By Laurel Brubaker Calkins and Andrew Harris
Jan. 13 (Bloomberg) -- R. Allen Stanford’s attorneys must defend him at a $7 billion investment fraud trial that will begin Jan. 23 in Houston federal court, said a U.S. judge who rejected the lawyers’ bid to quit.
Stanford’s court-appointed attorneys, Ali Fazel, Robert Scardino, John Parras and Ken McGuire, asked to exit his case in a motion filed on Jan. 11, less than two weeks before the start of jury selection. They claimed they hadn’t been given enough time or resources to prepare an adequate defense against what they describe as a complicated financial fraud case.
“The defense team’s primary reason for seeking such relief is based upon its self-proclamation that Stanford’s right to effective assistance of counsel will be impaired,” Hittner said in a two-page order that also rejected the lawyer’s bid for a three-month delay in starting the trial.
“The court notes that the defense team maintains this position despite the fact that two of its lawyers -- Scardino and Fazel -- have been appointed to this case since November 2010, and the other two lawyers -- Parras and McGuire -- have been appointed to this case since March 2011,” Hittner said.
Stanford, 61, has been imprisoned as a flight risk since he was indicted in June 2009 on charges of defrauding investors through allegedly bogus certificates of deposit at his Antigua- based Stanford International Bank Ltd. Stanford denies all wrongdoing.
Pretrial Hearing
Hittner said in a separate order late today that Stanford’s lawyers could argue yet another delay request, which they filed under seal this afternoon, at a pretrial hearing next week.
The lawyers seek “a continuance on the basis that a non- attorney member of the defense team will be unavailable to assist at the commencement of trial,” Hittner said in the ruling. He ordered the government and Stanford’s lawyers to continue “full trial preparation” in the meantime.
The former financier was declared indigent and given a taxpayer-financed defense because all of his assets were frozen by court order after the U.S. Securities and Exchange Commission sued him in February 2009.
Fazel and Scardino have complained about time and funding restrictions imposed on the defense team by Hittner and the U.S. Court of Appeals in New Orleans, which approves trial budgets for court-appointed attorneys.
Prison Attack
They said Stanford has had too little time since he was declared mentally competent on Dec. 22 to adequately review the thousands of documents necessary to assist in his defense. Stanford spent almost nine months in a prison rehabilitation program recovering from a head injury suffered during a 2009 prison attack and an addiction to anxiety drugs prescribed following the assault.
Fazel said in court filings that the defense team was also hampered by the yearend resignation of all its document- management and trial-preparation contractors over unpaid bills dating back to September. The contractors returned to work in early January after an appellate court granted them partial back pay and ordered them to continue working.
Lead prosecutor Gregg Costa opposed delaying the trial by more than a few weeks, citing efforts by Stanford’s defense team to get Stanford bail and to fight his competency declaration. Stanford’s attorneys have also filed multiple constitutional challenges in his case, none of which have succeeded.
Certain Issues
“The defense obviously has devoted extraordinary resources to certain issues,” Costa said in a filing earlier today. “It is time for the defense to devote those resources to the trial.”
Laura Sweeney, a Justice Department spokeswoman, declined to comment on the judge’s rulings today.
“We’re preparing for trial,” Fazel said in a telephone interview after Hittner denied him permission to quit. He declined to comment further, citing a gag order banning lawyers from publicly discussing the case.
The criminal case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv298, U.S. District Court, Northern District of Texas (Dallas).
--Editors: Mary Romano, Peter Blumberg
Showing posts with label denied. Show all posts
Showing posts with label denied. Show all posts
Saturday, 14 January 2012
Thursday, 29 December 2011
Allen Stanford’s Bid to Delay January Trial for Investment Fraud Is Denied
R. Allen Stanford’s request for more time to prepare to face charges he led a $7 billion investment fraud scheme was denied by the judge who declared him mentally fit for trial. Jury selection will begin in Houston federal court on Jan. 23.
“This case needs to be tried,” U.S. District Judge David Hittner said in an eight-page ruling today. “This trial will decide not just whether Stanford is guilty of the criminal charges, but also whether hundreds of millions of dollars of investor funds currently frozen may be forfeited and returned to his alleged victims.”
