Grant Thornton Press Release
Newly formed creditors’ committee is working closely with liquidators, but fears recovery efforts could stall if money isn’t released soon
ANTIGUA-July 13, 2011– Liquidators of Stanford International Bank announced today that its newly formed Advisory Creditors’ Committee is backing a proposal to urge the U.S. Department of Justice and the United Kingdom’s Serious Fraud Office to unfreeze critical funding to the estate immediately.
The Creditors’ Committee, which is currently made up of victims from six countries, says recovery efforts for over 21,000 creditors with $7.2 billion in claims will stall to the detriment of the estate unless money is released from the bank’s own accounts that have been frozen at the instigation of the DoJ for more than two years.
“The biggest single issue that we have facing us today is funding,” said Marcus Wide, who was appointed in May as liquidator of Stanford International Bank along with Hugh Dickson. “We have been in negotiations with the Department of Justice and Serious Fraud Office asking them to act quickly and release the money. At present we are optimistic as both DoJ and SFO have shown that they understand the nature of the difficulties facing our estate, and the potential impact on victims.Unfortunately the frozen assets have lost value while frozen and we fear they could continue to decline in value the longer they remain frozen. And more importantly the estate is presently without the money it needs to gather in and protect other assets to which the victims are entitled, and to fund the legal actions that can generate further recoveries for victims.”
“The Justice Department has frozen, at a cost to creditors, these funds which would otherwise have been handed over to the estate,” added Mr. Dickson. “It is the creditors’ money and it is unfortunate that it is not available to protect the creditors’ interests and generate additional recoveries in a situation which is otherwise rather bleak.” Approximately 99.7% of all 21,000 creditors of the Bank are holders of CDs that were victimized in R. Allen Stanford’s apparent fraud, according to the Liquidators.
The six-member Creditors’ Committee held its second meeting on July 7, 2011, and unanimously approved arrangements for alternate financing from commercial funders proposed by the Joint Liquidators urging the Antiguan Court to approve of that plan as well, so that the estate can do its job, although at greater cost to creditors, in the event that a portion of the frozen funds are not released. The High Court in Antigua has since approved the funding package in principle.
“This has been a trying time for all creditors and we have no time to lose in the recovery of our funds,” said Eric Cohen, a member of the Creditors’ Committee. “We all feel the sting of Stanford International Bank’s collapse, but we have faith in the approach Mr. Wide and Mr. Dickson are taking, and are pledging them our full support.”
Alexander Fundora, another member of the Creditors’ Committee and founder of a Miami, Fla.-based home health care company that lost $2.5 million in the Stanford scheme, said it is “hard to understand why the DoJ wants to retain control of our money and for it to expect the victims to absorb the expense of the commercial funding arrangements, when the bank’s own funds should be available at no cost. We urge the DoJ to release the funds immediately.”
Stanford International Bank failed in 2009 after top executives R. Allen Stanford, James M. Davis, and Laura Pendergest-Holt executed a massive Ponzi scheme misappropriating billions of dollars of investor funds, according to U.S. prosecutors.
Mr. Dickson and Mr. Wide, who are employed by Grant Thornton, a global audit, tax and advisory firm, were appointed liquidators on May 12, 2011, replacing Nigel Hamilton-Smith and Peter Wastell by order of the High Court of Antigua.
By creating a Creditors’ Committee, the new liquidators are working to have an ongoing dialogue with creditors and to create a creditor-driven estate, something that didn’t exist under the prior administration.
“We will consult with creditors in the early stages as often as we can,” Dickson said. “At the end of the day it is their money. It is important that we have access to the insights, opinions and support of the people who we serve.”
Members of the Creditors’ Committee include Mr. Fundora, United States; Mr. Cohen, Canada; Ricardo Del Valle, Panama; Luis Lopez, Venezuela; Attorney Patrick Kelly of Minneapolis (for a group of Mexican creditors who lost $66 million), and a Swiss member. A seventh creditor, Mr Richard Watson of Antigua has recently been invited from a number of applicants to join the Committee. The Committee will meet regularly and will weigh in on major decisions.
“We have gathered a group of knowledgeable individuals who are geographically diverse and represent both large and small creditors,” Mr. Wide said. “We are convinced that working with the creditors will expedite the process of recovering assets.”
.
Showing posts with label stanford financial group. Show all posts
Showing posts with label stanford financial group. Show all posts
Thursday, 28 July 2011
Tuesday, 26 July 2011
SIPC Says It Need Not Reimburse Stanford Victims; SEC Disagrees
By John Sullivan, AdvisorOne
Dispute centers on meaning of 'theft' versus 'fraud.' SIPC to decide on next move by mid-September.
Call it splitting hairs, but at least one entity designed to protect investors from theft is sticking by its ruling against reimbursing the victims of money manager Allen Stanford. The key word is "theft," and Bloomberg reports the Securities Investor Protection Corp. (SIPC) alleges Stanford committed fraud, not theft, and therefore SIPC has no liability for damages.
Stanford, chairman of the now defunct Stanford Financial Group, based in Houston, was charged on Feb. 17, 2009 by the SEC with fraud and other violations of U.S. securities laws for an alleged $8 billion Pozi scheme that involved supposedly "safe" certificates of deposit.
SIPC maintains the circumstances specific to the Stanford case mean "that the law doesn’t provide for payouts to investors." The SEC’s staff initially agreed, but on June 15, the SEC informed SIPC that the “Stanford matter was appropriate for a proceeding under the Securities Investor Protection Act,” or SIPA.
The Bloomberg report says "the SEC told SIPC to start a process that could give as much as $500,000 to each qualified Stanford investor. The agency further surprised SIPC by threatening to sue if it didn’t carry out the plan."
SIPC said that said it expects its board to announce “on or about September 15, 2011 its decision about the referral from the SEC, and SIPC President and CEO Stephen Harbeck said that SIPC has “already started conferring with the SEC and the Stanford receiver regarding the SEC's referral in the Stanford matter.”
The SEC’s action “'is highly unusual,' SIPC’s Harbeck told the news service.
Bloomberg adds "Harbeck has said publicly that he doesn’t think the Stanford investors are eligible for repayments. SIPC is supposed to aid investors when their securities are stolen or go missing at a brokerage. Stanford’s customers still have possession of their securities, he said, and fraud by itself isn’t covered."
For people who lost money through the Stanford scheme, “it is very difficult to explain the difference between theft and fraud,” Harbeck said, according to Bloomberg.
Dispute centers on meaning of 'theft' versus 'fraud.' SIPC to decide on next move by mid-September.
