Thursday, 23 June 2011

Court Filing: Libyans Knew Stanford Was Running Scam When They Withdrew Millions

By: Scott Cohn
Senior Correspondent, CNBC
Newly unsealed court documents obtained by CNBC allege the Libyan government knew Allen Stanford was running a scam when officials withdrew tens of millions of dollars in Stanford investments in 2008 and early 2009.

The Libyan Investment Authority and the Libyan Foreign Investment Company managed to withdraw nearly $55 million, including $12 million in January, 2009, less than three weeks before Stanford was accused by U.S. authorities of running a $7 billion Ponzi scheme.

The newly unsealed complaint, filed on behalf of the court-appointed receiver who is rounding up assets for investors, says the Libyans deposited all the funds in a Citibank account in the U.S. A federal judge has ordered the funds frozen at least until a hearing in December.

CNBC first reported last week on the claims by receiver Ralph Janvey, but the identity of the bank was not disclosed until now. Citibank has not been accused of wrongdoing.

Also undisclosed until now was the allegation that the Libyans knew before the general public — or Stanford's 28,000 investors — that the Stanford empire was about to collapse.

Stanford traveled to Tripoli and met with representatives of the Libyan Investment Authority on January 25 and 26, 2009. Two days later, according to the court filing, the Libyans withdrew $12.6 million — the last in a series of withdrawals dating back to November, 2008. On February 16, 2009, the SEC sued Stanford, shutting the business down.

"(I)t is clear the Libyan Defendants had access to Mr. Stanford that was substantially superior to other investors," the filing says, "and the Libyan defendants were aware of the impending demise of the Stanford investment scheme well before the Receivership was imposed on the Stanford parties."

The filing cites a U.S. State Department cable first revealed by WikiLeaks as proof the Libyans knew Stanford was in trouble. The cable, sent on January 28, 2010, notes that the head of the Libyan Investment Authority, Mohamed Layas, initially denied the fund invested with Stanford, saying the Texas financier approached the LIA "in the middle of this crisis" — proof, the filing said, that Stanford was seeking help from the Libyans, and the Libyans knew exactly why he was there.

According to the filing, Janvey's office traced the funds the Libyans withdrew to two Citibank accounts, one with a balance, as of March, of nearly $2.8 million, and the other with a balance of nearly $1.4 billion.

The complaint says all the Libyan withdrawals — $54.8 million — belong to Stanford's 28,000 investors.

Stanford's companies "made the payments to the Libyan defendants with actual intent to hinder, delay or defraud their creditors," the filing says.

While the discovery of the funds is an important step, it is not entirely clear how Janvey will ultimately collect the funds, because of the ongoing Libyan crisis.

For now, the funds are frozen by court order, with a hearing scheduled for December.

Allen Stanford, who faces 14 criminal counts in the alleged Ponzi scheme, has denied wrongdoing. He is currently scheduled to go on trial in January.

Two Peas in a Pod?

UPDATE: Allen Stanford and Whitey Bulger:
Two Peas in a Pod?
Posted by Larry Doyle on June 23, 2011

I referenced the potential similarity in the cases of alleged financial scammer Allen Stanford and noted Boston gangster James J. “Whitey” Bulger in May 2009.

Our nation and especially Stanford Financial investors continue to wait to learn what may have really happened with Allen Stanford. Was he a pawn for the Department of Justice and/or other government agencies looking to infiltrate the Central and South American drug trade?

As for Whitey, after sixteen years of living on the lam, we wait no longer as news broke overnight that the notorious South Boston gangster was picked up in sunny Santa Monica, California.

I am sure the boys back in Boston may get a real chuckle from the fact that Whitey was allegedly using the alias, Charlie Rosenzweig. That said, there is little to chuckle about the personal damage and destruction Whitey and his Winter Hill Gang wrecked by pushing drugs into the streets of South Boston,… amongst other things as well, including murder and extortion!!

While there is nothing romantic about the story of Whitey Bulger, there is certainly a special place in hell for him.

Here’s hoping America can really learn what happened with Allen Stanford.

For those unfamiliar with Whitey, he is Boston’s greatest gangster, a government informant who simultaneously continued to run his gangland activities, one of the FBI’s Most Wanted, and still on the lam. The Martin Scorsese film, The Departed, was largely based on Whitey and his boys. If Whitey dealt in drugs and murder, is Stanford Financial, operated by Allen Stanford, a financial version of a government cover totally run amuck?

We all know the SEC totally dropped the ball in the oversight of the Bernie Madoff Ponzi scheme. On the heels of that and to alleviate massive pressure on the commission, the SEC quickly moved on Allen Stanford.

Evidence has emerged that the Texan who bankrolled English cricket may have been a US government informer.

Sir Allen Stanford, who is accused of bank fraud, is the subject of an investigation by the BBC’s Panorama.

Sources told Panorama that if he was a paid anti-drug agency informer, that could explain why a 2006 probe into his financial dealings was quietly dropped.

Sir Allen vigorously denies allegations of financial wrongdoing, despite a massive shortfall in his bank’s assets.

But the British receiver of his failed Stanford International Bank – based in Antigua – told Panorama that the books clearly show the deficit.

If in fact this development is accurate, has the U.S. government, via the DEA, facilitated a Ponzi scheme? I am not so naive as to think that there aren’t massive undercover operations ongoing regularly to infiltrate and expose illicit activities. However, if in fact that were the case, how did the DEA lose control of Stanford’s investment activities? Is this situation an indication that the Obama administration will not partake of these types of undercover operations? Is there a massive in-house brawl currently ongoing between the DEA and the SEC?

The BBC reports:

Secret documents seen by Panorama show both governments knew in 1990 that the Texan was a former bankrupt and his first bank was suspected of involvement with Latin American money-launderers.

In 1999, both the British and the Americans were aware of the facts surrounding a cheque for $3.1m (£2.05m) that Sir Allen paid to the Drug Enforcement Administration (DEA).

It was drug money originally paid in to Stanford International Bank by agents acting for a feared Mexican drug lord known as the ‘Lord of the Heavens’.

The cheque was proof that Stanford International Bank had been used to launder Mexican drug money – whether or not Sir Allen knew it at the time.

On 17 February of this year, the US Securities and Exchange Commission (SEC) accused Sir Allen of running a multi-billion dollar Ponzi fraud – when cash from new depositors is used to pay dividends to old depositors – civil charges he has denied.

Two and a half months after the SEC filing, the Texan has not yet faced criminal charges.

He was initially investigated by the SEC for running a possible Ponzi fraud in the summer of 2006, but by the winter of that year the inquiry was stopped.

Is this another version of the Whitey Bulger story in which the criminal turned informant continues to operate his own illicit activities? Whitey is now on the lam and his FBI protection, John J. Connolly, is cooling his heels in a federal penitentiary.

The intrigue of this situation is surreal, but the natural and instinctive question has to be: if Uncle Sam (DEA) provided cover for Allen Stanford in the pursuit of illicit drug related activities, did Uncle Sam also provide cover for Bernie Madoff as well?

Wednesday, 22 June 2011

National Political Committees Must Return Stanford Donations

Five Democratic and Republican national political committees must return more than $1.7 million in contributions received from indicted financier R. Allen Stanford to his court-appointed receiver, a federal judge ruled.

U.S. District Judge David Godbey in Dallas today awarded final judgment in favor of receiver Ralph Janvey, who is marshalling assets to repay investors allegedly swindled of more than $7 billion through what the government claims was a Stanford-directed Ponzi scheme.

“Courts adhere to the principle that equality is equity in dealing with the aftermath of an imploded Ponzi scheme,” Godbey wrote in a 61-page ruling. “In disgorging the Stanford defendants’ contributions, the political committees will endure no greater hardship than that suffered by other innocent victims of the Stanford defendants’ Ponzi scheme who must do the same.”

Godbey ordered the Democratic Senatorial Campaign Committee Inc. to return $1,037,347; the Democratic Congressional Campaign Committee Inc., $218,273; the National Republican Congressional Committee, $260,291; the National Republican Senatorial Committee, $90,960; and the Republican National Committee, $140,241. The sums represent the donations the groups got from Stanford plus prejudgment interest, according to Godbey’s order.

Stanford, 61, denies all wrongdoing in connection with civil and criminal allegations that that he defrauded investors through the sale of bogus certificates of deposit sold by his Antigua-based Stanford International Bank Ltd.

‘Important Victory’

“This ruling represents an important victory for the Stanford receivership and the thousands of victims of the Stanford Ponzi scheme,” Kevin Sadler, lead attorney for Janvey, said in an e-mail today. “Unfortunately, the political committees waged a costly campaign to thwart the receiver’s efforts to recover the monies they received from the Stanford Ponzi scheme. The receiver will be filing appropriate papers with the court to recover the hundreds of thousands of dollars in attorneys fees and expenses he was forced to incur in this case.”

Mark Shank, a lawyer for the Republican committees, didn’t immediately return voice or e-mail messages seeking comment on today’s ruling.

