the Stanford case is about CDs that investors purchased from the Stanford International Bank Ltd. in Antigua. Stanford International Bank Ltd. is not a SIPC-member brokerage firm and has never been a SIPC member.
The Securities Investor Protection Act does not authorize SIPC to protect investors against the loss of monies invested with offshore banks or other firms that are not SIPC members. The Act also does not protect investors against a loss in value of a security, including because of mismanagement or fraud. In addition, this case involves CDs that were delivered, not a situation in which a SIPC-member brokerage firm had custody of securities but failed before delivery could occur.

Why SIPC Is Not The FDIC And Does Not Protect Against Securities Fraud

---

The Federal Bureau of Investigation, state securities regulators and experts have estimated that investment fraud in the U.S. totals $40 billion a year.¹ Market manipulation schemes alone generate an estimated $6 billion in losses annually.²
With a reserve of slightly more than $1 billion, SIPC could not continue operations for long if its purpose was to compensate all victims with losses due to investment fraud. SIPC 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.
It is important to understand that SIPC is not the equivalent of the banking industry's Federal Deposit Insurance Corporation ("FDIC") for investment fraud. Congress considered whether to guarantee investment losses and rejected that sort of protection as unrealistic and inappropriate.

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

Law professors support SIPC in dispute with SEC over Stanford fraud

An amici brief filed by renowned law professors supports the industry-backed Securities Investor Protection Corp. in its dispute with the Securities and Exchange Commission over the liquidation of convicted Ponzi schemer R. Allen Stanford’s brokerage firm.

Phyllis Skupien (Westlaw Journal Securities Litigation and Regulation).

In an appeal before the District of Columbia U.S. Circuit Court of Appeals, the SEC seeks. to force the SIPC to liquidate Stanford Group Co. for the benefit of investors.

Like Bernard Madoff’s Ponzi scheme, which cost investors an estimated $17 billion, Allen Stanford’s fraud dwarfed most others and is estimated to have cost investors over $7 billion.

The SEC says Stanford’s victims are entitled to protection under the Securities Investor Protection Act, 15 U.S.C. § 78aaa, which compensates investors when their brokers become insolvent.

Prior proceedings

In 2009 the SEC charged Stanford and Stanford Group, which is currently in court-ordered receivership, with violating federal securities laws. SEC v. Pendergest-Holt et al., No. 09-CV-298, complaint filed (N.D. Tex. Feb. 17, 2009).

Stanford was sentenced to 110 years in prison in a related criminal proceeding last year for defrauding investors with fraudulent certificates of deposit issued by Stanford International Bank, his bank in Antigua. United States v. Stanford et al., No. 09-CR-00342, defendant sentenced (S.D. Tex., Houston June 14, 2012).

According to the SEC’s suit against the SIPC, the agency directed the SIPC in June 2011 to initiate proceedings to liquidate the Stanford Group, but the SIPC has refused to do so.

In July 2012 U.S. District Judge Robert L. Wilkins of the District of Columbia denied the SEC’s request for an order compelling the liquidation, and this appeal followed.

Not ‘customers’

The SIPC maintains it has no responsibility to the investors because the SEC cannot show that the Stanford Group ever physically possessed their funds at the time of their purchases.

The amici brief supports the SIPC and says the investors were not “customers” of the domestic broker-dealer because they lent money to the offshore Antigua bank — a foreign institution not subject to regulation under U.S. law.

The amici brief was filed by Professor Joseph A. Grundfest of Stanford Law School, former SEC Commissioner Paul S. Atkins, former SEC General Counsel Simon M. Lorne, Emory Law School professor William J. Carney and Stanford Law School professor emeritus Kenneth E. Scott.

They say the SEC’s actions would dramatically expand the scope of persons covered by the SIPC and should be rejected.

The SEC’s proposal to “deem” purchasers of CDs issued by a foreign bank to be “customers” of a domestic broker-dealer is contrary to the Securities Investor Protection Act and is “at odds with 40 years of judicial precedent,” the amici say.

The SEC’s expansion of the definition of the term “customer” would substantially increase the financial exposure of the SIPC fund, they add.

