Sunday, 29 November 2009

King Says Legal Troubles Taking Toll On His Health

Former head of the Financial Services Regulatory Commission (FSRC) Leroy King said his legal troubles in the Stanford matter are taking a heavy toll on his already failing health, but he’s hanging in there on the strength of his innocence.

The veteran banker, who once held the title of ambassador, spoke with OBSERVER for the first time since his indictment by the US Securities and Exchange Commission in June.

While declining to comment on his connection to the alleged Ponzi scheme run by Texan businessman R Allen Stanford, King spoke with this reporter about the impact the last six months have had on him.

He disclosed that he suffered from cancer of the oesophagus and severe gastro-oesophageal reflux disease, both of which required very exacting and demanding treatment regimens.

The US wants King extradited to answer charges that he failed to exercise the required oversight, choosing to look the other way in exchange for lucrative bribes and favours from Stanford.

While legal processing of the US extradition request is pending, King must report daily to a local police station, and it’s this that he finds physically draining, given his state of health.

Careful to point out that he wasn’t complaining, he said he saw no reason why the authorities could not modify the requirement to once a week, since everyone knows him, and for sure he’s not going anywhere.

In addition to his travel documents having been surrendered, two appointed sureties must be able to vouch for his whereabouts at any given time the authorities may enquire.

King, who maintains his innocence, said the restrictions on his movements, the impact that the daily trips to the police station were having on his health care regimen, and the unfamiliar experience of facing criminal charges, were undeniably stressful.

Prior to the ongoing episode, he said, he’d never been accused of or prosecuted for any crime.

The veteran banker, now in his early 60s, said he’d been strictly advised by his lawyer against speaking to the media about any aspects of the case or the specific legal complaints against him.

But he did express sadness about what he said were media reports and even official statements that effectively put him on trial or made him out to be culpable, since the case is yet to be heard in court.

Despite all this, Leroy King said, he was enabled to cope with the present trying circumstances by a combination of faith in God and the assurance of his own innocence in the Stanford matter.

Thursday, 26 November 2009

Stanford victims ask why Texas didn't act sooner

In the aftermath of the R. Allen Stanford case, some local investors are asking: Where was the State of Texas?

Investors who lost money in the Houston financier's alleged Ponzi scheme now say the state's financial oversight was too lax.

"We have the right to know what the (Texas State Securities Board) knew and when they knew it, details of their past investigations, and why they didn't disclose anything to the citizens of Texas all these years," Austin investor Annalisa Mendez said.

In fact, the state looked into Stanford's dealings years ago.

The Securities Board wrote a memo in the mid-1990s, expressing concern "that the high return rates and commissions for CDs made it difficult for the Stanford bank to make a legitimate profit on the CDs," according to a September Financial Industry Regulatory Authority report on the aftermath of both the Bernard Madoff and Stanford cases.

FINRA is a private corporation that provides regulatory oversight of all securities firms nationwide.

Texas Securities Commissioner Denise Voigt Crawford mentioned the securities board's involvement with the Stanford case in Feb. 20 testimony to the state Senate Committee on Finance, just after the scandal broke.

"We looked at him about 10 years ago, because there was evidence of potential money-laundering," Crawford said in response to a question from state Sen. Steve Ogden, R-Bryan.

The FBI and the Securities and Exchange Commission took the case, "which is what should have happened," she said. "But why it took 10 years for the feds to move on it, I could not answer."

The SEC has been criticized by investors who say the agency didn't do enough, quickly enough, to stop Stanford.

In 2003, some Stanford employees told the SEC they suspected fraud at the company.

In 2005, the SEC's Fort Worth office started an informal investigation into the sale of certificates of deposit by Stanford International Bank, which is based in Antigua.

But it was not until this past February that the SEC sued Stanford, alleging he was running a "massive Ponzi scheme" based on fraudulent CDs.

The SEC's inspector general concluded in a report that the agency had fulfilled its duty to check out accusations against Stanford.

The report found that the agency's inquiry was "hampered by a lack of cooperation" from Stanford and his attorneys, as well as by jurisdictional obstacles and obstruction by regulators in Antigua.

Stanford's attorney, Kent Schaffer, denied that his client had operated a Ponzi scheme, saying that money from the CD program was invested in a "wide range of investments."

What caused the losses were the government's lawsuit and fraud investigation, which prompted a run on the bank, he said.

Allen Stanford Scandal Forces Restructuring In Antigua

The alleged Ponzi scheme perpetrated by American turned Antiguan citizen, R. Allen Stanford, will force a restructuring of the country`s financial system.