“We disagree with the court’s ruling and are weighing our options,’’ Jennifer Crider, a spokeswoman for the Democratic Congressional Campaign Committee, said in an e-mail.

The criminal case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv298, U.S. District Court, Northern District of Texas (Dallas).

Allen Stanford’s Criminal Trial Delayed to January While He’s in Treatment


Indicted financier R. Allen Stanford’s criminal trial was postponed to January from September so he can complete rehabilitation treatment for dependence on anti-anxiety drugs prescribed by prison doctors.

U.S. District Judge David Hittner in Houston said doctors treating Stanford said that it will take him as long as four more months to kick his dependence on anti-anxiety drugs prescribed after he was severely beaten by another inmate in September 2009.

Hittner found Stanford incompetent to assist in his own defense in January after three psychiatrists testified the former billionaire’s mental capacities were diminished from over-medication and lingering head injuries suffered in the prison fight.

Stanford was moved in February from a Houston jail to the federal medical center at the Butner, North Carolina, prison complex, on the expectation his rehabilitation would take as long as four months. Last month, Hittner scheduled the Stanford Group Co. founder for trial in September based on his expected return to Houston this month.

“However, the court now finds it has no alternative but to grant FMC’s request for an additional four months to continue treating Stanford,’’ Hittner said in a ruling handed down today. “Assuming FMC needs the entire four months to treat Stanford, the court now sets Stanford’s jury trial to commence January 2012.’’

Hittner said if Stanford recovers more quickly and returns to Houston sooner than expected, his trial may be moved up again.

Stanford Denies Wrongdoing
Stanford, 61, denies all wrongdoing in connection with civil and criminal allegations he defrauded investors of more than $7 billion through allegedly bogus certificates of deposit issued by Antigua-based Stanford International Bank Ltd.

Stanford has been incarcerated as a flight risk since his indictment and arrest in June 2009.

Ali Fazel, a lawyer for Stanford, declined to comment on today’s order, citing a ruling by Hittner barring lawyers from publicly discussing the case.

Laura Sweeney, a spokeswoman for the Justice Department, also declined to comment, citing the judge’s gag order.

The criminal case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv298, U.S. District Court, Northern District of Texas (Dallas).

Tuesday, 21 June 2011

SEC concludes Stanford is guilty

Securities News Network
Monday 20 June 2011

Sir Allen Stanford has not been convicted of any offence. Nor have any regulatory proceedings been concluded against him. Yet the USA's Securities and Exchange Commission has decided that he ran a Ponzi scheme and that "investors" are entitled to certain statutory protections.

A statement issued by the SEC on 15th June says " The Securities and Exchange Commission today concluded that certain individuals who invested money through the Stanford Group Company – a U.S. broker-dealer owned and used by Allen Stanford to perpetrate a massive Ponzi scheme – are entitled to the protections of the Securities Investor Protection Act of 1970 (SIPA)."

The commission does not, in fact, appear to have concluded any formal inquiry. Instead it appears to be relying on a report by a Court Appointed Receiver for the Stanford Group Company that there were a number of companies which “were operated in a highly interconnected fashion, with a core objective of selling” the CDs.

Among other things, the receiver also says that “[c]orporate separateness was not respected within the Stanford empire. ... Money was transferred from entity to entity as needed, irrespective of legitimate business need. Ultimately, all of the fund transfers supported the Ponzi scheme in one way or another, or benefited Allen Stanford personally.”

It is the finality of the wording that causes concern: "the" features strongly, juxtaposed with "Ponzi scheme."

The SEC does - almost - recognise that there has been no finding in any court of competent jurisdiction that there was in fact a Ponzi scheme: indeed, the best it can do is to refer to its early filings: "According to its 2009 complaint, the SEC alleged that Allen Stanford operated a Ponzi scheme in which certain investors were sold certificates of deposit (CDs) issued by Stanford International Bank Ltd. (SIBL) through the Stanford Group Company (SGC). SGC is a SIPC Member."

This is nothing more than an attempt to use its own earlier filings to bolster its current statements.The analysis upon which the SEC bases its current statements can be found (pdf) at

The fact remains that Stanford remains not guilty and not subject to any formal finding of impropriety within the regulatory regime. The SEC's actions and the wording it has adopted are tainting the jury pool for the eventual criminal trial, and producing a background which prosecutors will be able to use to great prejudicial effect.

Of course, if there was a ponzi scheme (and that remains uncertain although there are sufficient grounds for suspicion of some kind of impropriety), then victims should be able to use the full weight of the law to protect themselves against loss. But the other side of the coin is that Stanford is entitled to a clean run at a defence.

The SEC, by its choice of language, is seriously undermining that entitlement

Monday, 20 June 2011

Stanford Receiver Sues Libyan Fund for $55 Million Withdrawn, Lawyer Says

R. Allen Stanford’s court-appointed receiver sued the Libyan government wealth fund for $55 million he claims the state withdrew from Stanford’s alleged Ponzi scheme before it collapsed in early 2009, according to the receiver’s lawyer.

Ralph S. Janvey, Stanford’s receiver, also won a temporary freeze on some Libyan government bank accounts in the U.S. until a federal judge can determine if the money should be distributed to investors allegedly swindled of more than $7 billion, said Janvey’s lead attorney, Kevin M. Sadler.

“The payments made to the Libyan defendants were fraudulent transfers, using funds which Stanford obtained by fraud from investors who purchased Stanford’s phony CDs even as the Ponzi scheme was beginning to collapse,’’ Sadler said today by e-mail.

Janvey’s suit was filed under seal June 3 in U.S. District Court in Dallas, Sadler said. The lawsuit couldn’t be independently confirmed using the court’s electronic docket.

Stanford, 61, denies all allegations of wrongdoing. He previously said he met with Libyan sovereign-wealth fund officials shortly before the U.S. Securities and Exchange Commission seized his operations on suspicion of fraud in February 2009.

The Libyans withdrew $12 million of their Stanford investment immediately after this meeting, which occurred in Libya “just three weeks before the SEC filed suit,’’ Sadler said in today’s e-mail.

Order to Freeze
Janvey obtained a court order on June 6 freezing $55 million in Libyan assets in U.S. bank accounts, pending a December hearing before U.S. District Judge David Godbey, Sadler said. The judge oversees the SEC’s case against Stanford and several of his companies.

Stanford faces 14 criminal charges that he deceived investors about the safety and oversight of certificates of deposit sold by his Antigua-based Stanford International Bank Ltd. He is in a prison hospital unit in Butner, North Carolina, until he completes rehabilitation from a prescription-drug dependency he acquired in jail.

The former billionaire has been in custody as a flight risk since his indictment in June 2009. His attorneys have asked for a delay in his criminal trial, now scheduled for September in Houston federal court, until he is found competent to assist in his defense.

The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).

Compensating Stanford’s Investors

Source: NewYork Times

The Securities and Exchange Commission froze the assets of R. Allen Stanford’s financial empire almost two years ago. But authorities are still figuring out whether investors can get compensated for some of their losses

The S.E.C. is pushing for investors who bought more than $7.2 billion in allegedly bogus certificates of deposit from Mr. Stanford’s Antiguan bank to be treated as brokerage customers by the Securities Investor Protection Corporation. If that happens, clients could get at least some of their money back.

SIPC provides a measure of protection for customers when a broker becomes insolvent, paying up to $500,000 per customer that includes $250,000 in cash. The program, which is not intended to provide insurance against fraud, only covers the brokerage firm’s customers and not those who dealt with an affiliate, like an offshore bank, that is not qualified to participate in the program.

Mr. Stanford’s financial empire included a brokerage firm, called the Stanford Group Company, which promoted the C.D.’s to investors by promising above-market returns. The actual issuer of the C.D.’s, however, was his Antiguan bank, Stanford International Bank. The entity was not a broker-dealer and so it fell outside of the protections afforded by SIPC.

In a letter sent in August 2009 to the trustee appointed to gather assets for Mr. Stanford’s investors, SIPC denied that it was required to provide any coverage because the C.D.’s were bought from the offshore bank, even though the brokerage arm marketed them. The agency explained that the Stanford Group Company was merely an “introducing” broker that was not responsible for maintaining any securities on behalf of customers. As such, the agency was not responsible when the Antiguan bank collapsed and the C.D.’s became worthless.

The S.E.C. took a different position last week. In an analysis of the case , the S.E.C. told SIPC that it was putting form over substance by focusing solely on which of the various entities controlled by Mr. Stanford had issued the C.D.’s. Under the S.E.C.’s rationale, Mr. Stanford ignored those legal niceties and treated the various companies as one source of money for his alleged Ponzi scheme, taking money from each as if it were his personal piggy bank. “Credible evidence shows that Stanford structured the various entities in his financial empire,” according the S.E.C. “for the principal, if not sole, purpose of carrying out a single fraudulent Ponzi scheme.”

The S.E.C. asserted in its analysis that SIPC should cover investors. In effect, the agency said Mr. Stanford effectively stole from customers of the brokerage firm by selling worthless C.D.’s, much like the Ponzi scheme perpetrated by Bernard L. Madoff in which fictitious securities totaling $64 billion were credited to client accounts when it collapsed.

