‘They’re fighting over our money’

Those searching for Stanford dollars get twice as much as victims 

BY BILL LODGE
blodge@theadvocate.com 
June 23, 2014 

Court-authorized professionals cleaning up the debris of one of the largest Ponzi schemes in U.S. history have been paid $64.2 million — more than twice the amount returned so far to victims — and are seeking more compensation.

 Those professionals have recovered less than $300 million of the estimated $5.5 billion to $7 billion stolen from thousands of victims in Louisiana and in places as distant as Venezuela by convicted Houston swindler Robert Allen Stanford, whose company operated an office in Baton Rouge.

 Attorneys, accountants and investigators searching since February 2009 for the mountains of money had been paid $64.2 million of the victims’ money recovered by the end of 2013.

 Expenses incurred in the search by the court receivership team cost another $54.7 million, federal court records show.

 That’s $118.9 million of victims’ money spent on the search for Stanford’s swindled dollars out of a total of $240.9 million recovered by Dec. 31 in the five-year effort.

 Victims have received a combined $30 million — paid last year as a first distribution to some of the thousands of Stanford’s victims in Louisiana and other states. Another $25 million authorized by a judge for payment to victims has yet to be distributed.

 Now, Dallas attorney Ralph S. Janvey, the court-appointed receiver in charge of the search, is asking U.S. District Judge David C. Godbey for permission to withdraw $5.8 million from a disputed pot of $17.3 million in fees for payment to members of his search team.

 Don’t do it, a court-appointed examiner and the U.S. Securities and Exchange Commission have implored Godbey.

 In Louisiana, some of Stanford’s victims have the same response.

 Kathy and Louis Mier, of Zachary, were defrauded of $240,000 they invested with Stanford.

 “Janvey, from day one, was trying to make money off us,” Kathy Mier, a 66-year-old retired schoolteacher, said. “We resent the fact that those lawyers take advantage of us. They’re fighting over our money."

 Richard Cochran, 82, of Baton Rouge, who declined to specify his total loss, noted that he received 21.7 percent of his investment in the form of interest payments before the SEC shut down Stanford’s operations in February 2009.

 Now, the Korean War veteran said, Janvey’s team has demanded that he make payments into the Stanford receivership equal to that 21.7 percent.

 Cochran said he refused, noting that compliance would increase his Stanford loss to 100 percent.

 “Janvey said in the beginning all we’re going to get is pennies on the dollar,” Cochran recalled. “He’s making that come true.”

 Added Cochran: “He (Janvey) probably ought to get what we get on our claims — 1 percent.”

 In his filings in Dallas, Janvey has told the judge his team should receive $5.8 million of the disputed $17.3 million that Janvey contends has already been earned.

 By the middle of March, Janvey reported to Godbey, the receivership had recovered another $23 million in stolen investor funds.

 John J. Little, a Dallas attorney who has served as court-appointed examiner of the Stanford receivership for the past five years, argued June 9 that the judge should not release any portion of the $17.3 million to Janvey’s team.

 “What we know at present is that 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,” Little said.

 In addition, Little told Godbey, Janvey has not distributed $25 million of $55 million the judge authorized for pro rata payment last year to Stanford victims.

 Janvey’s 2009 demand was opposed by both the SEC and the investors lucky enough not to have lost all their money.

 The receiver’s motion for seizure of their remaining money also was denied by Godbey after SEC officials said commission policy is not to recover money from innocent fraud victims who lost more money than they received from a bogus investment operation.

 But Janvey, spending recovered Stanford funds, appealed the decision to the 5th U.S. Circuit Court of Appeals in New Orleans, where he lost.

 Both Little and the SEC now argue that the receivership’s record should be much closer to completion before the judge considers release of any of the $17.3 million withheld from Janvey’s team over the past five years.

 “What has actually been distributed to Stanford’s investors — approximately $30 million — is less than half what has already been paid to the receiver’s professionals,” Little added.

 Little said no more investor money should be paid to Janvey’s team until the total paid to the victims “significantly exceeds the amounts paid to the receiver and his professionals.”

 Said SEC attorney David B. Reece: “The question is not whether the receiver and supporting professionals should receive compensation. The receiver’s team has been paid.”

 Reece noted Janvey’s team has been paid $34 million more than Stanford’s victims.

 “There is no reason to release further funds,” Reece told the judge.

 Meanwhile, Stanford, 64, continues to maintain he is innocent of all charges for which he is serving a prison sentence of 110 years. He has filed an appeal in an effort to reverse his conviction.

 The SEC and Godbey have concluded that Stanford and his companies operated a giant Ponzi scheme from the beginning of their operations.

 Few, if any, investments are actually made in a Ponzi scheme. Instead, operators of the scheme skim most of the money that is put in by victims on the basis of false information provided by the criminals.

 Some of the early investors receive small portions of their own money and that of later investors. While those investors believe the money is profit from actual operations, it is simply seed money designed to attract additional cash from people hearing of the program’s reputed success.

 Stanford Group Co., insured by the federally chartered and industry-funded Securities Investor Protection Corp., received billions of dollars that victims were told would be secure at Stanford International Bank in the Caribbean nation of Antigua.

 Instead, a Houston jury concluded, the majority of the money went to Stanford and several of his associates. 

The SEC, in effect, directed SIPC to cover individual Stanford investor losses up to $500,000.

 SIPC officials refused and won a judgment from a federal district judge in Washington, D.C. The SEC is appealing that decision.

To join the debate click here.

For a full and open debate on the Stanford receivership visit the Stanford International Victims Group - SIVG official Forum http://sivg.org.ag/

HOW A FORMER SENIOR SEC OFFICIAL MANIPULATED THE SYSTEM FOR HIS CLIENTS' AND HIS OWN BENEFIT

Two years ago, Spencer C. Barasch, a former high-ranking Securities and Exchange Commission official based in Fort Worth, Texas, paid a $50,000 fine to settle civil charges brought against him by the United States Department of Justice for allegedly violating federal conflict-of-interest laws. The Department of Justice had alleged that Barasch, as a private attorney, had represented R. Allen Stanford, a Houston-based financier who was later found to have masterminded a $7 billion Ponzi scheme. Barasch had done so even though he'd played a central role at the SEC for years in overruling colleagues who wanted to investigate Stanford’s massive fraud. Federal law prohibits former SEC officials from representing anyone as a private attorney if they played a substantial or material role in overseeing the individual's actions while in government.

In part because of that episode, Barasch, rightfully or wrongfully, has served as an example for critics of the SEC who say that it—and the US government as a whole—has done too little to hold accountable those financial institutions responsible for the 2008 financial crisis and other corporate wrongdoers. James Kidney, a respected trial attorney for the SEC, recently drew attention when he asserted in his retirement speech that the agency’s pervasive “revolving door” has led to a paucity of enforcement actions against seemingly untouchable Wall Street executives. More than two dozen current and former SEC officials that I have interviewed about these matters largely agree with Kidney on the takeaway: Quite simply, American investors can no longer expect the protection they once did, and powerful Wall Street executives who have violated the law will continue to go unchecked.

 A three-month investigation by VICE has uncovered evidence of numerous similar instances of misconduct and potential violations of federal conflict-of-interest regulations and law by Barasch since he left the SEC. And while Barasch’s legal representation of Stanford might have been the single most consequential and egregious example of such misconduct, the new information shows that Barasch’s actions in representing Stanford were hardly an anomaly. The new disclosures serve as further ammunition for those who argue that the SEC has been tepid in its enforcement of such regulations and its punishment of those who would violate them.

 David Kotz, who served as the SEC’s inspector general from 2007 to 2012, investigated the agency's regulatory failure in pursuing Stanford’s Ponzi scheme and wrote a scathing report criticizing the actions of Barasch and other officials. Information that Kotz uncovered during that investigation led to the Justice Department’s charges that Barasch violated federal conflict-of-interest laws by representing Stanford.

