In Dallas Federal Court, Those Swindled by Allen Stanford Sue SEC For Failing to Stop Him

Spencer Barasch is a partner at the downtown Dallas law firm Andrews Kurth, where he is in charge of the corporate governance and securities enforcement team. But before that, and for close to 20 years, he worked for the Fort Worth office of the Securities and Exchange Commission, including a tenure as head of its enforcement program. It was under his watch that Allen Stanford swindled billions out of investors.

Eleven month ago, the SEC's inspector general all but blamed Barasch for allowing the Texas financier's Ponzi scheme to prosper, insisting in a 151-page report that for years he looked the other way on Stanford's behalf. Barasch never responded, but his friends claimed he'd been scapegoated by the feds -- even though Barasch wound up doing some work for Stanford in 2006, shortly before the SEC filed charges against Pete Sessions's pal.

Yesterday, but blocks away from the attorney's downtown office, some of the investors swindled by Stanford filed a federal suit against the government, claiming that the SEC and Barasch's refusal to shut down Stanford's operation years earlier -- say, in 1997, when he first appeared on the feds' radar screen -- resulted in their pockets being picked clean. Long story short:

This complaint is filed on behalf of the plaintiffs ... who, because of the negligence and misconduct of employees of the United States Securities and Exchange Commission ("SEC"), lost their investments in Stanford International Bank, Ltd ("SIBL"). The SEC employees were at all times material acting within the scope and course of their offices and employment, and under circumstances in which their employer, the United States, if a private person, would be liable to the plaintiffs in accordance with the law of the place where their acts or omissions occurred.

SIBL 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. But for the negligent acts and omissions, misconduct, and breaches of duty by Spencer Barasch, a former SEC regional Enforcement Director, the negligent supervision of Barasch by his SEC supervisors, and other inexcusable acts of negligence by SEC employees, the plaintiffs would not have made, and lost, their SIBL investments, as the following facts, and admissions by the SEC, show.

The entire suit filed at the Earle Cabell, which includes a recap of the 2010 report, follows.
Stanford Investors v USA

Stanford Investors v USA

Lawyer sues to recover Allen Stanford's donations to congressional fundraisers

Dallas attorney Ralph Janvey, who is in charge of recovering assets from the empire of alleged Ponzi schemer Allen Stanford, sued the congressional fundraising committees on Friday to recover money that could be returned to investors.

Janvey first requested in Feb. 2009 that more than $1.8 million in campaign donations be returned to the estate. The largest beneficiaries of Stanford's largess were the Democratic Senatorial Campaign Committee ($950,500); the National Republican Congressional Committee ($238,500); the Democratic Congressional Campaign Committee ($200,000); the Republican National Committee ($128,500); and the National Republican Senatorial Committee ($83,345). According to Janvey, who is represented in the matter by Kevin M. Sadler and Timothy S. Durst of Baker Botts, the committees have "ignored" his requests to return the funds.

Two of the Republican committees are led by Texans: the NRCC, by Rep. Pete Sessions of Dallas, and the NRSC, by Sen. John Cornyn. An NRCC official previously told The Dallas Morning News that the group has no plans to return the money. Sessions' NRCC struggled to raise money in 2009, although it reported raising $4.5 million in January. Even with improved fundraising prospects in 2010, it's hard to imagine the NRCC unilaterally disgorging the Stanford donations since its rival, the DCCC, hasn't agreed to give back the money, either.

There have been a lot of questions about what kind of favors Stanford sought in return for his generous donations. Interestingly, the attorneys argue the answer is nothing: "The Committee defendants did not furnish any consideration whatsoever for the funds they received from Stanford, Davis and the Stanford Financial Group," the complaint states. "Consequently, they have no legitimate right to retain the funds, and the Receiver is entitled to the return of all such funds."

Feds investigating Stanford ties to lawmakers

MIAMI - U.S. federal authorities are investigating millions of dollars contributed by fraud suspect Allen Stanford and his staff to U.S. lawmakers in the past decade, the Miami Herald reported on Sunday.

The newspaper said the Justice Department investigation aimed to determine whether the banker received special favors from politicians while he was operating his alleged $7 billion Ponzi scheme centered on fraudulent certificates of deposit issued by his offshore bank in Antigua and Barbuda.

The U.S. Department of Justice said it had no comment on the Herald report.
The newspaper said an e-mail sent to Stanford by Texas Republican Representative Pete Sessions on the day authorities announced fraud charges against the billionaire financier, as well as $2.3 million in contributions he made to Sessions and other U.S. lawmakers, were "part of the government's inquiry."

It said Stanford, who has pleaded not guilty and is awaiting a trial set for January 2011, also spent $5 million on lobbying since 2001. It said he successfully lobbied in 2001 to kill a bill that would have exposed the flow of millions into his secretive offshore bank on the Caribbean island of Antigua.

The following year he helped block legislation that would have led to more government scrutiny of his now disgraced Antigua bank, the Miami Herald said.

Stanford, 59, has been in custody since June 19, when he was indicted on 21 criminal charges related to his alleged fraud. His global banking and securities business was shut down in February when the U.S. Securities and Exchange Commission filed civil charges that he and others had committed fraud.

The Miami Herald said that on the day federal agents raided Stanford's offices in the United States, February 17, the financier received an e-mail message from Sessions, the chairman of the National Republican Congressional Committee.

The newspaper said the message was found on Stanford's computer servers and reads: "I love you and believe in you.
"If you want my ear/voice -- e-mail," the Miami Herald quoted the message as saying, adding it was signed "Pete."

Sessions did not respond to requests for interviews and his press secretary said she had not seen the e-mail and so could not comment on it, the newspaper said.

It said Stanford also funded Caribbean trips for a group of U.S. lawmakers known as the Caribbean Caucus, including Sessions and Democrats Gregory Meeks of New York and Donald Payne of New Jersey.

The newspaper said most of the members of Congress it contacted about their ties to Stanford declined to discuss them, other than to say they had returned the contributions.

Prosecutors say Stanford paid tens of thousands of dollars in bribes for years to a top financial regulator in Antigua and Barbuda to shield his Ponzi scheme from U.S. investigators.