Letter from COVISAL Regarding Clawbacks from Grant Thornton

February 17, 2014

Stanford’s victims feel defrauded again by the Joint Liquidators Marcus Wide & Hugh Dickson of Grant Thornton.

 Innocent Stanford victims are in a panic - many suffering emotional distress.

 Today marks the five year anniversary of the Stanford debacle and the Joint Liquidators Marcus Wide and Hugh Dickson, of Grant Thornton, decided to give Stanford’s defrauded depositors an anniversary present - a letter asking for the return of money that they withdrew during the six months prior to the collapse of the Stanford International Bank Limited (“SIBL”).

 The Letter from Marcus Wide and Hugh Dickson of Grant Thornton reads as follows:

 I write further to my previous notification to you regarding your claim, which was allowed in the amount of (x dollars) under the above Primary Express Account. 

 A significant amount of funds was withdrawn in the six-month period preceding SIB ceasing to trade of 23 February 2009. We consider that these payments were unfairly prejudicial to the other creditors of the Company under sections 204 of the Antigua and Barbuda International Business Corporations Act and thus preferential (the Preference Payments). In order to re-balance the creditors’ position, we are initiating a claw back process through the Courts against creditors who have received Preference Payments. 

 According to the Company records, you have received Preference Payments of US$ x which we require be repaid to the Estate. Please see the attached breakdown showing how your Preference Payment was calculated. 

 On repayment of the Preference Payment, your claim will be increased by the amount repaid resulting in a revised claim of US$ x, which will be used to calculate distributions as they are paid from time to time. 

Failure to repay the Preference Payment will result in the estate withholding dividends until sufficient funds are held back to offset the full amount of the Preference Payment you received; at point, you will be eligible to receive future dividends. Failure to repay may also result in the estate seeking judgment against you and to collect the Preference amount. 

 The Court has approved this decision to adjust your entitlement to any distribution in the future. You do however have the right to challenge this decision. If you with to challenge this decision, the Court has directed that in the first instance, you must apply directly to the Joint Liquidators at Stanford.enquiries@uk.gt.com or the address above within 120 days of the date of this correspondence. All future communication regarding this claim should include the Primary Express Account Number. This will serve as your claim number. 

Yours sincerely 

For and on behalf of the Stanford International Bank Limited (in Liquidation) 

Marcus Wide and Hugh Dickson 

 Joint Liquidators

The letter sent by the Joint Liquidators to investors challenging the above decision: 

 “Dear Sir/Madam, 

 Thank you for your email. 

 Your objection has been received and added to our system. You are not required to do anything more at this point. 

 All objections raised are being collated by the Joint Liquidators. Once the 120-day period expires, the objecting parties will be contacted and advised of the next steps. 

 Please note that the Joint Liquidators reserve the right to pursue the investor if they do not repay the preference payments. 

 If you have any further questions please do not hesitate to contact us. 

Yours faithfully 
 For and on behalf of 
 Marcus Wide and Hugh Dickson”

 Victims’ reactions: 

Many Stanford’s victims have contacted COViSAL to express their anger and disbelief. They are in shock after receiving this sinister claw back letter from the Joint Liquidators. Innocent families have been waiting for any meaningful distribution of their stolen savings; the majority of them have been enduring five years of hardship, unable to pay for living expenses or medical treatments. Mr. Wide and Mr. Dickson's shotgun approach to claw back investors who withdrew money from their principal invested at SIBL is cruel and horrific. The Joint Liquidators did not consider the consequences to the well being of many victims in poor health and emotional fragility before sending this blunt and damaging letter.

 “I am doing my best to contain the actual kind of foul language that I truly wish to use after reading this embarrassing letter sent by your company. I could not sleep when I read it last night at 2:00 a.m. in the morning wondering HOW, JUST HOW can I explain this NONSENSE to my parents when I translate the letter for them? It is an absolute disgrace and you, your company, and/or whichever court might have come up with this ruling should be ashamed before God, family, and life itself,” one victim wrote to Mr. Wide and Mr. Dickson, objecting to the letter.

 “The letter that I just received from Grant Thornton is affecting me emotionally… I never received the amount of my allowed claim; I wrote to them many times and I am still waiting for an answer,” another victim said.

 “What I understand from the letter is that according to them, I received ‘preferential payments’ that were prejudicial to other investors!!! So, what was I?... That I have to return an amount of money so they would consider returning something that was already mine?…”, a victim commented.

 “This act is an aberration, and a total injustice. Now the Joint Liquidators have found a way to keep getting a paycheck for themselves and their comrades for a long time. They are keeping the money they were supposed to distribute to victims; they found an easy target - the innocent families that knew nothing of this fraud.”

 “The Joint Liquidators should go after the net winners who took all of their money out, such as the Antiguan government that confiscated properties and received millions of dollars in loans from our savings." “The Joint Liquidators have not recovered any assets and are desperate to maintain most of the money assigned by the Department of Justice from the repatriation of funds from England."

 The facts: 

 The innocent families, who had their life savings deposited at SIBL in Antigua, did not know and had no previous knowledge of the bank’s problems. It is a fact that the majority of the depositors only became aware that SIBL was in trouble when the SEC intervened the Stanford Financial Group on February 17, 2009.

 In reference to the withdrawals made by the majority of depositors during the six months prior to the closing of SIBL’s operations, they were not “Preferential Payments,” they were Legitimate Withdrawals of part of their principal by the rightful owners of the money, which they deposited and withdrew at the bank during the ordinary course of business of SIBL. These withdrawals were made rightfully and in good faith. Families withdrew part of their invested principal to pay for living expenses, medical treatments, to help a relative in financial need, for a down payment to buy a home or to buy a car, to pay for a vacation, or to start a business.

 These families lost all of their life savings in Stanford’s fraud; many sold their homes and other assets they had left to be able to survive. The majority of investors in the SIBL were common people, families that worked very hard for 30-40 years to save money for their retirement, for a college fund for their children or grandchildren, and to have savings available for a medical emergency, among other things.

During the past five years, victims of the fraud have been living in dire straits; many died because they could not bear the news of losing their savings or because they could not pay for a life saving operation. The Stanford fiasco destroyed their lives. Recently, the Joint Liquidators announced a 1% distribution of the victims' approved net remaining principal after the interests and withdrawals were deducted. Families saw a light of hope with the announcement. However, Mr. Wide & Mr. Dickson decided to drop a bombshell at the last minute by sending these cold and calculated letters to innocent depositors, asking them to return their own money to the Estate.

 Show me the money! 

 Mr. Wide, Mr. Dickson and their colleagues have received millions of dollars from our stolen savings in fees and expenses, and so far they have not recovered any significant assets. Now, they want to exclude honest victims from a rightful distribution, including the money that was confiscated in England, and that according to the U.S. Department of Justice was to be distributed to the innocent families.

