Note. This is NOT the lawsuit being brought against the SEC by Kachroo Legal Services.
A federal appeals court will be asked to reverse a Baton Rouge federal judge's dismissal of a lawsuit that claims the Securities and Exchange Commission and a former official knew of Robert Allen Stanford's $7 billion fraud scheme but failed to investigate and stop it, an attorney for some victims said Friday.
The suit, filed in July by seven Baton Rouge residents and firms, was thrown out June 21 by U.S. District Judge Shelly Dick at the request of the federal government, which argued the SEC enjoys complete discretion in deciding what matters to investigate.
The suit alleges that Spencer Barasch, a former SEC regional enforcement director in Fort Worth, Texas, was negligent and engaged in deliberate misconduct in failing to investigate the scheme before investors suffered losses. The suit contends Barasch knew of the Stanford scheme but refused to probe it, allowing the continued defrauding of investors.
In his written ruling, Dick called Barasch's alleged conduct "disturbing" but said the law supports the government's position that there was no statute, regulation or policy that required Barasch to make an enforcement referral to either the National Association of Securities Dealers or the Texas State Securities Board.
"While the court sympathizes with the losses suffered by the plaintiffs in this matter, plaintiffs have failed to identify any mandatory obligations violated by SEC employees in the performance of their discretionary duties," the judge wrote.
Ed Gonzales, an attorney for the seven Baton Rouge residents and firms who filed suit in federal district court in Baton Rouge, said an appeal will be filed at the 5th U.S. Circuit Court of Appeals in New Orleans. Those plaintiffs say they lost roughly $3.5 million to the scheme.
Dick's ruling described the suit's plaintiffs as victims of a Ponzi scheme who lost their investments in Stanford International Bank Ltd.
The suit alleges the SEC knew in 1997 that Stanford was operating a fraudulent scheme and failed to stop him until February 2009.
Robert Stanford, 63, of Houston, is serving a 110-year prison sentence for a fraud conviction that followed estimated worldwide losses of approximately $7 billion. About $1 billion of those losses were from about 1,000 investors in the Baton Rouge, Lafayette and Covington areas, according to estimates by state Sen. Bodi White, R-Central, and Baton Rouge attorney Phil Preis, who represents numerous Stanford victims in another lawsuit.
A Ponzi scheme is a fake investment program. Illegal operators skim most of the money provided by people who believe they are investors.
Early investors receive dividends that actually are small portions of their personal funds and those of later investors. Stanford's Ponzi scheme attracted investment money for his Stanford International Bank on the Caribbean island of Antigua.
There are more than 20,000 Stanford victims across more than 100 countries.
Showing posts with label misconduct. Show all posts
Showing posts with label misconduct. Show all posts
Tuesday, 2 July 2013
Sunday, 17 April 2011
Lafayette Stanford investors sue SEC
The Securities and Exchange Commission and one its former officials, Spencer Barasch, were sued Thursday for negligence and misconduct by Baton Rouge attorney Edward Gonzales on behalf of nine Lafayette area investors who lost money in Allen Stanford's alleged $8 billion Ponzi scheme.
According to Gonzales, and as many as 50 plaintiffs are expected to join the suit, Robert J. Dartez LLC, et al v. the United States of America, filed in federal court in Dallas. “The others will be added as their six-month waiting periods [from date of filing an administrative claim] pass,” he says. The nine local clients are seeking almost $19 million, but Gonzales says his clients lost as much as $66 million in the alleged fraud.
Barasch, now a partner at the Dallas law firm Andrews Kurth, worked for the Fort Worth office of the SEC, at one time serving as head of its enforcement program. The suit alleges that it was under his watch that Allen Stanford swindled billions out of investors. Stanford, 61, remains in jail awaiting trial on criminal charges. He denies any wrongdoing.
About a year ago, an SEC inspector general’s 151-page report held Barasch up as a poster child for an agency now established to have missed one of the biggest investor scams of all time. The report found that for years he looked the other way on Stanford’s behalf. The suit cites the IG report, which noted other improper acts by Barasch, saying that he “sought to represent Stanford on three separate occasions … and represented Stanford briefly in 2006 before he was informed by the SEC Ethics Office that it was improper to do so.”
According to the suit, “[Stanford International Bank] and its affiliated or related companies, including Stanford Group Company (SFG), were known at all times material by the SEC to be participants in a massive Ponzi scheme, and the SEC, which has a mandate to protect the public interest, in this case had both the authority and the duty to put an end to this scheme.” If not for the "negligent acts and omissions, misconduct, and breaches of duty by Barasch and his SEC supervisors," and other “inexcusable” acts of negligence by SEC employees, his clients would not have lost their investments, Gonzales claims in the suit.
The Lafayette plaintiffs listed in the suit and the investments they are seeking to recover:
•Robert Juan Dartez LLC, $638,000
•David B. Sturlese, $696,000
•Cynthia R. Dore (who also resides in Houston), $3.09 million
•Randolph J. Hebert, $7.2 million
The other local plaintiffs are:
•Robert Hollier of Opelousas, $4.8 million
•Hollam Pinnacle Group LLC of Opelousas, $571,000
•Michael R. Robicheaux and Cheryl T. Robicheaux of Breaux Bridge, $1.6 million
•Brittany Robicheaux of Breaux Bridge, $52,000
Stanford Investors v USA
According to Gonzales, and as many as 50 plaintiffs are expected to join the suit, Robert J. Dartez LLC, et al v. the United States of America, filed in federal court in Dallas. “The others will be added as their six-month waiting periods [from date of filing an administrative claim] pass,” he says. The nine local clients are seeking almost $19 million, but Gonzales says his clients lost as much as $66 million in the alleged fraud.
Barasch, now a partner at the Dallas law firm Andrews Kurth, worked for the Fort Worth office of the SEC, at one time serving as head of its enforcement program. The suit alleges that it was under his watch that Allen Stanford swindled billions out of investors. Stanford, 61, remains in jail awaiting trial on criminal charges. He denies any wrongdoing.
About a year ago, an SEC inspector general’s 151-page report held Barasch up as a poster child for an agency now established to have missed one of the biggest investor scams of all time. The report found that for years he looked the other way on Stanford’s behalf. The suit cites the IG report, which noted other improper acts by Barasch, saying that he “sought to represent Stanford on three separate occasions … and represented Stanford briefly in 2006 before he was informed by the SEC Ethics Office that it was improper to do so.”
According to the suit, “[Stanford International Bank] and its affiliated or related companies, including Stanford Group Company (SFG), were known at all times material by the SEC to be participants in a massive Ponzi scheme, and the SEC, which has a mandate to protect the public interest, in this case had both the authority and the duty to put an end to this scheme.” If not for the "negligent acts and omissions, misconduct, and breaches of duty by Barasch and his SEC supervisors," and other “inexcusable” acts of negligence by SEC employees, his clients would not have lost their investments, Gonzales claims in the suit.
The Lafayette plaintiffs listed in the suit and the investments they are seeking to recover:
•Robert Juan Dartez LLC, $638,000
•David B. Sturlese, $696,000
•Cynthia R. Dore (who also resides in Houston), $3.09 million
•Randolph J. Hebert, $7.2 million
The other local plaintiffs are:
•Robert Hollier of Opelousas, $4.8 million
•Hollam Pinnacle Group LLC of Opelousas, $571,000
•Michael R. Robicheaux and Cheryl T. Robicheaux of Breaux Bridge, $1.6 million
•Brittany Robicheaux of Breaux Bridge, $52,000
Stanford Investors v USA