Kachroo Legal Services Update on SEC Lawsuit

TO ALL SEC CLIENTS
February 26, 2014

 Zelaya et al v. United States of America

 Dear Stanford/SEC Clients: We write to update you with respect to important information regarding the claim against the Securities and Exchange Commission.

 To read the complete update from Kachroo Legal Services 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/

Kachroo Legal Services Update July 30th

Dear KLS Stanford SEC Clients,

We write to update you on the current status of this case.

1. Order of Limited Discovery: As you are aware from our previous updates, in February 2013, the Court through the Magistrate Judge had ordered the US Government to provide discovery to Plaintiffs including disclosure of documents and information on a limited basis while a second Motion to Dismiss was outstanding. Since that time, the Government has repeatedly argued about the quantity and nature of the information they are prepared to give us, which has required us to go back to the court several times, for both hearings upon filing a number of motions and responses.
2. Discovery Orders and Multiple Hearings on Discovery: As you can see from the attached documents, KLS has participated in and requested several hearings in order to obtain the discovery initially ordered by the magistrate judge. Each of the times we have gone back to Court, we have been successful in persuading the Judge to allow discovery to proceed - despite the Government's repeated objections.
3. Stay of Proceedings: Only a few days ago, and amidst our progress to date, the District Court Judge in the case has just handed down an order staying all proceedings as he prepares to provide a ruling on the second motion to dismiss.

We will advise all clients as soon as this happens, but in the meantime, please do not hesitate to contact us if you have any questions.

The KLS Stanford Team. .


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

Kachroo Legal Services Update

STANFORD UPDATE

June 2013

Dear Stanford Clients:

Potential Unauthorized Claims Made By Attorneys On Behalf of Investors

We have received multiple reports from clients that certain named attorneys have lodged claims with the receiver, purportedly on behalf of clients. These investors, however, have not authorized the attorneys in question to do so - and in some cases have never even heard of them.

If you believe that a claim has been lodged on your behalf without your authorization or knowledge, please get in touch as soon as possible and we can assist you in rectifying the situation and advise you on your rights.

Zelaya vs. United States of America

On May 13, 2013, a telephonic hearing occurred regarding the scope of the deposition that Plaintiffs are entitled to take of the SEC through its designated representatives.  The United States objected to all of the subject areas that the Plaintiffs sought to cover at the deposition and further objected to providing any documents in response to the document request that accompanied Plaintiffs' notice of deposition of the SEC.  Plaintiffs responded, arguing that the Magistrate Judge authorized Plaintiffs to pursue those subject areas and also to serve the United States with a focused document request.  After briefing and oral argument, the Magistrate Judge overruled most of the United States' objections and ruled that the Government must proceed with the deposition and provide Plaintiffs with the information requested in their related document request.  

This ruling in our favor enables us to continue our vigorous efforts to expose the negligent acts of the SEC and brings us one step closer to obtaining the information necessary to proving our case.

NAFTA and Other Bilateral Trade Agreement Arbitrations

We have recently become aware of potential new action being pursued by Peter Morgenstern and (separately) Todd Weiler, Edward Snyder and Edward Valdespino on behalf of various investors.  These investors have filed a notice of intention to submit a private arbitration against the United States under the arbitration provisions of the various treaties.  We are confident, however, that the current action in front of the Federal District Court in Florida against the SEC is preferable for investors for a number of important reasons:

1)      NAFTA and other similar agreements ensure that foreign investors are not treated unfavorably compared to domestic US investors. While many of the investors in the Stanford entities were indeed foreign, all of the evidence shows that that they were treated equally as badly as US investors;

2)      The treaties seek to ensure that the treatment of foreign investors does not fall below a minimum acceptable standard, as defined in international law.  In order to prove that it has, investors pursuing arbitration will have to establish essentially the same facts we have alleged in our Federal Court case. The difference between the proposed arbitration and our court case, however, is that we can rely on the strong discovery mechanisms to force the Government to disclose relevant information, whereas arbitration has much weaker and more limited powers.

3)      It appears that participation in this arbitration by Mexican investors may result in their inability to participate in our SEC class action.  Please note that there are subsequently three key issues to keep in mind if you are considering joining the arbitration: (1) the timeline and pressure being imposed on investors to make this decision appears unfair; (2) as far as we know, such an arbitration has never previously been taken and therefore no precedent exists for it; and (3) as far as your SEC action is concerned, you may be precluded from participating in the class action and may be considered an opting out of the class action in which you have already invested time, money and resources.

Our action has already overcome the key initial hurdle and has a defined path towards a successful verdict.  We know from our case that, in order to overcome the Government's position on these claims, extensive discovery is necessary.  We do not believe that the procedural intricacies of a NAFTA international arbitration, including the limited means of discovery, provide the best avenue for recovery against the Government.  We believe the risk of being disqualified from participating in our SEC action far outweighs the potential for obtaining a successful judgment against the Government in the NAFTA international arbitration. 

The Investor Committee 

We have learned that significant changes to the Investor Committee composition have been occurring over the course of the past few months.  KLS will take this matter into serious consideration moving forward in its full representation of investor claims before the Dallas Receiver.

-          The KLS Stanford Team 

Visit the Stanford International Victims Group - SIVG official forum http://sivg.org.ag/

INITIAL REPLY BRIEF OF THESECURITIES AND EXCHANGE COMMISSION, APPELLANT

2013.05.24.SEC.replyBrief by Catherine Burnell

What The SEC-SIPC Lawsuit Is All About

Source: Securities Investor Protection Corporation

What The SEC-SIPC Lawsuit Is All About

• The SEC has brought an unprecedented lawsuit demanding that the Securities Investor Protection Corporation ("SIPC") guarantee the value of offshore certificates of deposit ("CDs") issued by the Stanford International Bank Ltd. in Antigua.
• SIPC disagrees with the SEC’s position because it is in conflict with the Securities Investor Protection Act, the legislation that created SIPC and has guided it for the last 40 years.
• SIPC is limited by law to protecting customers against the loss of missing cash or securities in the custody of failing or insolvent SIPC-member brokerage firms. SIPC was not chartered by Congress to combat fraud or guarantee an investment’s value, and its protections also do not cover investments with offshore banks or other firms that are not SIPC members.