Call it splitting hairs, but at least one entity designed to protect investors from theft is sticking by its ruling against reimbursing the victims of money manager Allen Stanford. The key word is "theft," and Bloomberg reports the Securities Investor Protection Corp. (SIPC) alleges Stanford committed fraud, not theft, and therefore SIPC has no liability for damages.
Stanford, chairman of the now defunct Stanford Financial Group, based in Houston, was charged on Feb. 17, 2009 by the SEC with fraud and other violations of U.S. securities laws for an alleged $8 billion Pozi scheme that involved supposedly "safe" certificates of deposit.
SIPC maintains the circumstances specific to the Stanford case mean "that the law doesn’t provide for payouts to investors." The SEC’s staff initially agreed, but on June 15, the SEC informed SIPC that the “Stanford matter was appropriate for a proceeding under the Securities Investor Protection Act,” or SIPA.
The Bloomberg report says "the SEC told SIPC to start a process that could give as much as $500,000 to each qualified Stanford investor. The agency further surprised SIPC by threatening to sue if it didn’t carry out the plan."
SIPC said that said it expects its board to announce “on or about September 15, 2011 its decision about the referral from the SEC, and SIPC President and CEO Stephen Harbeck said that SIPC has “already started conferring with the SEC and the Stanford receiver regarding the SEC's referral in the Stanford matter.”
The SEC’s action “'is highly unusual,' SIPC’s Harbeck told the news service.
Bloomberg adds "Harbeck has said publicly that he doesn’t think the Stanford investors are eligible for repayments. SIPC is supposed to aid investors when their securities are stolen or go missing at a brokerage. Stanford’s customers still have possession of their securities, he said, and fraud by itself isn’t covered."
For people who lost money through the Stanford scheme, “it is very difficult to explain the difference between theft and fraud,” Harbeck said, according to Bloomberg.
Sunday, 24 July 2011
SEC Watchdog Probes Agency’s Oversight of Stanford Receiver
By Joshua Gallu - Bllomberg
The U.S. Securities and Exchange Commission’s internal watchdog is investigating the agency’s dealings with the man hired to recover funds for victims of R. Allen Stanford’s alleged fraud amid claims the court-appointed receiver has taken too much money for himself.
Inspector General H. David Kotz said today he is reviewing the SEC’s oversight of the receiver, Ralph Janvey, after getting a complaint that the bulk of recovered funds has been used to cover legal bills.
Janvey was appointed in 2009 after the SEC sued Stanford and a federal grand jury indicted him on 21 criminal counts alleging that he used his Houston-based Stanford Financial Group and an Antigua-based banking unit to defraud clients through the sale of certificates of deposit. Stanford, who has denied the allegations, is being held without bail while awaiting trial.
Kachroo Legal Services P.C. of Cambridge, Massachusetts, released a statement yesterday accusing Janvey of “malfeasance and waste” in his management of collected assets and claiming there was an “inside deal” between Janvey and the Stanford investor committee to approve high fees.
Kevin Sadler, Janvey’s attorney, said that the allegations are “patently false and completely irresponsible.” Janvey, who hasn’t been contacted by Kotz, will respond “promptly and appropriately” to any request, Sadler said in a statement.
SEC spokesman Kevin Callahan declined to comment.
Stanford investors and lawmakers have pressed the SEC for more than two years demanding more help in recouping money lost in the alleged fraud. Last month, the SEC said some investors should be eligible for payouts from the Securities Investor Protection Corp., an industry-backed fund that protects customers when a brokerage fails.
The U.S. Securities and Exchange Commission’s internal watchdog is investigating the agency’s dealings with the man hired to recover funds for victims of R. Allen Stanford’s alleged fraud amid claims the court-appointed receiver has taken too much money for himself.
Inspector General H. David Kotz said today he is reviewing the SEC’s oversight of the receiver, Ralph Janvey, after getting a complaint that the bulk of recovered funds has been used to cover legal bills.
Janvey was appointed in 2009 after the SEC sued Stanford and a federal grand jury indicted him on 21 criminal counts alleging that he used his Houston-based Stanford Financial Group and an Antigua-based banking unit to defraud clients through the sale of certificates of deposit. Stanford, who has denied the allegations, is being held without bail while awaiting trial.
Kachroo Legal Services P.C. of Cambridge, Massachusetts, released a statement yesterday accusing Janvey of “malfeasance and waste” in his management of collected assets and claiming there was an “inside deal” between Janvey and the Stanford investor committee to approve high fees.
Kevin Sadler, Janvey’s attorney, said that the allegations are “patently false and completely irresponsible.” Janvey, who hasn’t been contacted by Kotz, will respond “promptly and appropriately” to any request, Sadler said in a statement.
SEC spokesman Kevin Callahan declined to comment.
Stanford investors and lawmakers have pressed the SEC for more than two years demanding more help in recouping money lost in the alleged fraud. Last month, the SEC said some investors should be eligible for payouts from the Securities Investor Protection Corp., an industry-backed fund that protects customers when a brokerage fails.
Thursday, 7 July 2011
Friday, 1 July 2011
SIPC to Announce Stanford Liquidation Decision in Mid-September
WASHINGTON, July 1, 2011 /PRNewswire-USNewswire/ -- The Securities Investor Protection Corporation ("SIPC"), which maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms, said today that it expects its Board of Directors to announce on or about September 15, 2011 its decision about the referral provided by the U.S. Securities and Exchange Commission ("SEC") with respect to the Stanford Group Company, operated by Robert Allen Stanford.
On February 17, 2009, the SEC filed an action in the U.S. District Court for the Northern District of Texas alleging that Stanford orchestrated an $8 billion fraud based on false promises of guaranteed returns related to certificates of deposit ("CDs") issued by the Antiguan-based Stanford International Bank ("SIB"). The SEC's Complaint alleged that SIB sold approximately $7.2 billion of CDs to investors by promising returns that were "improbable, if not impossible." See: Â Complaint, SEC v. Stanford International Bank, Ltd., et al., Case No. 3:09-CV-0298-N (N.D. Tex. filed February 17, 2009).
In response to the SEC's request for emergency relief, the Court immediately issued a temporary restraining order, froze the defendants' assets, and appointed a receiver to marshal those assets. Â The SEC filed a second amended complaint on June 19, 2009, alleging that Stanford conducted a Ponzi scheme.
SIPC President and CEO Stephen Harbeck said that SIPC has already started conferring with the SEC and the Stanford receiver regarding the SEC's referral in the Stanford matter.
The SEC's referral on June 15, 2011 was the first time the SEC had informed SIPC of the possibility that the Stanford matter was appropriate for a proceeding under the Securities Investor Protection Act ("SIPA").
