Federal court hears row over Stanford investor claims / Angela Shaw says she is confused!!

1/24/2012

WASHINGTON, Jan 24 (Reuters) - A hearing in federal court on Tuesday gave the victims of Allen Stanford's alleged Ponzi scheme little clarity after a federal judge said he needed more time before deciding whether an industry-backed fund should be forced to let the investors file claims.

The case before the U.S. District Court for the District of Columbia centers on a dispute between the U.S. Securities and Exchange Commission and the Securities Investor Protection Corp, a non-profit corporation that helps investors recover missing funds in the event a brokerage fails.

Stanford, 61, was arrested in 2009 over charges that he ran a $7.2 billion Ponzi scheme linked to certificates of deposit issued by his Antigua-based bank.

His criminal trial began on Monday in Texas. U.S. prosecutors told the jury on Tuesday that Stanford used lies and bribes to steal customers' hard-earned savings.

The SEC in December took formal legal action to try and force SIPC to launch a liquidation proceeding in Texas so that the victims of Stanford's alleged scheme may file claims.

SIPC is standing by its decision not to intervene on behalf of Stanford investors, saying its governing law does not apply to the Stanford bank.

In a three-hour hearing in Washington on Tuesday, a lawyer for the SEC urged the court to compel SIPC to launch a liquidation proceeding.

The SEC also sought to convince District Judge Robert Wilkins that he should leave it to another court to rule on the merits of whether or not certain customers will be eligible for compensation.

"We are not saying a court will never decide the customer question," said Matthew Martens, the chief litigation counsel for the SEC. "There is a time and place for such a determination."

SIPC argues it is limited by law to protecting customers against the loss of missing cash or securities in the custody of failing or insolvent SIPC-member brokerage firms. And while Stanford's Texas-based brokerage was a SIPC member, its offshore bank was not.

Eugene Assaf, outside counsel for SIPC from Kirkland & Ellis, said the SEC is trying to punt the matter down to Texas because the agency knows it does not have the facts to back up its argument.

"One of the facts they rely on is from a coalition of people who invested. That is at best double or triple hearsay," said Assaf. "I am skeptical when I don't see facts laid out the way they are normally laid out between litigants."

SIPC said if the judge decides to order it to start a liquidation proceeding, then it in turn will be forced to litigate each matter claim by claim, a process that will cost its fund a lot of money.

Wilkins, who asked skeptical questions of both sides during the hearing, said he would try to rule soon.

Angela Shaw, the founder and director of the Stanford Victims Coalition which says it can show investor money never went to Stanford's bank and was misspent by the brokerage arm, said she was a bit disappointed by Tuesday's hearing.

"I'm confused. There seems to be no sense of urgency," said Shaw, who flew in from Texas for the hearing. "It's going to take time the victims don't have."

The SEC case against SIPC is SEC v Securities Investor Protection Corporation, U.S. District Court, District of Columbia, no. 1:11-mc-00678-RLW.

For the SEC: Matthew Martens of the SEC

For the SIPC: Edwin U of Kirkland & Ellis

(Reporting by Sarah N. Lynch)

Allen Stanford’s Lawyers Can’t Quit His Case, Judge Says

By Laurel Brubaker Calkins and Andrew Harris

Jan. 13 (Bloomberg) -- R. Allen Stanford’s attorneys must defend him at a $7 billion investment fraud trial that will begin Jan. 23 in Houston federal court, said a U.S. judge who rejected the lawyers’ bid to quit.

Stanford’s court-appointed attorneys, Ali Fazel, Robert Scardino, John Parras and Ken McGuire, asked to exit his case in a motion filed on Jan. 11, less than two weeks before the start of jury selection. They claimed they hadn’t been given enough time or resources to prepare an adequate defense against what they describe as a complicated financial fraud case.

“The defense team’s primary reason for seeking such relief is based upon its self-proclamation that Stanford’s right to effective assistance of counsel will be impaired,” Hittner said in a two-page order that also rejected the lawyer’s bid for a three-month delay in starting the trial.

“The court notes that the defense team maintains this position despite the fact that two of its lawyers -- Scardino and Fazel -- have been appointed to this case since November 2010, and the other two lawyers -- Parras and McGuire -- have been appointed to this case since March 2011,” Hittner said.

Stanford, 61, has been imprisoned as a flight risk since he was indicted in June 2009 on charges of defrauding investors through allegedly bogus certificates of deposit at his Antigua- based Stanford International Bank Ltd. Stanford denies all wrongdoing.