Why don't they go after the “Net Winners” and the insiders who took all of their money out; such as financial advisors and directors, major clients, large institutions, wealthy individuals and the government of Antigua that confiscated Stanford’s properties and owes Stanford’s Estate millions of dollars in loans that were taken from our savings?

It seems that the money available from our stolen savings is simply petty cash for the attorneys and professionals managing the Liquidation of SIBL. They are getting rich quick, while the victims are unable to pay for their living expenses and medical bills, many continuing to live in poverty.

 Where are the morals and the good conscience of the people responsible for the Stanford case? 

COViSAL’s requests

• We ask the Joint Liquidators to stop the claw backs on innocent families, victims of this horrendous fraud who are “Net Losers.” You signed a joint agreement with the U.S. Receiver, and other parties, to go after the "Net Winners.” 
• We ask that all innocent victims be included in the upcoming 1% distribution that you recently announced, and any other future distribution, without being held prisoner through a 120-day holding period with an unclear and uncertain outcome. 
• We ask the U.S. Department of Justice, the U.S. Receiver, the U.S. Securities and Exchange Commission, the Stanford Examiner, and the Official Stanford Investors Committee, who jointly signed an agreement with the Joint Liquidators, to voice their opinion on the matter and demand that the Joint Liquidators stop these cruel actions that are hurting innocent families. 
• We ask the Courts in Antigua not to allow the Joint Liquidators, who were named to prevent the waste and squandering of the creditors' patrimony, to continue consuming what’s left of our stolen savings, and now, go after innocent investors. 

The actions in pursuing claw backs against innocent investors are supported by neither logic nor law. The Estate stands to expend a substantial amount of resources with little prospect for a meaningful recovery - money that could be use to help victims in need.

 Why prolong the suffering of innocent victims who do not have any means to defend themselves before the Courts of Antigua?

 What honest and transparent legal entity is providing oversight of the liquidation process?

 Where are the checks and balances?

 COViSAL hopes that the authorities responsible for the Stanford Case and the courts in Antigua make their principles coincide with their actions and show the world, with actions, its commitment to honesty, equality and justice.

 May God bless the hearts of the thousands of innocent families - victims of a fraud that still continues!

 To join the debate 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/

110 years for Allen Stanford

ABOUT THE AUTHOR: Tim Prudhoe TEP is a Partner and Barrister at Kobre & Kim LLP


On 14 June 2012, financier and cricket mogul Allen Stanford was sentenced to 110 years in jail, having been convicted on 13 of 14 charges against him arising from his involvement in a USD7 billion Ponzi scheme.

While the legal saga is far from over, financial realities may spell a US victory. The recent US decision on (or, more specifically, against) the application for, in effect, primacy of the Antiguan liquidation in respect of Stanford International Bank (SIB) goes a long way towards making the assets of all Stanford entities available to all creditors of those entities, including the US Internal Revenue Service (the IRS). Excluding any reversal on appeal, the adverse implications for the (many) victims of the Stanford Ponzi scheme run through SIB are certain to be dire.

It is a depressing, post-Madoff world where a fraudulent scheme as large as USD7 billion seems barely newsworthy. However, the Stanford saga, and in particular the recent decision for Chapter 15 recognition of the Antiguan liquidation as the main insolvency proceedings, continues to have significant implications for cross-border insolvency, with a particular focus on international financial centres (so-called offshore tax havens).

The Stanford US receivership (note, not bankruptcy) decision of 30 July 2012¹ deals with many issues, including determination of the centre of main interest (COMI) for a company involved in cross-border insolvency proceedings. It found in favour of the US receiver, dismissing the Antiguan attempt for ‘main proceedings’ status, and instead granting it ‘foreign non-main proceedings’ (i.e. ancillary) status. Notice of the Antiguan liquidators’ appeal against that decision was filed on 7 August 2012.

110-year sentence
The jury trial in Houston (US v Stanford 09-cr-342, US District Court, Southern District of Texas) lasted six weeks, with Stanford’s lawyers arguing that the scheme was the design of his Chief Financial Officer and requesting a mere 44-month sentence. In contrast, US Department of Justice prosecutors recommended the statutory maximum of 230 years, stating ‘[it]will not get anyone their money back but on sleepless nights they will know that [Stanford] got the maximum’. During his 40-minute statement in court Stanford denied culpability, saying ‘I’m not here to ask for sympathy or forgiveness or to throw myself at your mercy… I did not run a Ponzi scheme. I didn’t defraud anybody.’ The presiding judge, David Hittner, described Stanford’s actions as ‘egregious criminal frauds’, while one victim spokeswoman, Angela Shaw of the Stanford Victims Coalition, stated that Stanford ‘stole more than millions… he stole our lives as we knew them’. Stanford’s sentence is 40 years shorter than that handed down to Bernard Madoff, whose Ponzi scheme was estimated at USD17.3 billion. However, Shaw stated that Stanford’s conduct was worse than that of Madoff because he preyed on middle-class rather than wealthy investors.

From the perspective of extracting value for the many victims, the real battle over where the insolvency proceedings should be heard is still being played out. The Antiguan liquidators have already managed to halt efforts by the US Department of Justice (DoJ) to repatriate tens of millions of dollars of frozen Stanford assets to the US from the UK, Canada and Switzerland. The oral hearing on the Chapter 15 application made to the US courts by the Antiguan liquidators for recognition of Antigua as the foreign main proceeding took place in early December 2011. The adverse effect of a protracted wait for a decision was such that on 23 July 2012 a formal court pleading was actually filed solely to ask the Court for a decision². Subject to the pending appeal, this decision will be key to the future direction of the Stanford saga as we move past the fate of Stanford himself.

Procedural history of the SIB insolvency

Of the many steps in the complicated procedural background to the insolvency, the following are particularly noteworthy:

• 16 February 2009: the US Securities and Exchange Commission (SEC) applied successfully to the Northern District Court of Texas for an order appointing a US receiver over the assets of SIB and Stanford.
• April 2009: two orders issued by the UK High Court froze all SIB assets held in the UK following an application by the Serious Fraud Office, acting on behalf of the DoJ. The US was granted a similar restraint order for around USD140 million of assets held in Switzerland.
• 15 April 2009: the Court of Antigua granted an order for the liquidation of SIB and for the appointment of Mr Wastell and Mr Hamilton-Smith as its joint liquidators. This order meant that all of the assets of SIB, wherever situated, were vested in the Antiguan joint liquidators.
• 22 April 2009: the Antiguan liquidators applied to the High Court in England under Article 15 of the Model Law for an order for recognition of the Antiguan liquidation of SIB as the ‘foreign main proceeding’.
• 8 May 2009: the US receiver also applied to the English High Court for recognition of the US receivership of SIB.
• June 2009: the competing recognition applications of the Antiguan joint liquidators and the US receiver were heard by Lewison J. He accepted the application of the Antiguan liquidators and dismissed that of the US receiver.
• 25 February 2010: the English Court of Appeal3 held that the US receiver was not a ‘foreign proceeding’ within the meaning of that expression as defined in Article 2(1) of the Model Law (and that the Antiguan liquidation was a foreign proceeding). It held that SIB’s COMI was Antigua.
• 12 May 2011: the High Court of Justice for Antigua and Barbuda appointed Marcus Wide and Hugh Dickson of Grant Thornton as the new liquidators for SIB (the Antiguan liquidators).
• 5 December 2011: the Antiguan liquidators applied to the US District Court seeking recognition of a foreign main proceeding.
• 16 January 2012: Gloster J, in the Central Criminal Court in London, upheld the restraint order but ruled that the Antiguan liquidators should be granted a USD20 million line of credit from the assets to help fund the liquidation and realisations.
• 23–25 January 2012: SIB applied to the UK Supreme Court for permission to appeal the freezing order. The respondent applied for permission to cross-appeal in respect of the decision of the Court of Appeal to quash the original order.
• 15 February 2012: the UK Supreme Court granted permission to appeal. Judgment on the freezing order is unlikely to be given before 2013.
• 10 April 2012: the same Texas judge hearing the recognition application by the Antiguan liquidators issued a request for evidence (a letter of request) to the English Court, the basis for which was to completely ignore the current primacy of the Antiguan liquidation.
• 3 July 2012: Judge Robert Wilkins for the US District Court for the District of Columbia ruled against the SEC, which wanted the Securities Investor Protection Corp (SIPC) to start liquidation proceedings for the victims4. The SIPC previously handled high-profile liquidations such as Madoff’s Ponzi scheme but here maintained that it did not have jurisdiction over Stanford’s offshore bank. Although the Texas-based brokerage Stanford Group Company was a SIPC member, SIB was not. The judge agreed and found that the SEC did not meet its legal burden of showing why the SIPC should be compelled to act. The SEC has 60 days to decide whether or not to appeal the judge’s ruling; the agency is said to be ‘reviewing the decision’.

Statutory framework for cross-border insolvency

The legal framework within the US for recognition of cross-border insolvency is Chapter 15 of the Bankruptcy Code, which is based on the UNCITRAL Model Law. It came into force in 2005 and has been successfully invoked many times, especially since the financial crisis of 2008 (Fairfield Sentry, BVI and New York; Millennium Global Emerging Credit Master Fund, Bermuda and New York).

Under Chapter 15, an application can be made for insolvency proceedings in another jurisdiction to be recognised as a ‘foreign proceeding’ in the US. Section 101(23) of the Bankruptcy Code defines a foreign proceeding as ‘a collective judicial or administrative proceeding in a foreign country… under a law relating to insolvency… in which… the assets and affairs of the debtor are subject to control or supervision by a foreign court for the purpose of… liquidation’. Section 1517(b) provides that a foreign proceeding ‘shall be recognised… if it is pending in the country where the debtor has the center of its main interests; [n.b. which was refused in the decision of 30 July 2012] or… if the debtor has an establishment within the meaning of section 1502 in the foreign country where the proceeding is pending’. This second scenario (foreign non-main) was the limited recognition granted in the 30 July 2012 order.

The fight between the US court-appointed receiver and the Antiguan liquidators over which jurisdiction has the main insolvency proceedings will now continue on appeal. Unless that appeal succeeds, the Antiguan liquidators will not be able to assume the rights of a US bankruptcy trustee in US courts.

The decision of the Texas Court covers 60 pages, of which 46 are devoted to the discussion of ‘foreign main’ versus ‘foreign non-main’. From page 16 onwards there is a helpful review of the following:

• The right to sue and be sued in US courts, as well as the authority to apply directly to the US courts for other relief (such as stays, injunctions, examine witnesses) is an automatic result of recognition as ‘foreign main’, but not automatically for ‘foreign non-main’ proceedings.
• The Antiguan Stanford proceeding had the necessary ‘collective’, judicial, foreign and insolvency nature by which to satisfy the Chapter 15 test.
• The test – at least from the US perspective – for COMI is widely cast.

COMI

In general terms, the English position is a rebuttable presumption that the COMI will match the jurisdiction of the company’s registered office. Again in general terms, the position under US Chapter 15 is more expansive, with the registered office having only evidential value, and control and management of assets carrying much more weight.

As is well known, this issue was previously examined in the Stanford English High Court decision⁵ and then by the English Court of Appeal⁶, with both courts ultimately holding that the COMI was Antigua rather than the US. The courts also held that the Antiguan proceeding was the ‘foreign main proceeding’. Although this gave the Antiguan liquidators rights to SIB’s assets, these rights were quickly blocked by the restraint order granted in favour of the DoJ. Both the DoJ (via its agent the Serious Fraud Office) and the Antiguan liquidators appealed to the Supreme Court and the judgment is still pending (although the Antiguan liquidators were granted a USD20 million loan from the SIB assets to fund their proceedings). It will be interesting to see what the Supreme Court’s interpretation of the COMI test will be.

The term COMI has not been defined in any of the legislation governing cross-border insolvency: the UK Cross Border Insolvency Regulations 2006, the Model Law, the relevant provisions of the EU Insolvency Regulation (the Regulations) or the US Bankruptcy Code. The presumption under Article 16 of the Regulations that a company’s registered office is its COMI is often called into question if a company’s operations are handled elsewhere. In the case of the UK Stanford litigation, it was found that this presumption could not be rebutted. The registered office of SIB, its headquarters, accounting departments, human resources departments and 88 of the bank’s 93 employees were all based in Antigua and were subject to Antiguan regulation. Most of the bank’s senior managers resided in the US or the US Virgin Islands and board meetings were usually held by telephone. The bank’s network had a global reach; its investors were not purely US based, and assets were held in the US, the UK, Switzerland and Canada.

Proliferating corporate fictions would protect sinister characters such as Ponzi schemers who may target offshore jurisdictions to run their fraudulent empires

While awaiting a ruling in Texas on the Chapter 15 recognition application, the Antiguan liquidators filed, in support of their position, a decision on the issue of COMI on 3 July 2012. This was the decision of 25 June 2012 to uphold the Bankruptcy Court’s ruling in In Re Millennium Global Emerging Credit Master Fund Ltd, 11 CIV 7865-LBS, which affirmed that: ‘(i) each debtor has a “center of main interest”; (ii) that the “center of main interest” is discerned objectively; and (iii) that the debtor’s recognition as a foreign main proceeding was not manifestly contrary to the public policy of the United States.’ In the Millennium case the Court held that it is the petitioner’s burden to show that the debtor’s COMI is the location of the foreign proceedings or, alternatively, that the debtor has an establishment in that place.

A favourable decision in Texas would have been a real game changer for the Antiguan liquidators, granting control over the funds already frozen in UK and Switzerland.