Antigua and Barbuda`s Governor General, Dame Louise Lake-Tack, on Monday said the country`s financial laws will be amended to ensure adequate monitoring and strict compliance with anti-money laundering requirements.

Lake-Tack made the comments during her annual speech to Parliament laying out the government`s agenda. `The Financial Services Regulatory Commission will be seeking amendments wherever necessary to the legislative and regulatory frameworks that buttress our off-shore financial regime,` said the GG.

Amendments will be made to the International Business Act, The Money Laundering (Prevention) Act, and The Proceeds of Crime Act.

She also used her speech to accuse Stanford of compromising Antigua`s regulatory integrity.

Stanford is awaiting trial in a Houston jail on charges that he allegedly defrauded some 28,000 investors out of $7 billion by selling them what U.S. authorities say were bogus certificates of deposits from the Antigua-based Stanford bank.

Antigua`s National Honors Committee recently voted unanimously to revoke Stanford`s title for embarrassing the nation.

Baseball stars and others, to get back Stanford funds

Some of alleged swindler Allen Stanford's investors, including baseball star Johnny Damon, will see their funds returned after a U.S. appeals court ruled the receiver in the fraud case may not sue them.

Ralph Janvey, the receiver in the Stanford civil fraud case, had filed a lawsuit to recover "clawback" proceeds from several hundred investors in the firm's offshore bank, which prosecutors say is at the heart of a $7 billion Ponzi scheme.

Stanford, 59, faces civil and criminal charges for leading the alleged scheme related to certificates of deposit (CDs) issued by Stanford International Bank Ltd in Antigua.

Janvey has argued that Stanford clients who redeemed their CDs in the weeks before civil fraud charges were filed, unfairly cashed out and were paid with money stolen from other investors.

But the Fifth Circuit Court of Appeals in New Orleans said in a ruling late on Friday that Janvey had no right to sue the investors and the funds, which have been frozen by a lower court's order since February, should be released.

"We were pleasantly surprised that the receiver has indicated his intent to release the money and not pursue further appeals in this matter," Gene Besen, an attorney who helped recoup $9.5 million for seven current and former Major League Baseball players.

Other baseball players snared by the alleged Stanford fraud who will have their funds released include famed former major league pitcher Greg Maddux and J.D. Drew, an outfielder with the Boston Red Sox.

Stanford Financial Group sponsored numerous leagues and teams in such sports as cricket, golf, tennis, basketball, polo and sailing.

About $275 million in proceeds from certificates of deposit have been frozen in accounts at Bank of New York Mellon Corp's (BK.N) Person LLC, JP Morgan Chase & Co (JPM.N) and SEI Investments Co (SEIC.O), according to court documents.

"The Receiver will continue to carry out his duty to recover assets traceable to the Stanford fraud for the benefit of all investors by pursuing recovery of, where cost justified, improper and/or preferential payments of estate funds," a lawyer for Janvey said in an email.

The U.S. Securities and Exchange Commission, which filed the civil fraud charges, had also opposed Janvey's lawsuit, saying it penalized innocent investors.

"He (Janvey) viewed these funds, which were already frozen, as low-hanging fruit and the Fifth Circuit slapped him back on this money grab," Jacob Frenkel, a former SEC enforcement lawyer and now a partner at Shulman, Rogers, Gandal, Pordy & Ecker.

Saturday, 21 November 2009

Stanford investors to Antigua: Remove liquidator

ST. JOHN'S, Antigua -- A group of investors is urging an Antiguan court to remove a British accounting firm appointed to collect assets of a Caribbean offshore bank at the center of an alleged Ponzi scheme by Texas financier R. Allen Stanford.

Martin Kenney, a lawyer for the group led by Florida businessman Alexander Fundora, said his clients have asked the High Court of Antigua to remove Vantis Business Recovery Services as liquidator because a Canadian court found earlier this year that it had deleted data from computers in the Montreal branch of Stanford International Bank Ltd.

"In order to recover and apportion the bank's assets in the fairest and most efficient way possible for the victims of this apparent grand fraud, it is crucial to have Vantis removed and replaced as soon as possible," Kenney said Friday from the British Virgin Islands.

Vantis was appointed by Antiguan authorities to liquidate the assets of Stanford International Bank. A spokeswoman for the firm did not immediately return a telephone call Saturday.

Kenney said that Vantis wiped out original data on computers in the Stanford bank's branch in Montreal, Quebec, in March, without the authority of the Canadian courts and without notifying the Quebec financial regulator.