The agency has presented no economic analysis for the implications of this expanded coverage, the professors say, noting that the industry itself must pay fees to support the SIPC fund.

The professors urge the appeals court to reject the SEC’s “unprecedented interpretation” of the term “customer” and affirm Judge Wilkins’ decision.

The Securities Industry and Financial Markets Association and the Financial Services Institute also filed amici briefs supporting the SIPC.

Securities and Exchange Commission v. Securities Investor Protection Corp., No. 12-5286, amici brief filed (D.C. Cir. Apr. 19, 2013)

Source: http://sivg.org/forum/view_topic.php?t=eng&id=69

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

Provisional Liquidators to Stanford Development Company (“SDC”) Explain Provisional Liquidation Process

Marcus Wide of Grant Thornton (British Virgin Islands) Limited and Hordley Forbes of Forbes and Associates (Antigua) were appointed as Provisional Liquidators of SDC. Within that role, they have taken over the company and are duty-bound to preserve its assets. Further, until further notice, SDC’s former directors’ powers are withdrawn and there is a stay of proceedings in place as to any actions that may be commenced against SDC without a court order.

The next step is likely the resolution of an application to wind up SDC. Though the result is not known, in most instances, the company will transition from provisional liquidation to liquidation at which point a liquidator(s) will be appointed. The role of the liquidators will be to wind up the company and settle all debts.

In the interim, the Provisional Liquidators continue to confer with creditors, the Antiguan government and other interested parties to bring a speedy resolution to SDC’s provisional liquidation by, among other things, paying creditors and getting SDC’s books and records in order. Notably, since a provisional liquidation does not involve a claims process, there is no need to submit a claim at this time.

For further information related to SDC, please see the SDC tab at www.sibliquidation.com for information posted by the Provisional Liquidators.

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

Allen Stanford Told to Disgorge $6.7 Billion in SEC Case

R. Allen Stanford, the Texas financier convicted last year of leading an investment fraud scheme, was ordered to disgorge more than $6.7 billion by the judge in a U.S. Securities and Exchange Commission lawsuit.

U.S. District Judge David Godbey in Dallas issued the order yesterday against Stanford, his Stanford Group Co. and the Antigua-based Stanford International Bank Ltd.

The order may clear the way for Godbey to grant a court- appointed receiver’s request to make an interim $55 million payout to investors who lost money after buying certificates of deposit issued by the Stanford Bank.

“The fraud perpetrated was obviously egregious, was done with a high degree of scienter, caused billions in losses and occurred over the course of a decade,” Godbey said, using the legal term to describe the mental state of intent to deceive.

A federal jury in Houston convicted Stanford of lying to investors about how their money was being handled.

“The truth is that he flushed it away,” Justice Department lawyer William Stellmach told jurors in his closing arguments at the March 2012 trial. “He told depositors he was using their money in one way and the truth was completely different.”

Stanford, 63, was sentenced to 110 years in prison. Maintaining his innocence, he has appealed the verdict.


Parallel Judgment


Godbey referred to the jury’s guilty finding in granting the SEC’s request he render a parallel judgment in their case filed in February 2009, four months before the financier was indicted. The judge also cited the August 2009 guilty plea by Stanford Group Chief Financial Officer James Davis.


“The court finds that $5.9 billion is a reasonable approximation of the gains connected to Stanford’s fraud,” Godbey said of the sum he would order disgorged. He then added more than $861 million in interest for a total of $6.76 billion. Davis too is jointly liable.

Finally the judge imposed a $5.9 billion penalty on Stanford and a $5 million assessment against Davis, who received a five-year prison sentence.

The court-appointed receiver, Ralph Janvey, asked Godbey this month for permission to begin repaying some of the losses incurred by the more than 17,000 claimants. At an April 11 hearing, the judge told Janvey’s lawyer, Kevin Sadler, he was concerned about doing so before a final order had been entered against Stanford.


Societe Generale


In a separate filing today, a group of Stanford investors asked Godbey to grant them a judgment of at least $95 million in a lawsuit against a unit of Paris-based Societe Generale SA. (GLE)

The lender’s Societe Generale Private Banking (Suisse) unit took the money from a Stanford bank account with his permission in December 2008 to repay a loan made to him four years earlier, according to court papers.