Why The Securities Investor Protection Act Does Not Cover The Stanford-Antigua Situation

---

• This case is about investments in certificate of deposits ("CDs") issued by the Stanford International Bank Ltd. in Antigua. Stanford International Bank Ltd. is an offshore bank: it is not a SIPC-member brokerage firm and has never been a SIPC member.
• The Securities Investor Protection Act only covers the custodial function of a SIPC-member brokerage, by offering limited protection to customers against the loss of missing cash or securities when a SIPC-member brokerage firm is holding cash or securities for an investor but fails financially.
• The Act does not authorize SIPC to protect monies invested with offshore banks or other firms that are not SIPC members. The Act also does not protect investors against a loss in value of a security, including because of mismanagement or fraud.
• In addition, this case involves CDs that were delivered, not a situation in which a SIPC-member brokerage firm had custody of securities but failed before delivery could occur.

The Facts

• This case is about investments in CDs issued by the Stanford International Bank Ltd. in Antigua. Stanford International Bank Ltd. is a chartered bank formed under the laws of Antigua and Barbuda. This Antiguan bank is in liquidation in Antigua under the administration of liquidators in Antigua.
• Stanford International Bank Ltd. advertised interest rates that were higher (often much higher) than banks in the U.S., but its CDs now have the value, if any, of a debt instrument issued by a failed bank.
• Stanford International Bank Ltd. is not a SIPC-member brokerage firm and has never been a SIPC member.
• Investors received Disclosure Statements from Stanford International Bank Ltd. stating that these investments were not “covered by the investor protection or securities insurance laws of any jurisdiction such as the U.S. Securities Investor Protection Insurance Corporation….”

SIPC Letter of August 14, 2009 to Ralph S. Janvey, Receiver, Stanford Financial Group Receivership

Stanford - Madoff: The Key Differences

SIPC protection is available for investors who had brokerage accounts directly at Bernard L. Madoff Investment Securities LLC (“Madoff Securities”). Madoff Securities was a SIPC-member brokerage firm. Customer cash and securities were placed in the custody of Madoff Securities and were missing from the customer’s accounts when the firm failed. SIPC protection is thus available to protect customers, within limits, against the loss of their net equity balances.
By contrast, the Stanford case is about CDs that investors purchased from the Stanford International Bank Ltd. in Antigua. Stanford International Bank Ltd. is not a SIPC-member brokerage firm and has never been a SIPC member.
The Securities Investor Protection Act does not authorize SIPC to protect investors against the loss of monies invested with offshore banks or other firms that are not SIPC members. The Act also does not protect investors against a loss in value of a security, including because of mismanagement or fraud. In addition, this case involves CDs that were delivered, not a situation in which a SIPC-member brokerage firm had custody of securities but failed before delivery could occur.

Why SIPC Is Not The FDIC And Does Not Protect Against Securities Fraud

---

The Federal Bureau of Investigation, state securities regulators and experts have estimated that investment fraud in the U.S. totals $40 billion a year.¹ Market manipulation schemes alone generate an estimated $6 billion in losses annually.²
With a reserve of slightly more than $1 billion, SIPC could not continue operations for long if its purpose was to compensate all victims with losses due to investment fraud. SIPC is limited by law to protecting customers against the loss of missing cash or securities in the custody of failing or insolvent SIPC-member brokerage firms.
It is important to understand that SIPC is not the equivalent of the banking industry's Federal Deposit Insurance Corporation ("FDIC") for investment fraud. Congress considered whether to guarantee investment losses and rejected that sort of protection as unrealistic and inappropriate.




For a full and open debate on the Stanford Receivership visit:

http://sivg.org.ag/

The Stanford International Victims Group Forum

Eighty-nine investors defrauded by imprisoned financier Robert Allen Stanford are seeking $115 million from seven insurance companies in addition to claims that could total as much as $1 billion against the Louisiana Office of Financial Institutions and SEI Investments Co. 

Stanford, who was indicted by a federal grand jury for frauds exceeding $7 billion, is currently serving 115 years behind bars.


According to reports emanating out of the United States, six of the insurers responded earlier in March by transferring the investors’ four-year-old state court suit to Baton Rouge federal court, action the investors have fought hard in the past.


“We feel confident that this case should not be removed to federal court, because the state court has already ruled on it and granted the investors class-action status,” said Phillip W Preis, Baton Rouge attorney for the investors.


The investors sued OFI and Pennsylvania-based SEI in 19th Judicial District Court in Baton Rouge in 2009. That was soon after the Securities and Exchange Commission shut down Stanford’s worldwide operations and alleged his investment programme was nothing more than a fraudulent scheme.


However, a federal judge in Dallas, where the SEC had filed its complaint, yanked the Louisiana investors’ suit into his Texas court and then dismissed the case, a US online news site, The Advocate, reported.


It added that the Dallas judge ruled in 2011 that the Baton Rouge investors’ suit violated a Securities Litigation Uniform Standards Act prohibition against state court litigation that could negatively affect the nation’s financial markets.


Last year, however, a three-judge panel of the US 5th Circuit Court of Appeals overruled the Dallas judge and concluded that investors could pursue recovery of their losses in Baton Rouge state court.


“That returned the investor claims to state District Judge Michael Caldwell, who held hearings on disputed allegations that OFI knew of Stanford’s misdeeds and should have warned investors, as well as a complaint that SEI ignored a duty to tell investors that Stanford’s assets were grossly overvalued,” The Advocate reported.


“Caldwell issued a judgment last year that certified the investors’ suit as a class action, meaning that all people who lost investments at Stanford Trust Co’s Baton Rouge office could join the suit as plaintiffs against SEI, OFI, and now SEI’s seven insurers.”


