Appellate court panel to decide

An appellate court panel soon will decide more than the question of whether a small group of Robert Allen Stanford’s innocent investors is required to surrender its remaining assets to more than 25,000 others in Louisiana and around the globe.
The three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans also will determine who is “somebody” and who is “nobody.” That’s another big question in an increasingly bitter dispute between the Securities and Exchange Commission and the Dallas attorney SEC officials handpicked to marshal Stanford’s remaining assets.
That attorney is Ralph S. Janvey, the court-appointed receiver for assets seized from Stanford and Stanford’s companies after the SEC shut down the Texas promoter in February and alleged that he and others swindled as much as $9 billion from his investors.
Janvey has recovered more than $128 million in cash and other assets he says can easily be converted to cash.
He has stated in court records he hopes to recover another $335 million in cash and investments from people in foreign countries.
Janvey is asking the 5th Circuit to allow him to seize $894 million from the frozen accounts of approximately 600 U.S. investors who did not lose all their money when the SEC halted Stanford’s operations. He does not allege any of those people were aware of any of the crimes that a federal indictment in Houston alleges Stanford committed.
Janvey argues federal case law requires him to complete the financial destruction of those innocent investors so he can share their remaining assets with all other innocent investors across the nation and around the world.
It is a position with which Dallas attorney John J. Little, a court-appointed examiner responsible for the interests of investors, disagrees on practical as well as legal grounds.
Little maintains foreign investors will never surrender any profits or principal to Janvey.
Therefore, the remaining money of innocent investors in the United States should not be subject to what Little sees as unfair seizure by Janvey.
The SEC maintains it never takes such action against innocent investors who have lost more money than they received in profits before the collapse of a fraudulent scheme.
And, in situations in which innocent investors are net winners, the commission says that it recovers only their profits, not their principal.
Last week, 5th Circuit Judges William L. Garwood, James L. Dennis and Edward Prado heard oral arguments on Janvey’s appeal of a Dallas judge’s decision in favor of the SEC.
Garwood, in particular, sparred with Janvey’s appellate attorney, Kevin M. Sadler of Dallas.
Garwood repeatedly asked Sadler why Janvey should be permitted to sue innocent investors whose assets the SEC chose not to seize. The judge said some attorneys might conclude the only parties who should appeal such matters are the SEC and any defendant affected by an SEC action.
“In a sense,” Garwood told Sadler, “you’re nobody.”
Sadler responded: “We’re here trying to establish a uniform rule.
“You said we’re nobody, and I have to disagree with you,” Sadler added.
Garwood suggested a receiver in a securities fraud case has an obligation to follow the lead of the SEC.
“You’re not doing that,” Garwood told Sadler.
“We are doing it,” Sadler shot back. “The SEC has abandoned its responsibility.”
The judges agreed to consider the case on an expedited basis