 After examining the new information and previously undisclosed documents uncovered for this story, Kotz said: “Based upon the documents and information you provided me, and given the record of Barasch’s previous actions, I would say that there are questions about several matters in which Barasch had conversations about while he was at the SEC—during the same time that he was engaged in discussions for prospective employment—that should be scrutinized further to determine whether there were violations of conflict-of-interest statutes and regulations.”

 Barasch, through his lawyer, Paul Coggins, a former United States attorney for the Dallas-Fort Worth area, declined to comment for this story. “Neither Spencer nor I will be commenting for the story,” Coggins said in an email.

 The broad findings of my investigation are as follows:

•  Inspector General Kotz concluded in 2010 that Barasch may have violated federal conflict-of-interest rules through his legal representation of a Plano, Texas–based electronics company, Microtune. Barasch represented Microtune as a private attorney even though he had earlier investigated the company while working as a SEC enforcement official. According to previously confidential SEC records, Barasch escaped any punishment as a sole result of the SEC’s then general counsel setting aside Kotz’s recommendation that evidence about the alleged wrongdoing be referred to two state bar associations for further investigation. 

• During his final days at the SEC, Barasch was being courted by Houston law firm Andrews Kurth, where he is now currently employed as a partner who leads the firm’s corporate-governance and securities-enforcement team. According to confidential internal emails from Andrews Kurth, the firm apparently considered using Barasch to learn inside information about a potential civil fraud lawsuit that, at the time, the SEC was considering filing against the law firm. The potential lawsuit concerned legal work Andrews Kurth did for Enron, the Houston-based energy and commodities company, before it went bankrupt in December 2001 and following the discovery that the company’s leadership had engaged in one of the largest accounting frauds in US history. Confidential Andrews Kurth emails suggest that the firm's partners were eager to learn what action if any the SEC might take against them, and hoped Barasch, still with the SEC, could find out. Any discussion by Barasch with anyone at the SEC regarding Andrews Kurth’s representation of Enron would constitute a violation of federal conflict-of-interest laws, SEC officials and outside experts told me in numerous interviews. 

•  Less than three months before Barasch and the principals of Andrews Kurth began discussing the possibility of bringing him on as a partner, Barasch settled a foreign bribery case with an oil-and-gas services-and-equipment company, BJ Services, which was being represented in the matter by Andrews Kurth. Barasch supervised the SEC’s investigation of BJ Services, negotiated directly with Andrews Kurth partners to settle the case, and settled on terms favorable to the company, according to confidential records. “I like him and as I mentioned had some really good dealings with him in connection with resolving BJ Services FCPA [Foreign Corrupt Practices Act] problems,” one Andrews Kurth partner emailed another, as the firm was trying to recruit Barasch in December 2004. While by themselves Barasch’s talks with Andrews Kurth about taking on a job after his employment at the SEC might have been technically within the confines of the law, former colleagues he worked with at the SEC say they believe Barasch should not have discussed employment with a law firm with which he had only recently been negotiating to settle a case: “It is not just optics. What he did creates an appearance of impropriety,” a former SEC official who had worked with Barasch said.

This story is based on more than 1,000 pages of confidential records from inside Andrews Kurth—hundreds of emails, personal notes of partners of the firm, and billing records. Hundreds of pages of previously confidential SEC files, as well as public court records and public SEC records, were also reviewed. And more than two dozen former SEC officials and private attorneys who have worked with Barasch or Andrews Kurth spoke with me.

From 1998 to 2005, during his tenure as the chief enforcement officer of the SEC’s Dallas–Fort Worth regional branch, Barasch overruled examiners in his own office who wanted to investigate Stanford. Year after year, and with increasing urgency, they warned Barasch that Stanford was likely running a “massive Ponzi scheme” and also engaged in international money laundering. But each time the examiners sought to open a file, Barasch quashed any potential investigation.

 The SEC examiners weren’t able to persuade their superiors to investigate Stanford until 2005—exactly one day after Barasch left the agency to become a partner at Andrews Kurth. By then, investors in the US and overseas had lost additional billions of dollars. When Stanford was eventually arrested and charged, in March 2009, he had stolen more than $7 billion—the second largest Ponzi scheme in American history. Only Bernard Madoff stole more.

 To date, no concrete evidence has surfaced that Barasch’s suppression of the various potential probes of Stanford was anything more nefarious than bad judgment. Stanford ran his Ponzi scheme from his offshore bank, the Stanford International Bank, on the Caribbean island of Antigua. Barasch and others at the SEC said they did not believe that the SEC had proper jurisdiction to investigate, and that it would be difficult to obtain the necessary records from overseas. The SEC’s bungling the investigation of the Stanford Ponzi scheme is considered by many to be one of the worst—and most costly—regulatory failures in the history of the US government.

 But more so than quashing the potential Stanford probes, it was what Barasch did almost immediately after leaving the SEC that deeply angered many of his former SEC colleagues: He briefly represented Stanford as a partner with his new law firm, Andrews Kurth. Barasch appeared to be cashing in on his own missteps as a government official.

 Moreover, federal law explicitly prohibited Barasch from representing Stanford: Former SEC officials are barred from representing as private attorneys individuals or corporations about whom they have made substantial or material decisions while in the government. This resulted in the Justice Department bringing civil charges against Barasch. On January 13, 2012, Barasch agreed to a $50,000 settlement. The Justice Department alleged that Barasch’s “supervisory position at the SEC,” during which he engaged in the “oversight of the investigation of Stanford Financial Group… restricted him from future private representation of Stanford Financial Group before the SEC." Barasch had chosen to defy the lifetime restriction on representing Stanford.

 Besides the $50,000 fine, Barasch also agreed to a one-year ban on practicing before the agency as punishment for his representation of Stanford. In agreeing to settle matters with the Justice Department and SEC, Barasch was not required to admit to any wrongdoing.

 Asked by then SEC inspector general Kotz why he was so determined to represent Stanford, Barasch candidly responded: “Every lawyer in Texas and beyond is going to get rich over this case. OK? And I hated being on the sidelines.”

 A former Andrews Kurth employee told me that Barasch informed his law partners that the firm stood to earn $2 million or more from representing Stanford: “There is lot pressure for a new partner just walking in the door to prove themselves. And the way to do that here was to bring in a new client who could pay high fees. It’s not surprising that some corners were cut.”

 Barasch’s behavior in attempting to get Stanford’s business for Andrews Kurth is strikingly similar, my investigation found, to his involvement with another client he helped bring to the firm: Microtune, the Texas electronics firm that specialized in manufacturing semiconductors.

 At the SEC, Barasch had overseen a 2005 securities-fraud investigation of Microtune. At Andrews Kurth, Barasch represented Microtune when it came under a second investigation for an entirely new and separate matter, during which time Barasch met with former colleagues at the SEC without conferring with the SEC’s ethics counsel. The role that Barasch played in representing Microtune is detailed in hundreds of pages of internal Andrews Kurth records.

 Former SEC inspector general Kotz concluded in a 2010 memo that Barasch potentially violated federal conflict-of-interest rules by meeting with former colleagues without prior ruling from the SEC’s ethics counsel that it would be legal or ethical to do so.

 The inspector general recommended that his findings be forwarded to the state bar associations of Texas and the District of Columbia, where Barasch was licensed to practice law. Previously confidential SEC records indicate that no action was taken because the SEC’s general counsel at the time, David Becker, did not believe that Barasch’s alleged wrongdoing was strong enough to warrant such action.

 Two sources—one of whom is a former Andrews Kurth employee—say that Andrews Kurth earned $1.5 million from the firm’s representation of Microtune. One of these people explained to me: “Why would you put your reputation or livelihood at risk? Why would you put your law firm at risk? Because there is so much money to do so, and unfortunately little down side if you are caught.”