The Texas Court’s reasoning on COMI

First, the Court was prepared to apply the ‘corporate disregard’ doctrine (i.e. to step around the issue of separate corporate personality) to the (many) Stanford entities, and did so on the basis of the acknowledged fraud. It therefore applied COMI analysis to the aggregated Stanford entities and in doing so applied ‘federal principal place of business’ doctrines:

‘It is axiomatic that a corporation is a legal entity existing separate and apart from the persons composing it and entities related to it. However, courts equally accept that they should disregard the corporate form where that form was the means to a subversive end.’ (Page 20 of the judgment.)

‘… disallowing corporate disregard doctrines would proliferate recognition of foreign proceedings that have no real or rightful interest in liquidating the real estate. Proliferating corporate fictions in the Chapter 15 context would also protect sinister characters such as Ponzi schemers who may target offshore jurisdictions to run their fraudulent empires.’ (Page 23 of the judgment.)

Judge Golbey was careful to cite authority for this approach in not only the 5th Circuit of Appeals (i.e. the one encompassing Texas) but also the 1st, 7th, 9th and 11th Circuits as well. The absence of consolidated financials among the various Stanford entities was rejected as insignificant on the basis that the financial statements were manufactured or altered fraudulently anyway.

Secondly, the presumption as to registered office equating to COMI was taken as (i) rebutted by the US receiver and (ii) insufficiently proved as being Antigua. The COMI analysis to be extracted is as follows:

1. Important that the COMI is ascertainable to third parties: insolvency is a foreseeable risk and a debtor’s potential creditors must be able to calculate permissible risk.
2. COMI determination is based on the debtor’s administration, management and operations, along with whether reasonable and ordinary third parties can discern where the debtor is conducting these various functions.
3. The test (at least in the US context) is analogous to the ‘principal place of business analysis’ or ‘nerve centre’ test7, and the registered office might give (at best) insight.
4. The factual findings against the Antiguan liquidators were (p50 of the judgment):
5. SIB was only nominally headquartered in Antigua.
6. SIB’s major activities, certificates of deposit sales and fund investment took place outside Antigua, and a substantial number of the aggregated Stanford entities were headquartered outside Antigua.
7. The senior management of the aggregated Stanford entities based outside of Antigua (and in the US).hThe primary assets of the Stanford entities were held outside Antigua.
8. Most of the investor victims/creditors reside outside Antigua.jThe Texas Court is the jurisdiction locus (i.e. hub) of the Stanford entities.
9. The nerve centre of the Stanford entities is in the US.

Runner-up prize for Antigua: ‘foreign non-main proceeding’

This was not sought in the petition and did not have to be. A favourable finding on ‘foreign non-main proceedings’ from the US perspective requires a ‘local place of business’ in that jurisdiction, and this was found in respect of Antigua:

Physical structures there.578 Antiguan clients: 31 individual and 547 trust and corporate entities (2 per cent of total SIB customers and 4 per cent of total monies invested) 3 SIB employees carried out functions in relation to three types of accounts, credit cards, loan facilities, letters of credit, letters of guarantee and private banking services.4 SIB issued loans to the Antiguan government.

This equated to ‘a measurable amount of local business in Antigua sufficient to have an establishment there’ (p53 of the judgment)
.
Recognition in this much more limited way (i.e. as an ancillary proceeding, lacking primacy, real power and any practical abilities other than a recognised basis by which to seek US court relief) did not come without heavy criticisms of the Antiguan liquidators for the following (p54 onwards in the judgment)
:

1. The prior liquidators’ behaviour in Canada in terms of destroying computer records;
2. Efforts to unseat the US receiver as recognised foreign representative in Canada;
3. Challenges to DoJ criminal seizures in Canada, the UK and Switzerland;
4. The preference for a US bankruptcy rather than the current receivership (criticised by the US Court as the basis for delay and disruption).

On the basis of these criticisms only limited relief was granted to the Antiguan liquidators, for example the taking of evidence: ‘[t]his limited relief facilitates the Joint Liquidators’ US discovery needs related to the Antiguan liquidation’. This was made conditional on the following:

1. The Antiguan liquidators making available to the US receiver and the US Securities and Exchange Commission (SEC) any and all records the Antiguan liquidators have;
2. The Antiguan liquidators attempting (by ‘best efforts’) to allow the US receiver reciprocal rights in the Antiguan courts;
3. The Antiguan liquidators not disrupting the efforts of the US receiver or the SEC;
4. The Antiguan liquidators not duplicating their efforts;
5. The Antiguan liquidators not initiating US court actions, but instead consulting with the US receiver and attempting to adopt a common claims and distribution process for victims.

Further, the US Court was not troubled by the fact that permission for any of these requirements would be necessary in the Antiguan context:

‘To the extent that the Joint Liquidators require a court order from Antigua to comply with the above conditions, the Court leaves it up to the Joint Liquidators to attempt to obtain one. This Court will not modify its conditions simply because the Joint Liquidators are unable to secure the authority to comply.’

The Antiguan liquidators could be forgiven for feeling somewhat shell-shocked, and it will be interesting to see the reaction of the Antiguan Court on the necessary application(s).

Location of the assets and next steps, pending the outcome of the appeal by the Antiguan liquidators

It is believed that SIB has around USD8 billion in assets located all over the world, with 92 per cent of these assets yet to be traced. This sum is made up of 30,000 depositors in 100 different countries. 15.74 per cent of these depositors are US nationals, representing 22.21 per cent of the actual investments. Depositors from Latin America represent 71.17 per cent of total depositors and 58.56 per cent of investments. Before the decision of 30 July 2012, it was thought that these figures speak for themselves on this issue of whether it is accurate for insolvency proceedings to be carried out in the US and whether dealings with victims of the scheme should be characterised as necessarily US-centric.

On the part of the Antiguan liquidators, their latest ‘Communication to Creditors’ (dated 20 July 2012) reveals their perspective on the proceedings and requests patience from the investors:

‘The question to ask yourself is, “Do I want a small return at some future date, when the appeal process undertaken by Stanford in the US has run its course?” or “Do I want an earlier distribution recognizing that a small part will be invested to significantly increase my ultimate recovery?”’

Those questions now appear irrelevant in light of the recent Texas decision. The more pertinent question is now whether there will be any assets left to distribute now that the creditor pool has been aggregated by the US Court.

