Investors fight freeze

Hundreds of Baton Rouge-area residents are asking a Dallas federal judge not to freeze their local civil suits against Louisiana and people who allegedly helped now-notorious Texas promoter Robert Allen Stanford swindle more than $7 billion.

“That would be a financial death sentence for some of these people,” Baton Rouge lawyer Phillip W. Preis said Friday of the proposed freeze.

Preis said he represents between 400 and 500 Stanford investors in a class-action suit in state District Court against the Stanford Trust Co., Louisiana Office of Financial Institutions, and Pennsylvania-based SEI Investments Co.

Many of his clients are retirees, Preis noted. He said some don’t have the time and stamina or money to wait years to pursue their claims.

Preis said it will take years for federal prosecutors and securities regulators to finish their pending litigation against the man alleged to have turned investor deposits into his personal piggy bank.

Stanford, 59, is in federal custody in Houston, where he is scheduled to be tried next year on charges that he masterminded frauds that hurt approximately 30,000 investors in more than 100 countries.

The Securities and Exchange Commission sued Stanford and several of his associates a year ago in Dallas. And Dallas lawyer Ralph Janvey was appointed as the receiver responsible for locating, seizing and managing as many Stanford assets as possible for the eventual benefit of defrauded investors.

Janvey, with support from the SEC, told U.S. District Judge David Godbey, of Dallas, last month that all Stanford litigation outside his receivership and the criminal case in Houston should be halted.

Otherwise, Janvey argued, his receivership would be wasting recovered investor funds to provide information necessary for dozens of civil suits in Louisiana, Texas and other states.

Last year, however, Janvey sued Stanford investors in Louisiana and other states for assets they had not lost at the collapsed Stanford International Bank on the Caribbean island of Antigua.

Janvey argued that investments partially recovered prior to Stanford’s collapse should be confiscated and shared with all investors.

Although the SEC and Godbey said such action was not permissible against innocent investors who did not receive profits, Janvey pursued his suit all the way to the 5th U.S. Circuit Court of Appeals in New Orleans.

And the 5th Circuit ordered Janvey to return nearly $900 million to hundreds of investors whose accounts he had frozen.

Janvey and his team of attorneys, accountants, investigators and other professionals are paid from the assets recovered on behalf of investors. That includes the cost of all litigation, including failed suits against investors.

Preis told Godbey last week that Janvey’s efforts against innocent investors already have diminished the receivership estate by 23 percent.

Last month, Dallas attorney John J. Little told Godbey that Janvey’s team had billed the receivership for $41 million of the first $128.8 million recovered for defrauded investors. Little was appointed by Godbey to represent the interests of those investors.

Preis wrote Godbey on Wednesday that Janvey’s pursuit of Stanford brokers has been less aggressive than his pursuit of investors.

One of the suits Preis filed in Baton Rouge is targeted at Stanford brokers who sold certificates of deposit in Stanford International Bank.

Preis told Godbey the slow pace of Janvey’s recovery efforts, coupled with his rapid burn through investor assets, will prove devastating to Louisiana retirees if they are not permitted to pursue their own civil suits now.

“If not now, then when will the Louisiana retiree investors have their day in court?” Preis asked Godbey. “One year has passed. The action of the receiver (Janvey) has turned logic on its head.

“The receiver has spent more funds pursuing the Louisiana retirees than going after other third parties involved in the scheme,” Preis told Godbey.

Two of the targets of Preis’ class-action suit deny responsibility for Stanford investors’ losses.

The third target, Stanford Trust Co., was shut down last year.

Preis’ class-action suit alleges, however, that officials of the state Office of Financial Institutions knew as early as 2007 that Stanford Trust Co. was endangering the retirement funds of Louisiana investors.

The state owes a debt to those investors for OFI’s failure to protect them, the suit alleges.

Not so, New Orleans attorney David Latham responded on behalf of OFI.

Latham denied Preis’ allegations in documents filed with state District Judge R. Michael Caldwell in Baton Rouge.

“The role of OFI is to regulate, not to ensure that those who invest in companies subject to OFI regulation will never lose money as a result of criminal actions,” Latham wrote.

Pennsylvania-based SEI Investments Co. also is a defendant in the class-action suit filed by Preis.

On Dec. 30, New Orleans attorney Duris L. Holmes wrote Caldwell that SEI provided office administration services for Stanford Trust.

But any allegations that SEI was responsible for any mistakes by Stanford officials are unfounded, Holmes said. Allegations that SEI performed any valuation or marketing services connected to the sale of certificates of deposit at Stanford International Bank, Holmes added, “are false.”

In Dallas, Godbey has not announced when he will rule on Janvey’s request for a freeze of all litigation such as the investor suit against OFI and SEI.

If granted, Preis told Godbey, that freeze “suffocates any potential recovery that the retirees who invested in (individual retirement accounts) through the Stanford Trust would have.”