The Superior Court in Montreal ruled in September that Vantis deliberately misled the court, destroyed original computer data, and removed financial information. Vantis operated with "questionable motives," Judge Claude Auclair wrote in the Sept. 11 judgment.

The Canadian court subsequently replaced Vantis with Ralph Janvey, a lawyer appointed by U.S. courts to liquidate Stanford assets.

Vantis and Janvey have been fighting for jurisdiction over the assets, frustrating investors who are eager to recover money they invested in what U.S. authorities have alleged as a massive Ponzi scheme.

Stanford, once a benefactor of the Antiguan government, is in a Texas jail awaiting trial on charges including money laundering and fraud.

Prosecutors accuse Stanford of leading a $7 billion Ponzi scheme by promising inflated returns to about 28,000 investors on certificates of deposits. The U.S. Securities and Exchange Commission said he instead used the money from new investors to pay off old ones. They also accuse him of skimming more than $1 billion to fund his lavish lifestyle

Thursday, 19 November 2009

Recovered funds to go to Stanford investors

Hundreds of millions of dollars belonging to residents of Louisiana and other states are leaving court control and headed to their owners, people associated with the Stanford fraud debacle said Wednesday.
What’s being returned at this point, however, is just a fraction of the more than $7.2 billion alleged to have been looted by Texas promoter Robert Allen Stanford and some of his associates.
“This was almost like somebody who had a guillotine hanging over their head,” said Phillip W. Preis, a Baton Rouge attorney for several people retrieving their money. “It was like someone had given them a reprieve from a death penalty.”
Stanford, 59, is under indictment and in federal custody in Houston, accused of orchestrating frauds against nearly 30,000 investors.
Preis estimates that as much as $1 billion of that loss was suffered by approximately 1,000 residents of the Baton Rouge, Lafayette and Covington areas.
Dallas lawyer Ralph S. Janvey, the court-appointed receiver responsible for locating and seizing Stanford assets, froze about $894 million in funds remaining in approximately 600 investor accounts after Stanford’s operations were shut down in February.
Janvey had planned to distribute that money on a pro rata basis to about 4,000 bilked investors in this country and another 25,000 in other nations.
But the Securities and Exchange Commission, which had recommended Janvey’s appointment, argued there is no legal basis to seize funds from innocent investors who did not know their money had been poured into a fraudulent scheme.
And a three-judge panel of the 5th U.S. Circuit Court of Appeals ruled Friday in New Orleans that the SEC’s position was correct.
The 5th Circuit ordered Janvey to return the investor funds.
Janvey could have appealed the decision to the entire 5th Circuit or the U.S. Supreme Court.
But he posted a notice on his Web site Tuesday that “investor accounts previously subject to the freeze order are now available for release.”
The one exception, Janvey notes, covers funds frozen in the accounts of former Stanford brokers and employees. The receiver’s claim on that money continues, he says in his Internet posting.
Retirees and other investors had waited since February to retrieve their remaining money, but Preis said many were more stunned than celebrative this week.

“There was no joy,” Preis said. “Just relief.”

Some investors with Stanford lost everything, while other investors have varying amounts of money that remain in certain Stanford accounts.

Central resident Debbie Dougherty and her husband, Ken, had more than $500,000 at stake in the dispute with Janvey.

Dougherty said she and her husband filed for return of that money on Monday and are hoping that it will arrive this week.

Preis said the process may take slightly longer, between five and seven business days.

For investors who lost all of their savings to Stanford’s companies, the 5th Circuit’s decision was devastating.

Blaine Smith, of Baton Rouge, lost $1.5 million. He said Janvey’s plan, while painful to those who did not lose all of their investments, would have provided some money to all innocent investors.

The 5th Circuit judges “just did the same damn thing that Allen Stanford did,” Smith said. “They took money from us and gave it to others.”

Smith said he now will lend support to efforts by Louisiana’s congressional delegation to have the SEC order the broker-funded Securities Investor Protection Corp. to provide up to $500,000 for each defrauded Stanford investor. SIPC already has provided $534 million for victims of convicted New York investment promoter Bernard L. Madoff.

As for his fellow Stanford investors who now recover some or all of their money from Janvey, Smith said he bears no grudges.

“I’m glad for them,” Smith said. “At the same time, it just kills us.”

Receiver targets former Stanford employees to recover money for investors

More than 300 former employees of R. Allen Stanford — including some who worked in Austin — benefited substantially from their relationship with the financier, according to the court-appointed receiver in charge of recovering money for investors who were victims of Stanford's alleged $7 billion Ponzi scheme.

Now the receiver is seeking the return of bonuses those employees made selling certificates of deposits for Stanford.