1. Northern District Court of Texas (Dallas) Civil Action 3:09-CV-00721-N (Judge Godbey), 30 July 2012
2. ‘The lack of a ruling is causing severe prejudice to the [Antiguan joint liquidators]. Among other things, the absence of a ruling is:
3. Re Stanford International Bank Ltd (In Liquidation) [2010] EWCA Civ 137
4. SEC v Stanford International Bank Ltd and Others, Civil Action No 3:09–CV–0298–N
5. In Re Stanford International Bank Ltd [2009] EWHC 1441 (Ch)
6. In Re Stanford International Bank [2010] EWCA Civ 137
7. Which itself was subject to recent (2010) review in the US Supreme Court decision of Hertz Corp v Friend, 130 S Ct 1181, 1192

Stanford Accountants Face Final Criminal Trial Over Ponzi Scheme

By Laurel Brubaker Calkins and Andrew Harris on October 17, 2012


Two accountants accused of helping R. Allen Stanford swindle investors in a $7 billion Ponzi scheme are set to begin the last criminal trial stemming from the plot with opening statements in federal court in Houston.
Stanford Financial Group Co. Chief Accounting Officer Gilbert Lopez, 70, and Global Controller Mark Kuhrt, 40, face 10 counts of wire fraud and one count of conspiracy to commit wire fraud, which could send them to prison for more than 20 years if convicted by a jury. The men pleaded not guilty when they were indicted with the Texas financier in June 2009.
“Kuhrt and Lopez fabricated the financial statements that enabled Stanford to lie to investors about the circumstances surrounding their investments,” Robert Khuzami, enforcement director for the U.S. Securities and Exchange Commission, said in a statement the day the men were indicted.
Stanford, 62, was convicted in March of misappropriating more than $1.7 billion from investors who bought bogus certificates of deposit from Antigua-based Stanford International Bank Ltd. The former Texas billionaire is now serving a 110-year sentence in federal prison in Florida. He is appealing his verdict and sentence.
Stanford told investors their money was invested in conservative liquid assets. Evidence at his jury trial showed he was actually siphoning cash to fund risky private equity ventures, speculative real estate developments, cricket tournaments and a lavish personal lifestyle that included a fleet of private jets, yachts and multiple mansions.

Primary Evidence

The primary evidence against Lopez and Kuhrt are e-mails in which they discussed Stanford’s unreported loans and how to value certain assets to disguise that debt in the months before U.S. securities regulators seized Stanford’s businesses in February 2009.
Lopez, Kuhrt and James M. Davis, who was Stanford’s chief financial officer, discussed in these messages how to repeatedly flip a Caribbean resort property among Stanford entities so that its value could be inflated from $63.5 million to $3.2 billion in a matter of months, according to the indictment. The inflated value was intended to plug the hole in the books caused by Stanford’s personal loans and bad investments, prosecutors have said.
Lopez and Kuhrt also helped represent to investors that Stanford made a $741 million capital contribution to bolster the bank’s balance sheet in late 2008, when “Stanford did not make such capital contributions,” prosecutors have said.
Lawyers for Lopez and Kuhrt said during a 2011 court proceeding over legal-defense insurance coverage that the accountants were only following orders from Stanford and Davis and never intended to break any laws.

Draft Form

The accountants’ lawyers have said prosecutors are misconstruing documents that were in draft form at the time regulators seized the company. They claim that Stanford and his accountants were in the process of consolidating the private enterprises Stanford funded with investor loans onto the bank’s balance sheet, and that they were prevented from completing the rollup by the government shutdown.
Davis pleaded guilty to his role in the fraud scheme in 2009, testified against Stanford at trial and is awaiting sentencing. Laura Pendergest Holt, Stanford’s investment chief, pleaded guilty in June to obstructing a federal investigation into Stanford’s companies and was sentenced to three years in prison.
As of May 31, more than 20,000 Stanford CD investors had received nothing from about $220 million that court-appointed receiver Ralph Janvey has recovered from the sale of Stanford’s corporate and personal assets. About $108 million of that recovery has gone to cover the U.S. receivership’s expenses and windup costs on Stanford’s sprawling business empire.
An additional $335 million in Stanford assets have been identified in banks in the U.K., Switzerland and Canada. Janvey is fighting for control of those assets with a rival Antiguan-appointed receiver, who has spent about $20 million pursuing Stanford assets on behalf of defrauded investors.
The case is U.S. v Lopez, 4:09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

KLS has requested that we post the following on the blog for your information

“KLS continues to file administrative claims against the SEC on behalf of Stanford victims in order to have such investors included in the Stanford class action against the SEC. KLS on your behalf will likely face challenges to your inclusion in the class of litigants represented on the basis of the timeliness of your claim. However, KLS believes there are strong arguments to support later filings of such SEC claims. If you have filed a claim with a different attorney and need to file an amended claim or if you have never filed a claim with the SEC, please contact KLS immediately at the following address: info@kachroolegal.com”

Stanford Victims in Antigua Praise Latest Development

Source: Caribarena

Antigua St. John’s - Stanford victims in Antigua are calling the historic victory over the United States Securities Exchange Commission (SEC) a landmark achievement and “the best news the victims have had in three-and-a-half years.”

On Friday, a US Court ruled that the SEC must defend a negligence claim contending that the Commission had failed to act appropriately after concluding at least four times before 2008 that R. Allen Stanford was indeed operating a Ponzi scheme.

“We have made legal history with this latest ruling and I encourage all Stanford victims to go to http://stanfordsforgottenvictims.blogspot.com/ to read how they can join this lawsuit and for the first time have a chance of recovering their stolen money,” said spokesperson for the Stanford International Victims Group (SIVG) Kate Freeman.

She added that the achievement of attorney Gaytrie Kachroo is the first for any lawyer in finding a legal solution to the Discretionary Rule that has long protected the SEC from legal sanction when it failed to act accordingly.

“There are thousands of Stanford Victims that need to be made aware of what we have done here and also be given the chance of joining Kachroo Legal Services on this journey,” Freeman said.

The victims now have a clear passage to continue forward with the claim against SEC examiners, according to the ruling.

The lawsuit being carried by Kachroo claims that the SEC had a “nondiscretionary duty” to report Stanford to the Securities Investor Protection Corp. (SIPC) in the USA. The landmark judgment was filed on September 7.

“Gaytri Kachroo was originally contacted by me and another victim and asked to work on the behalf of the Stanford International Victims group to sue the American Government and the SEC. All other lawyers said this could not be done due to the “Discretionary Rule” that protects the US government and its departments,” Freeman said.

The attorney is reported as saying on Friday in a www.bloomberg.com report that the judge’s decision was the first to overcome the SEC’s “sovereign immunity.”

“The ruling handed down… is a bold statement and a warning to the government: if you fail to carry out your statutory obligations to protect the public against wrongdoing with massive repercussions to the investing public, you will be held liable,” Kachroo said in a statement.

According to the judgment, “…The Securities and Exchange Commission was obligated to report Stanford’s company to the Securities Investor Protection Corp. This obligation to report was not discretionary because the controlling statute mandates that the report be made.”

The SEC may use the next stage of the litigation to raise the argument that it had not concluded before 2009 that Stanford was running a Ponzi scheme, despite the plaintiff’s claims.

It is also being reported that the SEC shied away from investigating the case because of the clear complexities involved, as they reportedly preferred to investigate more slam-dunk cases due to work evaluation purposes.

The case is Zelaya v. United States, 11-cv-62644, U.S. District Court, Southern District of Florida (Miami).