The financier had caused a business funded by Stanford investor-depositor money to guarantee the loan in 2007, the investors alleged, while those depositors received no benefit. The transfer of that money to Societe Generale just two months before the SEC sued Stanford and shut down his businesses was a fraudulent transfer, the investors claimed in today’s filing.

Ken Hagan and Jim Galvin, New York-based spokesman for the French bank, did not immediately reply to voicemail messages seeking comment on the allegations.


Slush Fund


Davis, the CFO, testified at Stanford’s trial that the financier maintained a Societe Generale Swiss bank account, funded by investor deposits.

“It was a slush fund, just used for whatever the holder wanted to use it for,” Davis said during the Houston federal court trial in February 2012.

The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

The investors’ case is Rotstain v. Trustmark National Bank, 09-cv-02384, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


Source: http://sivg.org/article/2013_Stanford_Disgorge_6Billion.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/

Louisiana officials want release of SEC report in Stanford case

A Louisiana senator told officials of the Securities and Exchange Commission Friday that he wants immediate release of a year-old report by the commission’s inspector general on efforts to recover money for victims of a multibillion-dollar fraud.
U.S. Sen. David Vitter, R-La., described as incompetent efforts by a court-appointed receiver to find and distribute assets of convicted con man Robert Allen Stanford.
Stanford, 63, of Houston, is serving a 110-year prison sentence for a fraud conviction that followed estimated worldwide losses of approximately $7 billion. About $1 billion of those losses were from about 1,000 investors in the Baton Rouge, Lafayette and Covington areas, according to estimates by state Sen. Bodi White, R-Central, and Baton Rouge attorney Phillip W. Preis.
“The fraud caused an absolute tragedy for many Louisiana families who invested their hard-earned retirement savings in good faith that it would be there for them when they retired,” Vitter said Friday in a letter to Mary Jo White, who chairs the SEC.
Vitter said the receiver in the case, Dallas attorney Ralph Janvey, spent $100 million to collect $55 million for Stanford’s victims.
“In the best light, Janvey’s actions can only be seen as incompetent,” Vitter told White in that letter. He urged White to release the SEC inspector general’s report on Janvey, noting that it was completed in March 2012.
There are more than 20,000 Stanford victims across more than 100 countries.
A retired Zachary couple, Louis and Kathy Mier, saw $240,000 of their savings stolen by Stanford’s fraudulent scheme.
“Whatever any of our congressmen do to shed light on the truth of what happened, and whatever they can do to help us get our money back and be whole again, would make Louis and me very, very happy,” Kathy Mier said Friday.
John J. Nester, a spokesman for the SEC, said in an email Friday that neither he nor other SEC officials would comment on Vitter’s request before White issues a response to the senator’s letter.
U.S. Sen. Mary Landrieu, D-La., released a statement through her staff: “The Stanford victims deserve answers, and the immediate release of the IG’s report is the very least the SEC can do.”
U.S. Rep. Bill Cassidy, R.-Baton Rouge, said through his staff: “I strongly urge the SEC … to release the full results of the inspector general’s report. The victims of this crime were hard working Louisiana families, and they are entitled to see the details of the report.”
Vitter noted that Janvey, against the SEC’s wishes, unsuccessfully sued some Stanford victims in an effort to seize money those victims retrieved before Stanford’s operations were shut down in February 2009.
“Given the demonstrated incompetence of the court-appointed receiver, it makes you wonder how bad this (inspector general’s) report gets,” Vitter added. “The Stanford victims deserve to see.”
“Given the demonstrated incompetence of the court-appointed receiver, it makes you wonder how bad this (inspector general’s) report gets. The Stanford victims deserve to see.” U.S. Sen. David Vitter, R-La.

Source: http://sivg.org/article/2013_Louisiana_want_release_SEC_report_Stanford_case.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 Can't Force Help For Stanford Victims, DC Circ. Told

The Securities Investor Protection Corp. asked the D.C. Circuit on Monday to affirm a landmark district court ruling declaring it doesn’t owe compensation to victims of Robert Allen Stanford’s $7 billion Ponzi scheme, suggesting the U.S. Securities and Exchange Commission succumbed to political pressure in bringing the suit.