The former employees, including financial advisers and managing directors, had "big commissions and other compensation relating to the sale of CDs" as incentives, receiver Ralph Janvey said in a filing this month in U.S. District Court in Dallas.

"When Stanford paid CD proceeds to former Stanford employees, he did no more than take money out of investors' pockets and put it into the hands of the former Stanford employees," according to the filing. "For the more than 20,000 investors who have thus far received little or nothing from their investment in Stanford CDs, money recovered from wherever it resides today is likely the only money they will ever receive in restitution."

The money, Janvey said, was in the form of loans, quarterly bonuses and other compensation paid to brokers. He estimated that they totaled more than $217 million.

Stanford has denied any wrongdoing and is in jail in Houston, charged by the U.S. Department of Justice with multiple counts of fraud.

Some former Stanford employees who worked in his firm's Austin office are named in Janvey's new filing.

According to Janvey's court claim, they include Patrick Cruickshank, who made $2.9 million in bonuses and other compensation for selling the CDs; Ray Deragon, who made $1.15 million; Nigel Bowman, who made $922,000; Shawn Morgan, who made $425,000; and Carol McCann, who made more than $441,000.

Bradley Foster, a Dallas attorney representing Cruickshank and Bowman, didn't return a call for comment. Michael Stanley, a Houston attorney who is representing Deragon, McCann and Morgan, said that none of his clients has been charged with a crime and that they had no inclination of any wrongdoing at Stanford's company.

"My view is, they are innocent employees," Stanley said. "If there was a fraud going on, they didn't know anything about it."

Janvey is being "very aggressive" in his attempt to seize bonus money from former Stanford employees, Stanley said.

"There's no difference in saying the utility company should pay back the light bills or the landlord should pay back the rent, because in some way it can be traced to investors' funds," Stanley said. "We don't think that's a legitimate legal claim."

But Angela Shaw, a Dallas resident and Stanford investor who lost $2 million, called that comparison "laughable." Financial advisers have a fiduciary duty to check things like the underlying investment portfolio, said Shaw, who founded the nonprofit advocacy group Stanford Victims Coalition.

"They're basically saying, 'We were salespeople; we didn't have any other responsibility to you,' " she said. " 'We were just selling what we were told to sell.' If my doctor was held to the same standard, a lot of us would be dead right now."

Shaw said her family lost $4.5 million.

"They are professionals in their field for a reason, and that's what we trusted as their clients," she said.

In previous court filings, Janvey said he expected to recover $1.5 billion to return to investors.

But that was before he lost a court ruling last week in his effort to get money back from some of those investors. Janvey had argued that investors who had redeemed their CDs in the weeks before authorities moved against Stanford essentially had been paid with money stolen from other investors.

But the 5th U.S. Circuit Court of Appeals in New Orleans ruled that Janvey had no right to sue those and said the money, which has been frozen by a lower court's order since February, should be released. The ruling included some $275 million in proceeds.

A receivership spokesperson declined to give an updated estimate Wednesday on how much Janvey expects to return to investors.

Stanford victim aid requested

The Louisiana congressional delegation and 40 other federal lawmakers are asking the Securities and Exchange Commission to require securities brokers and dealers to cover some of the enormous investor losses in the Robert Allen Stanford fraud case.

U.S. Rep. Bill Cassidy, R-Baton Rouge, said Tuesday the proposal is directed at the Securities Investor Protection Corp., a nonprofit established by Congress in 1970.

SIPC’s funding is provided by member brokers and dealers — and if the SEC acts on the congressional proposal, those brokers and dealers would face increased assessments.

The SEC did not immediately respond Tuesday.

The commission has absolute authority to order SIPC to provide up to $500,000 for each of the more than 4,000 Stanford investors in this country who did not work for Stanford companies, Cassidy said.

SIPC, however, has maintained the Stanford investors were not covered by the corporation.

Stanford, 59, is in federal custody in Houston, where he is under indictment for masterminding frauds that claimed more than $7.2 billion from retirees and other investors in Louisiana and other states and countries.

As much as $1 billion of that loss was suffered by investors in the Baton Rouge, Lafayette and Covington areas, according to estimates by Baton Rouge lawyer Phillip W. Preis and state Rep. Bodi White, R-Central.

“These families worked hard, saved their money, and did their homework,” Cassidy said in a written statement Tuesday. “Many were presented with evidence that their investments were covered by SIPC, and SIPC is the logical place to turn for appropriate restitution.”