 Barasch and Andrews Kurth jumped at the chance to represent Microtune. In 2005, Microtune settled a civil case brought by the SEC alleging accounting fraud. Barasch supervised that investigation of Microtune, according to government records and interviews.

 In 2007, the SEC opened a new inquiry as to whether Microtune had engaged in securities fraud by misstating to its stockholders the backdating of stock options to some of its top executives. Microtune wanted to get out in front of the investigation and tasked Andrews Kurth with conducting its own internal investigation of the allegations Microtune was facing. (Increasingly, corporations conduct internal investigations of their own conduct to gain leniency from the government by disclosing their own wrongdoing and, critics say, to sometimes deflect attention and protect senior corporate executives by laying blame on subordinates.)

 Because Barasch had overseen the earlier investigation of Microtune, he was required by federal regulation to seek permission from the SEC’s ethics counsel as to whether he could represent the company in private practice. Because he did not do so, the SEC inspector general concluded that he had violated federal law by meeting with former colleagues at the SEC about the matter without obtaining such approval.

 Retaining Barasch and Andrews Kurth to advocate their case paid off for Microtune. On June 30, 2008, the SEC filed a civil lawsuit alleging that Mictrotune and two of its highest executives “perpetrated a fraudulent and deceptive stock option backdating scheme” in which they “awarded themselves” and their colleagues millions of dollars in compensation not properly reported to stockholders. On the very same day the SEC’s charges were filed, Microtune settled the case on highly favorable terms. In settling the SEC’s lawsuit, Mictrotune was not required to admit any wrongdoing or even pay a fine.

 Two former executives of Microtune, however, did not fare so well. The firm’s former chairman and CEO, Douglas Bartek, and its chief financial officer and general counsel, Nancy Richardson, fought the charges. Both of them were cleared after a federal appeals court ruled in August 2012 that the SEC had not filed the charges against the two executives until the statute of limitations had expired.

 Unsurprisingly, this raised some eyebrows among Barasch’s former colleagues at the SEC, as the internal investigation he participated in had largely exonerated Microtune and laid blame squarely on Bartek and Richardson who had both been made wholly expendable by leaving the company.

 And some of Barasch’s former colleagues I interviewed thought he held a personal vendetta against Bartek. During the initial SEC investigation of Microtune, which Barasch had supervised, he originally sought to bring charges against Bartek, but other enforcement officials at the SEC counseled that they did not believe they had a viable case against him. And as the then CEO of his own company, Bartek had the financial resources to fight any possible charges. According to one of Barasch’s former colleagues at the SEC, Barasch was told by Bartek's legal team, “If [the SEC] bring this case we are going to fight tooth-and-nail.” Barasch begrudgingly backed down.

 Another former SEC colleague of Barasch’s told me, “Spencer believed that Bartek unjustly escaped the noose the first time… He was still smarting from [not being able to charge] the first time. Now he had a second bite at the apple.” 

Even though Kotz concluded that Barasch likely violated federal conflict-of-interest laws, the SEC did absolutely nothing. It did not refer Kotz’s findings to the bar associations, as per his recommendation. Nor did it take any disciplinary action against Barasch. This was because the SEC’s then general counsel David Becker overruled Kotz. As Becker saw it, even though Barasch had overseen the earlier investigation of Microtune while at the SEC, the new options-backdating case was different enough to conclude that Barasch had not violated conflict-of-interest regulations, according to previously confidential SEC files. Because, in Becker’s view, there was no conflict of interest, Barasch did not deserve to be punished for having circumvented the SEC’s ethics counsel. Another former senior SEC official told me, “What harm could have come from someone simply examining the evidence? Becker’s decision foreclosed even that possibility.”

 Six former SEC officials told me in interviews that it was suspicious that Barasch had never sought the advice of the SEC ethics counsel. “It is the first call that I make—that any of us make—when we are considering a representation,” one official put it succinctly. “It takes a few minutes to make the call, and you are in the clear if you get approval. It’s necessary to do if you want to cover yourself. There is just too much downside to your reputation, your career, and, most of all, your firm.”

 Another former SEC attorney, who worked with Barasch, told me, “The only reason that you would not check is because you thought the answer might be no and you wouldn’t be able to do the representation. The only reason you would not check with the ethics office first is if you were trying to get around the system… Barasch agreed to represent Microtune without talking to the [SEC] ethics office. He represented Microtune without asking the ethics office. He didn’t in the first case because he knew the answer would be no. He didn’t in the second case because he knew there was a chance he would be told no.”

 Barasch’s actions in regard to his representation of Microtune were strikingly similar to his alleged illegal representation of Stanford. In the case of Microtune, Barasch never contacted the SEC ethics counsel at all. In the case of Stanford, shortly after leaving the SEC in 2005, Barasch had sought to represent Stanford and sought out guidance from the SEC ethics counsel about whether he would be allowed to do so—only to be told by the counsel that he could not represent Stanford. Barasch complied.

 In 2006, the SEC would intensify its investigation of Stanford, and in turn Stanford sought out Barasch to represent him. This time, however, Barasch simply began representing Stanford without seeking consent from the SEC’s ethics counsel. Barasch’s representation only ended when he called a former colleague to discuss the case, causing an uproar among several of Barasch’s former colleagues in the SEC’s Dallas–Fort Worth office. Barasch ended his representation of Stanford only when the ethics counsel told him that to continue to do so would be flat-out illegal.

 But Barasch’s alleged ethical lapses were potentially profitable (in the case of Stanford) and actually profitable (in the case of Microtune, Andrew Kurth earned $1.5 million). Barasch told his law partners that he stood to make as much as $2 million or more if Andrews Kurth defended Stanford before the SEC, according to a former firm employee.

 “People ask why corporations are given a slap on the wrist,” a former SEC litigation attorney told me in an interview. “Well, look at the regulators—and how they are regulators. If the SEC gives a slap on the wrist to someone powerful on Wall Street, look at the slap on the wrist for the regulators. Spencer Barasch and Andrews Kurth stood to earn millions if they represented Stanford. Barasch’s punishment: a $50,000 fine. You tell me they made $1.5 million from Microtune. Nobody even got in trouble for that one.”

 Many enforcement attorneys who still work for the SEC, or have since left, feel similarly. But those who continue to work there are not allowed to voice their criticisms publicly. And many of those who have left the SEC are loath to publicly make such comments, because once in private practice they have to represent clients before the Commission.

 Thus, it was left to one of the SEC’s most respected trial counselors, James Kidney, to say what his colleagues could not and cannot. Kidney worked as a lawyer for the SEC but never went through the revolving door, making him one of the rare enforcement officials who is able to speak freely. After a long and distinguished career, Kidney gave a poignant speech at his retirement party on March 27 of this year, in which he inexorably tied the SEC’s tepid response to bringing cases against the powerful to its conflict-of-interest revolving door. Kidney told his former colleagues:

 The revolving door is a very serious problem. I have had bosses, and bosses of my bosses, whose names we all know, who made little secret that they were here to punch their ticket. They mouthed serious regard for the mission of the Commission, but their actions were tentative and fearful in many instances… Don’t take risks where risk would count. That is not the intended message from the ticket punchers, of course, but it is the one I got on the occasions when I was involved in a high-profile case or two. The revolving door doesn’t push the agency’s enforcement envelope very often or very far.

 The attitude trickles down the ranks… It is no surprise that we lose our best and brightest, as they see no place to go in the agency and eventually decide they are just going to get their own ticket to a law firm or a corporate job punched. They see an agency that polices the broken windows on the street level and rarely goes to the penthouse floors. On the rare occasions when enforcement does go to the penthouse, good manners are paramount. Tough enforcement—risky enforcement—is subject to extensive negotiation and weakening.