The SIPC asked the appeals court to affirm U.S. District Judge Robert L. Wilkins’ decision dismissing the agency’s application to compel the SIPC to pay the fraud victims’ claims through a liquidation proceeding.

A top agency official had originally agreed that the SIPC did not owe funds under the Securities Investor Protection Act, SIPC claims, but that changed after U.S. Senator David Vitter, R-La., threatened to block the nominations of two SEC officials in June 2011, the SIPC said.

“The record shows that the SEC's general counsel agreed that SIPA did not apply to the Stanford case,” the SIPC said. “It was only two years later that the SEC sought to force SIPC's hand, apparently bowing to pressure from a U.S. senator,” referencing a June 14, 2011, press release from Vitter.

The corporation, funded by the brokerage industry to cover investors who lose money in failing firms, also claims the SEC didn’t seek a liquidation until two years after its 2009 case against Stanford.

“If the SEC had thought the Stanford fraud was within the scope of what SIPA protects, it was under a legal obligation to notify SIPC immediately,” the SIPC said. “The SEC did not do so, even though it filed an enforcement action against Stanford and secured the appointment of a receiver over U.S. Stanford assets in February 2009.”

On July 3, Judge Wilkins ruled that Stanford's U.S.-based Stanford Group Co. was a member of the SIPC, but that the Antigua-based Stanford International Bank was not. Stanford International Bank Ltd. was an offshore bank, not a registered broker-dealer, which is what the SIPC oversees, Judge Wilkins said.

Judge Wilkins’ decision was a major blow to victims of the Ponzi scheme, who together lost upwards of $7 billion in certificates of deposit administered by Stanford International Bank. It also carried broader legal significance, marking the first time since the enactment of SIPA 42 years ago that a federal court had ruled on how much power the SEC has to command a SIPC liquidation.

The U.S. Supreme Court has ruled that brokerage customers cannot force such proceedings, but that the SEC has the authority to do so.

Because of its precedential nature, a key issue in the Stanford dispute was the standard of proof required of the SEC. The agency argued for a more lenient standard than the SIPC did, describing its burden as merely probable cause supported by hearsay. Judge Wilkins ultimately chose the higher standard requested by the SIPC: a preponderance of the evidence. In an SIPC liquidation, an investor must meet a preponderance standard to prove the validity of his or her claim.

In its appellate brief filed in January, the SEC said Judge Wilkins had taken a too-narrow view of the term "customer." The agency argued that transactions with both Stanford entities should be treated the same way under SIPA because the company operated “as a single fraudulent enterprise that ignored corporate boundaries.”

“This interpretation of the statute to allow for flexibility in certain circumstances is the correct one, and it is at least a reasonable one that was entitled to deference by the district court,” the SEC said.

The SEC added that it was not seeking customer status for all Stanford investors, but only for those who held accounts with Stanford Group Co., purchased fraudulent certificates of deposit through SGC and deposited funds with Stanford International Bank Ltd.

But SIPC said Monday that the terms of its mission were clear: to protect investors when a member brokerage fails, adding that Judge Wilkins' purportedly narrow view of the term 'customer' was appropriate.

"By its terms, the statute does not insure against fraud or investment losses, instead protecting only the 'customer' property that an SIPC-'member' brokerage firm holds in custody when the brokerage fails,” the corporation added.

The corporation also said the SEC’s case was unprecedented because it has not made similar requests in proceedings related to the downfall of a major financial institution.

“In 40 years and over 300 liquidation proceedings — including the recent liquidations ofLehman Brothers Inc., Madoff Investment Securities LLC, and MF Global Inc. — this is the first the the SEC had ever tried to compel a liquidation. '

Stanford was sentenced in June to 110 years in prison for his role in the fraud.

SIPC is represented by Edwin John U, Eugene F. Assaf Jr., John C. O'Quinn, Michael W. McConnell and Elizabeth M. Locke of Kirkland & Ellis LLP.

