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.”
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