Caldwell has not yet scheduled a trial for the case, The Advocate said.

The US Supreme Court has agreed to hear arguments on appeals of related Stanford investor cases in October.


The six insurers that transferred the dispute last month to US District Judge James J Brady are: Allied World Assurance Co (US) Inc, Continental Casualty Co, Arch Insurance Co, Indian Harbor Insurance Co, Nutmeg Insurance Co, and certain underwriters at Lloyd’s of London.


Those insurers told Brady a seventh firm - Endurance Specialty Insurance Ltd of Bermuda - did not join their motion because Endurance officials had not yet been served with a copy of the investors’ suit.



For a full and open debate on the Stanford Receivership visit:

http://sivg.org.ag/

The Stanford International Victims Group Forum

Stanford fighting SEC fines

Convicted Ponzi-scheme operator R. Allen Stanford, who continues to protest what he says was an unfair criminal trial, is now fighting the government’s quest to squeeze billions of dollars in penalties out of him in a related civil lawsuit.

Stanford, currently serving a 110-year prison sentence, this week filed an objection to the Securities and Exchange Commission’s bid to impose billions of dollars in monetary penalties against him and several other defendants in a civil securities fraud lawsuit. He was convicted last year of criminal charges that he defrauded investors out of about $7 billion.

In court papers, the SEC argues that Stanford’s criminal conviction validates the similar claims it makes in its civil suit. The agency says Stanford, two of his businesses and one of his former associates should, at a minimum, face a penalty of $5.9 billion — the amount that federal prosecutors have ordered Stanford to forfeit in the criminal proceeding.

For a full and open debate on the Stanford Receivership visit:

http://sivg.org.ag/

The Stanford International Victims Group Forum

KLS Update February 2013

Dear Stanford Clients:

This update is in response to the questions and concerns of many of our clients regarding the
Receiver’s proposed interim distribution, as well as several other matters.

The Receiver’s Proposed Distribution

You may have received a notice indicating that you must complete a certification form within six weeks. However, the six week time period does not begin until after the Court approves the Receiver’s request to make an interim distribution. As soon as the Court approves the request, then you will have six weeks to complete the certification form. For many of you, we will be completing these requirements on your behalf. We do not anticipate the Court approving the request for several months. Several objections have been filed in opposition to the distribution, and there may be more objections filed within the next few weeks. These objections were filed by various parties, mostly defendants in lawsuits brought by the Receiver, claiming that they should be included in the distribution. It will take several weeks, if not months, for the Court to resolve these objections. We will keep you updated on this process and notify you as soon as the Court enters a ruling on the proposed distribution plan.

The February 14, 2013 Discovery Hearing in the SEC Class Action

We continue to vigorously prosecute the case against the Government for the SEC’s failure to take enforcement action against the Ponzi scheme. As we mentioned in past updates, the Government filed a second motion to dismiss the Complaint, raising new arguments that it had not previously raised. We filed a strong opposition to the motion, and the issues are now fully briefed and awaiting a ruling from the Court. We have also been moving forward with discovery and we filed a motion to compel the Government to disclose more information. The Government filed a motion seeking a stay on discovery until after the Court rules on the motion to dismiss.


The Court set a hearing on these motions on February 14, and we traveled to Miami, Florida last week to attend and argue at the hearing.

We are happy to report that the Court denied the Government’s motion to stay discovery. The Court ruled that the Government will have to begin responding to discovery in this case and cannot completely obstruct the process by staying discovery altogether. The Court also ruled on our motion to compel discovery by compelling the Government to produce certain preliminary information and requiring the Government to produce a witness to testify at a deposition regarding the allegations of our Complaint. We look forward to taking this deposition and will continue to update you regarding the status of this case.

The Antiguan Claim Process

As our SFA clients know, the Antiguan Liquidator set up a claim process and we submitted claims to the Liquidator on behalf of all of our SFA clients. At the time we submitted those claims, the Liquidator had not yet set up a deadline for submission of the claims. However, now the Liquidator has set a March 31, 2013 deadline. We encourage our non-SFA clients to review the procedure for submitting claims and make sure you submit your claims before the deadline. If any of you want to become SFA clients so that we can complete the process on your behalf, please do not hesitate to contact us. More information about the claims’ process requirements can be found at:

http://www.sibliquidation.com/claims-administration/

As always, if you have any questions or comments, please feel free to contact us.

For a full and open debate on the Stanford Receivership visit:

http://sivg.org.ag/ 

The Stanford International Victims Group Forum

Stanford Investors Sue Antigua, Caribbean Central Bank

By Laurel Brubaker Calkins (Bloomberg)

R. Allen Stanford’s receiver and investors’ committee sued Antigua, the Eastern Caribbean Central Bank and 23 former Stanford Financial Group Co. executives over allegations they aided the financier’s $7 billion fraud.

The Official Stanford Investors Committee seeks repayment of at least $90 million in documented loans Stanford made to the dual-island nation of Antigua and Barbuda and accuses its elected officials of having been “Stanford’s partners in crime.” The nation’s leaders shielded Stanford’s scheme and traded choice real estate for as much as $230 million in loans that haven’t been repaid, according to the lawsuit.

“Antigua knowingly provided necessary assistance to Stanford’s $7 billion Ponzi scheme and, in exchange, received millions of dollars in loans whose repayment terms Stanford did not enforce,’’ the committee said in a complaint filed in Dallas federal court on Feb. 15. “For well over a decade, Antigua was a prime participant in, and beneficiary of, the Stanford Ponzi scheme, and actively protected and shielded Stanford’s criminal enterprise from real regulatory scrutiny.’’

Stanford, 62, was convicted in March of masterminding a Ponzi scheme that defrauded investors through the sale of bogus certificates of deposit at his Antigua-based Stanford International Bank Ltd. He is serving a 110-year sentence in a Florida federal prison as he appeals his verdict and sentence.