The case is U.S. Securities and Exchange Commission v. Securities Investor Protection Corp., case number 12-5286, in the U.S. Court of Appeals for the District of Columbia Circuit.

Source: http://www.sivg.org/article/2013_SEC_Cant_Force_Help_For_Stanford_Victims.html

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

Stanford's Civil Tactic Makes SEC Indignant: April 11, 2013

Stanford's Civil Tactic Makes SEC Indignant
By DAVID LEE
ShareThis

DALLAS (CN) - R. Allen Stanford must be held civilly liable for his massive Ponzi scheme, the Securities and Exchange Commission argued, scoffing at the implication his criminal trial was unfair.
In a 2009 federal complaint, the agency accused Stanford of running an $8 billion Ponzi scheme through the sale of certificates of deposit. U.S. District Judge Reed O'Connor then entered a temporary restraining order, froze his assets, and appointed a receiver.
Stanford later faced a criminal trial for the scheme, and a jury convicted him in 2012 on 13 of 14 counts of conspiracy, wire fraud and mail fraud. He was sentenced in June to 110 years in federal prison.
With the SEC now seeking partial summary judgment on its civil claims, Stanford moved on March 25 for a time extension to secure sealed exhibits from his criminal trial.
The SEC replied Monday that this extension should be denied.
"First, for all the reasons noted above, these pleadings cannot add any substantive information relevant to the commission's motion for summary judgment because they relate to arguments that have already been rejected in Stanford's criminal case," it said in a six-page response. "In fact, the materials were attachments to a motion for new trial that was denied. The only reason for the Court to examine these pleadings would be to re-examine the fully litigated decisions made in the criminal case. The pleadings cannot give any basis to ignore the well-established precepts of collateral estoppel that demonstrate Stanford's civil liability in this parallel proceeding."
The SEC said Stanford has offered no basis to avoid the "estoppel effect" of his criminal conviction.
"In his response, Stanford admits, as he must, that he has been criminally convicted based on the very conduct that is at issue in this case," the filing states. "And he, in essence, concedes that the elements of collateral estoppel have been met here, including the fact that the same issues were at stake. His only argument is that the criminal trial did not provide him with a full and fair opportunity to litigate the common issues and that, as a result, collateral estoppel does not apply."
It is "beyond dispute" that Stanford had full and fair opportunity to try the criminal case against him, the agency added.
"As he admits, he was represented by competent counsel," the reply states. "His trial lasted over thirty days and over thirty witnesses testified. As even a cursory review of the docket sheet from that proceeding demonstrates, Stanford's criminal trial was fully and fairly litigated, even if Stanford does not like the results."
Stanford had even moved in October 2010 for change of venue based on the same pretrial publicity of which he complains now, the SEC said.
"He had a fair and full opportunity to litigate his motion for continuance," it wrote. "Stanford has pointed to no case suggesting that in circumstances like this collateral estoppel does not apply. Nor could he."
The SEC also sued several Stanford-controlled entities, including Antigua-based Stanford International Bank, Houston-based broker-dealer/investment adviser Stanford Group Co., and investment adviser Stanford Capital Management. The SEC also sued Stanford International Bank CFO James Davis and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group.
At the time of the suit, former SEC enforcement chief Linda Chatman Thomsen had called the conspiracy "a massive fraud based on false promises and fabricated historical return data to prey on investors."
Rose Romero, former regional director of the SEC's Fort Worth division, called it "a fraud of shocking magnitude that has spread its tentacles throughout the world." Romero is currently a partner with Thompson Knight in Dallas.
The SEC says Stanford International Bank sold roughly $8 billion of CDs by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through bank's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for 15 years.