Just as Barasch was preparing to leave the SEC, Andrews Kurth was facing legal problems of its own. The firm was under investigation by the SEC for legal advice it had given to the failed energy giant Enron. The firm’s partners were anxious for any word as to whether the SEC might bring charges.

 Barasch told his soon-to-be law partners that before he could formally accept their offer, he wanted to go to Washington, DC, to visit with his superiors and see whether they were fine with his leaving. According to confidential emails, Barasch worried that some at the agency might think he was simply too valuable to leave. If told so in DC, Barasch informed his suitors at Andrews Kurth, he might just have to stay.

 Several of Barasch’s former SEC colleagues told me that this was a bit of puffery at the expense of truth: “There is nobody at the SEC who doesn’t leave whenever they want. There is no such thing as anyone, even the chairwoman, who is not free to leave.” Another said, “Nobody was going to tell Spencer Barasch that he was too important to leave. That's just not even close to reality.”

 According to the same batch of confidential emails, Barasch then informed his soon-to-be colleagues at Andrews Kurth that one of the persons he was seeing in DC—to ask permission to leave the agency—was Linda Thomsen, the then deputy enforcement chief, who also happened to be the head of the SEC’s Enron task force. In other words, she was the single person who not only knew but would make the final decision as to whether the SEC would sue Andrews Kurth for its Enron work.

 Just as Barasch was about to leave for the capital, Jerry Beane, a senior partner at Andrews Kurth, who had been working to lure Barasch from the SEC, sent Barasch an email detailing various litigations against the firm under the heading “Update Concerning Enron Litigation—ATTORNEY CLIENT PRIVILEGE.” Beane wrote in the email: “As we have previously reported to you, the Firm is a defendant in two Enron-related lawsuits pending in federal district court in Houston…” At one point in the email, Beane bleakly reported that Enron stockholders were alleging that Andrews Kurth assisted Enron in transactions that allegedly allowed Enron to distort its financial condition.

Beane wrote: “Although we hope otherwise and firmly believe that the shareholders have not plead a cause of action under federal securities laws, it may well be that [the federal judge hearing the case] rules… that the pleadings in the… case sufficiently allege a course of action against us.”

 The following day, Andrews Kurth managing partner Harold Ayers—who had been copied on Beane's email to Barasch—sent a two-word email to both of them, simply asking, “Any word?”

 Ayers’s question suggests that he and others at Andrews Kurth might have been asking about whether their law firm was going to be sued for their Enron work. Or it could be interpreted as asking whether Barasch had been given the go-ahead by the SEC to leave and join the firm.

 A subsequent email suggests that Ayers believed that Barasch might learn something about the SEC’s plans as to whether or not to sue Andrews Kurth over its Enron work.

 On February 27, Ayers emailed several of his law partners, writing: I talked to Spence this evening. All systems are go for him leaving the SEC and joining AK. He will be in DC on Wednesday thru Friday of this coming week. He will be telling the SEC folks that he is leaving to go to AK. One of the people he will be talking to is the head of the Enron task force. Spence had some questions about the upcoming meeting between AK and the SEC. I told him that Ross [another Andrews Kurth partner] was the best person to provide the details. There is no problem with Spence. He just wants to respond if there is any question of comment. Ross, can you call Spence at his office on Monday or Tuesday to discuss?

 Ultimately, the SEC did not sue Andrews Kurth for its Enron work.

 But in January 2007, Andrews Kurth agreed to pay Enron’s bankruptcy estate $18.5 million for alleged malpractice committed by the firm. Earlier, Neil Baston, a court-appointed examiner responsible for distributing money to Enron’s creditors and defrauded investors, stated in a report to the court that an examiner he retained “concluded that there is sufficient evidence from which a fact-finder could determine that Andrews Kurth committed malpractice” and violated Texas bar-association rules while representing Enron.

 Under terms of the agreement to settle the civil Enron litigation, Andrews Kurth did not admit any wrongdoing. At the time, Harold Ayers was quoted as saying, “We have continuously denied wrongdoing and culpability with respect to our work for Enron… We felt, though, after the passage of five years, that it was expedient to enter into the settlement to put this matter behind us.”

To join the debate click here. 

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

It's a Scandal that Fraudsters Bernie Madoff and Robert Allen Stanford Were Not Shut Down by the SEC

Believe it or not Bernie Madoff’s phony monthly trading reports listed trades on days the market was closed, or at prices that were far off the market or in volumes that simply never existed. Yet, Madoff’s scam continued for 36 years, from 1972 until 2008, as the SEC was incapable of discovering the truth, and Madoff’s clients never read their phoney monthly statements, since through bull and bear markets Madoff always turned in profits that were not real. And shocking as it may seem, the SEC knew that Stanford was a fraud early on in 1998, but chose not to prosecute as the securities he sold were short term notes of a foreign bank supposedly yielding 12% and were not shares of stock. Imagine the stupidity of that pusillanimous decision. What a bunch of wimps!

 Such were the most shocking revelations at a Boston College Conference on the Madoff and Stanford Cases ” The Legacy of Mr. Ponzi,” that the American College of Bankruptcy organized last Friday, at which I was a speaker on the Madoff crimes. I emphasized the lackadaisical performance by the Securities and Exchange Commission as the key absurdity of allowing these crimes to damage so many naive investors who wanted to believe against all past investment history that Madoff’s year-in,year-out returns of 9%-10% and Stanford’s offer of a 12% coupon on his bank’s notes could somehow be a rational expectation by small investors entrusting these two con men with most of their valuable savings. By comparison, Mr. Ponzi was put out of business in a very short time long before there was even an SEC existing. So much for the securities regulatory process where scams are concerned. It is a travesty of justice.

 Clearly, the SEC should have had the smarts and the will to put Madoff and Stanford out of business before they were able to do so much harm. The fact that the SEC was inadequate to the challenge should give legislators the motivation to order a review of the agency’s leadership, manpower, and its statutory powers. It appears that the political connections of Madoff and the political contributions by Stanford may well have dulled or dented the investigations into their chicanery and kept the cops off the beat. Especially, as in the case of Madoff, the recent conviction of 5 employees together with the conviction of Madoff’s brother and other high-level employees reveals clearly the conspiracy pretty well included between 15 and 20 people. Stanford’s behavior involved an offshore bank in the Caribbean and so must not have been seen as so crucial to the SEC. It’s ability to make securities criminal cases is far overshadowed by the Justice Department.

 After 6 years of progress, Irving H. Picard, the Trustee for the Liquidation of Bernard L. Madoff Investments Securities, has been able to pay the innocent Madoff investors back 56% of the money they lost. With any luck in another 155 claims for $6 billion more payments, Picard is hopeful of returning 100% to those legitimate Madoff losers. “ My goal is 100%”, he said before a crowd of over 100 students and bankruptcy experts at Boston College Law School in Newton, Mass. on Friday. He has spent $980 million in legal and administrative fees to collect $9.8 billion so far. By comparison the Stanford fundraising is only about $240 million, while the costs have been $120 million or 50% of receipts. Picard revealed for the first time that fabricated backdated trades for Madoff’s sons(one committed suicide) in Apple common shares that threw off paper profits of $6.5 million suggests that they “should have known” the enterprise was a scam.

To join the debate click here. 

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Senator Vitter's Letter to Sharon Bowen

Senator Vitter's Letter to Sharon Bowen

 
To join the debate click here. 

 For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

U.S. Senator sets hurdle for CFTC hopeful Bowen

(Reuters) - A U.S. senator questioned a candidate for the Commodity Futures Trading Commission over a decision that left victims of the Allen Stanford fraud out of pocket, raising a hurdle she must jump to get the job.