ABOUT SIPC
The Securities Investor Protection Corporation is the U.S. investor's first line of defense in the event a brokerage firm fails, owing customers cash and securities that are missing from customer accounts. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds.
The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities - such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims for customer cash and/or securities custodied with the broker for up to a maximum of $500,000 per customer. Â This figure includes a maximum of $250,000 on claims for cash. From the time Congress created it in 1970 through December 2010, SIPC has advanced $ 1.6 billion in order to make possible the recovery of $ 109.3 billion in assets for an estimated 739,000 investors.
On February 17, 2009, the SEC filed an action in the U.S. District Court for the Northern District of Texas alleging that Stanford orchestrated an $8 billion fraud based on false promises of guaranteed returns related to certificates of deposit ("CDs") issued by the Antiguan-based Stanford International Bank ("SIB"). The SEC's Complaint alleged that SIB sold approximately $7.2 billion of CDs to investors by promising returns that were "improbable, if not impossible." See: Â Complaint, SEC v. Stanford International Bank, Ltd., et al., Case No. 3:09-CV-0298-N (N.D. Tex. filed February 17, 2009).
In response to the SEC's request for emergency relief, the Court immediately issued a temporary restraining order, froze the defendants' assets, and appointed a receiver to marshal those assets. Â The SEC filed a second amended complaint on June 19, 2009, alleging that Stanford conducted a Ponzi scheme.
SIPC President and CEO Stephen Harbeck said that SIPC has already started conferring with the SEC and the Stanford receiver regarding the SEC's referral in the Stanford matter.
The SEC's referral on June 15, 2011 was the first time the SEC had informed SIPC of the possibility that the Stanford matter was appropriate for a proceeding under the Securities Investor Protection Act ("SIPA").
ABOUT SIPC
The Securities Investor Protection Corporation is the U.S. investor's first line of defense in the event a brokerage firm fails, owing customers cash and securities that are missing from customer accounts. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds.
The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities - such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims for customer cash and/or securities custodied with the broker for up to a maximum of $500,000 per customer. Â This figure includes a maximum of $250,000 on claims for cash. From the time Congress created it in 1970 through December 2010, SIPC has advanced $ 1.6 billion in order to make possible the recovery of $ 109.3 billion in assets for an estimated 739,000 investors.
Thursday, 23 June 2011
Two Peas in a Pod?
UPDATE: Allen Stanford and Whitey Bulger:
Two Peas in a Pod?
Posted by Larry Doyle on June 23, 2011
I referenced the potential similarity in the cases of alleged financial scammer Allen Stanford and noted Boston gangster James J. “Whitey” Bulger in May 2009.
Our nation and especially Stanford Financial investors continue to wait to learn what may have really happened with Allen Stanford. Was he a pawn for the Department of Justice and/or other government agencies looking to infiltrate the Central and South American drug trade?
As for Whitey, after sixteen years of living on the lam, we wait no longer as news broke overnight that the notorious South Boston gangster was picked up in sunny Santa Monica, California.
I am sure the boys back in Boston may get a real chuckle from the fact that Whitey was allegedly using the alias, Charlie Rosenzweig. That said, there is little to chuckle about the personal damage and destruction Whitey and his Winter Hill Gang wrecked by pushing drugs into the streets of South Boston,… amongst other things as well, including murder and extortion!!
While there is nothing romantic about the story of Whitey Bulger, there is certainly a special place in hell for him.
Here’s hoping America can really learn what happened with Allen Stanford.
For those unfamiliar with Whitey, he is Boston’s greatest gangster, a government informant who simultaneously continued to run his gangland activities, one of the FBI’s Most Wanted, and still on the lam. The Martin Scorsese film, The Departed, was largely based on Whitey and his boys. If Whitey dealt in drugs and murder, is Stanford Financial, operated by Allen Stanford, a financial version of a government cover totally run amuck?
We all know the SEC totally dropped the ball in the oversight of the Bernie Madoff Ponzi scheme. On the heels of that and to alleviate massive pressure on the commission, the SEC quickly moved on Allen Stanford.
Evidence has emerged that the Texan who bankrolled English cricket may have been a US government informer.
Sir Allen Stanford, who is accused of bank fraud, is the subject of an investigation by the BBC’s Panorama.
Sources told Panorama that if he was a paid anti-drug agency informer, that could explain why a 2006 probe into his financial dealings was quietly dropped.
Sir Allen vigorously denies allegations of financial wrongdoing, despite a massive shortfall in his bank’s assets.
But the British receiver of his failed Stanford International Bank – based in Antigua – told Panorama that the books clearly show the deficit.
If in fact this development is accurate, has the U.S. government, via the DEA, facilitated a Ponzi scheme? I am not so naive as to think that there aren’t massive undercover operations ongoing regularly to infiltrate and expose illicit activities. However, if in fact that were the case, how did the DEA lose control of Stanford’s investment activities? Is this situation an indication that the Obama administration will not partake of these types of undercover operations? Is there a massive in-house brawl currently ongoing between the DEA and the SEC?
The BBC reports:
Secret documents seen by Panorama show both governments knew in 1990 that the Texan was a former bankrupt and his first bank was suspected of involvement with Latin American money-launderers.
In 1999, both the British and the Americans were aware of the facts surrounding a cheque for $3.1m (£2.05m) that Sir Allen paid to the Drug Enforcement Administration (DEA).
It was drug money originally paid in to Stanford International Bank by agents acting for a feared Mexican drug lord known as the ‘Lord of the Heavens’.
The cheque was proof that Stanford International Bank had been used to launder Mexican drug money – whether or not Sir Allen knew it at the time.
On 17 February of this year, the US Securities and Exchange Commission (SEC) accused Sir Allen of running a multi-billion dollar Ponzi fraud – when cash from new depositors is used to pay dividends to old depositors – civil charges he has denied.
Two and a half months after the SEC filing, the Texan has not yet faced criminal charges.
He was initially investigated by the SEC for running a possible Ponzi fraud in the summer of 2006, but by the winter of that year the inquiry was stopped.
Is this another version of the Whitey Bulger story in which the criminal turned informant continues to operate his own illicit activities? Whitey is now on the lam and his FBI protection, John J. Connolly, is cooling his heels in a federal penitentiary.
The intrigue of this situation is surreal, but the natural and instinctive question has to be: if Uncle Sam (DEA) provided cover for Allen Stanford in the pursuit of illicit drug related activities, did Uncle Sam also provide cover for Bernie Madoff as well?
Two Peas in a Pod?