Source: http://sivg.org/forum/view_topic.php?t=eng&id=59

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

Stanford Victim Penny-a-Dollar Payment Plan Goes to Judge

R. Allen Stanford’s investors may recoup some of their losses more than four years after the Stanford Group Co. founder was sued by the U.S. Securities and Exchange Commission and put out of business.
Ralph Janvey, the receiver appointed by a federal judge in 2009 to marshal and liquidate Stanford’s personal and business assets, today asked permission to make a $55 million interim distribution to about 17,000 claimants, or about 1 cent for each of the $5.1 billion lost in the fraud scheme.
“We will follow it up in a subsequent distribution as the money comes in,” Janvey’s attorney, Kevin Sadler of Baker Botts LLP, told U.S. District Judge David Godbey today in Dallas.
The proposed payout would trail the more than $5.4 billion paid to victims of Bernard L. Madoff, who was arrested in December 2008; about $4.9 billion paid clients of the MF Global Inc. brokerage after its parent MF Global Holdings Ltd. failed in October 2011; and the $123 million interim distribution for victims of Peregrine Financial Group Inc. founder Russell Wasendorf, who prosecutors last year said stole $215 million.
“No distribution plan can satisfy every claimant,” Janvey’s lawyers said in a Feb. 12 court filing. “But the receiver’s interim plan, which drew only three objections from thousands of claimants, comes remarkably close.”
Cross-Border Protocol
Godbey didn’t rule today on Janvey’s bid for payment plan approval. The judge granted a request to approve the Cross- Border Protocol, a cooperation agreement between the Dallas court-appointed receivership and U.S. authorities on one side, and Antiguan court-appointed liquidators of Stanford assets outside the U.S. on the other. That approval could boost investors’ final recovery.
“The court finds the motion to be well-taken,” Godbey said in a two-page order. He heard more than two hours of argument this morning.
A federal jury in Houston last year found Stanford, 63, guilty of lying to investors about the nature and oversight of certificates of deposit issued by his Antigua-based bank. The jurors decided he must forfeit $330 million in accounts seized by the U.S. government.
Sentenced to 110 years in federal prison, Stanford has appealed the verdict.
Godbey today asked Sadler whether it was proper to distribute Stanford’s money before entering a final order in the SEC case against the financier and his businesses.
No Precedent
No legal precedent requires Godbey to first issue such a ruling, Janvey’s lawyer replied. He also told the judge that in a prior decision he said “not a nickel” of the money recovered by the receiver from Stanford entities was not taken by fraud.
One objection to the payout plan came from the law firm Curtis, Mallet-Prevost, Colt & Mosle LLP. A lawyer for the firm, Myles Bartley, told the judge today that it’s owed $1.4 million for work done for Stanford entities and isn’t included in the first group of distributions.
Sadler said there would be enough funds to resolve those claims even if the judge approved the proposed payment plan.
In an e-mailed statement, Sadler called the judge’s ruling today “a significant milestone” in the receivership’s effort to get money to Stanford fraud victims.
Godbey’s order requires the Janvey receivership and the Antiguan liquidators to “perform in accordance with their rights and obligations as outlined in the settlement agreement.”
Long Dispute
Lawyers for both factions battled for months for control of $300 million of Stanford assets outside the U.S.
“So long as it continues, millions of dollars in assets that could otherwise be distributed to victims of the Stanford Ponzi scheme will remain tied up in the courts,” Sadler told Godbey in a filing last month.
The liquidators, Grant Thornton International Ltd. accountants Hugh Dickson and Marcus Wide, joined in the approval request through a separate filing.
For dropping their dispute with Janvey and the U.S. Justice Department, the Antiguan liquidators will receive fees of $36 million from Stanford’s frozen funds in the U.K., according to a statement jointly released by both receivers on March 12. The Antiguan liquidators already have received $20 million from the U.K. accounts.
About $23 million in Canadian funds and $132.5 million in Swiss funds will be transferred to the Justice Department and Janvey for distribution to investors through a system the U.S. receiver is establishing, according to the joint statement.
‘Ransom’ Payment
Angie Shaw, a founder of the Stanford Victims Coalition, has denounced the agreement as “ransom” that rewards the Antiguan liquidators at the investors’ expense.
“There is no Plan B,” Sadler told the judge.
Edward H. Davis Jr., an attorney for the liquidators, told Godbey today that an Antiguan court approved the agreement this week.
He said the agreement funds a “war chest” for the liquidators to further pursue lawsuits.
“The Joint Liquidators are pleased to have obtained the approval of the settlement from the High Court in Antigua this past Monday,” Davis said today in an e-mailed statement.
Attorneys representing law firms already defending suits filed by Janvey in the U.S. objected to the accord, arguing that it would result in more litigation offshore.
“There is obviously a jurisdictional issue,” Godbey said. “There is no getting around it.”
Fees Paid
Janvey’s professionals had been paid $63.3 million in fees and expenses as of Feb. 7, according to his most recent status report. That represents about a quarter of the $230.2 million Janvey has recovered for the estate. He has paid out $53.3 million more in costs to wind up Stanford’s business interests.
Shaw couldn’t immediately be reached for comment on Godbey’s ruling this afternoon. Peter Morgenstern, an attorney who serves on the official Stanford Investors Committee, also didn’t immediately reply to voice-mail and e-mail requests for comment.
An additional $4.1 million in Stanford-related assets have been identified in an account held by Pershing LLC, according to a court filing by Sadler yesterday seeking an order for the turnover of those funds.
The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