Falsified Audits

Evidence at Stanford’s trial showed he bribed Antiguan banking regulator Leroy King to falsify audits certifying the bank’s investment returns and mislead U.S. securities regulators investigating the former Texas billionaire’s operations. Stanford was also allowed to underwrite and participate in banking reform legislation that Antigua claimed had cleaned up its corrupt offshore banking industry, according to trial evidence. Antigua has so far failed to extradite King to face criminal charges in the U.S.

The investors on Feb. 15 separately sued the Eastern Caribbean Central Bank, which nationalized Stanford’s other island financial institution, the Bank of Antigua, after the U.S. Securities and Exchange Commission seized Stanford’s enterprise on suspicion of fraud in February 2009.

The ECCB in turn parceled out ownership in the bank to the government of Antigua and to other Caribbean banks in what the investors called “a second act of brazen thievery.” The head of ECCB’s monetary council at the time was Antiguan Minister of Finance Errol Cort, who was both King’s supervisor and one of Stanford’s personal attorneys, according to court papers.

‘Rightful Owners’

“The considerable value of the Bank of Antigua, believed to be in the tens or hundreds of millions of dollars, should be distributed as compensation to its rightful owners, Stanford’s victims and creditors,’’ the committee said in court papers.

Recent comments by Antiguan elected officials indicate the country intends to repay the bank instead of the defrauded investors, Peter D. Morgenstern, a lawyer for the investors’ committee, wrote, meaning that “in essence, Antigua intends to use CD investors’ money to pay itself.’’

Tom Bayko, Antigua’s attorney, didn’t immediately respond to voice or e-mail messages seeking comment on the lawsuit. In an earlier suit, Bayko said Antigua was protected from such litigation by foreign sovereign immunity.

Officials at the ECCB didn’t immediately return telephone or e-mail messages seeking comment on the lawsuit.

Ralph Janvey, Stanford’s court-appointed receiver, filed another lawsuit on Feb. 15 claiming breach of fiduciary duty lawsuit by 23 former directors and officers of Stanford’s operations, including three executives convicted of furthering the fraud scheme. The suit seeks return of all compensation from these individuals, some of whom have been previously sued by the receiver on similar claims.

“Many directors and officers simply looked the other way, while others actively assisted Stanford in defrauding thousands of people out of billions of dollars,’’ Kevin Sadler, Janvey’s lead lawyer, said in the filing in Dallas federal court. They “put their continued employment and substantial compensation ahead of the best interests of the entities they were hired to serve,” he said.

The cases are The Official Stanford Investors Committee v. Antigua and Barbuda, 3:13-cv-0760; The Official Stanford Investors Committee v. Bank of Antigua, 3:13-cv-0762; Janvey v. Alvarado, 3:13-cv-0775. All are in U.S. District Court, Northern District of Texas (Dallas).





For a full and open debate on the Stanford Receivership visit:

http://sivg.org.ag/ 

The Stanford International Victims Group Forum

Stanford Lawyer Culpable

Antigua St. John's - Ralph Janvey, the court appointed received for Stanford assets in the United States, has launched a ‪query‬ against a former Stanford attorney and two law firms suing them over claims they aided the $7 billion Ponzi scheme.
And the Stanford Victims Group has used the platform to remind the courts here in Antigua to consider similar actions.

Janvey filed the application last Friday in a Dallas Federal Court, accusing Thomas Sjoblom, the lawyer, and Proskauer Rose LLP, where Sjoblom was a partner from 2006 to 2009, and Chadbourne & Parke LLP, where Sjoblom was a partner from 2002 to 2006, of aiding and abetting Stanford’s fraudulent scheme, according to a Bloomberg news report.

R. Allen Stanford was convicted to serve 110-years in prison in March 2012 of stealing more than US$2 billion from depositors at his bank based here in Antigua. And for using the funds to finance a lavish personal lifestyle that included private jets, yachts and mansions.

According to news report, the attorney in question allegedly joined a “conspiracy” in the summer of 2005 at Stanford’s headquarters in Houston, Texas, to allegedly obstruct a U.S. Securities Exchange Commission investigation into the Ponzi scheme.

“Sjoblom, who had 20 years of experience as a senior lawyer in the SEC’s Enforcement Division, spent the next four years delaying and obstructing the investigation by lying to the SEC,” Janvey said.

Caribarena sought a comment on the matter from Attorney General Justin Simon, specifically looking for insights on whether or not similar suites could be repeated against Stanford’s attorneys here in Antigua. But the AG declined to comment.

A spokesperson from the Stanford International Victims group has however announced that the victims were pleased to see that some of the people who (allegedly) sold their integrity and honesty to Allen Stanford for the sake of making a fast dollar are now in the firing line of the receiver Ralph Janvey.

“The courts in the US and Antigua need to show that no matter whoever you are or wherever you are from, no one is above the law. These people are accused of making lots of money off the backs of the victims by turning a blind eye and therefore allowing and assisting Stanford to carry out his massive Ponzi scheme. If they are guilty then they assumed the risk and as lawyers they should know more than anyone that crime does not pay,” the spokesperson said.

In the meantime, the receiver is accusing the lawyer of falsely stating that he had personally confirmed Stanford Financial wasn’t a Ponzi scheme, instructing Stanford Financial to hide documents from the SEC, misrepresenting the existence and nature of the SEC’s investigation to Stanford Group Co.’s auditors, and offering false testimony to the SEC.





For a full and open debate on the Stanford Receivership visit:

http://sivg.org.ag/

The Stanford International Victims Group Forum

Supreme Court to hear law firm appeals in Allen Stanford case

Supreme Court to hear law firm appeals in Allen Stanford case

Terry Baynes and Jonathan StempelReuters
January 18, 2013

The Supreme Court on Friday accepted appeals by law firms that once represented convicted swindler Allen Stanford and were trying to avoid lawsuits by victims seeking to recoup losses from his $7 billion Ponzi scheme.

Former Stanford clients had sued the New York-based firms Chadbourne & Parke and Proskauer Rose, as well as Thomas Sjoblom, a lawyer who worked at both.