But the S.E.C. also makes it clear that any calculation of victim claims should not be based on the purported value of the C.D.’s reflected on the account statements provided by Stanford International Bank, but instead only the actual amount invested. Not surprisingly, this is the same position taken by the trustee appointed to liquidate Mr. Madoff’s firm, Irving H. Picard, and SIPC in dealing with investors in that Ponzi scheme.

The S.E.C. urged SIPC to initiate a liquidation proceeding like the one undertaken by Mr. Picard, including the appointment of a trustee to weigh claims from investors. This is more than just a request, however, because the S.E.C. has supervisory authority over SIPC. The last line of its analysis was a rather unsubtle hint to compensate investors:

“In a further exercise of its discretion, the Commission has authorized its staff to file in district court an application under Section 11(b) of [Securities Investor Protection Act] to compel SIPC to initiate a liquidation proceeding in the event SIPC refuses to do so.”

If SIPC does liquidate Mr. Stanford’s brokerage operation, not all investors may benefit, as some victims of Mr. Madoff are discovering.

Mr. Picard successfully argued in the federal bankruptcy court that those who withdrew more from their accounts with Mr. Madoff than they invested – the so-called “net winners” – are subject to clawback suits to repay their profits and have no claim for losses. The “net winners” issue was argued before the United States Court of Appeals for the Second Circuit in March, and a decision is likely to come in the near future.

It is not clear whether there were any “net winners” among Mr. Stanford’s investors. But there is a good possibility that some investors closed their accounts and took profits before the scheme collapsed. Any investors who profited on the C.D.’s from the Antiguan bank could face a similar situation to the “net winners” targeted by Mr. Picard.

I expect there to be similar clawback suits filed if SIPC does accede to the S.E.C.’s request. Given how contentious the Mr. Picard’s lawsuits against “net winners” have been, we can expect more of the same if SIPC liquidates Mr. Stanford’s brokerage firm.

The S.E.C.’s announcement had another salutary effect. Just a day before it issued its analysis, Senator David Vitter, Republican of Louisiana, placed a hold on the nominations of two commissioners to the S.E.C. until it announced its position on whether the investors were protected by SIPC.

The hold on the nominations has been removed, and everyone – except perhaps SIPC – is a bit happier. But when Mr. Stanford’s investors will receive some compensation for their losses is still unclear because a liquidation is only the start of the process, as the Madoff case shows.

What and who does SIPC cover?

I do not know how correct the statements here are, but I picked this information off a Spanish blog where someone has been putting questions to Elizabeth Murphy, (secretary of the SEC) and I have translated through Google...hence the broken English. That said, some of information here will probably be of interest. Again, I stress these are not my words and I do not guarantee the statements are correct, but if they are, it clearly states that SIPC will become a Preferential creditor with the receivers and this what I have feared all along.

1.Q. What decided the SEC on June 15?
A.The SEC, in exercising its full authority over the SIPC liquidation ordered start of the QMS.

2.Q. What is SGC?
A. The Stanford Group Company ("SGC") is a broker operating through 29 offices located in U.S. territory, with a single owner: R. Allen Stanford. The brokerage firm was principally engaged in the sale in the United States certificates of deposit ("CDs") issued by the Stanford International Bank Limited ("SIBL"). The Stanford Group Venezuela, Mexico, Peru, Ecuador, and so on. Stanford entities are different from the Casa de Bolsa (SGC) U.S., registered with the SEC and member of SIPC.

3. Q.What does it mean in practice under SIPA liquidation of the SGC?
A.It means that investors with brokerage accounts in the SGC, who bought CDs SIBL through the GSC are included under the umbrella SIPA.

4. Q.What is a brokerage account?
A.It is a brokerage account, through which a broker-dealer is buying or selling securities on behalf of the client. For SIPA coverage, according to the SEC's decision last June 15, it is essential that the potential claimant has opened and maintained a brokerage account at Pershing LLC or JP Morgan Clearing Corporation, through the QMS.

5. Q.What benefit investors receive coverage included under the SIPA?
A.Receive up to $ 500,000 per customer. Only recognized net investment (principal). Excludes interest.

6. Q.What should I do if I am eligible happy to receive this benefit?
A.Wait for instructions from the SEC and / or the SIPC. BEWARE unscrupulous lawyers who want to fish in troubled waters!

7. Q.What should I do if I am eligible to be included within the coverage SIPA?
A.Join Covisal to continue pressuring the US Government in all scenarios. Support Covisal in all its actions and contribute monthly with its operating expenses.

8. Q.How does the payment of this economic relief to the "Distribution Fund" of the Judicial Administration in the U.S.?
A.As I explained in October 2010, economic relief from the SIPC is only a loan against repayment guaranteed by the Heritage of the Receivership. For this reason when the SIPC pays the economic relief to the victims, clients of the QMS, the SIPC will automatically become a preferential creditor of the "Distribution Fund" of the Receivership.

Sunday, 19 June 2011

Some (But Not All) Ponzi Scheme Investors Entitled to Protections of SIPA

Source: Forbes (Timothy Spangler)

This week, the Securities and Exchange Commission (SEC) held that certain individuals who invested money through the Stanford Group Company, the US broker-dealer that was owned and used by Allen Stanford in connection with his Ponzi scheme, will be entitled to the protections of the Securities Investor Protection Act of 1970 (SIPA). The SEC alleged that Stanford operated a Ponzi scheme in which certain investors were sold certificates of deposit (CDs) issued by Stanford International Bank Ltd. (SIBL) through the Stanford Group Company (SGC).

The SEC exercised its discretionary authority under SIPA, and requested that the Securities Investor Protection Corporation (SIPC) initiate a court proceeding under SIPA to liquidate the broker-dealer. SGC is a SIPC Member.

The SEC decided that investors with brokerage accounts at SGC, who purchased the CDs through the broker-dealer, qualify for “customer” status under SIPA. The report of the court appointed-receiver for SGC had noted that corporate separateness was not respected by Stanford, and that many of his companies “were operated in a highly interconnected fashion, with a core objective of selling” the CDs.

A SIPA liquidation proceeding will allow investors with accounts at SGC to file claims with a trustee selected by SIPC. The trustee would decide whether the investors have “customer” claims that are protected by the statute. An investor who disagreed with the trustee’s determination could seek court review.

Certain Stanford Investors Get Some SEC Support

It looks like at least some of the investors who were screwed by Stanford may get to recover some assets. This is not meant to be a catch-all recovery nor for all investors, at least not the way we have read into a release from the SEC today. The news release from the Securities and Exchange Commission concluded that “certain individuals who invested money through the Stanford Group Company – a U.S. broker-dealer owned and used by Allen Stanford to perpetrate a massive Ponzi scheme – are entitled to the protections of the Securities Investor Protection Act of 1970 (SIPA).”

Before thinking this encompasses all assets for all customers, that might not be the case. The SEC went on to note, “on the specific facts of this case, investors with brokerage accounts at SGC who purchased the CDs through the broker-dealer qualify for protected “customer” status under SIPA.” This covers Stanford Group Company that was owned by Allen Stanford “to perpetrate a massive Ponzi scheme.”

Today’s news out of the SEC noted that these investors were sold certificates of deposit, or CDs, which were issued by Stanford International Bank Ltd. through the Stanford Group Company, and Stanford Group Company is a SIPC Member.

The SEC determined that customers’ claims should be based on their net investment in the fraudulent CDs used to carry out the Ponzi scheme. A SIPA liquidation proceeding would allow investors with accounts at SGC to file claims with a trustee selected by SIPC. Unfortunately for investors, it appears to be up to the trustee to decide whether investors have customer claims protected by a statute. Those who disagree with the trustee’s determination could seek a court review.

Lastly, the SEC noted, “The Commission has authorized its staff to file an action in federal district court under SIPA to compel SIPC to initiate a liquidation proceeding in the event SIPC does not do so.”


What this translates to certainly does not sound immediately like a full restitution. The analysis in the formal letter from the SEC to SIPC noted that the SEC “is making a formal request to the SIPC Board of Directors to take the necessary steps to institute a SIPA liquidation proceeding of SGC. Should the Board refuse to take such action, the Commission has authorized its Division of Enforcement to bring an action in district court against SIPC to compel the institution of a proceeding to liquidate SGC under SIPA.”

A separate release from SIPC noted, “The Securities Investor Protection Corporation (“SIPC”), which maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms, said that it will analyze the referral provided today by the U.S. Securities and Exchange Commission (“SEC”) with respect to the Stanford Group Company, operated by Robert Allen Stanford.”

Unfortunately, this is one of those situations that caught many investors off balance and has killed more than a few fortunes. Any and all Stanford investors will want to look far deeper than the amount of coverage we can give to this tragic topic.

Friday, 17 June 2011

Stanford Court Receiver Seeks $55 Million from Libya, All in US Banks

Published: Friday, 17 Jun 2011 | 2:19 PM By: Scott Cohn

Senior Correspondent, CNBC

The court-appointed receiver who is recovering assets for investors in Allen Stanford's alleged Ponzi scheme is demanding that Libya's sovereign wealth funds return millions of dollars they somehow managed to withdraw just before the firm blew up in 2009, CNBC has learned.