Hittner ruled Dec. 22 that Stanford has sufficiently recovered from a head injury suffered in a jailhouse assault and an addiction to anxiety medications prescribed to him by prison doctors after the attack.
The judge delayed Stanford’s original trial date last January and ordered him into a prison rehabilitation program after finding Stanford’s medical conditions had made him incompetent to understand the proceedings or assist his defense team.
“Our ability to defend our client has been consistently limited by matters the court is well aware of,” Ali Fazel, Stanford’s lead lawyer, said in an e-mailed statement today about the ruling. “We are now reviewing our options.”
Flight Risk
Stanford, 61, has been detained as a flight risk since his June 2009 indictment on charges he defrauded investors of more than $7 billion through allegedly bogus certificates of deposit at his Antiguan bank. The former financier has denied all wrongdoing.
Stanford’s attorneys had asked to delay the trial until late April to give them more time to review millions of pages of company documents with Stanford. They argued they’d had only a few days to review documents with Stanford while he was clear- headed. They said they needed to search beyond the limited set of papers the government has identified as critical to the case.
“The accused’s position is that this case is about the flow of money” through Antigua-based Stanford International Bank and more than 100 related Stanford companies scattered around the globe, Fazel said in a Dec. 27 court filing.
“Therefore, the defense in this case does not merely require knowledge of one company as the government contends, but rather, depends upon knowledge of the finances and operations” of all the companies, Fazel said in the filing.
Thousands of Investors
Prosecutors, who opposed a lengthy delay, said a four-to- six-week extension wasn’t unreasonable given the time Stanford’s lawyers had needed to devote to his recent competency hearing. They said further delay wasn’t fair to thousands of Stanford investors, whose recovery of funds from Stanford’s holdings is stalled until his criminal case is concluded.
ustice Department spokeswoman Laura Sweeney declined to comment on the ruling.
The government contends Stanford’s bank operated as a Ponzi scheme, in which early investors were paid above-market interest rates with funds taken from later investors.
Prosecutors claim Stanford siphoned off more than $1 billion to fund a lavish lifestyle of private jets, yachts, multiple mansions and a private Caribbean island.
“This case needs to be tried,” U.S. District Judge David Hittner said in an eight-page ruling today. “This trial will decide not just whether Stanford is guilty of the criminal charges, but also whether hundreds of millions of dollars of investor funds currently frozen may be forfeited and returned to his alleged victims.”
Hittner ruled Dec. 22 that Stanford has sufficiently recovered from a head injury suffered in a jailhouse assault and an addiction to anxiety medications prescribed to him by prison doctors after the attack.
The judge delayed Stanford’s original trial date last January and ordered him into a prison rehabilitation program after finding Stanford’s medical conditions had made him incompetent to understand the proceedings or assist his defense team.
“Our ability to defend our client has been consistently limited by matters the court is well aware of,” Ali Fazel, Stanford’s lead lawyer, said in an e-mailed statement today about the ruling. “We are now reviewing our options.”
Flight Risk
Stanford, 61, has been detained as a flight risk since his June 2009 indictment on charges he defrauded investors of more than $7 billion through allegedly bogus certificates of deposit at his Antiguan bank. The former financier has denied all wrongdoing.
Stanford’s attorneys had asked to delay the trial until late April to give them more time to review millions of pages of company documents with Stanford. They argued they’d had only a few days to review documents with Stanford while he was clear- headed. They said they needed to search beyond the limited set of papers the government has identified as critical to the case.
“The accused’s position is that this case is about the flow of money” through Antigua-based Stanford International Bank and more than 100 related Stanford companies scattered around the globe, Fazel said in a Dec. 27 court filing.
“Therefore, the defense in this case does not merely require knowledge of one company as the government contends, but rather, depends upon knowledge of the finances and operations” of all the companies, Fazel said in the filing.
Thousands of Investors
Prosecutors, who opposed a lengthy delay, said a four-to- six-week extension wasn’t unreasonable given the time Stanford’s lawyers had needed to devote to his recent competency hearing. They said further delay wasn’t fair to thousands of Stanford investors, whose recovery of funds from Stanford’s holdings is stalled until his criminal case is concluded.
ustice Department spokeswoman Laura Sweeney declined to comment on the ruling.