Blaine Smith, a Baton Rouge resident who lost $1.5 million to the alleged Stanford frauds, said SIPC officials have denied claims by Stanford investors because most losses were deposits earmarked for an offshore bank.

But Smith said investor bank statements provide evidence that Stanford and his employees never forwarded the money to his bank on the Caribbean island of Antigua.

Instead, Smith said, investors’ money was deposited at banks in Houston, Memphis and elsewhere in the United States.

“Our money never left the country,” Smith said.

While the SIPC has denied coverage for Stanford investors, it has provided $534 million for victims of the frauds perpetrated by Bernard L. Madoff, a confessed New York criminal serving a 150-year prison term. Madoff’s frauds involved more than $50 billion.

SIPC says on its Web site that coverage provided for Madoff’s victims thus far is $14 million more than all other cases covered since the corporation’s founding in 1970.

Cassidy said in an interview Tuesday that SIPC officials justified the disparity between its treatment of Madoff and Stanford investors by reasoning that all of Madoff’s investments were fictitious.

Cassidy added, however, that the value of Stanford’s assets was equally fictitious. Cassidy said some Caribbean properties purchased for less than $70 million were inflated on Stanford ledgers by more than $2 billion.

The Baton Rouge-based lawmaker also said the SEC erred by entering a confidential consent agreement with Stanford long before his operations were shut down by the commission in February.

That agreement, Cassidy said, required Stanford to remove references to “SIPC member” from brochures provided to potential investors.

Investors would have been better protected from fraud, Cassidy said, if the SEC had issued a public announcement that Stanford had been falsely claiming his firms were SIPC members.

“Investor confidence has been shattered in the wake of numerous financial frauds over the past few years, most notably the Stanford and Madoff … schemes,” Cassidy and 48 other lawmakers said in a letter sent Tuesday to Mary L. Schapiro, who chairs the SEC.

“Accordingly, we ask for your reconsideration of SIPC coverage,” the legislators wrote Schapiro.

The letter was signed by all nine members of the Louisiana delegation, as well as nine other senators and 31 additional House members.

The group is made up of 30 Republicans and 19 Democrats from 18 state

Stanford lawyers and Lloyd's of London butt heads in court

R. Allen Stanford sat in court glumly for three hours Tuesday while a dozen lawyers debated whether insurance should pay for his criminal attorneys and whether those lawyers will have to report to a civil receiver when they find something new in the case.

Lloyd's of London lawyers announced in court that under a Stanford company policy, they've paid out $4.2 million to some criminal defense lawyers for work done before the August guilty plea of the Stanford company's chief financial officer, James Davis.

The Lloyd's lawyers said they won't pay further for the criminal defense of Stanford or those accused with him because Davis said they conspired with him. They said that the insurance contract said Lloyd's could stop payment if it determined money laundering was committed. Though Davis didn't plead guilty to money laundering, Lloyd's contends the terms of the policy were violated.

Dan Cogdell, lawyer for the former Stanford chief investment officer, Laura Holt, disputed that position.

“It's a bad faith denial of coverage,” he said.

Stanford, Holt and others are accused of cheating investors who bought certificates of deposit issued by Stanford International Bank, on the Caribbean island of Antigua, and sold through companies affiliated with Houston-based Stanford Financial Group.

Stanford, a native Texan who founded Stanford Financial Group and is the only one of the defendants in the case who is behind bars while awaiting trial, faces 21 counts of conspiracy, fraud, bribery and obstruction of justice.

Lawyers for Stanford and other defendants asked U.S. District Judge David Hittner to order Lloyd's to pay on its policy, possibly unprecedented in a criminal case.

“We're in uncharted water,” Hittner said, asking lawyers on both sides to submit briefs on the issue.

Hittner observed that the insurance lawyers' position would mean taxpayers have to pay for legal representation of Stanford and his codefendants.

Frozen assets
The payment of the criminal defense lawyers has been an ongoing issue. When the Securities and Exchange Commission filed a civil fraud suit last February in Dallas, it froze all the company assets and the personal assets of Allen Stanford and Holt.

Holt filed a separate lawsuit against Lloyd's in Houston federal court Tuesday, saying it was denying her coverage in bad faith. It's unclear whether Hittner will hear that case.

Also discussed Tuesday, but left undecided, is whether a receiver appointed by the Dallas court in the SEC case should be allowed to force criminal defense lawyers to hand over information they obtain while conducting their defense investigations.

Constitutional rights
Kent Schaffer, Stanford's lawyer, argued that the receiver's demands could violate defendants' constitutional rights and interfere with attorney-client privilege.

On that and the insurance issue, prosecutor Gregg Costa asked the judge to consider moving the case along as quickly as possible, especially since Stanford is imprisoned.