These lawsuits, brought under state laws, accused Sjoblom of obstructing a U.S. Securities and Exchange Commission probe into Stanford, and sought to hold Chadbourne and Proskauer responsible as well.

The insurance brokerage Willis Group Holdings Plc was also sued over its alleged role in Stanford's fraud.

The defendants countered that the federal Securities Litigation Uniform Standards Act, or SLUSA, precluded state-law class actions involving alleged misrepresentations made "in connection with" the purchase or sale of covered securities.
 
Stanford's fraud had been centered on the sale of certificates of deposit by his Antigua-based Stanford International Bank, and much of the litigation centered on whether these qualified as securities under the applicable laws.

In October 2011, Dallas federal judge David Godbey ruled that SLUSA preempted the state law class-action litigation, noting that many investors sold securities to invest in the CDs, but the 5th U.S. Circuit Court of Appeals revived the cases.

Chadbourne, Proskauer and Willis appealed that decision to the Supreme Court, saying that lower courts are split on the issue, and that similar lawsuits over Bernard Madoff's Ponzi scheme have also been barred by SLUSA.

Stanford is serving a 110-year prison sentence following his sentencing last June. On January 11, a court-appointed receiver proposed that 18,000 of his defrauded investors would receive an initial $55 million payment on their claims, an average of roughly $3,000 per person.

The court could hear the appeal in April, and if it does would likely issue a decision by the end of June.

The cases are Chadbourne & Parke LLP v. Troice et al, U.S. Supreme Court. No. 12-79; Willis of Colorado Inc et al v. Troice et al, U.S. Supreme Court, No. 12-86; and Proskauer Rose LLP v. Troice et al, U.S. Supreme Court, No. 12-88.


For a full and open debate on this and other important issues visit Stanford International Victims Group Forum

Kachroo Legal Services Stanford Update January 2013

Stanford Update January 2013

  Dear Stanford Clients: This letter will update you on the recent activity in the Zelaya case. As you may recall, at the time of our last update, we had drafted and served a variety of discovery requests (that is, requests for information from the Government) regarding the SEC's knowledge of the Stanford Ponzi scheme and other requests directed towards proving our claims. We anticipated receiving responses to those requests and then determining whether those responses were adequate or whether we needed to request that the Court compel better responses from the Government.

After receiving and reviewing the Government's responses to our discovery, we determined that the responses were plainly inadequate and incomplete. We attempted to negotiate with the Government to resolve some of its objections to our requests, but the Government was unwilling to withdraw many of its objections. Although we are continuing to negotiate a resolution to the discovery dispute, we have also filed a motion to compel with the Court requesting that the Court compel better discovery responses from the Government.

The Government also recently filed a second motion to dismiss our complaint. Although generally a defendant can only file one motion to dismiss, there are a few limited jurisdictional grounds that can be raised at any time to dismiss a complaint. The Government has raised arguments that the Court does not have jurisdiction to hear the case because the Federal Tort Claims Act contains certain exceptions that apply in this case. For a more detailed explanation of the Government's arguments, we are attaching the motion to dismiss to this update. We are currently preparing a response to the motion, and we are confident that the Court will again deny the Government's attempts to dismiss the case.

In the meantime, the Government has also filed a motion to stay all discovery while its motion to dismiss is pending. The Government argues that it should not have to engage in discovery while a motion is pending that could result in a dismissal of the case altogether. We are currently working on a response to this motion, and we believe the Government's argument to stay discovery is without merit. We believe our pending motion to compel discovery, coupled with the Government's pending motion to stay discovery, perfectly contrasts the two sides in this case. We are pushing forward on all cylinders, and the Government is resisting at every turn.

 For your review, attached are copies of our motion to compel discovery, the Government's second motion to dismiss, and the Government's motion to stay discovery.

 Attachments:
 Plaintiffs Motion to Compel
US Motion to Dismiss Amended Complaint
 Zelaya v. USA -USA Motion to Stay Discovery  

For more information and discussions visit Stanford International Victims Group Forum

KLS Amended Scheduling order Against the SEC

Amended Scheduling Order

Judge approves Stanford class action lawsuit

By Bill Lodge
Advocate staff writer

A civil suit by 86 defrauded investors was certified by a Baton Rouge judge Wednesday as a class action against Louisiana’s regulator of financial institutions and a Pennsylvania company that compiled customer financial statements on behalf of convicted swindler Robert Allen Stanford.

The ruling by state District Judge R. Michael Caldwell could open the door for some 1,000 investors damaged by Stanford’s fraudulent $7.2 billion scheme to join the suit. Those people now have the option to join the original plaintiffs in seeking judgments against the Louisiana Office of Financial Institutions, or OFI, and the financial services firm of SEI Investments Co.

If investors win that suit, OFI and SEI could share liability for as much as $1 billion in losses in Louisiana, according to estimates by their attorneys.

SEI took investment-performance information from Stanford, now serving a prison term of 110 years, and used it for financial statements that went to investors. But both the Pennsylvania firm and OFI deny failing any obligations to investors.

“I do certify this lawsuit as a class action,” Caldwell told a courtroom populated by former Stanford investors and attorneys for all sides in the litigation.

The judge noted his decision merely opens the door for more defrauded investors to join the lawsuit against OFI and SEI. Additional litigation will be needed to determine whether those investors are entitled to recover any money from the two defendants for allegedly failing an obligation to warn them of indicators of fraud on Stanford’s part.

 Many people lost their money, Caldwell said, adding that there were more than 1,000 investor accounts at Stanford Trust Co. in Baton Rouge.

 Additional investors’ money was drawn into the scheme through Stanford Group Co. “Some of them lost all of their money,” Caldwell said of the victims. “Some of them lost hundreds of thousands of dollars, and some of them lost millions.”

Phil Preis, lead attorney for the plaintiffs, said Caldwell’s ruling “affords the people of Louisiana their day in court.” Preis said his clients “are overjoyed.”