And all of the money is on deposit in a U.S. bank.

In a complaint still under seal in U.S. District Court in Dallas, attorney Ralph Janvey demands the return of nearly $55 million in alleged "fraudulent transfers" to the Libyans. The money includes $12 million in funds Libya managed to withdraw just after Allen Stanford made a personal trip to meet with members of the Qaddafi regime in early 2009.

Three weeks later, the Securities and Exchange Commission filed suit against Stanford and his companies, shutting down the alleged scam. A spokesman for Janvey tells CNBC all of the money is in a U.S. bank, but he could not disclose which bank because the order is still under seal.

All of the funds have been frozen by the court, pending a hearing in December.

SEC says Stanford victims should be paid

Published: June 16 2011 01:04 | Last updated: June 16 2011 01:04

Victims of the alleged $7bn Stanford Ponzi scheme should receive compensation from a federal fund, the Securities and Exchange Commission has recommended.

Wednesday’s decision came a day after David Vitter, a Republican senator from Louisiana, threatened to block the confirmation of SEC commissioners until it decided whether his constituents should be compensated.


In depth: Stanford scandal - Jun-19SEC probes Merrill CDO sale - Jun-15Goldman banker loses court bid - Jun-11Regulator rebuffs plea on SAC Capital probes - Jun-11Investors target BDO with lawsuit - May-27Thousands of investors lost money in the 2009 collapse of Stanford Financial Group. Texan billionaire Allen Stanford is awaiting trial on charges of perpetrating a Ponzi scheme, which he denies. The Securities Investor Protection Corporation, which administers a guarantee fund for collapsed brokers, must now consider the SEC recommendation. It had previously decided the case did not merit compensation.

Compensation from the SIPC, which would be limited to only some of the US investors, would be limited to $500,000 per customer and $250,000 in cash, and the calculation would be based on the money invested rather than any later notional value.

“There will likely be litigation, and no one will be getting a cheque in the mail tomorrow, but still a huge step and a sigh of relief for many,” said Mr Vitter. The SEC’s analysis quoted an argument by counsel in the Madoff Ponzi fraud, which was taken up by the SIPC, as relevant: “This is a Ponzi scheme. It’s a zero-sum game. The customer fund is the money that went in. We can’t talk about anything else. Can’t talk about profits. Can’t talk about stocks.”

Mr Vitter said that he would lift his objection to the confirmation of Daniel Gallagher and incumbent commissioner Luis Aguilar as a result of the recommendation.

The SIPC said that the SEC’s report was “the first time the SEC has informed SIPC of the possibility that the Stanford matter is appropriate for a proceeding under the Securities Investor Protection Act”.

“SIPC’s board will review the referral, and analyse the SEC’s underlying documentation as quickly as possible,” said Stephen Harbeck, head of the SIPC.

The SEC declined to comment on whether political pressure had contributed to the decision. One person familiar with the situation said the length of the commission’s analysis suggested it had not been prepared overnight.

In the analysis, the SEC rejected the previous argument from SIPC that customers were not covered because of the way their certificates of deposit were held. “[That] would elevate form over substance by honouring a corporate structure designed by Stanford in order to perpetrate an egregious fraud,” the SEC said.

Press Release from the Office of Gaytri Kachroo

Here is the latest information from the office of Gaytri Kachroo with regard to the news concerning SIPC. It is worth remembering that Kachroo Legal Services are the only attorneys that have SIPC experience – of any of the attorneys out there – because of their vast experience in the Madoff case.

I would urge all victims to make contact with Kachroo Legal Services to establish whether or not you may be eligible for coverage under this latest proposal Ms Kachroo and her staff will be able to help you and answer your questions. WE have a new fight on our hands now because the remaining victims who are not eligible under this new proposal now have to make sure that either SIPC is restricted to only being allowed access to SGC assets to recover advance (and there are no assets in SGC) or, if SIPC are determined to go after everything including the land in Antigua, money in Switzerland and the UK (and from what I am hearing this is going to be their strategy), then each and every victim has to be included under SIPC.

My own opinion is that the American Committee will be giving themselves a pat on the back and congratulating themselves on a job well done. From my own standpoint as the proposal stands at the moment they have sold most of us down the river and it will cost the majority of victims dearly. The next step is pushing for coverage for all victims and with this in mind the first thing you need to determine is if you are going to be eligible for SIPC. We then have to start protecting all of our assets except SGC and making sure that SIPC does not take what little we have.

As with our registration of interest against the SEC, we need the help and support of Gaytri to make sure SIPC either includes all victims in this latest proposal or they are restricted to only being able to claim against SGC. This is going to be a tough battle to have us all included, and we all need to be united in this.

Regards, Kate.

Here is a part-copy of the latest from KLS:

Dear KLS Stanford Client:

The SEC determination on the SIPC issue was released yesterday. SIPC coverage was determined to apply to all SGC customers!!!

We believe that the SVC has in large part played a key role in this positive outcome and we are very pleased that many of you will have full or partial recovery of the amounts you have deposited (less any withdrawals of income or principal from those deposits). Please note we sent our letter to the Chairman this week in support of SIPC coverage. We have also made our support known through several meetings in the past few weeks to those in positions of power over this outcome. Senator Vitter's ultimatum in the 11th hour to hold up Commission nominations until this determination was successful obviously helped to push this determination through! He has now dropped this roadblock. As you may know, I met with Sen. Vitter's office two weeks ago.

Eligibility: Many of you are up in the air about eligibility and the process given your connection through advisors with SGC, or STC. We will determine and push for your eligibility, as well as complete the claim forms for you so that you receive appropriate payment in a timely manner - for those who have signed up for Stanford Further Actions (SFA) and for those who continue to do so. Please note that SIPC will recover these monies from the liquidation in Antigua and Texas. KLS will play a key role in the recovery of assets in those jurisdictions and will keep you informed as part of the SFA package for which you have signed up.

All International Victims need to read this and comment!!

I have attached a link that all International victims should go to and add a comment. You will see that there are comments from some victims lucky enough to be eligible for SIPC.

This site is being read by Congressman Culbertson and we can use the comment space to make him aware of what the cost of SIPC will be to all the International Victims. We now have to start our own campaign to make sure the coverage of SIPC is extended to include each and every one of us because WE are going to be the ones repaying SIPC for every investor they give money to. I have already heard rumours that SIPC are looking at the assets in Antigua, Switzerland and the UK. This is our money and it is all we have (Janvey has next to nothing). If SIPC are targeting ALL the assets, then they have to pay ALL of the victims.

WE have a new battle on our hands and we need to start making a noise and making sure that not just Congressman Culbertson but all the newspapers are told the true cost of this proposal to the majority of victims.

Here is the link, please go it it and start posting comments:

Thursday, 16 June 2011

Stanford International Bank liquidators seek to unfreeze funds

The newly appointed liquidators of Stanford International Bank (SIB), Marcus Wide and Hugh Dickson, announced yesterday that they hope to reach a compromise with various governments, including the US Department of Justice, to unfreeze hundreds of millions of dollars in assets in an effort to recover the billions lost by the more than 27,000 creditors of SIB.

“The estate has virtually no funds, but is saddled with obligations that exceed money on hand. Convincing government officials around the world to unfreeze the funds is a top priority,” a press release said.

“We hope to meet with the Department of Justice to understand the reasoning behind their approach and see if a compromise can be reached which will allow the estate to go forward with its own funds, and therefore maximise returns to creditors,” Dickson said.

“To have access to the bank’s own funds presently frozen by the criminal forfeiture proceedings would generate a considerable value to the estate in terms of allowing additional recovery and asset realisations to maximise recoveries,” he added.

The duo, the release said, have contacted officials from the Serious Fraud Office in the United Kingdom, the Prosecutor and Bankruptcy Trustee in Switzerland, and officers of the Attorney General of the Province of Ontario, Canada in recent weeks.

“Our objective has been to determine in the quickest time possible how the financial interests of the account holders, CD holders, and general creditors of the bank are best served,” Wide said.

“We have also been in contact with the US Department of Justice, the US Receiver, and the Creditors’ Committee for the US Receivership, with a view towards meeting with them once we have a better understanding of the issues between them and the SIB liquidation in Antigua,” the communiqué continued.

Dickson and Wide, who by order of the High Court last month replaced Nigel Hamilton-Smith and Peter Wastell as liquidators, also said they are considering the sale of real estate holdings in Antigua and are in the process of forming an advisory creditors committee, the release noted.

“These holdings are extensive and it is likely their value can be greatly enhanced if they are brought to market in an orderly manner over a period of time,” Dickson said.

Wednesday, 15 June 2011

SEC Concludes That Certain Stanford Ponzi Scheme Investors Are Entitled to Protections of SIPA

Washington, D.C., June 15, 2011 – The Securities and Exchange Commission today concluded that certain individuals who invested money through the Stanford Group Company – a U.S. broker-dealer owned and used by Allen Stanford to perpetrate a massive Ponzi scheme – are entitled to the protections of the Securities Investor Protection Act of 1970 (SIPA).