KLS - Stanford Update #17

HISTORIC VICTORY FOR STANFORD VICTIMS IN ZELAYA v. UNITED STATES

Miami, Florida - September 7, 2012

Federal District Court Judge Robert N. Scola, Jr. handed down an historic opinion against the U.S. Government today, holding the Securities and Exchange Commission potentially liable for billions of dollars for not notifying the Securities Investor Protection Corporation when it had information about Allen Stanford’s Ponzi scheme. In the wake of the Madoff and Stanford Ponzi schemes and the dozens of lawsuits filed against the Government for the SEC’s failure to protect the public, today marks the first time that a lawsuit survived the Government’s motion to dismiss.

The case is being fought by Dr. Gaytri Kachroo and her law firm, Kachroo Legal Services, P.C., on behalf of thousands of Stanford victims. KLS filed a class action against the government, alleging that the SEC knew Stanford was operating a multi-billion dollar Ponzi scheme and “sat and watched the scheme grow for years, as it ballooned into a $7 billion enterprise, second only to Bernard Madoff as the largest Ponzi scheme in history.”

In an unprecedented decision denying the Government’s efforts to dismiss the lawsuit, the Court held today that the SEC can be held liable for failing to act appropriately when put on notice that an investment advisor is operating a Ponzi scheme. To achieve this important and unprecedented goal on behalf of its clients, KLS crafted an argument not raised in any of the prior complaints against the government: that the SEC violated a statutory duty to notify SIPC that an investment advisor was in or approaching financial difficulty.

Dr. Gaytri Kachroo is proud of her firm’s achievement: “This decision reaffirms the SEC’s fundamental mission. For decades, the SEC has relied on sovereign immunity to avoid the consequences of its inaction in the face of Ponzi schemes. The ruling handed down today is a bold statement and a warning to the Government: If you fail to carry out your statutory obligations to protect the public against wrong doing with massive repercussions to the investing public, you will be held liable.”

Victims of the Stanford Ponzi scheme have not only lost billions of dollars as a result of the SEC’s failure to put an end to the scheme, but they have also lost hope that they will see any recovery, as the SEC- appointed receiver has recovered only pennies on the dollar at this point, and has not made any distribution to victims. “We are in an unprecedented position, and are thrilled to succeed in this first major hurdle in the case. Today, our small firm accomplished what thousands of lawyers and consultants employed by the Receiver could not do in over three years: restore hope for the victims of Stanford’s Ponzi scheme.”

Kachroo Legal Services represents individuals and corporate entities in business and securities litigation, companies and their Boards in ethics and audit compliance, funds and investors in their government and SEC relations, and in general corporate law and general counsel services for companies both domestic and international. Dr. Gaytri Kachroo is the attorney for Madoff whistleblower Harry Markopolos.

Lawsuit against U.S. over Stanford Ponzi scheme can go ahead

Source:Joseph Ax (Reuters)

(Reuters) - A lawsuit claiming U.S. securities regulators were negligent in failing to respond earlier to Allen Stanford's $7 billion Ponzi scheme can go forward for now, a federal judge ruled in Florida on Friday.

U.S. District Judge Robert Scola rejected the U.S. government's motion to dismiss the case, according to court documents. The government claimed the court did not have jurisdiction over the U.S. Securities and Exchange Commission's handling of the Stanford case.

The purported class action complaint, filed by two investors who say they lost a combined $1.65 million when the scheme collapsed, claims the SEC knew as early as 1997 that Stanford was likely operating a Ponzi scheme but took no action against him until 2009. The SEC had a duty to notify the Securities Investor Protection Corp (SIPC) of Stanford's fraud, the lawsuit asserts.

The SIPC, funded by the brokerage industry, handles investors' claims when brokers fail and has overseen liquidation proceedings for Bernard Madoff's Ponzi scheme and the collapse of MF Global.

In his ruling, Scola found that the SEC was required to act if it concluded that Stanford was running a Ponzi scheme.

"When the Securities and Exchange Commission believes that a broker or dealer is in or approaching financial difficulty then it must report that broker/dealer to the Securities Investor Protection Corporation," he wrote.

Scola did, however, dismiss the lawsuit's second claim, which faulted the SEC for not considering whether to deny Stanford's company's annual registration as an investment advisor. The judge agreed with the government's argument that such decisions are entirely within the SEC's discretion.

The government's argument that the SEC did not know Stanford was running a Ponzi scheme will be addressed if and when it moves for summary judgment, the judge said.

A similar $18.7 million lawsuit against the U.S. was tossed by a Texas federal judge last year for lack of jurisdiction.

In a March 2010 report, the SEC's inspector general found the SEC was aware since 1997 that Stanford was likely running a Ponzi scheme and that numerous agencies, including the Federal Bureau of Investigation, the Justice Department and the Secret Service, all probed Stanford's operations at one time or another.

An SEC spokeswoman declined to comment on Friday's ruling.

"This is a historic ruling showing that the SEC can finally be held accountable for not notifying SIPC," said Gaytri Kachroo, a lawyer for the plaintiffs.

Stanford was sentenced in June to 110 years in prison for bilking investors with fraudulent CDs issued by Stanford International Bank, his bank in Antigua.

The plaintiffs are seeking unspecified damages and certification of the class action.

The case is Zelaya et al. v. United States, U.S. District Court for the Southern District of Florida, No. 11-62644.

(Reporting by Joseph Ax; editing by Carol Bishopric)

KLS Beats the SEC Motion to Dismiss!!!!

FANTATIC NEWS FOR ALL VICTIMS GAYTRI KACHROO HAS BEAT THE SEC MOTION TO DISMISS HER CASE....WE ARE TAKING THE SEC TO COURT!

Zelaya Order MTD

Statement Regarding DoJ Meeting Next Week

Dear Members,

The Joint Liquidators have posted responses to communications from Ms Shaw and Mr. Escalona on their website at sibliquidation.com.   These are quite lengthy and we thought it might be useful to summarise a couple of the key points, and add some comments of our own before we go to Washington DC to represent Stanford International Victims Group at the "summit" meeting between DoJ, the victims groups, the Receiver parties, and the Joint Liquidators and their Creditor Committee.

From where we sit it appears that Ms. Shaw and Mr. Escalona have joined forces to encourage the DoJ and Receiver parties to block the JL's actions to get an early release of the SIB frozen funds - preferring the "all American" solution, no matter what the cost or delay.  The DoJ intervention to freeze funds, took place at a time when the funds were not at risk as they were going to go to one of the Court appointees. In so doing they have only caused several years delay in these funds becoming available to support recovery actions and distributions to depositors without adding any value or certainty.  The JL's have been trying to get these funds released since their appointment over a year ago as they were in a position to flow the bulk of them through to depositors promptly, and use some part of them to generate further recoveries which could also have been distributed by now.  (The JL's did not press forward with their claims process as early as they might have had there been the prospect of distribution to save money in the early going.)

There is no doubt that DoJ was continually aware of Ms. Shaw and Mr. Escalona, and hearing from no other victims were able to assume these were the only victim voices. Were it not for the JL's we would not have been included in this summit, as DoJ say they were not aware of the Stanford International Victims Group, nor its site which we believe properly posts all victims views in an effort to be genuinely representative. In that context we note Ms Shaw did not post the JL's response to her open letter, and as best we can tell neither has Mr.  Escalona posted the multiple responses by the JL's to his open communications.  We are concerned that he has mostly served to "re-victimise" the victims by asking for more money on a continuing basis.