 Zachary resident and Stanford victim Kathy Mier said, “I am very, very, very excited, very happy. Someone has listened, and I’m ready to go on.”

Mier and her husband, Louis Mier, lost $240,000 of their retirement nest egg to Stanford, 62. “

For the first time in a long time, I felt like someone really listened to us, and we’re moving forward with our fight,” Kathy Mier said.

Debbie and Ken Dougherty, of Central, recovered their principal investment in Stanford’s certificates of deposit at his bank on the Caribbean island of Antigua before federal officials shut down his operations in February 2009. But they continue to face demands from a court-appointed receivership in Dallas for return of more than $100,000 in profits.

“I know this is just one hurdle, but it’s huge,” Debbie Dougherty said after Caldwell’s certification of the class action lawsuit. “If we can get something for those folks who got nothing, then this (court fight) will be worth it.”

Attorneys for OFI and SEI, however, said long before Caldwell’s ruling that the government agency and financial services corporation did not violate any obligations to investors and will fight investor claims in court.

 “The role of OFI is to regulate, not to ensure that those who invest in companies subject to OFI regulation will never lose money as a result of criminal actions,” OFI attorney David Latham wrote in one court filing.

 In May 2011, however, former Stanford employee-turned-whistleblower Charles W. Rawl testified in Washington, D.C., before the House Financial Services Subcommittee on Oversight and Investigations. Rawl told members of Congress that he advised OFI officials of corrupt Stanford practices in 2008.

 In late summer 2008, Rawl testified, OFI officials blocked future sale of additional Stanford bank certificates of deposit into Individual Retirement Accounts at Stanford Trust Co.

Preis said after Caldwell’s ruling: “The state examined the trust company. For a period of four years, we allege, they (OFI officials) knew of (Stanford’s) Ponzi scheme.”

 A Ponzi is not a legitimate investment program. From beginning to end, it is intended to do nothing more than drain money from investors and transfer those assets to criminals. Early investors are paid dividends in order to attract new investors, whose money prolongs the scheme.

 Both the Securities and Exchange Commission and the U.S. Attorney’s Office in Houston alleged in 2009 that Stanford’s operations were fraudulent from the beginning. Federal judges in Dallas and Houston have since agreed with that assessment.

But those court rulings have yet to benefit any defrauded investors. And they did not target any blame toward OFI and SEI.

 SEI attorney J. Gordon Cooney Jr. told Caldwell two months ago that SEI did not falsify any information in investors’ financial statements, which routinely showed healthy profits, even as Stanford’s worldwide empire was collapsing.

 All financial information used in those statements was provided by Stanford or his employees, Cooney added. He said SEI did not knowingly participate in the dissemination of false information to investors.

Lawsuit by Allen Stanford's victims targets his key helpers

Loren Steffy
Published: Tuesday, November 27, 2012 at 1:00 a.m.

Allen Stanford couldn't have acted alone.

That's the idea behind a lawsuit filed last week by a group of investors he ripped off and the receiver appointed to recover assets for them.

Stanford, of course, was convicted of fraud and is serving 110 years in prison. Two top lieutenants have pleaded guilty, and two others were convicted by a Houston jury last week.

But none possessed the legal, banking and international business expertise to enable Stanford -- a former bankrupt gym owner from Mexia, Texas -- to create a fraud that spanned more than 100 countries and swindled $7.2 billion from about 30,000 investors.

"How could it be that five people alone could do this?" asked Angela Shaw, head of the Stanford Victims Coalition, which represents investors and is a party to the 172-page lawsuit.
Her answer: They had help. They had lawyers.

Stanford's Ponzi scheme, the lawsuit contends, wouldn't have grown so large and enveloped so many without the legal expertise of two law firms, Greenberg Traurig and Hunton & Williams, which collected millions in fees from their Stanford work.

Stanford's longtime outside counsel, Carlos Loumiet, worked for both firms and consistently provided the legal advice Stanford needed to perpetuate his fraud, the lawsuit alleges.

With his lawyers' help, the lawsuit alleges, Stanford hijacked the Caribbean nation of Antigua and used it as a shield for his fraudulent banking and investment businesses, which were run from Houston.

Those people who set that up in Antigua, they were with Stanford from the very beginning," Shaw said. "They precipitated in the whole thing. They set this up, saw it through, and then they all walked away."

Stanford himself acknowledged Loumiet's role, telling the lawyer in a 2006 email that "I wouldn't be where I am today without you," according to the lawsuit.

Loumiet wasn't named as a defendant in the lawsuit, but many of its allegations focus on his actions. When the lawsuit was filed last week, he issued a statement saying, "I have never represented anyone that I knew was engaged in wrongdoing. And, after years of investigations by the federal government and months of trials involving Allen Stanford and his co-defendants, I have not been implicated in any wrongdoing."

The suit seeks $1.8 billion in damages from the firms, which denied the allegations, saying investors are simply trying to "pry open a deep pocket" to repay their losses.

Yet the lawsuit lays out excruciating detail how Loumiet knew Stanford's business was a sham. For example, it notes that Loumiet did the legal work on a deal in which Stanford lent the Antiguan government $30 million in 1994 for a hospital. Another Greenberg partner warned Loumiet of mounting financial problems inside Stanford's bank and expressed concern that Stanford couldn't cover the amount of the loan, according to an email included in the lawsuit.

Unfortunately, this pattern is familiar. Law firms are happy to collect big fees, look the other way while companies commit fraud, then feign ignorance.

For example, Vinson & Elkins and Andrews Kurth wound up paying hefty fines -- $30 million and $18.5 million respectively -- to settle civil claims that they provided the legal grease for Enron Corp.'s fraudulent machinations.

In Southwest Florida, high-profile law firm Holland & Knight agreed in August to pay $25 million to settle a suit accusing it of not reporting illegal activities at Scoop Management hedge funds that Arthur Nadel operated in downtown Sarasota.

