Stanford Ponzi Victims To Be Compensated

GENEVA — The office of Switzerland’s attorney general says its criminal investigation into former Texas tycoon R. Allen Stanford’s massive Ponzi scheme has concluded that some of the victims’ money was laundered in Swiss accounts.

 The office says the investigation since Feb. 2009 is completed and all of the assets remaining in Switzerland will be returned to fraud victims.

 It said Monday that Stanford Group (Suisse) AG was fined 1 million Swiss francs ($1.1 million) and ordered to pay between 6 million and 9 million francs in claims. It has provided American authorities with banking documents and hearing transcripts for use in U.S. criminal proceedings.

 The U.S. Supreme Court ruled last month that Stanford’s victims can go forward with class-action lawsuits against those that allegedly aided the $7.2 billion fraud.

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For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

Open Letter From Stanford Receiver Dated February 14, 2014

Stanford Financial Group Receivership 

 1029 State Highway 6 North I Suite 650-272 1 Houston, TX 77079 

 Phone 866.964.6301 

 February 14, 2014

 To All Those Affected by the Stanford Fraud:

 It has been five years since the Court appointed me as Receiver to unwind the world-wide Ponzi scheme perpetrated by Allen Stanford and those who aided, abetted and enabled him. I know that these continue to be very difficult times for the thousands of you whose lives were impacted, and in many cases devastated, by the Stanford fraud. Even though my team and I have worked hard and made much progress over the last 5 years, the process of unwinding the fraud and the pace of recovering money have been frustratingly slow. Unfortunately, the costs associated with this process have been substantial. Although many challenges still lie ahead, the entire Receivership team and I are committed to working as hard as we can to recover as much money as we can for the eligible claimants.

To read the full transcript click here.


For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group – SIVG official forum http://sivg.org.ag/

IRS Hit Stanford Estate for $432 million

The Internal Revenue Service filed a "notice of claim" yesterday with the US District Court advising the Court that it is IRS's view that Allen Stanford is indebted to the United States for approximately $432 million in personal tax liability. The IRS intervened in the SEC's lawsuit against Allen Stanford three years ago and asserted the existence of a claim against Allen and Susan Stanford, which at that time was for approximately $226 million in personal tax liability. The U.S. District Court permitted the intervention and retained the authority to adjudicate all aspects of the IRS claim.

 

SIVG has been warning victims for years about the IRS having a claim against the Stanford estate, now we see our claims are all true.

 

Time is running out we have only two days before the JL's Grant-Thornton neet with the DoJ in Washington. Please write to the DOJ and tell them you want the money to go to Grant Thornton now before its to late!.

 

I want to see some sort of interim payout before the end of this year......if you want the same it is your duty to make the DOJ aware of how you feel.

 

 Addresses to send emails:

kondi.kleinman@usdoj.gov
reeceD@sec.gov

 

Third Party Discovery of Foreign Bank Records Should First Proceed Under the Hague Convention

Where U.S. litigation discovery obligations were argued to be in conflict with foreign civil and criminal privacy statutes, many recent opinions found that discovery should proceed under the Federal Rules over the protest of the foreign data custodians. See, e.g., Gucci Amer., Inc. v. Curveal Fashion, No. 09 Civ. 8458, 2010 WL 808639 (S.D.N.Y. Mar. 8, 2010) (compelling the third-party U.S. parent of a foreign bank to produce documents located at its subsidiary despite claims that such production was illegal under Malaysian law) discussed further in prior blog posts here and here. However, in SEC v. Stanford International Bank Ltd, the court departed from this pattern in finding that discovery should first proceed under the Hague convention “in the interest of comity.” Civil Action No. 3:09–CV–0298–N, 2011 WL 1378470 at *14 (N.D.Tex. April 6, 2011).

In this case, the court previously determined that R. Allen Stanford, his associates, and various entities under Stanford's control (collectively “Stanford”) operated “a massive Ponzi scheme that stole approximately $8 billion from an estimated 50,000 investors scattered over more than 100 countries,” and accordingly, the Court appointed a Receiver to identify and take control of Stanford’s assets. Id. at *1. As third-party Société Générale Private Banking (Suisse) S.A. (“SocGen”) was believed to hold accounts belonging to Stanford, the Receiver sought to discover account records under the Federal Rules of Civil Procedure (“FRCP”). Id. at *2. SocGen, opposing discovery under the FRCP, argued that as the sought-after documents were located in Switzerland, compliance with the FRCP discovery request would “subject it and its employees to criminal, civil, and administrative penalties under Swiss law.” Id. Instead, SocGen argued that the Receiver should first utilize the discovery procedures of the Hague Convention, of which Switzerland is a signatory.

To determine under which mechanism discovery should proceed, the court applied the balancing of factors set out in Société Nationale Industrielle Aérospatiale v. U.S. District Court, 482 U.S. 522, 538, 107 S.Ct. 2542, 96 L.Ed.2d 461 (1987) (“Aérospatiale”) and Minpeco, S.A. v. Conticommodity Serv., Inc., 116 F.R.D. 517, 523 (S.D.N.Y. 1987). These factors include: (1) the importance to the litigation of the documents or other information requested; (2) the degree of specificity of the request; (3) whether the information originated in the United States; (4) the availability of alternative means of securing the information, (5) the competing interests of the nations whose laws are in conflict; (6) the hardship of compliance on the party or witnesses from whom discovery is sought; and (7) the good faith of the party resisting discovery under the Federal Rules. See id. at *4.