The government contends Stanford’s bank operated as a Ponzi scheme, in which early investors were paid above-market interest rates with funds taken from later investors.
Prosecutors claim Stanford siphoned off more than $1 billion to fund a lavish lifestyle of private jets, yachts, multiple mansions and a private Caribbean island.
Thursday, 8 July 2010
Allen Stanford Loses Bid for Bail Before Fraud Trial
Allen Stanford the Texas financier accused U.S. of leading a $7 billion investment-fraud scheme, lost another bid for pre-trial release.
U.S. District Judge David Hittner in Houston today denied Stanford’s request for bail for the third time, rejecting arguments that the 19 months he will spend in jail before his January trial add up to a violation of his constitutional rights and that he can’t adequately ready his case while locked up.
Although conditions at Houston’s federal detention center are “much less ‘posh’ than Stanford prefers, there is no evidence that it is so burdensome as to impede his ability to prepare for trial,” Hittner wrote. Prosecutors opposed the bid, arguing the financier might disappear if freed.
Stanford, 60, is accused in a 21-count indictment of defrauding those who bought certificates of deposit issued by his Antigua-based Stanford International Bank Ltd. Held without bail since June 2009, he maintains his innocence.
Lead defense attorney, Robert Bennett of Houston, didn’t immediately return a call seeking comment. Harvard University law professor Alan Dershowitz assisted in drafting the bail request.
The case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston).
U.S. District Judge David Hittner in Houston today denied Stanford’s request for bail for the third time, rejecting arguments that the 19 months he will spend in jail before his January trial add up to a violation of his constitutional rights and that he can’t adequately ready his case while locked up.
Although conditions at Houston’s federal detention center are “much less ‘posh’ than Stanford prefers, there is no evidence that it is so burdensome as to impede his ability to prepare for trial,” Hittner wrote. Prosecutors opposed the bid, arguing the financier might disappear if freed.
Stanford, 60, is accused in a 21-count indictment of defrauding those who bought certificates of deposit issued by his Antigua-based Stanford International Bank Ltd. Held without bail since June 2009, he maintains his innocence.
Lead defense attorney, Robert Bennett of Houston, didn’t immediately return a call seeking comment. Harvard University law professor Alan Dershowitz assisted in drafting the bail request.
The case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston).
Tuesday, 29 December 2009
Judge refuses to release Stanford
Texas investment promoter Robert Allen Stanford tried just before Christmas to persuade a federal judge to release him from prison pending his $7 billion fraud trial in January 2011.
It was the second such attempt by Stanford, 59, who is alleged to have wrecked the retirement dreams of 30,000 investors from Baton Rouge to Brazil and other points around the world.
U.S. District Judge David Hittner needed just a single word to rule on the request: “Denied.”
Stanford’s defense team — Houston attorneys Kent A. Schaffer and George McCall Secrest Jr. — did not return calls Monday.
They argued in their pre-Christmas filing with Hittner that Stanford’s health has deteriorated during the six months that he has been in custody since his June indictment.
The defense attorneys added that a prison beating Stanford suffered in September contributed to his decline.
Schaffer and Secrest also argued the millions of documents involved in Stanford’s criminal case make it impossible for him to meaningfully participate in the planning of his defense while he remains at the federal detention center in Houston.
Another key point in their argument referred to confessed swindler Bernard Madoff of New York, who was allowed to remain free on bond before he pleaded guilty to felony charges that netted him a prison term of 150 years.
Madoff, whose frauds totaled more than $50 billon, and several other recently convicted white-collar criminals did not flee prior to their convictions, Schaffer and Secrest noted.
Stanford appealed Hittner’s initial refusal to permit him release on bond to the 5th U.S. Circuit Court of Appeals in New Orleans.
Circuit judges Edith Brown Clement, Priscilla Owen and Emilio Garza upheld Hittner’s decision in August, ruling that “Stanford’s arguments are without merit.”