In exercising its discretionary authority under SIPA and based on the totality of the facts and circumstances of the case, the Commission asked the Securities Investor Protection Corporation (SIPC) to initiate a court proceeding under SIPA to liquidate the broker-dealer.

According to its 2009 complaint, the SEC alleged that Allen Stanford operated a Ponzi scheme in which certain investors were sold certificates of deposit (CDs) issued by Stanford International Bank Ltd. (SIBL) through the Stanford Group Company (SGC). SGC is a SIPC Member.

In an analysis provided to SIPC, the SEC explains that, on the specific facts of this case, investors with brokerage accounts at SGC who purchased the CDs through the broker-dealer qualify for protected “customer” status under SIPA.

In reaching its determination, the SEC cited the conclusions in the report of the court appointed-receiver for SGC, who noted that the many companies controlled and directly or indirectly owned by Stanford “were operated in a highly interconnected fashion, with a core objective of selling” the CDs.

Among other things, the receiver also noted that “[c]orporate separateness was not respected within the Stanford empire. ... Money was transferred from entity to entity as needed, irrespective of legitimate business need. Ultimately, all of the fund transfers supported the Ponzi scheme in one way or another, or benefitted Allen Stanford personally.”

The Commission further determined that, in light of all of the facts and circumstances in this case, the customers’ claims should be based on their net investment in the fraudulent CDs used to carry out the Ponzi scheme.

A SIPA liquidation proceeding would allow investors with accounts at SGC to file claims with a trustee selected by SIPC. The trustee would decide whether the investors have “customer” claims that are protected by the statute. An investor who disagreed with the trustee’s determination could seek court review.

The Commission has authorized its staff to file an action in federal district court under SIPA to compel SIPC to initiate a liquidation proceeding in the event SIPC does not do so.

Vitter Comments on SEC Response to Alleged Stanford Ponzi Scheme

Claims Agency Misled Committee on Timeline of Investigation

(Washington, D.C.) -- U.S. Sen. David Vitter today made the following comments after the U.S. Senate Banking Committee hearing on a Securities and Exchange Commission Inspector General’s report into the SEC’s handling of the alleged Stanford Ponzi scheme. (Click here for video of some of Vitter’s comments at the hearing.)

“I unfortunately came away from today’s hearing even more convinced that the SEC has been purposely misleading this committee about the agency’s mishandling of the Stanford case,” said Vitter. “The Inspector General’s latest report clearly showed that the SEC’s examination office had been looking into the Stanford Group since 1997 and were concerned it was a ‘possible Ponzi scheme.’ Yet, at a Senate Banking Committee hearing last August, SEC officials claimed the investigations only began in 2004.

“As if the fraud Stanford committed wasn’t bad enough, the agency’s attempts to cover up its negligence pour salt on the wound of Stanford’s victims, who have already lost much of their life savings.

“There are critical discrepancies between the IG report and the testimony we’ve heard from SEC officials, and Ms. Romero’s answers to the Senate Banking Committee raise more questions about her credibility and those who helped her prepare her testimony. I’m going to continue demanding answers and working with the Senate Banking Committee to get the answers Stanford’s victims deserve because it’s not yet clear how high up the chain the deception goes at the SEC.”

Earlier this month, Vitter wrote to SEC Chairwoman Mary Schapiro requesting a meeting to discuss the concerns raised by the IG report and whether the SEC had in fact implemented the changes recommended in the report.

Senator David Vitter to Block SEC Nominees Until Stanford Victims Get Answers

(Washington, D.C.) – U.S. Sen. David Vitter today announced that he will block the nominations of two Securities and Exchange Commission members until the SEC responds to a request by victims of the alleged Stanford Group Co. Ponzi scheme who are seeking to receive Securities Investor Protection Corporation coverage for their losses.

"Unfortunately, the SEC has not yet given the Stanford victims an answer despite my repeated conversations with Chairwoman Mary Schapiro," said Vitter. "Many of these folks in Louisiana and along the Gulf region lost their life savings, and they at least deserve a direct answer on their request for coverage. After months of delay the commission has now met a number of times to consider SIPC coverage for Stanford's victims. It would be salt in the wound of these victims for Congress to force those discussions to start over by approving new commissioners.

"We've known for some time that the SEC waited far too long to take action against Allen Stanford, and now they're dragging their feet in responding to the victims. I will continue to hold them accountable – including holding these nominations – until these fraud victims get an up-or-down answer from the SEC on SIPC so they can move forward in the process, and if necessary, file a judicial appeal."

At a U.S. Senate Banking Committee hearing last year, Vitter raised concerns about the SEC's misleading statements about its handling of the Stanford case. An Inspector General's report showed the SEC's examination office had been looking into the Stanford Group since 1997 and were concerned it was a "possible Ponzi scheme," but at a previous banking committee hearing, SEC officials claimed the investigations only began in 2004.

The SEC has five commissioners who are appointed by the President with the advice and consent of the Senate. Mr. Daniel M. Gallagher (a partner at the law firm Wilmer Cutler Pickering Hale & Dorr LLP) has been nominated to fill the seat being vacated by Commissioner Kathleen Casey and the Honorable Luis Aguilar is being re-nominated because the term for which he is now serving expires June 5, 2010. Vitter is concerned that because the Commission has claimed to be close to a ruling, bringing a new commissioner into the mix would unnecessarily slow down the pace.

Once the SEC issues a recommendation on the coverage of claims of Stanford's alleged victims, Vitter would release his hold on SEC nominees Luis Aguilar and Daniel Gallagher, his office said.

Some of Vitter's comments at the hearing:

"I unfortunately came away from today's hearing even more convinced that the SEC has been purposely misleading this committee about the agency's mishandling of the Stanford case," said Vitter. "The Inspector General's latest report clearly showed that the SEC's examination office had been looking into the Stanford Group since 1997 and were concerned it was a ''possible Ponzi scheme.'' Yet, at a Senate Banking Committee hearing last August, SEC officials claimed the investigations only began in 2004.

"As if the fraud Stanford committed wasn't bad enough, the agency's attempts to cover up its negligence pour salt on the wound of Stanford's victims, who have already lost much of their life savings.

"There are critical discrepancies between the IG report and the testimony we've heard from SEC officials, and Ms. Romero's answers to the Senate Banking Committee raise more questions about her credibility and those who helped her prepare her testimony. I'm going to continue demanding answers and working with the Senate Banking Committee to get the answers Stanford's victims deserve because it's not yet clear how high up the chain the deception goes at the SEC."


Boustany Seeks Justice for Stanford Victims

Washington, DC – U.S. Congressman Charles W. Boustany, Jr., MD (R-Southwest Louisiana), a leading voice in Congress for the victims of the Stanford Ponzi schemes, today praised his Senate colleague for pledging to stop the nominations to the Securities and Exchange Commission (SEC). U.S. Senator David Vitter announced he will block the nominations of Daniel M. Gallagher and Luis Aguilar to the SEC until the commission assists victims of the Stanford schemes with Securities Investor Protection Corporation coverage.

"We must continue to fight the Administration for the answers they are unwilling to provide," Boustany said. "These nominees should be withheld until the SEC answers the questions I've asked on behalf of the victims of this scheme. I am determined, along with Senator Vitter, to help Stanford victims gain financial relief and will continue to push for remedies through the SEC and in Congress."

In April, Congressman Boustany demanded answers from the SEC on their efforts to assist Stanford victims. The SEC response defended their two-year investigation but provided no further details.

Congressman Boustany also joined Representative Bill Pascrell, Jr. (D-NJ) to introduce the Ponzi Scheme Victim's Tax Relief Act of 2011. The bill expands the net operating loss carryback period for investors in a Ponzi-type scheme from five to 10 years. Victims who lost money in a Ponzi scheme can recoup the losses by declaring them as net operating losses during previous tax years and collecting refunds from those tax years.

Paul Coussan
Press Secretary
Rep. Charles Boustany, Jr. MD (LA-07)
1431 Longworth House Office Building
Washington, DC 20515
(337) 288-1665

Tuesday, 7 June 2011

HSBC Agrees to Pay $62.5 Million to Settle U.S. Class-Action Madoff Suit

The following article raises the question are HSBC not also liable for acting as custodian for Allen Stanford?

HSBC Holdings Plc (HSBA), Europe’s biggest bank, agreed to pay $62.5 million to settle a group lawsuit in New York, filed by investors in a fund that lost money in Bernard Madoff’s fraud while the bank acted as custodian.

The accord, which needs court approval, applies to a class- action case against several HSBC units and other defendants by investors in the Ireland-based Thema International Fund Plc, whose assets were invested with Bernard L. Madoff Securities LLC, HSBC said in a statement today.

The settlement “shall in no way be construed” as an admission of fault, HSBC said in the statement. The London-based bank, which faces other Madoff-related lawsuits in Germany, Luxembourg and other countries, has “good defenses” against them, it said.