Stanford, who has had two surgeries since he went to jail in late June and has dropped more than 35 pounds, was unshaven and gaunt.

Concern on health
He leaned his head down so much at the beginning of the hearing that Hittner asked his lawyers to check on him and admonished that if Stanford is not well enough to attend court, he should stay in the detention center downtown.

Stanford perked up during a break, engaging in animated conversation with two U.S. marshals.

Thursday, 12 November 2009

Appellate court panel to decide

An appellate court panel soon will decide more than the question of whether a small group of Robert Allen Stanford’s innocent investors is required to surrender its remaining assets to more than 25,000 others in Louisiana and around the globe.
The three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans also will determine who is “somebody” and who is “nobody.” That’s another big question in an increasingly bitter dispute between the Securities and Exchange Commission and the Dallas attorney SEC officials handpicked to marshal Stanford’s remaining assets.
That attorney is Ralph S. Janvey, the court-appointed receiver for assets seized from Stanford and Stanford’s companies after the SEC shut down the Texas promoter in February and alleged that he and others swindled as much as $9 billion from his investors.
Janvey has recovered more than $128 million in cash and other assets he says can easily be converted to cash.
He has stated in court records he hopes to recover another $335 million in cash and investments from people in foreign countries.
Janvey is asking the 5th Circuit to allow him to seize $894 million from the frozen accounts of approximately 600 U.S. investors who did not lose all their money when the SEC halted Stanford’s operations. He does not allege any of those people were aware of any of the crimes that a federal indictment in Houston alleges Stanford committed.
Janvey argues federal case law requires him to complete the financial destruction of those innocent investors so he can share their remaining assets with all other innocent investors across the nation and around the world.
It is a position with which Dallas attorney John J. Little, a court-appointed examiner responsible for the interests of investors, disagrees on practical as well as legal grounds.
Little maintains foreign investors will never surrender any profits or principal to Janvey.
Therefore, the remaining money of innocent investors in the United States should not be subject to what Little sees as unfair seizure by Janvey.
The SEC maintains it never takes such action against innocent investors who have lost more money than they received in profits before the collapse of a fraudulent scheme.
And, in situations in which innocent investors are net winners, the commission says that it recovers only their profits, not their principal.
Last week, 5th Circuit Judges William L. Garwood, James L. Dennis and Edward Prado heard oral arguments on Janvey’s appeal of a Dallas judge’s decision in favor of the SEC.
Garwood, in particular, sparred with Janvey’s appellate attorney, Kevin M. Sadler of Dallas.
Garwood repeatedly asked Sadler why Janvey should be permitted to sue innocent investors whose assets the SEC chose not to seize. The judge said some attorneys might conclude the only parties who should appeal such matters are the SEC and any defendant affected by an SEC action.
“In a sense,” Garwood told Sadler, “you’re nobody.”
Sadler responded: “We’re here trying to establish a uniform rule.
“You said we’re nobody, and I have to disagree with you,” Sadler added.
Garwood suggested a receiver in a securities fraud case has an obligation to follow the lead of the SEC.
“You’re not doing that,” Garwood told Sadler.
“We are doing it,” Sadler shot back. “The SEC has abandoned its responsibility.”
The judges agreed to consider the case on an expedited basis

Thursday, 5 November 2009

Vantis Report to Stanford's Investors

2 November 2009

Dear Sir/Madam

Stanford International Bank Limited -in Liquidation (the Bank)(SIB)

This report will be emailed to those investors who have registered on the Online claims Management System. We will not be sending this report out via the postal service, as we have found the service to be unreliable in many of the countries where investors are located and this Is compounded by the costs involved. We therefore believe that email is the most effective way to communicate wi investors. For ease of reference, a copy of this report has also been posted on our website

Current Position with Investor Claims and Enquiries

Investors can now register their claims on the Online Claims Management System, which can be accessed via the following link: Investors who have registered on the Online Claims Management System will be able to print a statement of their account, change their address details, and formally agree their claim, or notify us of any discrepancies.

For investors who do not have access to a computer, or do not wish to register online, it will remain possible for them to submit their claims In writing directly to the Joint Liquidators via the headquarters of SIB in Antigua. We shall also advertise details of how investors can register their claims in due course through national publications in the various jurisdictions where investors reside.

We continue to deal with email enquiries, responding to investor queries both in English and Spanish.