The 5th Circuit panel also said in August: “Stanford has the means, the motive and the money to flee.”
In Baton Rouge on Monday, attorney Winston G. Decuir Jr. said Stanford’s new argument concerning the pre-trial release of Madoff and other white-collar criminals might justify another appeal to the 5th Circuit. Decuir is not involved with the Stanford case.
Decuir, who regularly practices in federal courts, said Stanford’s argument for pre-trial release does not carry a high chance of success.
“It wouldn’t surprise me to see federal prosecutors use the Bernie Madoff case the other way,” Decuir said, noting that Madoff received a prison term of 150 years.
“No one expected Bernie Madoff to get that kind of time,” Decuir said.
Younger people convicted of massive white-collar crimes might not run from a 10-year prison term, Decuir said.
Many people might be tempted to run from possible prison terms in excess of a century. And prosecutors probably would use that argument in any debate over Stanford’s requested release, Decuir added.
The 5th Circuit also may not be impressed by Stanford’s argument that he needs release from prison to help his attorneys sift through millions of documents, Decuir said.
“Today, you can put a million pages on a CD-ROM, slap it in a laptop and meet with your client in prison,” Decuir noted.
Stanford has developed heart problems since his arrest and undergone surgery for an aneurysm, his attorneys told Hittner last week.
When Stanford was beaten at a detention center near Conroe, Texas, his attorneys told the judge, he suffered a broken nose and fractures near his right eye that required reconstructive surgery.
The attorneys added that Stanford has lost 40 pounds and sometimes coughs up blood.
Decuir said, however, that reports of deteriorating health often are not “sufficient to persuade a judge to change his or her mind.”
Approximately $1 billion of the Stanford losses occurred in the Baton Rouge, Lafayette and Covington areas, state Rep. Bodi White, R-Central, and Baton Rouge lawyer Phillip W. Preis estimated earlier this year.
It was the second such attempt by Stanford, 59, who is alleged to have wrecked the retirement dreams of 30,000 investors from Baton Rouge to Brazil and other points around the world.
U.S. District Judge David Hittner needed just a single word to rule on the request: “Denied.”
Stanford’s defense team — Houston attorneys Kent A. Schaffer and George McCall Secrest Jr. — did not return calls Monday.
They argued in their pre-Christmas filing with Hittner that Stanford’s health has deteriorated during the six months that he has been in custody since his June indictment.
The defense attorneys added that a prison beating Stanford suffered in September contributed to his decline.
Schaffer and Secrest also argued the millions of documents involved in Stanford’s criminal case make it impossible for him to meaningfully participate in the planning of his defense while he remains at the federal detention center in Houston.
Another key point in their argument referred to confessed swindler Bernard Madoff of New York, who was allowed to remain free on bond before he pleaded guilty to felony charges that netted him a prison term of 150 years.
Madoff, whose frauds totaled more than $50 billon, and several other recently convicted white-collar criminals did not flee prior to their convictions, Schaffer and Secrest noted.
Stanford appealed Hittner’s initial refusal to permit him release on bond to the 5th U.S. Circuit Court of Appeals in New Orleans.
Circuit judges Edith Brown Clement, Priscilla Owen and Emilio Garza upheld Hittner’s decision in August, ruling that “Stanford’s arguments are without merit.”
The 5th Circuit panel also said in August: “Stanford has the means, the motive and the money to flee.”
In Baton Rouge on Monday, attorney Winston G. Decuir Jr. said Stanford’s new argument concerning the pre-trial release of Madoff and other white-collar criminals might justify another appeal to the 5th Circuit. Decuir is not involved with the Stanford case.
Decuir, who regularly practices in federal courts, said Stanford’s argument for pre-trial release does not carry a high chance of success.
“It wouldn’t surprise me to see federal prosecutors use the Bernie Madoff case the other way,” Decuir said, noting that Madoff received a prison term of 150 years.
“No one expected Bernie Madoff to get that kind of time,” Decuir said.
Younger people convicted of massive white-collar crimes might not run from a 10-year prison term, Decuir said.
Many people might be tempted to run from possible prison terms in excess of a century. And prosecutors probably would use that argument in any debate over Stanford’s requested release, Decuir added.
