Just in from Morgenstern and Blue

Dear Clients:

We are providing this update concerning a significant development in the case relating to the roles of the U.S. Receiver (Ralph Janvey) and the Antiguan Liquidators (Nigel Hamilton-Smith and Peter Wastell of Vantis). As you know, the U.S. Receiver and the Antiguan Liquidators have been fighting on a number of fronts over control of Stanford’s assets. In the U.S. Courts, the Antiguan Liquidators started what is called a Chapter 15 Proceeding (named after the section of the Bankruptcy Code that applies to actions related to foreign bankruptcies). In the Chapter 15 Proceeding, the Antiguan Liquidators asked Judge David Godbey, the Federal Judge presiding over the Stanford case in Dallas, to find that Stanford International Bank, Ltd. was primarily based in Antigua, and that the Antiguan Liquidators (not the U.S. Receiver) should control Stanford International Bank’s assets, and the distribution of those assets to Stanford’s victims and other creditors. The U.S. Receiver opposed that request, arguing that all Stanford matters should be handled through the federal court in Dallas. That dispute was scheduled for a hearing in January, but was abruptly cancelled shortly before it was scheduled to begin.

On May 18, 2010, the U.S. Receiver and the Antiguan Liquidators announced that they had reached a settlement agreement that would resolve the Chapter 15 Proceeding and allocate assets and responsibility between them. In essence, the agreement provided that the Antiguan Liquidators would be responsible for all assets and actions in Antigua, and that the U.S. Receiver and the Antiguan Liquidators would not interfere with each other and would attempt to work out further arrangements for cooperation. The U.S. Receiver and the Antiguan Liquidators jointly requested that Judge Godbey approve the stipulation between them.

Yesterday, however, news reports from the Caribbean indicated that Vantis has been fired by the Antiguan authorities, and that no successor liquidators have yet been named. The apparent removal of Vantis casts considerable doubt on the continued validity of the agreement that the U.S. Receiver and the Antiguan Liquidators reached.

In all events, we felt compelled to object to Court approval of the agreement because we do not believe that the agreement, at least in its current form, is in the best interests of our clients or other Stanford investors. We are particularly concerned that the agreement would leave in place, and formalize, a dual-receivership that would require investors to submit two sets of claims, to two sets of liquidators, with differing requirements. We are also troubled by the agreement’s perpetuation of a system that essentially requires the investors to pay the bill for two sets of administrators, two sets of attorneys, two sets of accountants, and so on. In our view, a real resolution of the disputes between the U.S. Receiver and the Antiguan Liquidators would unify control of Stanford’s assets, establish a single system for the submission of claims and distribution of assets, and eliminate duplication of effort and expense. Because the proposed agreement does not accomplish those goals, we filed an objection yesterday in which we argued that the Court should not approve the settlement. (A copy of the Objection is available on our website.)

We do not know when Judge Godbey will act on the Receivers’ motion to approve the settlement. When he does, we will provide you with a further update.

This information can also be found on our website:

http://mbstanford.typepad.com/clientinformation