Recognition Proceedings

United Kingdom (UK)

Assets of circa US 100 million have been located in the UK. To gain control of these assets, the Joint Liquidators sought formal recognition of our appointment. On 3 July 2009, the High Court of Justice of England & ales Issued a judgment in favour of the liquidators that the Centre Of Main Interest (COMI) of SIB is Antigua and Barbuda. This judgment has been appealed to the Court Of Appeal in the UK by Ralph Janvey, the United States (US) Receiver appointed by the Securities and Exchange Commission (SEC). The appeal hearing has been set for the 17 November 2009. As such, until the appeal is concluded, the funds in question are frozen and not available to either the Joint liquidators or Mr Janvey.


The Canadian Court did not consider our application for recognition under COMI, but issued a judgment recognising the US Receiver as the party to whom the assets located in Canada (approx. US$20 million) should pass.We have taken steps to appeal the Court's decision to not hear our COMI argument. Given the existence of further proceedings involving the Attorney General in Ontario, Canada, the funds in Canada remain frozen.


The decision recognition Switzerland is with the Swiss authorities and we await their decision, which we anticipate receiving within the next two months. Detailed submissions have been made to the Swiss Financial Market Supervisory Authority, as to why COMI should be granted to the Joint Liquidators.

United States (US)

Proceedings have been issued under Chapter 15 of the US bankruptcy code. As SIB is not the subject of insolvency proceedings in the US, we are seeking the recognition by the US Court of the Antiguan proceedings. Unfortunately, the US Court has not yet considered our application and,at the current time, is not able to forecast a hearing date.

US Receiver's Appeal Against the Decision of the High Court of Antigua & Barbuda

On 15 April 2009, the US Receiver made an application to the Eastern Caribbean Appeal Court of Antigua & Barbuda to appeal the decision to place SIB into liquidation and this matter remains outstanding.

US Receiver Co-operation

We, together with our attorneys, have sought to reach a co-operation agreement with the US Receiver and we set out these matters in detail in our last report. To date, no indication of co-operation has been received.

Antiguan & Barbudan land Assets

The land assets of SIB are still the subject of discussion with the Government of Antigua who took a protective step to preserve these assets. The land assets have a significant value, but will inevitably take a considerable time to realise.

Dividend Prospects for Creditors

As all the COMI recognition proceedings have either not been adjudicated upon or the decision is subject to appeal and other assets, being land with an anticipated long term realisation period, we are at present unable to estimate the level and timing of a distribution to creditors.

Other Matters

We continue with our investigations into the failure of the Bank and the alleged fraudulent manner in which its executive directors acted. You may be aware that a number of the former directors of the Bank have been charged in the US with offences relating to the fraud perpetrated upon the Bank.

Wednesday, 4 November 2009

Arise Allen Stanford, un-knighted…

Sir Allen Stanford, accused by the US Securities and Exchange Commission of masterminding a $7bn Ponzi scheme, was quite proud of the honorific bestowed upon him by the Antiguan government in 2006.
To give the man his full title, he was appointed “Knight Commander of the Most Distinguished Order of the Nation (Antigua and Barbuda)”, the first American to be so honoured. (Worth noting here that he was not – contrary to a tale the businessman liked to tell, including on his now-defunct corporate website — presented with the award by “His Royal Highness Prince Edward, Earl of Wessex.”)
But it looks like Sir Allen won’t be able to brag about his knighthood for much longer.
Antiguan sources told FT Alphaville on Monday that the Texan businessman, currently in a Houston jail awaiting trial, will be stripped of his title. A recommendation to do so has been sent to the twin-island’s Governor General at the behest of the National Honours Committee.
The Governor General still has to sign the request, but this is a mere formality, and the deed is all but done. Stanford may now claim the much more dubious distinction of being the first person to have an Antiguan knighthood revoked.
The move is something of a reversal for the Antiguan government, which up to at least March this year had stood behind the honorific.
Maurice Merchant, a government spokesman, said at the time that Stanford was quite right to continue using the title, despite the accusations against him.
“Until a conclusion of the U.S. investigations and charges lead to a conviction, we would not act upon the accusations,” Merchant said in March.
The businessman has denied all of the charges against him, and has not even been tried, much less convicted of any wrongdoing. We suspect, however, that the increasingly loud and discontented mutterings of the nation’s populace were becoming too much to bear.
Nor have the attention-seeking remarks of a coalition of investors burnt by the alleged fraud done much to help the government’s image.
The debt-ridden nation has been hard hit by the collapse of the Stanford empire and has had to seek assistance from both Venezuela and, more recently, the IMF.
The country’s administration, led by Prime Minister Baldwin Spencer, is working with the IMF to restore fiscal stability, a program which includes significant cuts to expenditure on public sector wages and salaries — some 20 per cent by 2012. The government is also expected to announce new taxes.