Posted by Larry Doyle on June 23, 2011
I referenced the potential similarity in the cases of alleged financial scammer Allen Stanford and noted Boston gangster James J. “Whitey” Bulger in May 2009.
Our nation and especially Stanford Financial investors continue to wait to learn what may have really happened with Allen Stanford. Was he a pawn for the Department of Justice and/or other government agencies looking to infiltrate the Central and South American drug trade?
As for Whitey, after sixteen years of living on the lam, we wait no longer as news broke overnight that the notorious South Boston gangster was picked up in sunny Santa Monica, California.
I am sure the boys back in Boston may get a real chuckle from the fact that Whitey was allegedly using the alias, Charlie Rosenzweig. That said, there is little to chuckle about the personal damage and destruction Whitey and his Winter Hill Gang wrecked by pushing drugs into the streets of South Boston,… amongst other things as well, including murder and extortion!!
While there is nothing romantic about the story of Whitey Bulger, there is certainly a special place in hell for him.
Here’s hoping America can really learn what happened with Allen Stanford.
For those unfamiliar with Whitey, he is Boston’s greatest gangster, a government informant who simultaneously continued to run his gangland activities, one of the FBI’s Most Wanted, and still on the lam. The Martin Scorsese film, The Departed, was largely based on Whitey and his boys. If Whitey dealt in drugs and murder, is Stanford Financial, operated by Allen Stanford, a financial version of a government cover totally run amuck?
We all know the SEC totally dropped the ball in the oversight of the Bernie Madoff Ponzi scheme. On the heels of that and to alleviate massive pressure on the commission, the SEC quickly moved on Allen Stanford.
Evidence has emerged that the Texan who bankrolled English cricket may have been a US government informer.
Sir Allen Stanford, who is accused of bank fraud, is the subject of an investigation by the BBC’s Panorama.
Sources told Panorama that if he was a paid anti-drug agency informer, that could explain why a 2006 probe into his financial dealings was quietly dropped.
Sir Allen vigorously denies allegations of financial wrongdoing, despite a massive shortfall in his bank’s assets.
But the British receiver of his failed Stanford International Bank – based in Antigua – told Panorama that the books clearly show the deficit.
If in fact this development is accurate, has the U.S. government, via the DEA, facilitated a Ponzi scheme? I am not so naive as to think that there aren’t massive undercover operations ongoing regularly to infiltrate and expose illicit activities. However, if in fact that were the case, how did the DEA lose control of Stanford’s investment activities? Is this situation an indication that the Obama administration will not partake of these types of undercover operations? Is there a massive in-house brawl currently ongoing between the DEA and the SEC?
The BBC reports:
Secret documents seen by Panorama show both governments knew in 1990 that the Texan was a former bankrupt and his first bank was suspected of involvement with Latin American money-launderers.
In 1999, both the British and the Americans were aware of the facts surrounding a cheque for $3.1m (£2.05m) that Sir Allen paid to the Drug Enforcement Administration (DEA).
It was drug money originally paid in to Stanford International Bank by agents acting for a feared Mexican drug lord known as the ‘Lord of the Heavens’.
The cheque was proof that Stanford International Bank had been used to launder Mexican drug money – whether or not Sir Allen knew it at the time.
On 17 February of this year, the US Securities and Exchange Commission (SEC) accused Sir Allen of running a multi-billion dollar Ponzi fraud – when cash from new depositors is used to pay dividends to old depositors – civil charges he has denied.
Two and a half months after the SEC filing, the Texan has not yet faced criminal charges.
He was initially investigated by the SEC for running a possible Ponzi fraud in the summer of 2006, but by the winter of that year the inquiry was stopped.
Is this another version of the Whitey Bulger story in which the criminal turned informant continues to operate his own illicit activities? Whitey is now on the lam and his FBI protection, John J. Connolly, is cooling his heels in a federal penitentiary.
The intrigue of this situation is surreal, but the natural and instinctive question has to be: if Uncle Sam (DEA) provided cover for Allen Stanford in the pursuit of illicit drug related activities, did Uncle Sam also provide cover for Bernie Madoff as well?
Wednesday, 22 June 2011
National Political Committees Must Return Stanford Donations
Source:Bloomberg
Five Democratic and Republican national political committees must return more than $1.7 million in contributions received from indicted financier R. Allen Stanford to his court-appointed receiver, a federal judge ruled.
U.S. District Judge David Godbey in Dallas today awarded final judgment in favor of receiver Ralph Janvey, who is marshalling assets to repay investors allegedly swindled of more than $7 billion through what the government claims was a Stanford-directed Ponzi scheme.
“Courts adhere to the principle that equality is equity in dealing with the aftermath of an imploded Ponzi scheme,” Godbey wrote in a 61-page ruling. “In disgorging the Stanford defendants’ contributions, the political committees will endure no greater hardship than that suffered by other innocent victims of the Stanford defendants’ Ponzi scheme who must do the same.”
Godbey ordered the Democratic Senatorial Campaign Committee Inc. to return $1,037,347; the Democratic Congressional Campaign Committee Inc., $218,273; the National Republican Congressional Committee, $260,291; the National Republican Senatorial Committee, $90,960; and the Republican National Committee, $140,241. The sums represent the donations the groups got from Stanford plus prejudgment interest, according to Godbey’s order.
Stanford, 61, denies all wrongdoing in connection with civil and criminal allegations that that he defrauded investors through the sale of bogus certificates of deposit sold by his Antigua-based Stanford International Bank Ltd.
‘Important Victory’
“This ruling represents an important victory for the Stanford receivership and the thousands of victims of the Stanford Ponzi scheme,” Kevin Sadler, lead attorney for Janvey, said in an e-mail today. “Unfortunately, the political committees waged a costly campaign to thwart the receiver’s efforts to recover the monies they received from the Stanford Ponzi scheme. The receiver will be filing appropriate papers with the court to recover the hundreds of thousands of dollars in attorneys fees and expenses he was forced to incur in this case.”
Mark Shank, a lawyer for the Republican committees, didn’t immediately return voice or e-mail messages seeking comment on today’s ruling.
“We disagree with the court’s ruling and are weighing our options,’’ Jennifer Crider, a spokeswoman for the Democratic Congressional Campaign Committee, said in an e-mail.
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).
Five Democratic and Republican national political committees must return more than $1.7 million in contributions received from indicted financier R. Allen Stanford to his court-appointed receiver, a federal judge ruled.
U.S. District Judge David Godbey in Dallas today awarded final judgment in favor of receiver Ralph Janvey, who is marshalling assets to repay investors allegedly swindled of more than $7 billion through what the government claims was a Stanford-directed Ponzi scheme.