For more than 20 years, Stanford dodged almost two dozen investigations in the U.S. and elsewhere. His strategy ran the gamut from finesse to bullying.

Stanford had the charisma that all con men need, but that alone couldn't have created the global veneer of legitimacy that allowed him to fleece thousands of investors and balloon his fraud to historic proportions.

For that, he had help.

Convictions of Two Accounting Execs May Wrap Up Prosecutions for Stanford Ponzi Scheme

In federal court in Texas yesterday, prosecutors in the Stanford Financial case won convictions against Gilbert Lopez Jr., the former chief accounting officer for Stanford Financial Group, and Mark Kuhrt, the former global controller of Stanford Financial Group Global Management. The convictions appear to mark the end of the many criminal prosecutions that resulted from the massive Stanford Ponzi scheme that began to unravel in early 2009.

According to a Bloomberg report, both Lopez and Kuhrt were found guilty of 9 of 10 wire fraud counts and one count of conspiracy to commit wire fraud. Prosecutors alleged that the men helped hide the company's scheme that involved bogus certificates of deposit at Antigua-based Stanford International Bank Ltd. Sentencing for Lopez and Kuhrt is set for February 14, and they both face prison terms of more than 20 years. Lawyers for the men acknowledged that there was "massive fraud" going on at the company, but that Lopez and Kuhrt had themselves been deceived by Allen Stanford and the company's former CFO, James Davis.

Earlier this year, Allen Stanford was found guilty by a jury on thirteen counts, including charges of conspiracy, mail and wire fraud, and obstructing a Securities and Exchange Commission investigation, and sentenced to 110 years in prison (along with a personal money judgment of $5.9 billion against him). Davis pleaded guilty back in 2009 to three counts of conspiracy to commit mail, wire, and securities fraud; mail fraud; and conspiracy to obstruct an SEC investigation. He has been cooperating with the government's prosecutions of others such as Lopez, Kuhrt, and former Chief Investment Officer Laura Pendergest-Holt, and has yet to be sentenced.

With the trial of Lopez and Kuhrt now completed, all of the criminal trials from the Stanford case now appear to be wrapped up. The final Stanford scorecard looks like this:

• R. Allen Stanford (former Chairman of Stanford International Bank): Convicted on June 14, 2012 on 13 counts (one count of conspiracy to commit wire and mail fraud, four counts of wire fraud, five counts of mail fraud, one count of conspiracy to obstruct an SEC investigation, one count of obstruction of an SEC investigation and one count of conspiracy to commit money laundering). Sentenced to 110 years in prison.
• Laura Pendergest-Holt (former Chief Investment Officer): Pleaded guilty in June 2012 to obstructing an SEC investigation into Stanford International Bank. Sentenced in September 2012 to 36 months in prison, followed by three years supervised release.
• James M. Davis (former CFO): Pleaded guilty in April 2009, to three counts (conspiracy to commit mail, wire, and securities fraud; mail fraud; and conspiracy to obstruct an SEC investigation). Has not yet been sentenced.
• Gilberto T. Lopez (former Chief Accounting Officer) and Mark J. Kuhrt (former Global Controller of Stanford Financial Group Global Management): Convicted in November 2012 on 9 counts of wire fraud counts and one count of conspiracy to commit wire fraud. Scheduled to be sentenced on February 14, 2012.
• Bruce Perraud (former global security specialist at Stanford Financial Group) and Thomas Raffanello (former global director of security at Stanford Financial Group): Perraud and Raffanello were both acquitted by the judge presiding over the case against them. Prosecutors had alleged that the men conspired to obstruct an SEC proceeding and to destroy documents in a federal investigation.

Stanford Investors Claim Lawyers Enabled $7 Billion Fraud

By Laurel Brubaker Calkins on November 15, 2012

 

 Two of R. Allen Stanford’s former law firms were sued by defrauded investors who claim the lawyers crafted corporate structures that enabled the financier’s $7 billion Ponzi scheme for more than 20 years.

The proposed class-action, or group, lawsuit filed in federal court in Dallas by investors and Stanford’s court-appointed receiver seeks the return of $10 million in legal fees and more than $7 billion in damages from Greenberg Traurig LLP and Hunton & Williams LLP.

These law firms employed Miami attorney Carlos Loumiet, who served as Stanford’s outside general counsel, from 1988 through 2009. Yolanda Suarez, Stanford’s former chief of staff and general counsel, also worked at Greenberg Traurig before joining Stanford Financial Group Co. in 1992. Suarez, a former protégée of Loumiet described in the complaint as Stanford’s “right-hand,” is named as an individual defendant, while Loumiet isn’t.

“Stanford could not have perpetrated this global mass fraud on his own,” Edward Snyder, a lawyer for the Official Stanford Investors Committee, said in the complaint. “Loumiet’s and Suarez’s fingerprints are all over the Stanford fraud scheme from beginning to end.”

Stanford, 62, was convicted in March of orchestrating a scheme built on bogus certificates of deposit at Antigua-based Stanford International Bank Ltd. Evidence at his jury trial showed the Texas financier bribed Antiguan bank regulators and auditors and skirted U.S. securities laws and money-laundering regulations to keep cash flowing to his offshore bank.

$2 Billion

Prosecutors said Stanford took more than $2 billion in depositor funds to finance a lavish personal lifestyle of jets, yachts and cricket tournaments as well as an array of money-losing private enterprises. He is serving a 110-year term in a Florida federal prison while appealing his verdict and sentence.

“Greenberg Traurig sympathizes with the investors who lost money as a result of Allen Stanford’s fraud, but the firm played no part in causing those losses,” Jim Cowles, an attorney for the firm, said in an e-mailed statement. “This is merely plaintiff’s newest attempt to pry open a deep pocket.”

Cowles said the firm’s “principal legal work” for Stanford occurred prior to 2001, “three years before the sale of the CDs involved in this suit,” when Loumiet left to join the other firm. “On limited matters in which Greenberg Traurig’s attorneys were subsequently consulted, they properly advised Stanford entities” and had no knowledge of Stanford’s fraudulent conduct, Cowles said.