The 5th Circuit also may not be impressed by Stanford’s argument that he needs release from prison to help his attorneys sift through millions of documents, Decuir said.
“Today, you can put a million pages on a CD-ROM, slap it in a laptop and meet with your client in prison,” Decuir noted.
Stanford has developed heart problems since his arrest and undergone surgery for an aneurysm, his attorneys told Hittner last week.
When Stanford was beaten at a detention center near Conroe, Texas, his attorneys told the judge, he suffered a broken nose and fractures near his right eye that required reconstructive surgery.
The attorneys added that Stanford has lost 40 pounds and sometimes coughs up blood.
Decuir said, however, that reports of deteriorating health often are not “sufficient to persuade a judge to change his or her mind.”
Approximately $1 billion of the Stanford losses occurred in the Baton Rouge, Lafayette and Covington areas, state Rep. Bodi White, R-Central, and Baton Rouge lawyer Phillip W. Preis estimated earlier this year.
Thursday, 24 December 2009
Stanford won't be released, judge rules
Fallen financier R. Allen Stanford won’t be released from jail before his fraud trial in 2011, a U.S. judge ruled after reviewing a doctor’s report that the accused is close to “a complete nervous breakdown.”
Attorneys for Stanford, who faces 21 criminal counts for allegedly swindling investors out of more than $7 billion, asked U.S. District Judge David Hittner in Houston yesterday to reconsider his earlier ruling denying bail out of concern the defendant might flee. They submitted reports from two psychiatrists who’d examined Stanford, 59, and found him suffering from severe depression triggered by his incarceration under conditions that render him unable to help in his defense.
“Having considered the motion along with the exhibits attached thereto, and the applicable law, the court determines the motion should be denied,” Hittner wrote in an order today.
Stanford has been jailed since his arrest June 19 and is in a federal detention center in downtown Houston. Stanford’s lawyers said in a Dec. 21 filing that one of the psychiatrists determined that the financier’s mental and physical health had deteriorated sharply.
“If the present set of circumstances persist, Mr. Stanford’s spiraling downhill course will continue to the point where he will suffer serious physical disorders and, more likely than not, a complete nervous breakdown,” the doctor’s report said, according to the filing.
Stanford and three former top executives at Stanford Financial Group are charged with running a Ponzi scheme that paid above-market rates to early investors by taking money from later investors in certificates of deposit sold by Antigua-based Stanford International Bank. Stanford is accused of skimming about $1.6 billion from depositors to fund a lavish lifestyle that included a fleet of jets, yachts, multiple homes and a private island in the Caribbean.
Stanford faces spending the rest of his life in prison if he’s convicted at a trial set to begin in January 2011. The financier denies all wrongdoing in connection with both the criminal case and the parallel civil fraud lawsuit brought against him and the same associates by the U.S. Securities and Exchange Commission.
Stanford’s lawyer complained that without Internet access and frequent communication with his defense team, the jailed financier cannot adequately review more than 7 million documents in the government database or answer questions from attorneys and accountants hired to defend him.
“The issues we raised were real, as well as legally and factually compelling,” attorney Kent Schaffer said in an e-mail today. “I am surprised that we were shot down so abruptly and without a response from the government or a hearing. I am not sure how Allen will be able to participate in assisting in his own defense and, the truth is, he probably won’t be.”
Attorneys for Stanford, who faces 21 criminal counts for allegedly swindling investors out of more than $7 billion, asked U.S. District Judge David Hittner in Houston yesterday to reconsider his earlier ruling denying bail out of concern the defendant might flee. They submitted reports from two psychiatrists who’d examined Stanford, 59, and found him suffering from severe depression triggered by his incarceration under conditions that render him unable to help in his defense.
“Having considered the motion along with the exhibits attached thereto, and the applicable law, the court determines the motion should be denied,” Hittner wrote in an order today.
Stanford has been jailed since his arrest June 19 and is in a federal detention center in downtown Houston. Stanford’s lawyers said in a Dec. 21 filing that one of the psychiatrists determined that the financier’s mental and physical health had deteriorated sharply.