“Courts adhere to the principle that equality is equity in dealing with the aftermath of an imploded Ponzi scheme,” Godbey wrote in a 61-page ruling. “In disgorging the Stanford defendants’ contributions, the political committees will endure no greater hardship than that suffered by other innocent victims of the Stanford defendants’ Ponzi scheme who must do the same.”
Godbey ordered the Democratic Senatorial Campaign Committee Inc. to return $1,037,347; the Democratic Congressional Campaign Committee Inc., $218,273; the National Republican Congressional Committee, $260,291; the National Republican Senatorial Committee, $90,960; and the Republican National Committee, $140,241. The sums represent the donations the groups got from Stanford plus prejudgment interest, according to Godbey’s order.
Stanford, 61, denies all wrongdoing in connection with civil and criminal allegations that that he defrauded investors through the sale of bogus certificates of deposit sold by his Antigua-based Stanford International Bank Ltd.
‘Important Victory’
“This ruling represents an important victory for the Stanford receivership and the thousands of victims of the Stanford Ponzi scheme,” Kevin Sadler, lead attorney for Janvey, said in an e-mail today. “Unfortunately, the political committees waged a costly campaign to thwart the receiver’s efforts to recover the monies they received from the Stanford Ponzi scheme. The receiver will be filing appropriate papers with the court to recover the hundreds of thousands of dollars in attorneys fees and expenses he was forced to incur in this case.”
Mark Shank, a lawyer for the Republican committees, didn’t immediately return voice or e-mail messages seeking comment on today’s ruling.
“We disagree with the court’s ruling and are weighing our options,’’ Jennifer Crider, a spokeswoman for the Democratic Congressional Campaign Committee, said in an e-mail.
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).
Allen Stanford’s Criminal Trial Delayed to January While He’s in Treatment
Source:Bloomberg
Indicted financier R. Allen Stanford’s criminal trial was postponed to January from September so he can complete rehabilitation treatment for dependence on anti-anxiety drugs prescribed by prison doctors.
U.S. District Judge David Hittner in Houston said doctors treating Stanford said that it will take him as long as four more months to kick his dependence on anti-anxiety drugs prescribed after he was severely beaten by another inmate in September 2009.
Hittner found Stanford incompetent to assist in his own defense in January after three psychiatrists testified the former billionaire’s mental capacities were diminished from over-medication and lingering head injuries suffered in the prison fight.
Stanford was moved in February from a Houston jail to the federal medical center at the Butner, North Carolina, prison complex, on the expectation his rehabilitation would take as long as four months. Last month, Hittner scheduled the Stanford Group Co. founder for trial in September based on his expected return to Houston this month.
“However, the court now finds it has no alternative but to grant FMC’s request for an additional four months to continue treating Stanford,’’ Hittner said in a ruling handed down today. “Assuming FMC needs the entire four months to treat Stanford, the court now sets Stanford’s jury trial to commence January 2012.’’
Hittner said if Stanford recovers more quickly and returns to Houston sooner than expected, his trial may be moved up again.
Stanford Denies Wrongdoing
Stanford, 61, denies all wrongdoing in connection with civil and criminal allegations he defrauded investors of more than $7 billion through allegedly bogus certificates of deposit issued by Antigua-based Stanford International Bank Ltd.
Stanford has been incarcerated as a flight risk since his indictment and arrest in June 2009.
Ali Fazel, a lawyer for Stanford, declined to comment on today’s order, citing a ruling by Hittner barring lawyers from publicly discussing the case.
Laura Sweeney, a spokeswoman for the Justice Department, also declined to comment, citing the judge’s gag order.
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).
Indicted financier R. Allen Stanford’s criminal trial was postponed to January from September so he can complete rehabilitation treatment for dependence on anti-anxiety drugs prescribed by prison doctors.
U.S. District Judge David Hittner in Houston said doctors treating Stanford said that it will take him as long as four more months to kick his dependence on anti-anxiety drugs prescribed after he was severely beaten by another inmate in September 2009.
Hittner found Stanford incompetent to assist in his own defense in January after three psychiatrists testified the former billionaire’s mental capacities were diminished from over-medication and lingering head injuries suffered in the prison fight.
Stanford was moved in February from a Houston jail to the federal medical center at the Butner, North Carolina, prison complex, on the expectation his rehabilitation would take as long as four months. Last month, Hittner scheduled the Stanford Group Co. founder for trial in September based on his expected return to Houston this month.
“However, the court now finds it has no alternative but to grant FMC’s request for an additional four months to continue treating Stanford,’’ Hittner said in a ruling handed down today. “Assuming FMC needs the entire four months to treat Stanford, the court now sets Stanford’s jury trial to commence January 2012.’’
Hittner said if Stanford recovers more quickly and returns to Houston sooner than expected, his trial may be moved up again.
Stanford Denies Wrongdoing
Stanford, 61, denies all wrongdoing in connection with civil and criminal allegations he defrauded investors of more than $7 billion through allegedly bogus certificates of deposit issued by Antigua-based Stanford International Bank Ltd.
Stanford has been incarcerated as a flight risk since his indictment and arrest in June 2009.
Ali Fazel, a lawyer for Stanford, declined to comment on today’s order, citing a ruling by Hittner barring lawyers from publicly discussing the case.
Laura Sweeney, a spokeswoman for the Justice Department, also declined to comment, citing the judge’s gag order.
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).
Tuesday, 21 June 2011
SEC concludes Stanford is guilty
Securities News Network
Monday 20 June 2011
Sir Allen Stanford has not been convicted of any offence. Nor have any regulatory proceedings been concluded against him. Yet the USA's Securities and Exchange Commission has decided that he ran a Ponzi scheme and that "investors" are entitled to certain statutory protections.
A statement issued by the SEC on 15th June says " The Securities and Exchange Commission today concluded that certain individuals who invested money through the Stanford Group Company – a U.S. broker-dealer owned and used by Allen Stanford to perpetrate a massive Ponzi scheme – are entitled to the protections of the Securities Investor Protection Act of 1970 (SIPA)."
The commission does not, in fact, appear to have concluded any formal inquiry. Instead it appears to be relying on a report by a Court Appointed Receiver for the Stanford Group Company that there were a number of companies which “were operated in a highly interconnected fashion, with a core objective of selling” the CDs.
Among other things, the receiver also says that “[c]orporate separateness was not respected within the Stanford empire. ... Money was transferred from entity to entity as needed, irrespective of legitimate business need. Ultimately, all of the fund transfers supported the Ponzi scheme in one way or another, or benefited Allen Stanford personally.”
It is the finality of the wording that causes concern: "the" features strongly, juxtaposed with "Ponzi scheme."