Mr. Escalona also continues to make legal pronouncements on the JL's procedures and policies.  He is not a lawyer licensed to practice any where that we can determine, and certainly not in Antigua.  We are told he has not answered the JL's on this point when they asked him directly if he was a lawyer.  He demonstrates a continuing lack of knowledge of the laws of Antigua, and binding rules implemented under those laws, and the simply has no experience with, or understanding of, the intricacies of international insolvency proceedings. Unfortunately it appears he is simply wrong on many of his pronouncements, yet to depositors who rely on him for information, his is only voice heard, which creates problems and costs for the JL's as they go about their business.  

We invite you to look at the backgrounds of the JL's team who are all specialists in fraud and international insolvency with many years experience.  The US team of lawyers, including the Receiver, the lead lawyer from Baker Botts, the Examiner and the tort lawyers on OSIC, have virtually none collectively, never mind individually, nor does the US Court running the US case, which has declined to refer the matter to the US Bankruptcy Court, where that expertise resides. Bluntly it seems to us that this is one of the biggest reasons why the JL's have not been able to come up with a cooperative protocol, as fear by the Receiver parties for their positions  prevails rather than an understanding as to how to make the tools available work for both of the Receiver and the JLs,which was the JL's aim.

We note the JLs have pledged to continue the fight to recover funds for the earliest distribution possible and ultimately in the largest amounts possible.  If any of our members have concerns or questions with respect to what the JLs are doing, it is our experience that they are very responsive to direct communication.  

Latest Communication from Grant Thornton

GrantThornton

 An instinct for growth"

Stanford International Bank Limited

 In Liquidation 

171 Main Street

P.O.Box 4259 Road 

Town Tortola

 British Virgin Islands

 VG1110

Tel: +1284 494 616

20 AUGUST 2012

Stanford International Bank Limited in Liquidation (SIB) 

Dear Depositor:

Thank you for taking the time to write to us and express your opinion.   We trust that you had the time to read judge Godbey's ruling before writing to us.  If you have not, we are in the process  of posting the  Order on our website in English with a Spanish translation at "sibliquidation. com". 

We know that you are being asked to send letters and e-mails to the Joint Liquidators and we welcome all constructive input. But we also know that in some cases you are being asked to do so, directly or indirectly, by persons who have a personal economic stake in opposing the joint Liquidators in their efforts to obtain the best results for creditor/victims. Therefore we are inclined to view such correspondence with some skepticism.

We respectfully disagree with judge Godbey's approach to his ruling and with the ruling itself, mainly because it potentially sets up a very poor outcome for the creditor/victims of Stanford International Bank (SIB). And to be clear, we have only the interests of creditor/victims of SIB to consider, not the creditors of the many other Stanford entities whose interests the Receiver and Judge Godbey are obligated to take into account.

If you are not a lawyer or international insolvency practitioner, we understand that you may not appreciate all of the potential implications of judge Godbey's ruling and its limited application to this worldwide case if not appealed. We urge you to keep an open mind and read the following in which we set out our approach to obtaining the best results for the creditor/victims such as you. We appreciate the issues are very technical ones relating to international insolvency laws and the difference between a Receiver and a Trustee/Liquidator under US law, but this is what we do day to day. Let us try to explain some of the issues.

1. A Trustee/Liquidator has more rights than an equity Receiver with respect to some of the parties that can be sued and the nature of damages that can be claimed. This is the principal reason why the Madoff case very quickly went into bankruptcy and is making big recoveries for his victims. In the SIB case a group of creditors, through lawyers, urged judge Godbey to authorise a bankruptcy filing, a right he had unusually reserved to himself. That request was withdrawn when Judge Godbey created the so called "Official Stanford Investors Committee" (OSIC), placed some of the same lawyers who had urged bankruptcy on the OSIC, and approved those same lawyers filing lawsuits on a contingency fee basis. It is our view that the decision not to take the bankruptcy avenue, limited the remedies available to recover assets by trying to make an international proceeding US centric, and allowed the US Receiver to spend a massive sum,  over $115,000,000, on the administration of the receivership. Remember it is the US Receiver who is battling the joint Liquidators - not the other way around - as normally these Chapter 15 petitions are granted quite quickly and inexpensively.  However, the US Receiver has always seen it as a threat to his continued running of his Estate (which you can judge for yourself) rather than as a cooperative tool that would have eased tensions and served to allow the two estates to work in concert  and thus he forced the expenditure of hundreds of thousands of dollars to block what was and remains a reasonable request.  Lamentably, Judge Godbey's ruling has the feeling of a parochial, paternalistic and protective ruling which is out of step with the vast body of law developed for these types of proceedings around the world.
2. Unfortunately, the ruling of judge Godbey makes findings with which we strongly disagree and which we fear will be used by third parties who assisted the fraud, to try and avoid financial responsibility for their misconduct when sued.   For example, an issue raised by Judge Godbey, and Mr. Escalona, is why the joint Liquidators have yet to sue the Government of Antigua and Barbuda for the loans owed.  However, despite clear evidence on this point that none of those loans are in the name of SIBL and are actually in the name of entities controlled by the US Receiver or others (like the Bank of Antigua) we feel that the facts are simply being ignored.The fact is that SIBL has no loan claim against the Government of Antigua and Barbuda but we have offered to assist the US Receiver as part of an overall protocol to collect those loans (if we can) but that has fallen on deaf ears. Why do your "advisors" continue to hide that fact from you?
3. By finding that all of Stanford's entities can be aggregated, and treated as one, judge Godbey has opened the door to SIB depositors having to share assets and recoveries properly attributable to SIB with creditors from other Stanford entities including claims that may rank in the hundreds of millions of dollars, such as the IRS. This cannot happen with recoveries that are distributed through the SIB Liquidation.  Our obligation under this application is only to SIB creditor/victims.  At the very least the fight between competing creditors from the different Stanford companies over who is entitled to recoveries in the US proceeding may delay distributions for months or years. We have no similar issues in our liquidation  estate.
4. Judge Godbey in approving the US Receiver's claims process ignored our written suggestion that the claims process we had been running at that time for many months, at a much lower projected cost, be used in both proceedings; but in his ruling he is critical that we did not agree to a combined process. Had we been recognised as we requested, the US Receiver's more expensive and duplicative process would not have been necessary and it was open to Judge Godbey to accept our process in any event. Had either happened you would not have needed to file two claims nor suffer the higher cost of the Receiver's process. This has or will result in an expenditure of at least $4 million by the US Receiver which could have been significantly reduced. So please ask hard questions of those that advocate the US approach which so far has only enriched a small group of lawyers and forensic accountants and those surrounding them. 
5. Judge  Godbey,  in his  conditions  to relief,  attempts  to exert authority for his US Receiver/DoJ in parts of the world where the Liquidation has already been found by the local Courts or responsible authority, to be the "main" proceeding in the winding up of SIB. The Joint Liquidators in meeting their obligations in those jurisdictions cannot accept this - not because we don't like it - but because: 

