Stanford Update March 2013
Dear Stanford Clients: This update will summarize recent events in the Stanford matters over the past several weeks.
SEC Litigation
In our last update, we notified you that the magistrate judge in our SEC class action denied the Government's request to stay all discovery. We are summarizing here the outcome of the discovery hearing which was held in Miami on February 14, 2013. One of the key hurdles to overcome in an action against the Government is the discretionary function exception. The magistrate made clear that this hurdle has been overcome and the court had already ruled on the sovereign immunity issue. The magistrate also held that "it is not obvious that [the Government's second motion to dismiss] will succeed." A copy of this ruling is attached for your review. Following this ruling, we have moved forward with discovery and we continue to wait for the district court to rule on the Government's second motion to dismiss.
In view of the delays caused by the Government's motion to stay discovery, we requested that the Court push back certain pre-trial and trial deadlines to allow us adequate time to pursue the discovery required to prove our case. We are happy to report that the Court granted our request and pushed back discovery deadlines to afford us this opportunity, which also resulted in a new trial date set for April 7, 2014.
Potential NAFTA Action
We have also recently become aware of a potential new action being pursued by Peter Morgenstern on behalf of Mexican investors. Apparently, Mr. Morgenstern intends on filing a private arbitration against the United States under the arbitration provisions of NAFTA. It appears that participation in this arbitration by Mexican investors may result in your inability to participate in our SEC class action. Please note that there are three key issues to keep in mind as you consider joining this litigation: (1) the timeline and pressure being imposed on investors to make this decision appears unfair; (2) as far as we know, such an action has never previously been taken and therefore no precedent exists for it; and (3) as far as your SEC action is concerned, you may be precluded from participating in the class action and may be considered an opting out of the class action in which you have already invested time, money and resources.
First, we do not know of any successful action against the United States for failure to provide fair and equitable treatment to foreign investors under circumstances similar to the Stanford Ponzi scheme. This is an untested and speculative theory for recovery which could disqualify you from participating in our action. Our action has already overcome the key initial hurdle and has a defined path towards a successful verdict. Moreover, discovery in arbitration is far more limited than discovery in our pending action. We know from our case that, in order to overcome the Government's position on these claims, extensive discovery is necessary. We do not believe that the procedural intricacies of a NAFTA international arbitration, including the limited means of discovery, provide the best avenue for recovery against the Government. We believe the risk of being disqualified from participating in our SEC action outweighs the potential for obtaining a successful judgment against the Government in the NAFTA international arbitration.
Claims
In the meantime, we have been working with many of our clients who have received determination notices from the Stanford Receiver regarding the claim amount. We have assisted our clients in objecting to those determinations if they were less than the total claimed amount, and we will continue to assist any and all clients who would like us to review their claims determination and provide advice. Should you have any questions, please do not hesitate to contact us.
For a full and open debate on the Stanford Receivership visit:
http://sivg.org.ag/
The Stanford International Victims Group Forum
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