Thema Fund, a so-called Madoff feeder fund, was controlled by Bank Medici AG, according to a statement by the fund’s law firm, Chapin Fitzgerald Sullivan & Bottini LLP. Bank Medici with its founder Sonja Kohn is part of a $59 billion suit by the trustee liquidating Madoff’s firm.

HSBC units acted as custodian for Thema and other funds that funneled money to Madoff. Irving Picard, the trustee liquidating New York-based Bernard L. Madoff Investment Securities LLC, in December sued HSBC and a dozen feeder funds for $9 billion in U.S. Bankruptcy Court in Manhattan, saying they should have known of the fraud.

HSBC Losses
HSBC didn’t know of the fraud and lost $1 billion of its own money investing in funds that in turn put money with Madoff, the bank said last month in court papers seeking dismissal of Picard’s lawsuit.

The bank was warned twice by auditors that entrusting as much as $8 billion in client funds to Madoff opened it up to “fraud and operational risks,” according to KPMG LLP reports obtained in March by Bloomberg News. The investors claim HSBC failed to act on the warnings.

According to HSBC’s May filing, Picard, who sued HSBC saying he was doing so on behalf of Madoff investors, is competing with the feeder funds and investors that have sued HSBC, and intends to claim any money they recover from the U.K. bank to give it to other investors.

“He is attempting to steal their claims, along with the funds’ claims, and planning to provide the fruits of any recoveries to other parties,” on the principle of “robbing Peter to pay Paul,” HSBC said as it asked a judge to dismiss Picard’s suit.

Amanda Remus, a Picard spokeswoman, declined at the time to comment.

Alpha Suit
On May 27, Alpha Prime Fund Ltd. and Senator Fund SPC, two funds sued along with HSBC by the Madoff firm’s trustee, filed so-called cross claims against HSBC to try to recoup “hundreds of millions of dollars” in losses they incurred in the fraud.

HSBC in December was sued by a group of 650 mainly private German investors in Luxembourg seeking compensation for losses they suffered through Herald (Lux) US Absolute Return Fund, which placed assets with Madoff. That suit seeks about 25 million euros ($36.6 million) in damages.

Thema and another fund, AA (Alternative Advantage) Plc, sued HSBC in January 2009 in Dublin’s High Court.

HSBC is facing about 50 investor complaints in Ireland for allegedly failing in its duties as custodian for Thema, a European-Union regulated fund, and AA (Alternative Advantage) Plc. Both funds suspended redemptions after Madoff’s fraud was uncovered. Custodians are responsible for oversight of funds, and manage deposits and payments to investors.

Dublin Court
A court in Dublin in January ordered HSBC to disclose a report on the status of the Thema fund without ruling on whether HSBC had made the necessary data available. Almost all of the funds invested in Thema “are currently lost, apparently as a result of the fallout from the collapse of the Madoff empire,” Judge Frank Clarke said in the Jan. 10 order in a case filed by French investor Aforge Finance SAS, which lost about 54 million euros in Thema.

HSBC’s Luxembourg unit was also custodian for the Herald (Lux) fund, which had assets of $225.7 million as of Oct. 31, 2008, according to Bloomberg data. The fund was forced to dissolve because of Madoff-related losses.

The Luxembourg-based liquidators of the Herald Lux fund are suing HSBC for the return of lost assets. Luxembourg’s financial market regulator in November 2009 ordered HSBC Securities Services in Luxembourg to review its internal rules related to its role as custodian bank of local mutual funds.

Luxembourg Liquidators
In Luxembourg, the liquidators may be the only possibility for Herald (Lux) investors to recoup some of their lost money after a March 4 ruling by a commercial court that liquidators alone can recover capital assets.

Documents from Madoff’s company show the value of HSBC- serviced funds as of Nov. 30, 2008, was about $8.4 billion, including fake profit from Madoff’s Ponzi scheme, according to HSBC’s statement. The funds’ actual transfers to Madoff’s firm minus their actual withdrawals during the period HSBC acted as custodian, totaled about $4.3 billion, it said.

The settlement provides for a $10 million litigation fund that will allow investors to try to recover money from defendants that haven’t settled, said Thema Fund’s law firm in the statement.

Monday, 6 June 2011

Stanford's receiver sues him for $1.8 billion from CD loans

A court-appointed receiver filed suit Friday against jailed financier R. Allen Stanford, asking return of $1.8 billion loaned to him since 1999.

The lawsuit filed in North Texas U.S. District Court claims that across the years, Stanford rarely earned any income outside what he was loaned from Stanford International Bank Ltd.’s certificate of deposit sales. He also never repaid the money, it says.

Stanford was chief executive officer of Stanford Financial Group and its affiliates until early 2009, when the international financial empire came crashing down under the weight of a U.S. Securities and Exchange Commission investigation.

He, four Stanford executives and an Antiguan bank regulator were indicted on multiple charges that they ran or participated in a $7.2 billion Ponzi scheme on CD investors.

The lawsuit says the investors numbers 50,000 in 100 countries. Scores of Mississippians were among them and lost their retirement funds and life savings.

Stanford, who is in jail, is set to go on trial Sept. 12 in Houston, Texas. The others are expected to be tried afterward.

They all pleaded not guilty, except former COO James M. Davis, who pleaded guilty later in 2009 and will testify against them.

The new lawsuit insists that at least since 1999, Stanford’s financial empire was insolvent. It also insists that each payment of CD proceeds to him was “made with actual intent to hinder, delay and defraud” its creditors.

Ralph Janvey, the receiver, said he’s still seeking records from Antigua and Switzerland, where a “secret” account disbursed money to Stanford.

He also says that at the time SIB was placed into receivership in Februrary 2009, the bank was insolvent by more than $6 billion.

“R. Allen Stanford was either unable to repay principal or interest on the loans or never intended to do so,” the lawsuit states.

Treasures of alleged Ponzi schemer Stanford auctioned

While Texas financier Allen Stanford awaits trial on charges of running a $7 billion Ponzi scheme, hordes of buyers waited on Saturday at a sweltering warehouse for an auction of his possessions.

People lined up around the northeast Houston warehouse for a chance to bid on items like a $55,000 Baccarat crystal eagle -- a symbol prominent in Stanford's company logo -- and an arsenal of guns and rifles, including 30 Glock semi-automatic pistols still in their original packaging.

"I got pretty excited over the wine," said Eric Worstell, one of three brothers who make up the third generation of auctioneers in the 57-year-old Seth Worstell Auction Company which won a bid to liquidate Stanford's property.

More than 1,000 bottles of wine, champagne and other spirits were part of the treasure trove of items on the auction block that included art, antiques, silver, crystal, and china, much of which appeared unused.

Worstell said the company expected to collect at least $250,000 in the six-hour auction, which included a Chevrolet Suburban and a Ford Taurus. After the auction house gets its cut, the balance will go to a court-appointed receiver.

Stanford was arrested in June 2009 and charged with mail and wire fraud in connection with a $7 billion scheme linked to certificates of deposit issued by his Antigua-based banking company.

Authorities have said the one-time billionaire used proceeds in part to fund other ventures and a lavish lifestyle that included several yachts and private jets, and homes around the world, most of which have been liquidated by the receiver.

Stanford, 61, has denied any wrongdoing and remains incarcerated without bail in a federal detention facility.

Artwork at the auction house varied widely in value, from a bronze sculpture to posters with motivational messages about pride and attitude.

A pallet of 34 laptop bags were heaped on a table across from marble-based lamps, Chinese dragons and two-foot-tall cut-glass vases.

Coffee mugs with the company logo were boxed up near five tables of embossed leather books, including a 134-volume set of Civil War records, medical and legal texts, and novels by William Faulkner and Jules Verne.

The gun collection appeared to be a big draw for many who paid the $100 registration fee, including engineer Isaac Fox.

"I've never been to an auction before, so I was kind of curious," he said. "This one has a little notoriety about it."

Fox's friend, Brent Aronson, was also interested in the guns, but was eyeing the piles of computer equipment -- much of it still in the box -- and a chair for his wife.

Trina Fowlkes, who works in the financial industry, said she showed up mostly for the spectacle, but was not greatly impressed.

"He supposedly had so many fabulous things, but this is mostly office furniture," Fowlkes said. "If we don't pass out from the heat, we'll stick around."

An assortment of burled and carved wood antique furniture stood side-by-side with office cubicle components in the 20,000-square-foot warehouse where industrial fans provided the only relief from temperatures in the mid-90s.

IT coordinator Steve Shapiro said he came out to look for a bargain to add to his crystal collection, but the Stanford connection offered no extra cachet.

"I'm certainly not paying any more than its actual value just because it was his," Shapiro said. "If it had belonged to Jackie Kennedy Onassis maybe."

Saturday, 4 June 2011

The SEC and Stanford

A Securities and Exchange Commission worker gave investors false and misleading information about an alleged Ponzi scheme that could have hindered investigation of a fraud in which he also was a victim, the agency’s watchdog said.