       i   it will result in you being denied your proper recovery of  assets;    

       ii    it will be delay any distribution to you; 

       iii   it will be more expensive; 

       iv   funds properly payable to you will be shared with creditors 
             of other Stanford entities,  

       v    having been given a mandate in those jurisdictions 
            it would be improper and offensive  to them for us to 
            step back; 

     vi    the conditions set by the US Judge for the very limited 
            form of recognition given to the joint Liquidators 
            include some that are completely contrary 
            to our duties under Antiguan law and our obligations to 
            you, including  disclosure of the bank's confidential 
            financial and personal information on depositors; and 

    vii   the conditions of the Order, were we to seek relief under 
            it, prohibits us from making payments "to any US person",
            which on the plain language of the Order would appear 

            to prohibit distributions to US based creditor/victims.

As a result, the joint Liquidators present intention is to seek no relief from the US court until these conditions are removed or modified to be fair and balanced and in the interests of all the creditor victims, or an appeal sets the Order aside.  Failing that, we will seek no relief from the US court so that those conditions can never  apply.

While we respect Judge Godbey and his court, we believe that his decision, unfortunately, is an attempt to bludgeon the joint Liquidators to submit to the US Receivership, in exchange for very limited assistance from his court. Whilst this is no doubt very welcome to the US Receiver and the US SEC, given their handling of this case to date, we believe that his ruling will actually result in a much lower distribution to the SIB creditor/victims.  Further to acquiesce to the DoJ with respect to the "frozen assets", recognising that DoJ cannot distribute them until all Stanford's appeals are finalized, when the Liquidation could distribute the bulk of them forthwith, (a point we have been making for the last 15 months), is not in the best interests of the creditor/victiins. This is particularly so in the light of the offer we made to DoJ some months ago which would have put a substantial payment in your hands in September    that is to say a month from now as opposed to a year to fifteen months from now if  DoJ has control of the "frozen assets".

 While Judge Godbey describes the Joint Liquidators' actions as interference with the US Receiver we would like to tell you about one specific instance of so-called "interference".  The Joint Liquidators asked Judge Godbey to allow them to file damage claims in Washington DC, against four US-based third parties who we allege facilitated the fraud. Judge Godbey refused to allow such suit even though the US Receiver and OSIC, in the instance of two of the targets, had failed to file the claim or otherwise protect the right to file in Texas (where judge Godbey had ordered all suits be filed) before the filing deadlines required by Texas law had expired.  Instead the Judge found for the US Receiver, and with retrospective blessing approved a filing in DC. Having filed those suits, the US Receiver appears to have done nothing of substance to progress them. In our view the combination of judge Godbey's ruling and the lack of substantive action may end up depriving the estate, and therefore you, of tens if not hundreds of millions of dollars of recoveries.  Only time will tell but at least our "interference" forced the US Receiver to file the claim before the statute of limitations expired with just days to spare.

In this and other instances of so-called "interference," our actions are driven by the prospect of trying to increasing the distribution to you as quickly, cheaply and fairly as possible, while continuing to assert rights given to us in other parts of the world where SIB operated or had assets, to make recoveries on your behalf.  Only the Joint Liquidators are authorized to act for you in the United Kingdom and Switzerland, and the US Receiver has purposefully ceased all actions with regard to the frozen funds there.  Further, even though the US Receiver had been recognized in Canada, he had taken no action to preserve rights which were about to expire at the time of our intervention there.  This failure put at risk a claim of material value which we have filed in Canada on your behalf, with the permission of the Canadian Court.  Once again, our so called "interference" saved a potentially large asset of the Estate from being extinguished by the expiration of the statute oflimitations.

 We do not intend to, nor have we ever indicated that we want to, "take over" the US Receivership.  Those are the US Receiver's words adopted by his supervising judge, not ours. Indeed, as noted above, we only have authority over SIB and a few other Antiguan-based companies, not the whole group of companies the Receiver is charged with. Regarding SIB, our intention has been clear to all who take the time to read our papers and who want to understand them. We proposed a detailed protocol with the US Receiver to provide assistance where useful, and leadership where necessary    based on an independent "who has the best chance of winning" assessment - a sharing of records and a joint claims process, in a balanced approach that respected the roles and fiduciary obligations of both Court appointees.  We were open to discussion on any potentially controversial point of that proposal.  Yet in his Order Judge Godbey makes no reference to our proposed protocol for cooperation between the two proceedings.

 We continue to deal with the other assets outside of the US in the belief that not only can we make the most timely distribution to you, and our efforts could, if we have the tools we need, greatly increase what you ultimately recover.  A favorable ruling on recognition in the US we believe will not only reduce costs but increase recoveries to you, the depositors of SIB.

 That is why we are appealing judge Godbey'sruling.

 Rest assured if a deal can be accomplished with the DoJ and the US Receiver that facilitates putting money in your pockets immediately while meeting the needs of the Antiguan process to optimize total recoveries for you, then we are all for it and will champion such a deal. But if it's simply about centralizing assets and recoveries in the US Receiver's hands without regard to the size or speed of the distribution to victims and in an attempt to bully other Courts that have made findings adverse to the US Receiver, into accepting US decisions, which tramples on the concept of international community in the process, then the joint Liquidators will stand firm in response to such an attack against the rights of the creditor/victims of SIB, and no amount of e-mails or letters will undermine that resolve.

  

We remain convinced that allowing assets located outside of the US to pass through the US DOJ forfeiture process  and then onto the US Receiver is  not in the best interests  of the victims/creditors You Might think to ask the US Receiver and those working with him: What is wrong with the plan proposed by the joint Liquidators regarding these assets?   What  is  wrong  with  avoiding  another 10-12 month  delay  in  getting  you  a distribution? What is wrong with funding claims against those who assisted the fraud in order to obtain potentially hundreds of millions of additional monies for distribution? What is wrong with using a cheaper claims process than proposed by the US Receiver? What is wrong with avoiding any risk that distributions to you are diluted by payments to US creditors who are not victims of the fraud? Ask these questions to whomever is urging you to write letters and e-mails to the joint Liquidators and listen carefully to the answers. Perhaps you might consider the motivations of those urging you to send these letters and e-mails and ask yourself if those motivations are consistent with your expectations to recover as much money as possible, as soon as possible, and in the fairest manner possible.

If you would like more information on the liquidation, we have just filed our third report to our supervising Court, a copy of which will be available on our website shortly in English with a Spanish translation. As noted above our website address on the internet is "sibliquidation.com".

 

Marcus A. Wide

for the Joint Liquidators, Stanford International Bank Limited 

http://www.sibliquidation.com/images/Communication_to_Creditors_8-20-12.pdf