STANFORD UPDATE
June 2013
Dear Stanford Clients:
Potential Unauthorized Claims Made By Attorneys On Behalf of Investors
We have received multiple reports from clients that certain named attorneys have lodged claims with the receiver, purportedly on behalf of clients. These investors, however, have not authorized the attorneys in question to do so - and in some cases have never even heard of them.
If you believe that a claim has been lodged on your behalf without your authorization or knowledge, please get in touch as soon as possible and we can assist you in rectifying the situation and advise you on your rights.
Zelaya vs. United States of America
On May 13, 2013, a telephonic hearing occurred regarding the scope of the deposition that Plaintiffs are entitled to take of the SEC through its designated representatives. The United States objected to all of the subject areas that the Plaintiffs sought to cover at the deposition and further objected to providing any documents in response to the document request that accompanied Plaintiffs' notice of deposition of the SEC. Plaintiffs responded, arguing that the Magistrate Judge authorized Plaintiffs to pursue those subject areas and also to serve the United States with a focused document request. After briefing and oral argument, the Magistrate Judge overruled most of the United States' objections and ruled that the Government must proceed with the deposition and provide Plaintiffs with the information requested in their related document request.
This ruling in our favor enables us to continue our vigorous efforts to expose the negligent acts of the SEC and brings us one step closer to obtaining the information necessary to proving our case.
NAFTA and Other Bilateral Trade Agreement Arbitrations
We have recently become aware of potential new action being pursued by Peter Morgenstern and (separately) Todd Weiler, Edward Snyder and Edward Valdespino on behalf of various investors. These investors have filed a notice of intention to submit a private arbitration against the United States under the arbitration provisions of the various treaties. We are confident, however, that the current action in front of the Federal District Court in Florida against the SEC is preferable for investors for a number of important reasons:
1) NAFTA and other similar agreements ensure that foreign investors are not treated unfavorably compared to domestic US investors. While many of the investors in the Stanford entities were indeed foreign, all of the evidence shows that that they were treated equally as badly as US investors;
2) The treaties seek to ensure that the treatment of foreign investors does not fall below a minimum acceptable standard, as defined in international law. In order to prove that it has, investors pursuing arbitration will have to establish essentially the same facts we have alleged in our Federal Court case. The difference between the proposed arbitration and our court case, however, is that we can rely on the strong discovery mechanisms to force the Government to disclose relevant information, whereas arbitration has much weaker and more limited powers.
3) It appears that participation in this arbitration by Mexican investors may result in their inability to participate in our SEC class action. Please note that there are subsequently three key issues to keep in mind if you are considering joining the arbitration: (1) the timeline and pressure being imposed on investors to make this decision appears unfair; (2) as far as we know, such an arbitration has never previously been taken and therefore no precedent exists for it; and (3) as far as your SEC action is concerned, you may be precluded from participating in the class action and may be considered an opting out of the class action in which you have already invested time, money and resources.
Our action has already overcome the key initial hurdle and has a defined path towards a successful verdict. We know from our case that, in order to overcome the Government's position on these claims, extensive discovery is necessary. We do not believe that the procedural intricacies of a NAFTA international arbitration, including the limited means of discovery, provide the best avenue for recovery against the Government. We believe the risk of being disqualified from participating in our SEC action far outweighs the potential for obtaining a successful judgment against the Government in the NAFTA international arbitration.
The Investor Committee
We have learned that significant changes to the Investor Committee composition have been occurring over the course of the past few months. KLS will take this matter into serious consideration moving forward in its full representation of investor claims before the Dallas Receiver.
- The KLS Stanford Team
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