 In a letter on Friday, Louisiana Republican David Vitter asked Sharon Bowen - who has been nominated by President Barack Obama to join the derivatives regulator - a series of 10 questions about her role in the decision.

 Bowen is the acting head of the Securities Investor Protection Corporation (SIPC), the body that seeks to recoup money for investors if their broker goes under.

 SIPC holds there is no basis in law to refund people who lost money in the $7 billion Ponzi scheme set up by Allen Stanford, who is serving a 110-year jail sentence.

 The Securities and Exchange Commission (SEC) lost a court case in which it contested that decision, though an appeal in the case is still pending. A group of 14 senators and fraud victims are supporting the SEC's legal fight.

 "It seems that SIPC continues to prioritize protecting its Wall Street members by hiring lawyers to fight the SEC in court rather than protect investors," Vitter said in his letter.

 SIPC, created under the Securities Investor Protection Act (SIPA), is funded by Wall Street firms.

 Vitter also asked whether SIPC had received any outside funding for its legal defense, whether its decision had been influenced by the banks, and wanted to know whether Bowen had received any gifts while at SIPC.

 Bowen and two other nominees to the five-strong CFTC met little pushback in a Senate committee at a confirmation hearing on March 6, but it is no surprise that the Stanford scandal is coming to haunt Bowen. Thad Cochran, the highest-ranking Republican on the Committee, mentioned the scandal during the meeting, though he did not pursue the issue.

 The agency - down to just two Commissioners, one Democrat and one Republican - is facing a leadership vacuum just as it is implementing some of the most fundamental reforms of financial markets after the 2007-09 credit meltdown.

To join the debate click here. 

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Kachroo Legal Services Update on SEC Lawsuit

TO ALL SEC CLIENTS
February 26, 2014

 Zelaya et al v. United States of America

 Dear Stanford/SEC Clients: We write to update you with respect to important information regarding the claim against the Securities and Exchange Commission.

 To read the complete update from Kachroo Legal Services Click Here:  

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Justices Throw a Rope to Stanford Ponzi Victims

WASHINGTON (CN) - Federal law does not preclude investors allegedly defrauded by R. Allen Stanford's $7 billion Ponzi scheme from attempting recovery via state class actions, the Supreme Court ruled Wednesday.

 For nearly 15 years, Stanford Group Co. and related entities sold certificates of deposit issued by its Antigua-based Stanford International Bank, and then used investor funds to cover its liabilities.

 Its eponymous leader was sentenced in 2012 to 110 years in federal prison after a federal jury in Houston, Texas, convicted him on 13 of 14 counts of conspiracy, wire fraud and mail fraud.

Read the full transcript from the Courthouse News Service here. 

 For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

SLUSA - The full Court Ruling

Great news for ALL victims! With the SLUSA ruling going in favour of the victims all the FROZEN court cases can now proceed.

To view the full court ruling on SLUSA click Here

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

U.S. Justices say Allen Stanford Victim Lawsuits can go Forward

(Reuters) - The Supreme Court on Wednesday ruled that lawyers, insurance brokers and others who worked with convicted swindler Allen Stanford cannot avoid lawsuits by investors seeking to recoup losses incurred in his $7 billion Ponzi scheme.

On a 7-2 vote the court held that lawsuits filed in state court can go forward. New York-based law firms Chadbourne & Parke and Proskauer Rose and insurance brokerage Willis Group Holdings Plc were all sued by former Stanford investors. The investors also sued financial services firm SEI Investments and insurance company Bowen, Miclette & Britt.

Writing for the majority, Justice Stephen Breyer said the Securities Litigation Uniform Standards Act did not prevent the state lawsuits from proceeding. The law says that state lawsuits are barred when the alleged misrepresentations are "in connection with" the purchase or sale of a covered security.

As the defendants in the case were not selling securities traded on U.S. exchanges, "it is difficult to see why the federal securities laws would be - or should be - concerned with shielding such entities from lawsuits," he wrote.

The defendants sought Supreme Court review after the New Orleans-based 5th U.S. Circuit Court of Appeals in March 2012 said the lawsuits brought under state laws by the former Stanford clients could go ahead.

The former Stanford clients are keen to pursue state law claims because the Supreme Court has previously held that similar so-called "aiding and abetting" claims cannot be made under federal law.
The class action lawsuits filed by the former investors accused Thomas Sjoblom, a lawyer who worked at both law firms, of obstructing a Securities and Exchange Commission probe into Stanford, and sought to hold the other defendants responsible as well.

The Obama administration, representing the SEC, sided with the defendants over the interpretation of the state law in an avowed effort to protect the agency's own authority to pursue wide-ranging investigations.

The administration pointed out that the "in connection with" language in SLUSA that limits state court lawsuits mirrors language in federal law that gives broad authority of the SEC to pursue such misrepresentations. Therefore, the administration urged the court to give the phrase a broad interpretation.

Stanford's fraud involved the sale of certificates of deposit by his Antigua-based Stanford International Bank. Much of the litigation centers on whether these qualified as securities under applicable laws.

The cases are Chadbourne & Parke LLP v. Troice et al, U.S. Supreme Court. No. 12-79; Willis of Colorado Inc et al v. Troice et al, U.S. Supreme Court, No. 12-86; and Proskauer Rose LLP v. Troice et al, U.S. Supreme Court, No. 12-88.

To join the debate click here. 

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Politicians yet to return big money from Stanford’s Ponzi Scam

Five years after R. Allen Stanford’s investment companies collapsed in an infamous multibillion-dollar Ponzi scheme, records show that the receiver charged with recouping money for victims still is chasing a long list of politicians.

Stanford was a generous and bipartisan donor to political campaigns. After his conviction, Ralph Janvey was appointed by the court as receiver and given the task of tracking down and recovering Stanford’s fraudulent expenditures so the money could be returned to the Ponzi scheme victims.

Some of the big donors have returned money, even if they had to be sued: The Democratic Senatorial Campaign Committee has returned $950,000, and the National Republican Congressional Committee gave back nearly $250,000.

But a number of other campaigns have not. By Mr. Janvey’s calculation, nearly $120,000 in tainted donations should go to creditors.

The Obama campaign has not returned $4,600, and Rep. Pete Sessions, Texas Republican, and the New Jersey Democratic State Committee each owes $10,000, according to the receiver’s most recent list.

A spokeswoman for Mr. Sessions said he has already gotten rid of money from Stanford, who is serving a 110-year prison sentence on fraud charges.

“Congressman Sessions donated to charity the dollar amount of all contributions from individuals charged in the case,” Sessions spokeswoman Torrie Miller wrote in an email.

Federal Election Commission rules allow politicians to disgorge unwanted or illegal donations by donating to charity, but that won’t get Mr. Sessions or any other lawmaker off of Mr. Janvey’s list.

Scott Powers, an attorney for Mr. Janey, said contributions to charity that are equal to the amount of campaign donations from Stanford don’t make any difference.

“The money at issue did not rightfully belong to Mr. Stanford,” he said.

“It was not rightfully transferred to the political committees. And so the political committees are not entitled to decide that the money should be given to charity rather than given to the receiver for distribution to the victims from whom the money was taken in the first place.”

The DSCC and the NRCC, which have returned their money, did so only after losing arguments in court. In perhaps a rare example of Capitol Hill bipartisanship, the fundraising committees said Mr. Janvey’s demand wasn’t timely.

But the 5th U.S. Circuit Court of Appeals ruled in Mr. Janvey’s favor in October 2012.

The problem for Mr. Janvey now is that the donations that still haven’t been collected aren’t worth the expense of filing lawsuits. Most of the outstanding contributions are for a few thousand dollars each.

Other top recipients on the receiver’s list include Sen. John Cornyn, Texas Republican, who received $6,000 from Stanford, and congressional Delegate Donna M. Christensen, a Democrat who represents the Virgin Islands and accepted $5,000 from him.