“If the present set of circumstances persist, Mr. Stanford’s spiraling downhill course will continue to the point where he will suffer serious physical disorders and, more likely than not, a complete nervous breakdown,” the doctor’s report said, according to the filing.
Stanford and three former top executives at Stanford Financial Group are charged with running a Ponzi scheme that paid above-market rates to early investors by taking money from later investors in certificates of deposit sold by Antigua-based Stanford International Bank. Stanford is accused of skimming about $1.6 billion from depositors to fund a lavish lifestyle that included a fleet of jets, yachts, multiple homes and a private island in the Caribbean.
Stanford faces spending the rest of his life in prison if he’s convicted at a trial set to begin in January 2011. The financier denies all wrongdoing in connection with both the criminal case and the parallel civil fraud lawsuit brought against him and the same associates by the U.S. Securities and Exchange Commission.
Stanford’s lawyer complained that without Internet access and frequent communication with his defense team, the jailed financier cannot adequately review more than 7 million documents in the government database or answer questions from attorneys and accountants hired to defend him.
“The issues we raised were real, as well as legally and factually compelling,” attorney Kent Schaffer said in an e-mail today. “I am surprised that we were shot down so abruptly and without a response from the government or a hearing. I am not sure how Allen will be able to participate in assisting in his own defense and, the truth is, he probably won’t be.”
Thursday, 19 November 2009
Stanford victim aid requested
The Louisiana congressional delegation and 40 other federal lawmakers are asking the Securities and Exchange Commission to require securities brokers and dealers to cover some of the enormous investor losses in the Robert Allen Stanford fraud case.
U.S. Rep. Bill Cassidy, R-Baton Rouge, said Tuesday the proposal is directed at the Securities Investor Protection Corp., a nonprofit established by Congress in 1970.
SIPC’s funding is provided by member brokers and dealers — and if the SEC acts on the congressional proposal, those brokers and dealers would face increased assessments.
The SEC did not immediately respond Tuesday.
The commission has absolute authority to order SIPC to provide up to $500,000 for each of the more than 4,000 Stanford investors in this country who did not work for Stanford companies, Cassidy said.
SIPC, however, has maintained the Stanford investors were not covered by the corporation.
Stanford, 59, is in federal custody in Houston, where he is under indictment for masterminding frauds that claimed more than $7.2 billion from retirees and other investors in Louisiana and other states and countries.
As much as $1 billion of that loss was suffered by investors in the Baton Rouge, Lafayette and Covington areas, according to estimates by Baton Rouge lawyer Phillip W. Preis and state Rep. Bodi White, R-Central.
“These families worked hard, saved their money, and did their homework,” Cassidy said in a written statement Tuesday. “Many were presented with evidence that their investments were covered by SIPC, and SIPC is the logical place to turn for appropriate restitution.”
Blaine Smith, a Baton Rouge resident who lost $1.5 million to the alleged Stanford frauds, said SIPC officials have denied claims by Stanford investors because most losses were deposits earmarked for an offshore bank.
But Smith said investor bank statements provide evidence that Stanford and his employees never forwarded the money to his bank on the Caribbean island of Antigua.
Instead, Smith said, investors’ money was deposited at banks in Houston, Memphis and elsewhere in the United States.
“Our money never left the country,” Smith said.
While the SIPC has denied coverage for Stanford investors, it has provided $534 million for victims of the frauds perpetrated by Bernard L. Madoff, a confessed New York criminal serving a 150-year prison term. Madoff’s frauds involved more than $50 billion.
SIPC says on its Web site that coverage provided for Madoff’s victims thus far is $14 million more than all other cases covered since the corporation’s founding in 1970.
Cassidy said in an interview Tuesday that SIPC officials justified the disparity between its treatment of Madoff and Stanford investors by reasoning that all of Madoff’s investments were fictitious.
Cassidy added, however, that the value of Stanford’s assets was equally fictitious. Cassidy said some Caribbean properties purchased for less than $70 million were inflated on Stanford ledgers by more than $2 billion.
The Baton Rouge-based lawmaker also said the SEC erred by entering a confidential consent agreement with Stanford long before his operations were shut down by the commission in February.