The employee, based at SEC headquarters in Washington, shared non-public information with several investors during the SEC’s investigation and litigation of the case, SEC Inspector General H. David Kotz said in his semi-annual report to Congress released today. The report didn’t identify either the SEC employee or the firm accused of conducting the fraud.

Kotz opened his probe in February after a senior official said the employee had contacted fellow investors and told them that the company was legitimate and that investors “would be receiving considerable sums of money,” according to the report. Some or all of the investors knew the man worked at the SEC and believed he had first-hand knowledge of the investigation, according to the report.

“His conduct not only confused certain investors and gave them a false sense of hope, but it also had the potential to adversely affect an on-going enforcement investigation,” Kotz said in the report. The employee was placed on administrative leave, and Kotz referred the matter for disciplinary action “up to and including dismissal,” according to the report.

The SEC sued the firm on Oct. 6 and won a judgment on Feb. 14, according to the report. Imperia Invest, a Web-based entity with a fictitious Bahamian address, was ordered to pay more than $15 million in a default judgment on Feb. 14 after failing to respond to the SEC’s lawsuit, according to court documents.


Elsewhere in the report, Kotz summarized the status of other on-going investigations, including one involving former SEC general counsel David M. Becker. Kotz said his office has searched 1.7 million e-mails and is beginning witness interviews to determine whether Becker violated conflict-of-interest rules.

Becker, who re-joined the SEC in 2009 after the Bernard Madoff Ponzi scheme unraveled, has been sued by the trustee liquidating the jailed money manager’s business over profits he inherited from his parents’ Madoff account. Becker helped set SEC policy stemming from the case before leaving in February.

The inspector general’s staff has met with congressional investigators on the Becker probe and plans to issue findings before Sept. 30, according to the report.


The report also details new cases of agency employees and contractors viewing pornography on SEC computers, following reports last year that 30 workers had improperly used agency computers for that purpose in the preceding five years.

An accountant based at the agency’s Washington headquarters “successfully accessed numerous sexually explicit photographs from his SEC computer, including graphic depictions of sexual acts” -- often during normal work hours, according to the report. Managers recommended that he be fired, the report said.

Two Washington-based attorneys were also accused of accessing pornography at work. One of them resigned, according to the report, and management recommended that the other -- who used an SEC computer to access “inappropriate images of partially or fully nude women” -- be fired.

In another case, a contractor was fired and escorted from the building after admitting he had been viewing pornography on his SEC computer for at least a year, even as he’d received computer training and notices that such behaviour was banned.

SEC Chairman Mary Schapiro said last year that she was “angry and frustrated that a very few individuals have demonstrated that they are willing to place the credibility of the SEC at risk.”

John Nester, an SEC spokesman, declined to comment on the inspector general’s investigations.

The Stanford Timeline

1985 Robert Allen Stanford starts Guardian International Bank on the Caribbean island of Montserrat with $6 million in seed money from an unknown source.

Mid-1990s Stanford is asked by government officials in Montserrat to leave the country. He relocates the bank to Antigua and names it Stanford International Bank.

1996 Jay Comeaux, Alvaro Trullenque and their investment team leave Merrill Lynch with the Stanford account to start Stanford Group Company in City Plaza.

1998 Stanford begins selling its disputed certificates of deposit.

1999 Stanford Group Company receives a negative annual supervisory review in which the Securities and Exchange Commission finds that some advisers' actions are inconsistent with the investors' intentions.

1999 The Justice Department tells the SEC to stand down in an investigation on Stanford.

2001 The first known complaint regarding Stanford's referral fees is filed with the SEC.

2002 The first known letter from a Stanford insider in Antigua is sent to the SEC detailing the alleged Ponzi scheme.

2003 A complaint is filed with the National Association of Securities Dealers in regards to misleading materials for the CDs.

2006 Regulators require that Stanford modify its CD Disclosure Statement.

2007 NASD fines Stanford $20,000 for failing to "establish and maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws." Later, the Financial Industry Regulatory Agency fines Stanford $10,000 for distributing literature that "failed to disclose a conflict of interest" between advisers and the bank and also for a failure to present "fair and balanced treatment of the risks and potential benefits of a CD investment."

2008 FINRA fines the Stanford Group Company $10,000 for a failure to properly report customer transactions.

2008 FINRA fines Stanford Group $30,000 for a failure to disclose adviser compensation in published research reports.

2008 Alex Dalmady's Duck Tales blog details Stanford's possible Ponzi scheme.

February 2009 Federal regulators storm the Houston offices of Stanford Financial Group and issue a freeze on all of the companies and their associated assets.

March 2009 Ten Louisiana investors who lost millions sue their financial advisers, arguing that the men misrepresented the investment products they sold.

June 2009 Stanford and six others are indicted and jailed on charges the international banking empire was really just a $7 billion Ponzi scheme built on lies, bluster and bribery. If convicted of all charges in the 21-count indictment, Stanford could face as much as 250 years in prison.

July 2009 Stanford and his co-defendants ask for the delay of an August trial, citing the complexity of the case; the government does not oppose the request.

January 2011 A federal judge again postpones the criminal trial because Stanford needs to be weaned off an anti-anxiety drug prescribed for him in prison and undergo more tests to determine his competency. His lawyers seek a two-year delay.

February 2011 Stanford files a lawsuit seeking $7.2 billion in damages, claiming that U.S. prosecutors "undertook illegal tactics" in their investigation. He contends that the federal government used more than $51 million of his assets to pursue the cases against him. One month later, he drops the allegations.

May 2011 The U.S. Department of Justice issues a superceding indictment against Stanford, who now faces a total of 14 counts on conspiracy to commit wire fraud and mail fraud, wire fraud, mail fraud, conspiracy to obstruct an SEC investigation, obstruction of an SEC investigation and conspiracy to commit money laundering. U.S. District Judge David Hittner signs an order setting Stanford's trial for Sept. 12.

Ponzi Proprieties

"It is with a pious fraud as with a bad action; it begets a calamitous necessity of going on."

-- Thomas Paine, The Age of Reason.

One of the questions being asked with increasing regularity is what is the polite thing to do when you have benefitted from the actions of someone running a Ponzi scheme. In one case it may be that you invested and got remarkable returns, and in another it may be that you were not an investor, but the recipient of the funds that the Ponzi schemer stole. Herewith two different answers to that question. But first, a word about the process itself.

Let us assume that you invested $100 with Bernie Madoff 10 years ago, and for the last 10 years have been getting a 30 percent return on the investment. Now you learn that in the years after you made your first investment, Mr. Madoff convinced everyone in your neighbourhood to give him $100 to invest, and he used that to pay you. Once that became known, of course, your neighbours were upset. The courts were also upset and appointed someone called a receiver to try to recoup for your neighbours the profits on the $100 investment you and other early investors made. Early investors were not the only beneficiaries of Ponzi schemes. Sometimes the schemer gave money he collected to charities, or even politicians, for political purposes.

Irving Picard is the court-appointed trustee of the Madoff mess that was uncovered on December 8, 2008. To date, Mr. Picard has recovered almost one half of the estimated $20 billion lost by Madoff investors. A good chunk of what Mr. Picard has collected to date comes from the widow of Jeffry M. Picower. Mr. Picower had invested with Mr. Madoff for more than 30 years. Ms. Picower agreed to return $7.2 billion to the fund. In a statement accompanying her agreement to pay, she said:

On behalf of my late husband Jeffry and his estate, I am announcing today that we... will return every penny received from almost 35 years of investing with Bernard Madoff, an amount totalling $7.2 billion that will go to the Madoff victims' compensation fund. Although it is my understanding that the estate's legal liability may not have exceeded $2.4 billion, I believe that this settlement honours what Jeffry would have wanted... I believe that the Madoff Ponzi scheme was deplorable and I am deeply saddened by the tragic impact it continues to have on the lives of its victims. It is my hope that this settlement will ease that suffering.
Not everyone is concerned about victims.

Ralph Janvey is a Dallas lawyer. He is the receiver for Stanford Financial Group that was run by R. Allen Stanford. In early 2009, it was learned that Mr. Stanford had stolen more than $7 billion from investors in 114 countries in a Ponzi scheme. Mr. Janvey, like Mr. Picard, is charged with trying to recover that money for the victims of the fraud. To date, Mr. Janvey has recovered less than $200 million. Part of his problem is the kinds of people who benefitted from the scheme before it was uncovered. They were not all investors. Some of them were members of Congress and the Democratic and Republican National Committees, to whom Mr. Stanford made contributions.

They were not eager to return the funds they had received. According to the Washington Post: "At least 50 members of the House and Senate have either ignored restitution demands or donated some of Stanford's campaign contributions to charity instead... " Included among the refuseniks are Eric Cantor, the House Majority Leader, Charles Schumer, the chairman of the Senate Rules Committee, Senator Bill Nelson who chairs a Finance Committee subcommittee and Senator John Cornyn, a member of the Judiciary Committee.