Also listed are Senate Minority Leader Mitch McConnell, Kentucky Republican, at $2,500, and former Rep. Rahm Emanuel, Illinois Democratic and current Chicago mayor, for $3,000.

Cornyn spokeswoman Megan Mitchell said the senator gave the money he received from Stanford to the Big Brothers Big Sisters of America and sent letters to federal agencies to ensure money caught up in the Stanford scheme was returned to investors.

Ms. Mitchell also said Mr. Cornyn co-sponsored a resolution calling on the Treasury secretary to “use the voice and the vote” of the U.S. to oppose World Bank or International Monetary Assistance to Antigua until its government cooperates with U.S. efforts to compensate Stanford victims.

Stanford’s fraud centered at his offshore bank in Antigua.

Still, Mr. Powers said, charitable contributions don’t do Stanford victims much good.

“For economic reasons, the receiver is not in a position to pursue litigation with every politician who received contributions from Stanford,” Mr. Powers said. “The receiver nevertheless calls on the remaining holdouts to do the right thing and to return the contributions for the benefit of the victims of the Stanford fraud.”

To join the debate click here. 

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Five years since swindle, some Stanford victims now threatened with lawsuit

By Stephanie Riegel Published Feb 17, 2014 at 2:38

This month marks five years since investors with the now-defunct Stanford Group—which had a large presence in Baton Rouge—first learned they were victims of a $7 billion Ponzi scheme. And, though R. Allen Stanford has since been convicted and sent to prison for the massive fraud, most of the 28,000 investors who thought they were buying certificates of deposit from Stanford International Bank in Antigua have yet to recoup more than 1% of their lost savings. 

Now, adding insult to injury, some local victims are getting emails from a receiver in the case threatening to sue them in connection with claims they filed to recover their funds. "We're being terrorized again after five years," says Blaine Smith, a local Stanford victim, who lost more than $1 million through Stanford and is among those who have received the emails. "It's really kind of sick."

 Smith says the emails are coming from Grant Thornton, an Antiguan-based receiver that is supposed to be helping victims recoup lost funds. There is also a U.S. receiver in the case. Smith has filed claims with both. 

In his letter, Grant Thornton tells Smith that because he withdrew nearly $22,000 in interest payments from his account with Stanford back in 2008—before the Ponzi scheme had been uncovered by the Securities and Exchange Commission—he must return the money before his claim is processed. "Failure to repay may result in the estate seeking judgment against you," the letter reads.

 Smith has been in contact with Angela Kogutt, the head of the Stanford Victims Coalition, which advocates in Washington, D.C., for Stanford victims. In an email to Smith, Kogutt says other victims have also received the email and that she is trying to get to the bottom of the matter.

 Smith has also contacted the offices of U.S. Sens. Mary Landrieu and David Vitter, as well as U.S. Rep. Bill Cassidy, who he says have been very supportive and helpful.

 Stanford is serving a 110-year prison sentence in Florida, while multiple lawsuits rage on over victim compensation. Kogutt was recently quoted in the national media as saying it could be years before victims recoup any of their lost investments.

To join the debate click here.

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Five years after Stanford scandal, many victims penniless

By: Scott Cohn

Five years after learning they were victims of a $7 billion Ponzi scheme, investors in the Stanford Financial Group say they feel abandoned, even though their losses rival those in the Madoff scam that was revealed two months earlier.

Unlike the Madoff case, in which a court-appointed trustee has said he is well on his way to recovering all of the investors' principal—estimated at $17.5 billion—Stanford victims have recovered less than one penny on the dollar since the Securities and Exchange Commission sued the firm and a court placed it in receivership on Feb. 17, 2009.

"I do have to say the Stanford victims do feel like the stepchildren in the Ponzi world," said Angela Shaw Kogutt, who estimates her family lost $4.5 million in the scam. Shaw heads the Stanford Victims Coalition, which has been trying for years to drum up support in Washington.

Some 28,000 investors—10 times the number of direct investors in the Madoff case—bought certificates of deposit from Stanford International Bank in Antigua, which was owned by Texas financier R. Allen Stanford. Stanford's U.S. sales force had promised the investors—many of them retired oil workers—that the CDs were at least as safe as instruments from a U.S. bank. But a jury later found most of the clients' money financed Stanford's lavish lifestyle instead of the high-grade securities and real estate it was supposed to. 

Stanford, who portrayed himself as a self-made billionaire, exuded the American Dream. He claimed to have built his global financial empire from a family insurance business in his rural hometown of Mexia, Texas. A generous contributor to politicians of all stripes, Stanford effectively took over the financial sector in Antigua while nurturing rumors of his unique connections.

But asked directly by CNBC in 2009 about suggestions he was a government informant, Stanford demurred.

"You talkin' about the CIA?" he asked. "I'm not gonna talk about that."

On the eve of the fifth anniversary of the scandal, Dallas attorney Ralph Janvey, appointed by a federal judge to head the receivership and round up assets for the victims, said he feels the victims' pain.

"Even though my team and I have worked hard and made much progress over the last five years, the process of unwinding the fraud and the pace of recovering money have been frustratingly slow," Janvey wrote in an open letter to "all those affected by the Stanford fraud."

In the Stanford case, progress is relative.

Last April, Janvey won court approval to begin distributing $55 million to some investors. In the letter, he said $25 million has already been distributed, another $5.5 million could be paid this month and another $18 million in Stanford assets from Canada could be distributed this year as well. 

But the rest of the investors' money was either spent by Stanford or is tied up in litigation. Janvey said some $200 million in assets is in Swiss banks and tied up in the criminal forfeiture process. He has sued dozens of people and institutions that allegedly profited from the Ponzi scheme, seeking more than $680 million. The prospects for recovering anything close to that amount, however, are unclear.

"Asset recovery litigation is difficult, lengthy and expensive," Janvey wrote. "The defendants, many of whom have significant resources, are defending the cases aggressively, and many of the favorable rulings in these cases have already been appealed."

Further complicating matters, victims allege: the Justice Department has not been as aggressive in the Stanford case as it has been in the Madoff case.

Even the federal judge overseeing the Stanford receivership, David Godbey in Dallas, made note of the apparent contrast during a status hearing Jan. 16, a week after authorities announced a $2 billion settlement with JPMorgan Chase for its role in the Madoff scandal.

"I read with interest in the media that JPMorgan Chase is paying the Madoff folks a whole bunch of money. I assume our check will follow shortly," Godbey said, according to a transcript of the hearing.

No fewer than five banks—though not JPMorgan Chase—have been sued in the Stanford case for allegedly facilitating the fraud, but there have been no signs of interest from criminal authorities. A spokesman for the Justice Department did not respond to a request for a comment.

The government did prosecute Allen Stanford and several of his top executives. Stanford, 63, is serving a 110-year sentence at a federal penitentiary in Florida. He has appealed his 2012 conviction on 13 criminal counts, but with his assets frozen and having fired his court-appointed attorney, Stanford is representing himself and filing handwritten legal motions from prison. One was filed March 4, 2013 and another on March 12, 2013.

"I or any other American citizen deserve better than this," he wrote in a filing last March. "The presumed innocent part of our constitution is only a myth in America today."

The pending appeal is yet another complication for Stanford's victims, since approximately $300 million he was ordered to forfeit as a result of his conviction cannot be released until the appeals process is complete.

But one of the biggest sources of frustration for the victims is another stark contrast to the Madoff case. 

The Securities Investor Protection Corp. (SIPC), which insures U.S. brokerage accounts, has refused to pay Stanford victims, while qualified Madoff victims are eligible for SIPC's maximum coverage of $500,000 per account.

The SEC sued SIPC in 2012 on behalf of the Stanford investors, arguing they also were entitled to coverage, as Stanford's U.S. brokerage was an SIPC member. But SIPC says its insurance covers only securities, and even if the Stanford CDs are considered securities, they are worthless.