Tuesday, 3 November 2009

Miami's ex-DEA chief could escape charge in Allen Stanford case

In a blow to prosecutors, a federal judge Monday called for the dismissal of an obstruction charge against Miami's former DEA chief in the Allen Stanford bank fraud case.

Two months after one of Miami's most celebrated drug cops was charged in the Allen Stanford financial scandal, a federal magistrate is recommending that one of the key charges be thrown out.
Judge Robin Rosenbaum said prosecutors failed to prove Tom Raffanello -- head of security for Stanford's worldwide enterprise -- interfered with a federal investigation by ordering the destruction of reams of company documents.
The former Drug Enforcement Administration chief, who left the agency to join Stanford's security force in 2004, was charged with ordering the shredding of records just days after federal agents shut down Stanford's empire in a massive fraud case in February.
Though prosecutors said Raffanello defied a court order by destroying the documents, Rosenbaum said the government failed to show he impeded the U.S. Securities and Exchange Commission's probe.
The magistrate fell short of rejecting the entire case, however, saying prosecutors were able to show the former drug cop destroyed records in the course of a federal investigation. Her recommendation will be taken up by presiding Judge William Zloch later this month.
The charges over the destruction of the records -- including sensitive background checks on employees and investors -- are just part of the government's case against Stanford, who prosecutors say orchestrated a $7 billion Ponzi scheme.
Raffanello's attorney, Richard Sharpstein, said he was pleased with Rosenbaum's recommendation.
``We hope Judge Zloch not only agrees with Judge Rosenbaum, but throws out the entire case,'' he said.
Lead prosecutor Paul Pelletier could not be reached on Monday. However, prosecutors have argued in prior hearings that Raffanello and co-defendant Bruce Perraud were aware of a judge's order to preserve all company documents when they called a shredding truck to the company's Fort Lauderdale security bunker on February 25.
Federal agents have been scrambling to trace billions of dollars that flowed through Stanford's Antiguan bank over the past decade.
Ruling mostly on technical grounds, Rosenbaum said the order to preserve the records was for the court-appointed receiver and not the SEC. ``[The indictment] does not assert that defendants knew that when they allegedly obstructed the receiver's investigation, they were also interfering with the SEC's proceeding,'' Rosenbaum wrote.
She also threw out a portion of a conspiracy count relating to the obstruction charge. A trial on the remaining counts is tentatively set for January.

U.S. appeals panel weighs Stanford "clawback" claims

A U.S. appeals panel had tough questions on Monday for the receiver in Allen Stanford's civil fraud case, who is suing to recover proceeds from several hundred investors in the firm's offshore bank.
Stanford, 59, faces civil and criminal charges for masterminding an alleged $7 billion Ponzi scheme centered on fraudulent certificates of deposit issued by Stanford International Bank Ltd in Antigua.
At issue is whether receiver Ralph Janvey has a right to pursue "clawback" claims for principal from Stanford clients who redeemed their certificates of deposit (CDs) in the weeks before civil fraud charges were filed and the firm's assets were seized and customer accounts frozen.
Janvey has said the clients named in his lawsuit unfairly cashed out and were paid with money stolen from other Stanford clients.
"All of these people were paid with someone else's money," Kevin Sadler, an attorney representing Janvey, told the appeals panel.
U.S. District Court Judge David Godbey in Dallas ruled in July that Janvey only has a right to sue the investors for the interest on their certificates of deposit and not the principal, so the matter was sent to the Fifth Circuit Court of Appeals in New Orleans.
But the three-judge panel in New Orleans took issue with some of the case law Janvey used to support his appeal and questioned why the receiver, rather than the plaintiff in the case -- the U.S. Securities and Exchange Commission -- was suing the investors.
"What gives you statutory authority to sue people the SEC did not?" Senior Judge Will Garwood asked. "It seem to me that the plaintiff or defendant ought to be the ones ... Frankly, in a sense, you're nobody. You are neither one."
The SEC has also objected to Janvey's lawsuit, saying it would wrongly penalize the victims of a fraud.
Michael Quilling, a lawyer representing the investors, told the appeals panel his clients, who have had their accounts frozen since February, have suffered enough.
"This has been nine months," Quilling told the court. "These investors need their money now. Retirees, many of them, have been getting their interest for eight years. They can't get their principal. They are victims."
About $275 million in funds are being held in accounts at Bank of New York Mellon Corp's Pershing LLC, JP Morgan Chase & Co and SEI Investments Co.