Thursday, 25 June 2015

Fifth Circuit Holds that “Value” under the Uniform Fraudulent Transfer Statute Requires a Showing of Value to the Transferor’s Creditors Where the Transferor Operated a Ponzi Scheme

In its decision in Janvey v. The Golf Channel, 2015 WL 1058022 (5th Cir. 2015), the Fifth Circuit reiterated its requirement that value for purposes of the Uniform Fraudulent Transfer Act requires a showing of value to the transferor’s creditors where the transferor was operating a Ponzi scheme. The facts in the case were undisputed. Stanford International Bank operated a Ponzi scheme over the course of many years. In order to increase its name recognition, Stanford decided to sponsor the St. Jude’s Championship, a golf tournament broadcast on The Golf Channel. The Golf Channel offered Stanford an advertising package which included a range of marketing services, and for which Stanford paid The Golf Channel $5,900,000 by the time it was placed into receivership. The receiver sued to recover these payments on the grounds that they were fraudulent transfers.

 In light of established Fifth Circuit precedent providing that transfers made by the perpetrator of a Ponzi scheme are fraudulent for purposes of the UFTA, the parties stipulated that the payments by Stanford to The Golf Channel were fraudulent. The parties also stipulated that The Golf Channel acted in good faith in accepting the payments. Consequently, the only issue in the dispute was whether, in providing advertising and marketing services to Stanford, The Golf Channel gave reasonably equivalent value in exchange for the payments.

 In finding that The Golf Channel did not give reasonably equivalent value, the court held that the market value of the marketing and advertising services failed to meet the standards for “value” under the statute. The court held that “value,” for purposes of the UFTA is measured “from the standpoint of the creditors, not from that of a buyer in the marketplace.” Further, the court held that services—even legitimate services provided by an entity which has no knowledge of the fraudulent scheme—which further the scheme, have no value as a matter of law. When dealing with a Ponzi scheme, which is inherently illegitimate and insolvent from its inception, the court stated that the “primary consideration . . . is the degree to which the transferor’s net worth is preserved.” As a result, the fact that The Golf Channel’s services would have been valuable to legitimate businesses in the marketplace was of no moment. In the context of a Ponzi scheme, they had no value as a matter of law.

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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group - SIVG official Forum

Wednesday, 24 June 2015

Big U.S. law firms must face Stanford receiver's Ponzi lawsuit

* Chadbourne & Parke, Proskauer must face malpractice claims

* Allen Stanford receiver claimed that law firms aided fraud By Jonathan Stempel

 June 24 (Reuters) - Two large New York law firms failed to persuade a federal judge to throw out a malpractice lawsuit seeking to force them to pay creditors of imprisoned swindler Allen Stanford for aiding the Texas financier's $7.2 billion Ponzi scheme.

 U.S. District Judge David Godbey in Dallas on Tuesday said Chadbourne & Parke and Proskauer Rose must face most claims brought by Ralph Janvey, a court-appointed receiver liquidating Stanford's companies, and a committee of Stanford investors helping him recover money for creditors.

 Stanford, 65, is serving a 110-year prison term following his March 2012 conviction for scheming to sell fraudulent high-yielding certificates of deposit through his Antigua-based Stanford International Bank. Prosecutors said he used customer funds to make risky investments and fund a lavish lifestyle. 

Janvey claimed that Chadbourne and Proskauer should be held liable because Thomas Sjoblom, a lawyer who worked at both firms, allegedly obstructed investigations by the U.S. Securities and Exchange Commission and other regulators into Stanford, and helped hide the SEC probe from Stanford's auditor.

 Godbey said the receiver may pursue several claims including professional negligence, aiding and abetting fraud, negligent supervision and civil conspiracy.

 The allegations suggest that Sjoblom "was aware that Stanford was engaged in a fraudulent enterprise, and that the enterprise was very possibly a Ponzi scheme," the judge wrote. "Because Sjoblom's knowledge is imputed to both Chadbourne and Proskauer, plaintiffs have alleged that all defendants were aware of sufficient wrongdoing on Stanford's part."

 Godbey dismissed a claim alleging aiding and abetting fraudulent transfers, saying Texas law would not recognize it.

 Chadbourne, Proskauer, a lawyer for Sjoblom, and a lawyer for Janvey did not immediately respond to requests for comment.

 Ed Snyder, a lawyer for the investor committee, said he is pleased with the decision.

 Janvey's lawsuit is separate from a proposed class action by roughly 18,000 former Stanford investors against the two law firms. Godbey in March refused to dismiss that lawsuit, and Chadbourne and Proskauer are appealing.

 The Ponzi scheme was uncovered in 2009. Stanford is appealing his conviction, and had during the course of his defense claimed he was indigent.

 The case is Janvey et al v. Proskauer Rose et al, U.S. District Court, Northern District of Texas, No. 13-00477. (Reporting by Jonathan Stempel in New York; Editing by Andrea Ricci)

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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group - SIVG official Forum

Tuesday, 9 June 2015

Ex-Stanford Execs' Convictions Upheld By 5th Circ.

Errors committed by a judge in the trial of two former Stanford Financial Group executives sentenced to 20 years in prison for their roles in Robert Allen Stanford's $7 billion Ponzi scheme were ultimately harmless, the Fifth Circuit ruled Friday.

 Former Stanford Financial Group execs Mark Kuhrt, left, and Gilbert Lopez were convicted for their roles in Robert Allen Stanford's $7 billion Ponzi scheme. (Credit: AP) A three-judge appeals court panel in a published opinion affirmed the 2013 convictions of Gilbert T. Lopez Jr., the former chief accounting...

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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group - SIVG official Forum

Monday, 1 June 2015

Stanford Financial Group Receivership and SIB Liquidation… Hope, punishment, or fraud?

Six years and three months have passed since Stanford’s debacle destroyed the lives of 21,739 innocent families around the world when on February 17, 2009, the U.S. Securities and Exchange Commission (“SEC”) abruptly seized Stanford Financial Group in the United States.

The largest group is Latin American families with 15,270 victims representing 70% of the total depositors in the Stanford International Bank, Ltd. (“SIBL”) and more than $4 billion in losses. Depositors from the United States are the second largest group. These families entrusted their savings to a company belonging to an American conglomerate regulated and supervised by the U.S. Government.

The majority of Stanford’s depositors are modest people; many are elderly, ill, close to retirement, or families with special needs children. All are unable to pay for their critical medical treatments and living expenses. A great number continue to die while waiting in vain for even a small portion of their savings to be returned in time for life-saving operations, or treatment of cancer, and other life-threatening diseases.

 The reality is that injustice continues for these victims as the U.S. Receiver for the Stanford Financial Group and the Joint Liquidators for SIBL in Antigua insatiably persist in generating fees and expenses for themselves, their attorneys, and other professionals, the sole beneficiaries so far, charging millions of dollars.

 The U.S. Receiver, Ralph Janvey has “recovered” approximately $240.9 million as of December 31, 2013, and spent more than $127.5 million in fees and expenses. Mr. Janvey’s accomplishments in the recollection of assets for the depositor’s distribution fund have been lacking. According to Examiner John Little, “The Receiver and his professionals have not identified any significant Stanford assets or accounts that were not identified in the earliest days of the Receivership.” In contrast, Irving Picard, the trustee unwinding Bernard Madoff’s fraud has recovered more than $10.6 billion for victims. That is 60% of the $17 billion in principal lost by thousands of investors in Madoff’s investment advisory business...............................................

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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group - SIVG official Forum