The judge in the case sided with SIPC. A federal appeals panel is considering the SEC's appeal, and victims are anxiously waiting for a ruling.

"I really think the only chance the victims really have to recover something is either years down the road or through SIPC," said Kogutt of the victims' coalition.

Because many of the victims are elderly, there is no time to waste. Since the scandal broke in 2009, 176 of Stanford's investors have died. 

To join the debate click here. 

 For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Stanford Lodges another appeal March 12th 2013

Allen Stanford lodged a second appeal on March 12th 2013, this is particularly relevant to victims since approximately $300 million he was ordered to forfeit as a result of his conviction cannot be released until the appeals process is complete.

 Allen Stanford intends to represent himself in the appeal, below is the hand written letter Stanford sent to the 5th circuit court of appeals, it makes interesting reading and shows Stanford's state of mind.

Stanford Appeals Letter Mar12 2013 by Stanfords Forgotten Victims

To join the debate click here.


For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Stanford Lodges Appeal March 4th 2013

Allen Stanford lodged an appeal on March 4th 2013, this is particularly relevant to victims since approximately $300 million he was ordered to forfeit as a result of his conviction cannot be released until the appeals process is complete.

 Allen Stanford intends to represent himself in the appeal, below is the hand written letter Stanford sent to the 5th circuit court of appeals, it makes interesting reading and shows Stanford's state of mind.

Stanford Appeal Mar 4 2013 by Stanfords Forgotten Victims

To join the debate click here.


For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Open Letter From Stanford Receiver Dated February 14, 2014

Stanford Financial Group Receivership 

 1029 State Highway 6 North I Suite 650-272 1 Houston, TX 77079 

 Phone 866.964.6301 

 February 14, 2014

 To All Those Affected by the Stanford Fraud:

 It has been five years since the Court appointed me as Receiver to unwind the world-wide Ponzi scheme perpetrated by Allen Stanford and those who aided, abetted and enabled him. I know that these continue to be very difficult times for the thousands of you whose lives were impacted, and in many cases devastated, by the Stanford fraud. Even though my team and I have worked hard and made much progress over the last 5 years, the process of unwinding the fraud and the pace of recovering money have been frustratingly slow. Unfortunately, the costs associated with this process have been substantial. Although many challenges still lie ahead, the entire Receivership team and I are committed to working as hard as we can to recover as much money as we can for the eligible claimants.

To read the full transcript click here.


For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Stanford Victims Coalition Update Regarding SIPC

Dear SVC Members,

 I apologize for the gap in time between updates, but I have some very exciting news today about a project I have been working on full-time all year—a legislative remedy that should get us SIPC if the bill is passed—regardless of the outcome of the SEC vs. SIPC appeal (which could still go our way). “The Restoring Main Street Investor Protection and Confidence Act,” is being introduced in the House today with a Senate companion bill to follow. A hearing of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises is set for Thursday, November 21 (victims are encouraged to attend and I will be testifying along with another Stanford victim). A Senate Banking Committee hearing will be held as well, but a date has not been set.............


To read the Complete Update from SVC Visit: http://sivg.org.ag/topic236.html 


For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org.ag/

U.S. lawmakers seek fix to help investors file claims against brokers

Nov 20 (Reuters) - A bipartisan group of U.S. House and Senate members is seeking to make it easier for investment fraud victims to seek compensation, after investors in Allen Stanford's Ponzi scheme were deemed ineligible under current law to file claims.

The bill, introduced by Louisiana Republican Senator David Vitter, New York Democratic Senator Charles Schumer, New Jersey Republican Rep. Scott Garrett and New York Democratic Rep. Carolyn Maloney, would bestow U.S. securities regulators with greater powers to oversee the process of determining whether customers of failed brokerages qualify for compensation.

The legislative proposal comes as the Securities and Exchange Commission awaits a crucial decision from a U.S. appeals court over the fate of the Stanford victims.

The SEC is trying to get the court to force an industry-backed fund that protects investors to start court proceedings so Stanford victims can file claims to recover a least a portion of the millions they lost.

The Securities Investor Protection Corp., or SIPC, which administers the fund, has refused the SEC's request, saying Stanford investors do not meet the legal definition of "customer" under the federal law designed to protect investors if their brokerage collapses.

SIPC uses funds paid by the brokerage industry to compensate investors in the event of a bankruptcy, such as the one that occurred at Lehman Brothers in 2008.

 Allen Stanford was sentenced in 2012 to 110 years in prison for bilking investors with fraudulent certificates of deposit issued by Stanford International Bank, his bank in Antigua.

Many of the investors who purchased the products, however, did so through his Houston, Texas-based brokerage, Stanford Group Co.

SIPC argues that investors in the scheme entrusted their money to the offshore, unregulated Antiguan bank and not to the U.S. broker-dealer. Moreover, it says that Stanford's investors actually did receive their certificates of deposit, as promised, even though they turned out to be virtually worthless.

A federal district judge agreed with SIPC's legal position in July 2012, and tossed out the SEC's lawsuit.

The SEC appealed the ruling before the U.S. Court of Appeals for the District of Columbia in October, and is awaiting a decision.

 SIPC's refusal to let Stanford victims file claims has frustrated many lawmakers on Capitol Hill, including Vitter, who has been among the most vocal in fighting for the Stanford victims.

"The Stanford Ponzi scheme devastated many Louisiana families who invested their hard-earned savings in good faith that it would be there for them when they retire," Vitter said in a statement issued on Wednesday.

"Our bill will fix a key problem we've seen with the system, which currently allows SIPC's Wall Street members to benefit economically from the SIPC guarantee while denying the claims of legitimate victims," he added.

The legislative proposal by the four lawmakers will be vetted in a hearing before a subcommittee of the House Financial Services Committee on Thursday.

Among the witnesses scheduled to testify are Stephen Harbeck, the president of SIPC, a representative from Wall Street's leading brokerage trade group, and Angie Kogutt, a Stanford victim in charge of the Stanford Victims Coalition.

The 19-page bill would amend the definition of "customer" to ensure that investors who deposit cash to buy securities can still be covered by SIPC protection, even if the money is initially given to a firm that is not a SIPC member.

 It would also give the SEC more authority to force SIPC to act without the need for court approval.  

Read More: http://sivg.org.ag/topic235.html  

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org.ag/

LEGISLATIVE ALERT 11/12

LEGISLATION TO BE INTRODUCED IN HOUSE, HEARINGS SET  BILL ALSO BEING PREPARED IN SENATE!

• Garrett & Maloney to introduce legislation in House. Senator Vitter current lead sponsor in Senate
• House hearings set for 11/21
• Selective grassroots to commence
• 5th Anniversary media needs victims willing to be interviewed by media

Dear NIAP Member & Madoff Investor, 

 Greetings.  I am excited to announce that SIPC legislation is to be introduced later this week or early next followed by Congressional hearings on Thursday, Nov 21. The legislation is to be jointly introduced by Congressman Garrett (NJ) and Congresswoman Carolyn Maloney (NY).  Similar legislation is expected to be introduced shortly in the Senate as well, consistent with the strategy laid out by Congressman Garrett in the last Congress. 

The intention is to have the legislation introduced by approximately 15 co-sponsors, and followed by an extensive outreach effort via Garrett’s and Maloney’s offices, our lobby team and our own grassroots efforts to ramp up sponsorship numbers.

 The specific bill language is still going through final stages, and a bill number and title will be finalized shortly. We will make the bill public as soon as we receive the final version.  As you probably know, it prevents clawback of the innocent, insures SIPC payments to $500,000 based on account statements, and gives the SEC authority over SIPC.