That agreement, Cassidy said, required Stanford to remove references to “SIPC member” from brochures provided to potential investors.
Investors would have been better protected from fraud, Cassidy said, if the SEC had issued a public announcement that Stanford had been falsely claiming his firms were SIPC members.
“Investor confidence has been shattered in the wake of numerous financial frauds over the past few years, most notably the Stanford and Madoff … schemes,” Cassidy and 48 other lawmakers said in a letter sent Tuesday to Mary L. Schapiro, who chairs the SEC.
“Accordingly, we ask for your reconsideration of SIPC coverage,” the legislators wrote Schapiro.
The letter was signed by all nine members of the Louisiana delegation, as well as nine other senators and 31 additional House members.
The group is made up of 30 Republicans and 19 Democrats from 18 state
U.S. Rep. Bill Cassidy, R-Baton Rouge, said Tuesday the proposal is directed at the Securities Investor Protection Corp., a nonprofit established by Congress in 1970.
SIPC’s funding is provided by member brokers and dealers — and if the SEC acts on the congressional proposal, those brokers and dealers would face increased assessments.
The SEC did not immediately respond Tuesday.
The commission has absolute authority to order SIPC to provide up to $500,000 for each of the more than 4,000 Stanford investors in this country who did not work for Stanford companies, Cassidy said.
SIPC, however, has maintained the Stanford investors were not covered by the corporation.
Stanford, 59, is in federal custody in Houston, where he is under indictment for masterminding frauds that claimed more than $7.2 billion from retirees and other investors in Louisiana and other states and countries.
As much as $1 billion of that loss was suffered by investors in the Baton Rouge, Lafayette and Covington areas, according to estimates by Baton Rouge lawyer Phillip W. Preis and state Rep. Bodi White, R-Central.
“These families worked hard, saved their money, and did their homework,” Cassidy said in a written statement Tuesday. “Many were presented with evidence that their investments were covered by SIPC, and SIPC is the logical place to turn for appropriate restitution.”
Blaine Smith, a Baton Rouge resident who lost $1.5 million to the alleged Stanford frauds, said SIPC officials have denied claims by Stanford investors because most losses were deposits earmarked for an offshore bank.
But Smith said investor bank statements provide evidence that Stanford and his employees never forwarded the money to his bank on the Caribbean island of Antigua.
Instead, Smith said, investors’ money was deposited at banks in Houston, Memphis and elsewhere in the United States.
“Our money never left the country,” Smith said.
While the SIPC has denied coverage for Stanford investors, it has provided $534 million for victims of the frauds perpetrated by Bernard L. Madoff, a confessed New York criminal serving a 150-year prison term. Madoff’s frauds involved more than $50 billion.
SIPC says on its Web site that coverage provided for Madoff’s victims thus far is $14 million more than all other cases covered since the corporation’s founding in 1970.
Cassidy said in an interview Tuesday that SIPC officials justified the disparity between its treatment of Madoff and Stanford investors by reasoning that all of Madoff’s investments were fictitious.
Cassidy added, however, that the value of Stanford’s assets was equally fictitious. Cassidy said some Caribbean properties purchased for less than $70 million were inflated on Stanford ledgers by more than $2 billion.
The Baton Rouge-based lawmaker also said the SEC erred by entering a confidential consent agreement with Stanford long before his operations were shut down by the commission in February.
That agreement, Cassidy said, required Stanford to remove references to “SIPC member” from brochures provided to potential investors.
Investors would have been better protected from fraud, Cassidy said, if the SEC had issued a public announcement that Stanford had been falsely claiming his firms were SIPC members.
“Investor confidence has been shattered in the wake of numerous financial frauds over the past few years, most notably the Stanford and Madoff … schemes,” Cassidy and 48 other lawmakers said in a letter sent Tuesday to Mary L. Schapiro, who chairs the SEC.
“Accordingly, we ask for your reconsideration of SIPC coverage,” the legislators wrote Schapiro.
The letter was signed by all nine members of the Louisiana delegation, as well as nine other senators and 31 additional House members.
The group is made up of 30 Republicans and 19 Democrats from 18 state