Source: Loren Steffy (chron)
Two years later, Cassie Wilkinson and thousands like her are still waiting.
Thursday was the second anniversary of the U.S. Securities and Exchange Commission's lawsuit against Stanford Financial Group. The SEC accused the company and its founder, R. Allen Stanford, of bilking more than $7 billion from investors with phony certificates of deposit issued by his Caribbean bank.
Since then, the court-appointed receiver, Ralph Janvey, has recovered almost nothing — less than $200 million so far, which, after attorneys' fees and other expenses, is about half that. If the almost 3,000 investors who lost money in Stanford ever see their money, it's likely to be only a penny or two for every dollar they invested.
"To the Stanford investors, it seems kind of like a hopeless thing," said Wilkinson, a retired Houston commercial office designer who now lives in Austin. "We're kind of hand-tied and blindfolded."
Wilkinson and her husband invested in Stanford's CDs in 2007 on the advice of their longtime broker, who had recently joined the company and told them the CDs would protect them from market volatility.
Even in a state where the crass excess of wheeler-dealers is legendary, Allen Stanford's extravagance stands out. Of the money he collected from investors, he helped himself to about $2 billion for planes, cars, girlfriends, lavish cricket matches and other trappings of a jet-setting lifestyle, said Janvey's attorney, Kevin Sadler. Another chunk of the money was spent on the 140 opulent offices that Stanford maintained around the world.
What money was left went, ironically, to bad investments: $80 million for an unfinished time share golf course in Florida that's now belly-up, for example, or $180 million for a company developing wireless phone service in Latin America that today might be worth about $7 million if the receiver could find a buyer, Sadler said.
"Over the 15 years that Stanford was allowed to run amok, he spread his money everywhere," he said. "It was just throwing money in all sorts of different places. They all turned out to be essentially junk. It's just gone."
The receiver is suing to recover some $600 million, mostly from former employees and investors who cashed out before the collapse.
"Everybody who got any money out of Stanford before it collapsed is fighting to keep every penny of it," Sadler said. That includes elected officials from both parties and the Republican and Democratic National Committees, who received donations from Stanford that they refuse to return.
Blame the Janitor
This week, a group of former brokers who were sued in 2009 by Janvey filed a countersuit, accusing him of mismanaging the company after he stepped in to clean up the mess. It's a blame-the-janitor legal strategy. If the brokers had applied similar scrutiny to the bogus CDs they peddled, investors might still have their life savings.
Meanwhile, justice in the case seems a long way off. Allen Stanford's trial was delayed last month after a judge ruled he's not competent to mount a defense because he's addicted to painkillers for injuries from a prison beating.
He isn't, however, too far gone to launch a legal counterattack. This week his attorneys sued U.S. prosecutors and agents for the FBI and SEC, accusing them of "abuse of law enforcement," and seeking $7.2 billion in damages. Stanford contends the government's "illegal tactics" began with the SEC's lawsuit, which including the seizure of his assets. The lawsuit says Stanford's constitutional rights were violated, the government used his own money to build a case against him, and used the civil case to build criminal charges against him, violating his Fifth Amendment protections.
SEC ignored warnings
In his disdain for the feds, Stanford has something in common with his alleged victims. Investors like Wilkinson question the amount of money Janvey is spending to recover the pittance that's left. They also are outraged at the SEC, which, an inspector general's report has found, ignored at least four earlier warnings about Stanford going back a decade.
Then there's the sting of Bernie Madoff, whose Ponzi scheme erupted in the headlines just a few months before Stanford's case. Madoff's investors were wealthy and well-connected. Stanford's tended to be more middle class - many of them veterans of the Oil Patch.
The receiver in the Madoff case has been able to recover billions, and the Securities Investor Protection Corp., an insurance fund for brokerages, has covered some of the investors' losses. SIPC doesn't apply to Stanford because of the nature of the investments and because it doesn't insure against a loss of value. Stanford investors are trying to get SIPC to cover their losses, but that's unlikely.
It's just one more insult to a group that has endured a two-year sojourn of betrayal - by their brokers, by Stanford himself and by the SEC.
"It's like our trials don't matter," Wilkinson said. "I would think that we should mean more than that."
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