Pretrial Hearing

Hittner said in a separate order late today that Stanford’s lawyers could argue yet another delay request, which they filed under seal this afternoon, at a pretrial hearing next week.

The lawyers seek “a continuance on the basis that a non- attorney member of the defense team will be unavailable to assist at the commencement of trial,” Hittner said in the ruling. He ordered the government and Stanford’s lawyers to continue “full trial preparation” in the meantime.

The former financier was declared indigent and given a taxpayer-financed defense because all of his assets were frozen by court order after the U.S. Securities and Exchange Commission sued him in February 2009.

Fazel and Scardino have complained about time and funding restrictions imposed on the defense team by Hittner and the U.S. Court of Appeals in New Orleans, which approves trial budgets for court-appointed attorneys.

Prison Attack

They said Stanford has had too little time since he was declared mentally competent on Dec. 22 to adequately review the thousands of documents necessary to assist in his defense. Stanford spent almost nine months in a prison rehabilitation program recovering from a head injury suffered during a 2009 prison attack and an addiction to anxiety drugs prescribed following the assault.

Fazel said in court filings that the defense team was also hampered by the yearend resignation of all its document- management and trial-preparation contractors over unpaid bills dating back to September. The contractors returned to work in early January after an appellate court granted them partial back pay and ordered them to continue working.

Lead prosecutor Gregg Costa opposed delaying the trial by more than a few weeks, citing efforts by Stanford’s defense team to get Stanford bail and to fight his competency declaration. Stanford’s attorneys have also filed multiple constitutional challenges in his case, none of which have succeeded.

Certain Issues

“The defense obviously has devoted extraordinary resources to certain issues,” Costa said in a filing earlier today. “It is time for the defense to devote those resources to the trial.”

Laura Sweeney, a Justice Department spokeswoman, declined to comment on the judge’s rulings today.

“We’re preparing for trial,” Fazel said in a telephone interview after Hittner denied him permission to quit. He declined to comment further, citing a gag order banning lawyers from publicly discussing the case.

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).

--Editors: Mary Romano, Peter Blumberg

Stanford in solitary confinement, no trial date

Allen Stanford,the alleged swindler who is being held in solitary confinement in a federal jail, fell ill during a hearing on Wednesday where a judge denied the U.S. government's request to set a trial date.

Stanford, who has been taken to the hospital twice since his arrest on June 19, began spitting blood into tissues and a cup during the hearing, a condition his attorney described as a persistent and undiagnosed.

"They've checked him out and he appeared to be OK," Kent Schaffer, Stanford's attorney told reporters after the hearing in federal court in Houston.

At the status hearing which was temporarily held up by Stanford's condition, U.S District Judge David Hittner said defense attorneys on the case need more time to prepare.

"You will get a trial date set by me after the next conference," Hittner said, adding that the next hearing will likely be in December.

Stanford, 59, was arrested on June 18 and faces 21 criminal counts. He is accused of masterminding an alleged $7 billion scheme where fraudulent certificates of deposit from an Antiguan bank were sold to clients.

It was Stanford's first court appearance since he suffered a mild concussion, broken nose and two black eyes in a prison brawl last month while detained at the Joe Corley Detention Facility in Conroe, Texas.

At the hearing on Wednesday, Stanford's face bore faint bruising and he looked gaunt.

Stanford has since been moved to a federal detention facility in downtown Houston, where he is being held in an 8-foot by 9-foot cell and is prohibited from having phone calls or visits from his family, according to Schaffer.

"It's just harassment," the lawyer told reporters after the hearing. "They are trying to break him down."

A spokesperson for the U.S. Marshals Service did not immediately have a comment.

In their request for Hittner to set a trial date, U.S. prosecutors said defendants and their lawyers have now been provided access to court documents that they would need to help prepare for trial.

"There should be a trial date that people can start working around," Assistant U.S. Attorney Gregg Costa said at the hearing. "We're going to try a lean case."

Still, Stanford lawyer and other defense attorneys argued that it is too early to set a trial date because there is too much work to be done.

Judge Hittner ordered public defenders to take the case on Sept. 15 after Stanford failed to come up with the funds to retain a team of defense attorneys.

Since then, funds from a directors and officers insurance policy have become available and the federal public defenders are off the case.

Stanford Victims Coalition - Hearing in Baton Rouge