Hunton & Williams said it neither caused or facilitated Allen Stanford’s fraud.

‘Legally Baseless’

“This lawsuit is factually and legally baseless and an overreach by Stanford Financial Group’s understandably frustrated investors attempting to recoup their unfortunate losses,” the Richmond, Virginia-based firm said in an e-mailed statement.

Matthew Rinaldi, Suarez’s attorney, didn’t immediately respond to a voice or e-mail message after regular business hours.

Investors said in today’s complaint that Loumiet and Suarez helped Stanford “hijack” Antigua with bribes and loans so he could “thereafter run it like a corrupt dictatorship” to provide a safe haven for his offshore banking empire.

They claim the two lawyers helped set up Stanford’s U.S. marketing, sales and trust operations to funnel billions of dollars into the Ponzi scheme without attracting the scrutiny of U.S. regulators. The lawyers also structured investments deals Stanford made with funds he stole from the bank, including his extensive Caribbean real estate and venture capital deals, according to the complaint.

“Defendants were subjectively aware of and absolutely indifferent to the risk posed by their conduct,” even when it ran the risk of breaking the law, Snyder said in the complaint.

The case is Janvey v. Greenberg Traurig, 3:12-cv-4641, U.S. District Court, Northern District of Texas (Dallas).

Statement from Kachroo Legal Services

We are preparing another update specifically addressing the status of our lawsuit against the government and all the work we have conducted after the Court denied the government’s motion to dismiss. However, to clarify, the Court’s order was an initial ruling that allowed our lawsuit to go forward into the next stage, which is where we attempt to prove our claims against the government. It was a groundbreaking ruling because all other lawsuits were dismissed immediately upon filing and were not allowed to go forward. We are now in the next stage of the litigation where we seek documents from the other side in order to prove our claims. Our update will address the status of this stage of the litigation. If you have any other questions, please feel free to contact me directly. I am happy to speak with you via email or we can discuss over the phone. You can reach me (212) 372-8939.

The Court’s order was an initial ruling that allowed our lawsuit to go forward into the next stage, which is where we attempt to prove our claims against the government. It was a groundbreaking ruling because all other lawsuits were dismissed immediately upon filing and were not allowed to go forward. We are now in the next stage of the litigation where we seek documents from the other side in order to prove our claims.

And how long does that procedure may take

The deadline to complete this stage of the litigation (called “discovery”) is March 1, 2013. There are a few other stages of the litigation after discovery, during which each side will argue that a judgment should be entered in their favor and the case should not proceed to a trial. If the court disagrees with both sides, then it will go to a full trial. The trial date is now set for October 21, 2013.

Stanford investors, receiver file suit against two law firms

By Mike Tolson | November 15, 2012 | Updated: November 15, 2012 11:16pm

A group of investors victimized by R. Allen Stanford's $7 billion Ponzi scheme along with the court-appointed receiver tasked with obtaining Stanford's remaining assets filed a $1.8 billion lawsuit Thursday against two law firms which they claim share responsibility for the swindle.

Receiver Ralph Janvey along with several named investors filed the federal class-action lawsuit in Dallas that pointed a finger at Miami banking attorney Carlos Loumiet. Loumiet was not named as a defendant, but two law firms where he worked - Greenberg Traurig and Hunton & Williams - were alleged to have designed the "architecture" of the scheme and co-opted government officials in the Caribbean island nation of Antigua whose complicity was essential.

Offshore banking

Stanford Financial Group sold what it called certificates of deposit that provided higher rates of return than typical CDs available from American financial institutions.

The money flowed into an elaborate offshore banking enterprise that was more difficult for U.S. regulators to scrutinize. The scheme lasted for two decades before it collapsed amid a federal investigation in 2009.

Stanford himself lived on Antigua and enjoyed a lavish lifestyle unwittingly fueled by thousands of investors who believed their money was safe.

Also named as a defendant was Yolanda Suarez, a former Stanford employee characterized as Loumiet's onetime protege.

"As a partner at Greenberg Traurig and then Hunton & Williams, Carlos Loumiet helped design the basic architecture of the Ponzi scheme by helping Stanford establish and operate unlicensed foreign bank offices in the U.S. and essentially hijacking the sovereign island nation of Antigua through the use of political corruption, loans made with funds stolen from Stanford's investors, and even writing the laws that governed Stanford International Bank's operations," said plaintiff attorney Ed Snyder, who filed the complaint, in a prepared statement.

Denies impropriety

Loumiet denied any wrongdoing.

"I can say that I have never in my long career knowingly helped any client commit any wrongdoing," Loumiet said in a prepared statement. "I have never represented anyone that I knew was engaged in wrongdoing. And after years of investigations by the federal government and months of trials involving Allen Stanford and his codefendants, I have not been implicated in any wrongdoing."

Likewise, the two named law firms said they had no idea what was going on. Hunton & Williams called the suit "factually and legally baseless and an overreach by Stanford Financial Group's understandably frustrated investors."

The attorney for Greenberg Traurig, Jim Cowles, said the lawsuit is just one more in a series of legal actions intended to "pry open a deep pocket" in order to compensate victims.

"Greenberg Traurig is not responsible for the fraud committed by Stanford," Cowles said.

Janvey's suit, however, says Loumiet was not just a lawyer but a longtime Stanford confidante who was relied on to get the scheme up and running and keep it that way.

"In the final analysis Loumiet and Suarez succeeded for 21 years in enabling Stanford Financial to effectively operate free of governmental regulations and oversight and completely outside the law," the lawsuit states.

"Loumiet's and Suarez's fingerprints are all over the Stanford Ponzi scheme from beginning to end, and to tell the story of Loumiet's and Suarez's involvement with Stanford is to tell the story of the Stanford Financial Group itself."

Loumiet now works at a different law firm in Miami.

Suarez lives in Miami and could not be reached for comment.