Senator Cornyn explained that, when he learned of the Ponzi-like character of the Stanford operation, he donated the money he'd received to charity. Senator Cornyn comes from Texas. According to one victims' group, 1,300 Texans invested with Stanford and lost $582 million that the receiver is trying to recover. The 1,300 probably feel a lot better knowing that Mr. Cornyn gave the funds that rightfully belonged to them to charity instead of to the receiver, who could have distributed it back to them. Senator Nelson told the Post he had given the money he received to charity but was now preparing to write a check to the receiver. Mr. Cantor said he'd give back the money if the receiver gave him a release. It isn't clear what he wants to be released from. The political fundraising committees are less tractable. According to the Post, "four of the principal national Republican and Democratic fundraising committees took in $1.6 million in Stanford donations," that they have refused to disgorge and over which they are now fighting with the receiver.

It's too bad the beneficiaries of the Stanford scam didn't have among their number people of the caliber of Ms. Picower. If there were, the receiver might have recovered more than a paltry $200 million. Indeed, it's too bad there aren't more people with a moral compass like that possessed by Ms. Picower living among us.

Thursday, 2 June 2011

Stanford International Bank Limited (In Liquidation) - Notice to Creditors/(Noticia a los a Acreedores)

English Version

Marcus Wide and Hugh Dickson of Grant Thornton Appointed New World-Wide Liquidators of Stanford International Bank Limited

Marcus Wide and Hugh Dickson of Grant Thornton were appointed as the new liquidators of Stanford International Bank Limited ("SIB") by order of the Eastern Caribbean Supreme Court at Antigua on 12 May, 2011. Mr Wide and Mr Dickson were appointed in place of the former liquidators, Nigel Hamilton-Smith and Peter Wastell.

The new liquidators and their staff are working with the former liquidators to ensure that control of SIB is transferred to the new liquidators in an orderly fashion. The new liquidators are currently working with legal counsel in the various jurisdictions to develop a business plan and budget to generate the maximum possible return to depositors through co-operation and co-ordination with other office holders where possible. It is also the intention of the new liquidators to establish a committee representative of the body of depositors to assist and provide input in the liquidation process.

All creditor enquiries should now be directed to the new liquidators via email: The new liquidators are also in the process of establishing a website to keep creditors informed of developments in the liquidation. The website address will be: The new liquidators will post regular communications updating you on the status of the liquidation and recommend that creditors monitor the website for information. Please note that creditors do not need to take any further action if you have previously registered your claim via the online claims management system.

Marcus Wide and Hugh Dickson
Joint Liquidators

Versión en Español

Marcus Wide y Hugh Dickson de Grant Thornton nombrados como los nuevos liquidadores mundial de Stanford International Bank Limited.

Marcus Wide y Hugh Dickson fueron nombrados como los nuevos liquidadores de Stanford International Bank Limited (“SIB”) por una orden de la Corte Suprema del Caribe Oriental en Antigua el 12 de Mayo del 2011. Los señores Wide y Dickson fueron nombrados en lugar de los anteriores liquidadores, Nigel Hamilton-Smith y Peter Wastell.

Los nuevos liquidadores y su personal están trabajando con los anteriores liquidadores para asegurarse que el control de SIB sea transferido a los nuevos liquidadores de un modo ordenado. Los nuevos liquidadores están actualmente trabajando con abogados en varias jurisdicciones para desarrollar un plan de negocios y presupuesto para generar el máximo retorno posible a los depositantes a través de la cooperación y coordinación con otros administradores judiciales siempre y cuando sea posible. También es la intención de los nuevos liquidadores de establecer un comité que represente el conjunto de depositantes para que puedan asistir y contribuir en el proceso de liquidación.

Todas las consultas de los acreedores deben ser ahora dirigidas a los nuevos liquidadores a través de la siguiente dirección de correo electrónico: Los nuevos liquidadores están también en el proceso de establecer un sitio en la web para mantener a los acreedores informados sobre la evolución de la liquidación. La dirección del sitio en la web será: Los nuevos liquidadores publicarán comunicaciones frecuentes, resumiendo sus hallazgos en la liquidación y les recomiendan a los acreedores monitorear el sitio web por información al respecto. Por favor tengan en cuenta que los acreedores no necesitan tomar ninguna acción adicional si ya registraron su reclamación a través del Sistema de Gestión de Reclamación en línea.

Marcus Wide y Hugh Dickson
Liquidadores Conj

Wednesday, 1 June 2011

Is the end near?

As they approach their 60s, Blaine Smith and his wife, who once had a $1.5 million nest egg, are preparing to move into a rental house or apartment in July.

The couple is selling their $850,000 dream home, for which they saved for most of their professional lives—working two, and sometimes three, jobs—because they're no longer able to afford the mortgage payments.

They've also delayed their retirement plans, returning to work at a time when they thought they would be taking it easy. And they haven't taken a vacation since flamboyant financier Robert Allen Stanford's alleged $7 billion Ponzi scheme came to light.

The Smiths are but two of an estimated 28,000 victims of the Stanford Group, spread across 46 states and 188 countries, who still are awaiting justice. The Smiths unknowingly invested—and lost—their 30-year savings in the group's certificates of deposit.

"It's the worst nightmare you could ever imagine," Smith says. "It consumes me to know that the [Securities and Exchange Commission] sat on this for 12 years and didn't warn anyone."

A federal judge finally has set aside a trial date for Stanford, the man behind the alleged scheme. Jury selection is scheduled to begin Sept. 12 in Houston.

But the Smiths, and thousands of other bilked Stanford investors, still are waiting to see whether they'll ever see so much as a penny of their money returned.

Court-appointed Stanford receiver Ralph Janvey, who is suing to recover $600 million, has recovered less than one-third of that amount. After attorneys' fees and other expenses, that leaves about $100 million. Investors who lost money likely are to see only a penny or two for every dollar they invested.

The Smiths and other victims likewise are still awaiting word on whether the Securities Investor Protection Corporation—an insurance fund for brokerages—will cover any of their losses up to $500,000. The agency, which is overseen by the SEC, so far has opposed covering Stanford victims because the investments were CDs rather than stocks; a final decision is expected in the next few weeks.

The SIPC has helped an estimated 739,000 investors recover $109.3 billion in assets over the past 40 years, but the brokerage insurance does not cover every investor or every investment.

The 61-year-old Stanford, who denies all wrongdoing, is charged with 14 criminal counts involving certificates of deposit issued by his Antigua-based Stanford International Bank. He has been imprisoned as a flight risk since he was arrested almost two years ago.

The case has been fraught with drama, including a fight with an inmate over the use of a telephone, during which Stanford suffered a broken nose and a major concussion that left him unconscious. He also suffered an aneurysm in his leg.

The judge postponed the case a second time in January to allow Stanford to undergo drug rehabilitation in a prison facility to address an addiction to prescription anxiety drugs he acquired while jailed. Stanford has been undergoing detox treatment at the hospital unit at the federal prison in Butner, N.C., since mid-February.

Stanford has dismissed or been abandoned by at least five legal teams, all of which were unsuccessful in persuading the court to free him as he awaits trial. The current legal team was appointed after he was declared an indigent defendant. Attorneys and many of the principal players in the case declined to comment for this story, citing a gag order imposed by the judge.

In the meantime, new details have emerged in recent weeks about the SEC's delay in investigating the Stanford Group. A congressional subcommittee conducted a hearing in May on the agency's failures to stop the alleged Ponzi scheme. A former official accused of repeatedly blocking efforts to investigate the group now is the subject of a federal criminal inquiry for having done legal work for Stanford after leaving the SEC.

Spencer C. Barasch, now a private-sector lawyer in Texas, has represented clients dealing with the agency, including Stanford, despite being told multiple times by the SEC's ethics office that it was improper. He previously led the enforcement bureau in the SEC's Fort Worth office, and he had blocked efforts to pursue Stanford at least six times in a seven-year span in spite of repeated accusations of fraudulent behaviour, according to a report released last year by the SEC's inspector general. Barasch's law firm continues to say that he did not violate conflicts of interest.

"This is not even defensible," U.S. Rep. Randy Neugebauer, a Texas Republican who serves as the head of the House subcommittee, said at the conclusion of the hearing. "It is extremely disturbing that we had a culture in agencies that demand high levels of disclosure and integrity, that within that very agency there wasn't a similar amount of integrity."

Longtime SEC employee Julie Preuitt also testified at the hearing that she was reprimanded and demoted for reporting as early as 1997 that Stanford likely was operating a massive Ponzi scheme. An internal watchdog issued a report last year that concluded the agency had treated her improperly, she says, adding that "the commission has failed to discipline anyone, at least not visibly, nor has there been any effort to restore me to a position with similar duties and responsibilities to the one I held before. I paid a heavy price for complaining."

As far as Smith and other victims are concerned, the SEC is the true guilty party in the Stanford case. Their goal is to see the return of at least a portion of the money they lost.

"I would much prefer to see the SEC on trial," Smith says. "They're the true culprits: the people who allowed this to happen. I could care less about Allen Stanford. He's a liar, he's an evil person and he set out to steal money from investors from the very beginning.

"But the only reason I want him to be convicted is so that some of the other governmental entities in other countries holding up money will release it once there is a guilty verdict rendered against him."