The SEC does - almost - recognise that there has been no finding in any court of competent jurisdiction that there was in fact a Ponzi scheme: indeed, the best it can do is to refer to its early filings: "According to its 2009 complaint, the SEC alleged that Allen Stanford operated a Ponzi scheme in which certain investors were sold certificates of deposit (CDs) issued by Stanford International Bank Ltd. (SIBL) through the Stanford Group Company (SGC). SGC is a SIPC Member."
This is nothing more than an attempt to use its own earlier filings to bolster its current statements.The analysis upon which the SEC bases its current statements can be found (pdf) at http://sec.gov/rules/other/2011/stanford-sipa-analysis.pdf.
The fact remains that Stanford remains not guilty and not subject to any formal finding of impropriety within the regulatory regime. The SEC's actions and the wording it has adopted are tainting the jury pool for the eventual criminal trial, and producing a background which prosecutors will be able to use to great prejudicial effect.
Of course, if there was a ponzi scheme (and that remains uncertain although there are sufficient grounds for suspicion of some kind of impropriety), then victims should be able to use the full weight of the law to protect themselves against loss. But the other side of the coin is that Stanford is entitled to a clean run at a defence.
The SEC, by its choice of language, is seriously undermining that entitlement
Monday 20 June 2011
Sir Allen Stanford has not been convicted of any offence. Nor have any regulatory proceedings been concluded against him. Yet the USA's Securities and Exchange Commission has decided that he ran a Ponzi scheme and that "investors" are entitled to certain statutory protections.
A statement issued by the SEC on 15th June says " The Securities and Exchange Commission today concluded that certain individuals who invested money through the Stanford Group Company – a U.S. broker-dealer owned and used by Allen Stanford to perpetrate a massive Ponzi scheme – are entitled to the protections of the Securities Investor Protection Act of 1970 (SIPA)."
The commission does not, in fact, appear to have concluded any formal inquiry. Instead it appears to be relying on a report by a Court Appointed Receiver for the Stanford Group Company that there were a number of companies which “were operated in a highly interconnected fashion, with a core objective of selling” the CDs.
Among other things, the receiver also says that “[c]orporate separateness was not respected within the Stanford empire. ... Money was transferred from entity to entity as needed, irrespective of legitimate business need. Ultimately, all of the fund transfers supported the Ponzi scheme in one way or another, or benefited Allen Stanford personally.”
It is the finality of the wording that causes concern: "the" features strongly, juxtaposed with "Ponzi scheme."
The SEC does - almost - recognise that there has been no finding in any court of competent jurisdiction that there was in fact a Ponzi scheme: indeed, the best it can do is to refer to its early filings: "According to its 2009 complaint, the SEC alleged that Allen Stanford operated a Ponzi scheme in which certain investors were sold certificates of deposit (CDs) issued by Stanford International Bank Ltd. (SIBL) through the Stanford Group Company (SGC). SGC is a SIPC Member."
This is nothing more than an attempt to use its own earlier filings to bolster its current statements.The analysis upon which the SEC bases its current statements can be found (pdf) at http://sec.gov/rules/other/2011/stanford-sipa-analysis.pdf.
The fact remains that Stanford remains not guilty and not subject to any formal finding of impropriety within the regulatory regime. The SEC's actions and the wording it has adopted are tainting the jury pool for the eventual criminal trial, and producing a background which prosecutors will be able to use to great prejudicial effect.
Of course, if there was a ponzi scheme (and that remains uncertain although there are sufficient grounds for suspicion of some kind of impropriety), then victims should be able to use the full weight of the law to protect themselves against loss. But the other side of the coin is that Stanford is entitled to a clean run at a defence.
The SEC, by its choice of language, is seriously undermining that entitlement
Monday, 20 June 2011
Stanford Receiver Sues Libyan Fund for $55 Million Withdrawn, Lawyer Says
Source:Bloomburg
R. Allen Stanford’s court-appointed receiver sued the Libyan government wealth fund for $55 million he claims the state withdrew from Stanford’s alleged Ponzi scheme before it collapsed in early 2009, according to the receiver’s lawyer.
Ralph S. Janvey, Stanford’s receiver, also won a temporary freeze on some Libyan government bank accounts in the U.S. until a federal judge can determine if the money should be distributed to investors allegedly swindled of more than $7 billion, said Janvey’s lead attorney, Kevin M. Sadler.
“The payments made to the Libyan defendants were fraudulent transfers, using funds which Stanford obtained by fraud from investors who purchased Stanford’s phony CDs even as the Ponzi scheme was beginning to collapse,’’ Sadler said today by e-mail.
Janvey’s suit was filed under seal June 3 in U.S. District Court in Dallas, Sadler said. The lawsuit couldn’t be independently confirmed using the court’s electronic docket.
Stanford, 61, denies all allegations of wrongdoing. He previously said he met with Libyan sovereign-wealth fund officials shortly before the U.S. Securities and Exchange Commission seized his operations on suspicion of fraud in February 2009.
The Libyans withdrew $12 million of their Stanford investment immediately after this meeting, which occurred in Libya “just three weeks before the SEC filed suit,’’ Sadler said in today’s e-mail.
Order to Freeze
Janvey obtained a court order on June 6 freezing $55 million in Libyan assets in U.S. bank accounts, pending a December hearing before U.S. District Judge David Godbey, Sadler said. The judge oversees the SEC’s case against Stanford and several of his companies.
Stanford faces 14 criminal charges that he deceived investors about the safety and oversight of certificates of deposit sold by his Antigua-based Stanford International Bank Ltd. He is in a prison hospital unit in Butner, North Carolina, until he completes rehabilitation from a prescription-drug dependency he acquired in jail.
The former billionaire has been in custody as a flight risk since his indictment in June 2009. His attorneys have asked for a delay in his criminal trial, now scheduled for September in Houston federal court, until he is found competent to assist in his defense.
The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).
R. Allen Stanford’s court-appointed receiver sued the Libyan government wealth fund for $55 million he claims the state withdrew from Stanford’s alleged Ponzi scheme before it collapsed in early 2009, according to the receiver’s lawyer.
Ralph S. Janvey, Stanford’s receiver, also won a temporary freeze on some Libyan government bank accounts in the U.S. until a federal judge can determine if the money should be distributed to investors allegedly swindled of more than $7 billion, said Janvey’s lead attorney, Kevin M. Sadler.
“The payments made to the Libyan defendants were fraudulent transfers, using funds which Stanford obtained by fraud from investors who purchased Stanford’s phony CDs even as the Ponzi scheme was beginning to collapse,’’ Sadler said today by e-mail.