Source: http://sivg.org/forum/view_topic.php?t=eng&id=58

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

SEC Not Liable for Missing Bernie Madoff Scheme: Court

Investors who lost billions in Bernie Madoff’s infamous Ponzi scheme may be angry with securities regulators for failing to catch him during his decades-long crime, but a federal appeals court ruled Wednesday the investors cannot sue them.

The Second U.S. Circuit Court of Appeals upheld a lower court’s rejection of claims by a number of defrauded Madoff clients who argued “the SEC [Securities and Exchange Commission] negligently failed to adequately investigate Bernard Madoff despite numerous warnings.”

INVESTIGATION: The Madoff Scandal: Behind the Headlines

The three-judge panel said SEC employees are shielded by what’s known as the Discretionary Function Exception, which protects the government from certain lawsuits even if a private employer could be held liable under similar circumstances.

“We recognized that challenging the SEC would be difficult but this was a case that needed to be fought,” said plaintiff’s attorney, Howard Elisofon.  “We believe that our clients were wronged (both by Madoff and the SEC) and their rights needed to be vindicated.”

PHOTOS: The Secret World of Bernie Madoff

The judges said they have “sympathy” for the plaintiffs, and they called the SEC’s failure to uncover Madoff’s scheme “regrettable.”  However, the judge said, “Congress’s intent to shield regulatory agencies’ discretionary use of specific investigative powers… is fatal to the plaintiffs’ claims.”

“We were disappointed,” said another of the plaintiff’s attorneys, Howard Kleinhendler, who told ABC News he plans to appeal to the United States Supreme Court.  “The SEC completely failed.  They failed to collect the facts.  They failed to properly investigate.  They broke down and should be held accountable.”

The SEC declined to comment on the decision.

Madoff pleaded guilty in 2009 to orchestrating a colossal fraud that cost his clients at least $17 billion.  He is serving what amounts to a life sentence at a federal prison in North Carolina.

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

SDC workers picket over non-payment of wages

ST JOHN’S, Antigua – There’s very little end in sight for unpaid striking workers of Stanford Development Company (SDC) as neither SDC’s former directors nor the liquidators of Allen Stanford’s empire in Antigua are able to say when they will receive their monies.

      The 65 workers reported they have not received wages and salaries since January 15. They said their former bosses, Barbara Streete and Andrea Stoelker, can no longer pay staff since a court ruled the two were not properly appointed as directors of the company.

      The duo had appealed the ruling and applied for a stay of execution (a hold on enforcement of the judgment). The appeal is set for a date two months from now, but the application for a stay was recently rejected, workers confirmed.

      Staff had hoped the liquidators of most of Stanford’s assets here could help, but liquidator of Stanford International Bank (SIB) Marcus Wide told OBSERVER media last night he can offer no relief.

      “As of now we have no authority over SDC and while we are very sympathetic to their situation, regretfully, we cannot assist the employees,” Wide said.

      Wide said SIB was not responsible for the removal of the directors or freezing of their bank accounts.

      Up to yesterday, Wide said he was unaware the workers had not been paid since January and further that they had begun protesting.

      Affected workers are car park attendants, landscapers, maintenance crew and security at SDC properties.

      Efforts to reach the former directors were unsuccessful.

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