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."
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