The court’s application of these factors was initially fairly typical. Factors 1, 2, and 4 were found to favor the Receiver, as the documents were “vital” to the receivership proceedings and not available anywhere else. In particular, the court noted that as it considered the Receiver to essentially be SocGen’s customer, the discovery request “constitutes no more than a bank customer asking for a copy of its own records.” Id. at *5-6, 8, and 11. Counseling the opposite conclusion, factors 3, 6, and 7 were found to favor SocGen, as the documents were only located in Switzerland; this defense was not raised in bad faith; and “comity counsels deference” to SocGen’s “potentially well-founded fear” that compliance with the discovery request under the Federal Rules could lead to prosecution. Id. at *7-8, and 12-13.

Where the Court’s analysis deviates significantly from other opinions is its consideration of the fifth factor, which in this case involves the competing interests of the U.S. and Switzerland. Whereas other courts found that U.S. discovery interests trumped foreign privacy concerns, the Stanford court found this factor to be neutral, after noting that any such balancing of interests would be “political” and “especially inapposite in this case, where the legislative authorities of both nations essentially have spoken by adopting the Convention.” Id. at *9. Compare id. (“the Convention inherently, and adequately, balances the competing sovereign interests here because its use will benefit U.S. interests by providing the needed evidence, and protect Swiss interests by avoiding intrusions upon Swiss sovereignty.”) with Gucci, 2010 WL at *7 (“[T]he Court concludes that the United States interest in fully and fairly adjudicating matters before its courts . . . outweighs Malaysia’s interest in protecting the confidentiality of its banking customers’ records.”).

On balance, the Stanford court found that the comity factors weighed in SocGen’s favor “at least in the first instance.” Id. at *13. Accordingly, the Receiver was to proceed with discovery under the Hague Convention, but was not precluded from renewing its request for discovery under the FRCP should its efforts be unsuccessful. Id. at *13-14. In so holding, the court acknowledged that others relied on the discretion provided by the Supreme Court in Aérospatiale as a “green light to generally ‘discard[ ] the treaty as an unnecessary hassle.’” Id. at *3 (citing In re Automotive Refinishing, 358 F.3d 288, 306 (3rd Cir. 2004)). However, this approach “ignores Aérospatiale's admonition to ‘exercise special vigilance’ in international discovery disputes . . . and exemplifies courts' intrinsic ‘proforum bias’ warned against by . . . the Aérospatiale minority.” Id.

While it is unclear the extent to which this approach will be followed by other courts in the future, this opinion illustrates that it is possible for litigants and third parties to successfully navigate cross border discovery conflicts even where privacy interests are at stake.

SocGen, Stanford Receiver Spar Over Swiss Bank Data Subpoena

Societe Generale Private Banking (Suisse) SA urged a U.S. judge in Dallas to block subpoenas for Swiss banking records sought by the receiver for indicted financier R. Allen Stanford.

Stanford, who allegedly led a $7 billion fraud scheme, routed more than $100 million in investor funds through the Swiss bank accounts, court-appointed receiver Ralph Janvey told U.S. District Judge David Godbey in papers filed Feb. 22.

Janvey subpoenaed Stanford’s personal and business banking records in December from the Lausanne, Switzerland-based unit of Paris-based Societe Generale, France’s second-largest lender. The bank said Janvey should seek the records through international banking treaties, as the bankers could be jailed for breaking Swiss privacy laws.

“There’s no reason not to go to the Hague Convention when you have conflicts of law as serious as the one you have here,’” SocGen’s lawyer, Noelle Reed, told Godbey in court today. ”My client takes very seriously the criminal statutes we have referred to.”

Stanford, 60, is accused in civil and criminal cases of misleading investors about the nature and oversight of certificates of deposit they purchased from his Antigua-based Stanford International Bank Ltd.

The U.S. Securities and Exchange Commission sued the former Stanford Group Co. principal two years ago, resulting in Janvey’s appointment. A U.S. grand jury in Houston indicted him on 21 criminal counts four months later.

Stanford Denies Wrongdoing

Stanford, who has denied the civil and criminal allegations, is being held without bail while awaiting trial.

He is being treated for a prison-acquired prescription drug addiction at the same U.S. correctional complex where Bernard Madoff is serving a 150-year sentence for an unrelated Ponzi scheme.

Societe Generale, in papers filed with Godbey earlier today, said Janvey opted to serve the subpoena upon a bank office in Miami, rather than comply with the international legal procedures for taking evidence abroad outlined in the Hague Convention.

His demand placed bank officers at risk of criminally violating Swiss banking secrecy laws, said Reed, a Houston-based attorney with New York’s Skadden Arps Slate Meagher & Flom LLP.

“The threat of criminal punishment is real, including the possibility of imprisonment,” Reed said. “Swiss residents cannot avoid these laws simply by turning information over to their American counterparts to be ‘produced’ in this country.”

‘Given You Nothing’
Janvey’s lawyer, Kevin Sadler, told the judge today it’s “speculative” of the bank to say it will be prosecuted for breaking privacy laws.

“They’ve given you nothing that the risk of prosecution is likely or probable,” Sadler said.

More than $70 million of the money sent to the Swiss accounts was diverted to Stanford’s personal accounts and more than $1 million used to bribe Stanford International Bank’s Antiguan outside auditor, Sadler said in the Feb. 22 filing.

“This was a Ponzi scheme, and the Swiss banks are one of the conduits through which money flowed,’’ John Little, the court-appointed examiner who speaks for Stanford’s investors, told Godbey today. “This idea of going to the Hague Convention will buy us six more months or a year of delay, and that delay is killing the investors. There has to be a Swiss interest against facilitating fraud.’’

Godbey took the lawyers’ arguments under advisement and said he’d rule as promptly as possible.