 After hearings, the bill will be moved to a mark-up session in the House Subcommittee on Capital Markets, voted on and moved to the Financial Services Committee.

  Next Steps on Grassroots. We will want to focus our House grassroots efforts on key Financial Services Committee members, as well as other influential House members, particularly those in districts or states with sizeable Madoff and Stanford victim constituents.  Our Senate strategy will focus on Senate members on the Senate Banking Committee and other key Senate members.

  The first wave of Grassroots letters and communications however will go out to those who are sponsoring the legislation at introduction, thanking them for their support and encouraging their reaching out to their colleagues to do the same. 

 Stay Tuned!  In the coming days we will be providing more detailed information, as well as laying out the details for the grassroots outreach.  We will also undertake a rapid fundraising campaign to assist costs of Congressional hearings and grassroots support.

  We look forward to working with all previous and current leaders in this effort as well. 

  Game on!
  Most sincerely,
 Ron Stein, CFP
 President, NIAP

CONTACT INFORMATION:

Victims Needed for Media interviews & Congressional testimony

Volunteers and Funds Needed. Please assist us in whatever way you can!  

Email us at: djmionis@investoraction.org

              rstein@investoraction.org

Call us at: 800-323-9250

www.investoraction.org 

www.fixsipcnow.com

Read More: http://sivg.org.ag/topic233.html 

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org.ag/

Is the SEC Here to Help Defrauded Victims in a Ponzi Scheme, Or Not?

Posted by Kathy Bazoian Phelps

 The Securities Exchange Commission (SEC) plays an active role in protecting the rights of investors. Its own mission statement is:

The mission of the Securities and Exchange Commission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.

Yet, in the high-profile Ponzi scheme case of R. Allen Stanford and Stanford Financial Bank, the SEC is finding itself aligned both for and against efforts to recover funds for the benefit of the defrauded victims. Positions taken by the SEC in two different pending litigation matters in the Stanford case may have polar opposite effects on the financial outcome for defrauded investors.

 One case, SEC v. SIPC, now pending in the Circuit Court for the District of Columbia, involves a battle between the SEC and the Securities Investor Protection Corporation (SIPC) over whether the defrauded victims are “customers” under the Securities Investor Protection Act (SIPA) and therefore entitled to payment from SIPC. This is the first time that the SEC has ever commenced an action seeking SIPC coverage for investors. The lower court found that the Stanford investors are not entitled to SIPC coverage, but the SEC continues to champion the cause of the investors in the Circuit Court seeking SIPC coverage for them.

 The other case, Chadbourne & Park LLP v. Troice et al., involves an appeal to the U.S. Supreme Court over the issue of whether Securities Litigation Uniform Standards Act of 1998 (SLUSA) bars lawsuits by a class of victims against third parties to recover their losses from alleged wrongdoers. The Fifth Circuit held that the claims against two law firms, an insurance brokerage firm and a financial services firm could proceed despite SLUSA. The U.S. Government, on behalf of the SEC and other agencies, filed an amicus brief with the Supreme Court arguing that the investor claims should be barred under SLUSA. If the Government’s position prevails, defrauded victims will be denied recovery on their claims.

 In what would be a worst case scenario for the investors, the SEC will lose in SEC v. SIPC so that investors will be denied “customer” status and protection, and the Government’s position in the Chadbourne & Park case will prevail, denying investors the ability to use self-help to sue alleged wrongdoers.

 At a quick glance, it seems that the SEC is on the wrong side of the SLUSA fight in Chadbourne & Park, given the potentially adverse consequences for investors if the SEC’s position is adopted. But perhaps the issue has more do with the way that the applicable statutes are written and interpreted than with any intent on the part of the SEC.

 In Chadbourne & Park, the principal question to be considered by the Supreme Court is:

Does the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), 15 U.S.C. 77p(b), 78bb(f)(1), prohibit private class actions based on state law only where the alleged purchase or sale of a covered security is “more than tangentially related” to the “heart, crux or gravamen” of the alleged fraud?

SLUSA prohibits a state law class action alleging a purchase or sale of a covered security “in connection with” an untrue statement or omission of material fact. A “covered class action” is a lawsuit in which damages are sought on behalf of more than 50 people, and a “covered security” is a nationally traded security that is listed on a regulated national exchange. So the question remaining is: What does “in connection with” mean? 

The target defendants in the litigation at issue argue that “in connection with” covers the following two factual scenarios that touch “covered securities” in the Stanford case: (1) that Stanford lied to purchasers of CDs and told them that the CDs were backed by investments in stocks; and (2) that some of the CD purchasers must have liquidated stocks in order to purchase the CDs.

 The Fifth Circuit did not agree that either of these two scenarios were sufficient to bar claims under SLUSA, holding that the purchase or sale of a covered security must be more than tangentially related “to the ‘heart,’ ‘crux,’ or ‘gravamen’ of the defendants’ fraud.”  The Fifth Circuit held that the claims against the defendants could proceed.

 The Government, on the other hand, has taken the position in its amicus brief to the Supreme Court that the relevant language of SLUSA was taken from the Securities Exchange Act of 1934 and should be read consistently with similar language in Section 10(b) of the Act.  In urging a broad reading of the words “in connection with,” the Government contends that:

[A] broad reading is essential to the achievement of Congress’s purpose in enacting both Section 10(b) and SLUSA.  Under Section 10(b), it enhances the SEC’s ability to protect the securities markets against a variety of different forms of fraud. Under SLUSA, it furthers Congress’s objective of preventing the use of state-law class actions to circumvent the restrictions by the PSLRA [Private Securities Litigation Reform Act] and by this Court’s decisions constraining private securities-fraud suits.

In an amicus brief taking the contrary position, 16 law professors directly challenge the concept of broadening the application of SLUSA to include the certificates of deposit purchased by the Stanford investors. They note that the certificates of deposit are not themselves covered securities and argue that therefore SLUSA should be “interpreted in a way that does not preclude investors from using state courts to pursue claims seeking traditional state law remedies for acts that do not involve covered securities within the meaning of the federal securities laws.”

 To stress their position that SLUSA should not apply to non-covered bank-issued securities that may be potentially backed by covered securities, the 16 law professors float the following hypothetical class action claims, among others, that they contend would improperly be prohibited under SLUSA if interpreted that broadly:

• "A car dealer who lies to customers about the terms of a car loan, where the car loans are securitized in a pool and interests in the pool are sold off as covered securities."
• "A credit card company that securitizes credit card balances fails to pay appropriate wages to telephone operators and answering card holder questions, and the operators file a state class action alleging violations of state wage and hour laws."
• "A nationally-traded securities clearing firm engages in sex discrimination in compensating clerical workers for work done in the securities office, and the workers file a sex discrimination class action law suit."

In summary, where the Supreme Court draws the lines on the application of SLUSA could have a significant impact on a variety of state law claims that may or may not have much to do with securities. The SEC stands behind a broad reading of SLUSA under the pretense of protecting the securities market, but its position appears to have the consequence of harming, not helping, defrauded victims by blocking state law damage claims.

 The issues are undoubtedly complicated, and there are a variety of competing considerations. From the investors’ perspective, however, they can just add this to the list of roadblocks to getting their money back.

Read More: http://sivg.org.ag/topic232.html 

  For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org.ag/

Stanford Financial Claims 6th Distribution November 4th 2013

Receiver files 6th Schedule of Payments to be Made Pursuant to the Interim Distribution Plan - On November 4, 2013, the Receiver filed his 6th Schedule of distribution payments with the United States District Court for the Northern District of Texas, Dallas Division. The 6th Schedule will be followed by others, each of which will be submitted by the Receiver on a rolling basis as additional responses to Certification Notices are received and processed.

 To view a copy of the 6th Schedule, please click here: 

 http://sivg.org.ag/topic230.html 
 
 For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org.ag/