Janvey’s suit was filed under seal June 3 in U.S. District Court in Dallas, Sadler said. The lawsuit couldn’t be independently confirmed using the court’s electronic docket.
Stanford, 61, denies all allegations of wrongdoing. He previously said he met with Libyan sovereign-wealth fund officials shortly before the U.S. Securities and Exchange Commission seized his operations on suspicion of fraud in February 2009.
The Libyans withdrew $12 million of their Stanford investment immediately after this meeting, which occurred in Libya “just three weeks before the SEC filed suit,’’ Sadler said in today’s e-mail.
Order to Freeze
Janvey obtained a court order on June 6 freezing $55 million in Libyan assets in U.S. bank accounts, pending a December hearing before U.S. District Judge David Godbey, Sadler said. The judge oversees the SEC’s case against Stanford and several of his companies.
Stanford faces 14 criminal charges that he deceived investors about the safety and oversight of certificates of deposit sold by his Antigua-based Stanford International Bank Ltd. He is in a prison hospital unit in Butner, North Carolina, until he completes rehabilitation from a prescription-drug dependency he acquired in jail.
The former billionaire has been in custody as a flight risk since his indictment in June 2009. His attorneys have asked for a delay in his criminal trial, now scheduled for September in Houston federal court, until he is found competent to assist in his defense.
The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).
Compensating Stanford’s Investors
Source: NewYork Times
The Securities and Exchange Commission froze the assets of R. Allen Stanford’s financial empire almost two years ago. But authorities are still figuring out whether investors can get compensated for some of their losses
The S.E.C. is pushing for investors who bought more than $7.2 billion in allegedly bogus certificates of deposit from Mr. Stanford’s Antiguan bank to be treated as brokerage customers by the Securities Investor Protection Corporation. If that happens, clients could get at least some of their money back.
SIPC provides a measure of protection for customers when a broker becomes insolvent, paying up to $500,000 per customer that includes $250,000 in cash. The program, which is not intended to provide insurance against fraud, only covers the brokerage firm’s customers and not those who dealt with an affiliate, like an offshore bank, that is not qualified to participate in the program.
Mr. Stanford’s financial empire included a brokerage firm, called the Stanford Group Company, which promoted the C.D.’s to investors by promising above-market returns. The actual issuer of the C.D.’s, however, was his Antiguan bank, Stanford International Bank. The entity was not a broker-dealer and so it fell outside of the protections afforded by SIPC.
In a letter sent in August 2009 to the trustee appointed to gather assets for Mr. Stanford’s investors, SIPC denied that it was required to provide any coverage because the C.D.’s were bought from the offshore bank, even though the brokerage arm marketed them. The agency explained that the Stanford Group Company was merely an “introducing” broker that was not responsible for maintaining any securities on behalf of customers. As such, the agency was not responsible when the Antiguan bank collapsed and the C.D.’s became worthless.
The S.E.C. took a different position last week. In an analysis of the case , the S.E.C. told SIPC that it was putting form over substance by focusing solely on which of the various entities controlled by Mr. Stanford had issued the C.D.’s. Under the S.E.C.’s rationale, Mr. Stanford ignored those legal niceties and treated the various companies as one source of money for his alleged Ponzi scheme, taking money from each as if it were his personal piggy bank. “Credible evidence shows that Stanford structured the various entities in his financial empire,” according the S.E.C. “for the principal, if not sole, purpose of carrying out a single fraudulent Ponzi scheme.”
The S.E.C. asserted in its analysis that SIPC should cover investors. In effect, the agency said Mr. Stanford effectively stole from customers of the brokerage firm by selling worthless C.D.’s, much like the Ponzi scheme perpetrated by Bernard L. Madoff in which fictitious securities totaling $64 billion were credited to client accounts when it collapsed.
But the S.E.C. also makes it clear that any calculation of victim claims should not be based on the purported value of the C.D.’s reflected on the account statements provided by Stanford International Bank, but instead only the actual amount invested. Not surprisingly, this is the same position taken by the trustee appointed to liquidate Mr. Madoff’s firm, Irving H. Picard, and SIPC in dealing with investors in that Ponzi scheme.
The S.E.C. urged SIPC to initiate a liquidation proceeding like the one undertaken by Mr. Picard, including the appointment of a trustee to weigh claims from investors. This is more than just a request, however, because the S.E.C. has supervisory authority over SIPC. The last line of its analysis was a rather unsubtle hint to compensate investors:
“In a further exercise of its discretion, the Commission has authorized its staff to file in district court an application under Section 11(b) of [Securities Investor Protection Act] to compel SIPC to initiate a liquidation proceeding in the event SIPC refuses to do so.”
If SIPC does liquidate Mr. Stanford’s brokerage operation, not all investors may benefit, as some victims of Mr. Madoff are discovering.
Mr. Picard successfully argued in the federal bankruptcy court that those who withdrew more from their accounts with Mr. Madoff than they invested – the so-called “net winners” – are subject to clawback suits to repay their profits and have no claim for losses. The “net winners” issue was argued before the United States Court of Appeals for the Second Circuit in March, and a decision is likely to come in the near future.
It is not clear whether there were any “net winners” among Mr. Stanford’s investors. But there is a good possibility that some investors closed their accounts and took profits before the scheme collapsed. Any investors who profited on the C.D.’s from the Antiguan bank could face a similar situation to the “net winners” targeted by Mr. Picard.
I expect there to be similar clawback suits filed if SIPC does accede to the S.E.C.’s request. Given how contentious the Mr. Picard’s lawsuits against “net winners” have been, we can expect more of the same if SIPC liquidates Mr. Stanford’s brokerage firm.
The S.E.C.’s announcement had another salutary effect. Just a day before it issued its analysis, Senator David Vitter, Republican of Louisiana, placed a hold on the nominations of two commissioners to the S.E.C. until it announced its position on whether the investors were protected by SIPC.
The hold on the nominations has been removed, and everyone – except perhaps SIPC – is a bit happier. But when Mr. Stanford’s investors will receive some compensation for their losses is still unclear because a liquidation is only the start of the process, as the Madoff case shows.
The Securities and Exchange Commission froze the assets of R. Allen Stanford’s financial empire almost two years ago. But authorities are still figuring out whether investors can get compensated for some of their losses
The S.E.C. is pushing for investors who bought more than $7.2 billion in allegedly bogus certificates of deposit from Mr. Stanford’s Antiguan bank to be treated as brokerage customers by the Securities Investor Protection Corporation. If that happens, clients could get at least some of their money back.
SIPC provides a measure of protection for customers when a broker becomes insolvent, paying up to $500,000 per customer that includes $250,000 in cash. The program, which is not intended to provide insurance against fraud, only covers the brokerage firm’s customers and not those who dealt with an affiliate, like an offshore bank, that is not qualified to participate in the program.
Mr. Stanford’s financial empire included a brokerage firm, called the Stanford Group Company, which promoted the C.D.’s to investors by promising above-market returns. The actual issuer of the C.D.’s, however, was his Antiguan bank, Stanford International Bank. The entity was not a broker-dealer and so it fell outside of the protections afforded by SIPC.
In a letter sent in August 2009 to the trustee appointed to gather assets for Mr. Stanford’s investors, SIPC denied that it was required to provide any coverage because the C.D.’s were bought from the offshore bank, even though the brokerage arm marketed them. The agency explained that the Stanford Group Company was merely an “introducing” broker that was not responsible for maintaining any securities on behalf of customers. As such, the agency was not responsible when the Antiguan bank collapsed and the C.D.’s became worthless.
The S.E.C. took a different position last week. In an analysis of the case , the S.E.C. told SIPC that it was putting form over substance by focusing solely on which of the various entities controlled by Mr. Stanford had issued the C.D.’s. Under the S.E.C.’s rationale, Mr. Stanford ignored those legal niceties and treated the various companies as one source of money for his alleged Ponzi scheme, taking money from each as if it were his personal piggy bank. “Credible evidence shows that Stanford structured the various entities in his financial empire,” according the S.E.C. “for the principal, if not sole, purpose of carrying out a single fraudulent Ponzi scheme.”
The S.E.C. asserted in its analysis that SIPC should cover investors. In effect, the agency said Mr. Stanford effectively stole from customers of the brokerage firm by selling worthless C.D.’s, much like the Ponzi scheme perpetrated by Bernard L. Madoff in which fictitious securities totaling $64 billion were credited to client accounts when it collapsed.
But the S.E.C. also makes it clear that any calculation of victim claims should not be based on the purported value of the C.D.’s reflected on the account statements provided by Stanford International Bank, but instead only the actual amount invested. Not surprisingly, this is the same position taken by the trustee appointed to liquidate Mr. Madoff’s firm, Irving H. Picard, and SIPC in dealing with investors in that Ponzi scheme.
The S.E.C. urged SIPC to initiate a liquidation proceeding like the one undertaken by Mr. Picard, including the appointment of a trustee to weigh claims from investors. This is more than just a request, however, because the S.E.C. has supervisory authority over SIPC. The last line of its analysis was a rather unsubtle hint to compensate investors:
“In a further exercise of its discretion, the Commission has authorized its staff to file in district court an application under Section 11(b) of [Securities Investor Protection Act] to compel SIPC to initiate a liquidation proceeding in the event SIPC refuses to do so.”
If SIPC does liquidate Mr. Stanford’s brokerage operation, not all investors may benefit, as some victims of Mr. Madoff are discovering.
Mr. Picard successfully argued in the federal bankruptcy court that those who withdrew more from their accounts with Mr. Madoff than they invested – the so-called “net winners” – are subject to clawback suits to repay their profits and have no claim for losses. The “net winners” issue was argued before the United States Court of Appeals for the Second Circuit in March, and a decision is likely to come in the near future.
It is not clear whether there were any “net winners” among Mr. Stanford’s investors. But there is a good possibility that some investors closed their accounts and took profits before the scheme collapsed. Any investors who profited on the C.D.’s from the Antiguan bank could face a similar situation to the “net winners” targeted by Mr. Picard.
I expect there to be similar clawback suits filed if SIPC does accede to the S.E.C.’s request. Given how contentious the Mr. Picard’s lawsuits against “net winners” have been, we can expect more of the same if SIPC liquidates Mr. Stanford’s brokerage firm.
The S.E.C.’s announcement had another salutary effect. Just a day before it issued its analysis, Senator David Vitter, Republican of Louisiana, placed a hold on the nominations of two commissioners to the S.E.C. until it announced its position on whether the investors were protected by SIPC.
The hold on the nominations has been removed, and everyone – except perhaps SIPC – is a bit happier. But when Mr. Stanford’s investors will receive some compensation for their losses is still unclear because a liquidation is only the start of the process, as the Madoff case shows.
What and who does SIPC cover?
I do not know how correct the statements here are, but I picked this information off a Spanish blog where someone has been putting questions to Elizabeth Murphy, (secretary of the SEC) and I have translated through Google...hence the broken English. That said, some of information here will probably be of interest. Again, I stress these are not my words and I do not guarantee the statements are correct, but if they are, it clearly states that SIPC will become a Preferential creditor with the receivers and this what I have feared all along.
FAQ:
1.Q. What decided the SEC on June 15?
A.The SEC, in exercising its full authority over the SIPC liquidation ordered start of the QMS.
2.Q. What is SGC?
A. The Stanford Group Company ("SGC") is a broker operating through 29 offices located in U.S. territory, with a single owner: R. Allen Stanford. The brokerage firm was principally engaged in the sale in the United States certificates of deposit ("CDs") issued by the Stanford International Bank Limited ("SIBL"). The Stanford Group Venezuela, Mexico, Peru, Ecuador, and so on. Stanford entities are different from the Casa de Bolsa (SGC) U.S., registered with the SEC and member of SIPC.
3. Q.What does it mean in practice under SIPA liquidation of the SGC?
A.It means that investors with brokerage accounts in the SGC, who bought CDs SIBL through the GSC are included under the umbrella SIPA.
4. Q.What is a brokerage account?
A.It is a brokerage account, through which a broker-dealer is buying or selling securities on behalf of the client. For SIPA coverage, according to the SEC's decision last June 15, it is essential that the potential claimant has opened and maintained a brokerage account at Pershing LLC or JP Morgan Clearing Corporation, through the QMS.
5. Q.What benefit investors receive coverage included under the SIPA?
A.Receive up to $ 500,000 per customer. Only recognized net investment (principal). Excludes interest.
6. Q.What should I do if I am eligible happy to receive this benefit?
A.Wait for instructions from the SEC and / or the SIPC. BEWARE unscrupulous lawyers who want to fish in troubled waters!
7. Q.What should I do if I am eligible to be included within the coverage SIPA?
A.Join Covisal to continue pressuring the US Government in all scenarios. Support Covisal in all its actions and contribute monthly with its operating expenses.
8. Q.How does the payment of this economic relief to the "Distribution Fund" of the Judicial Administration in the U.S.?
A.As I explained in October 2010, economic relief from the SIPC is only a loan against repayment guaranteed by the Heritage of the Receivership. For this reason when the SIPC pays the economic relief to the victims, clients of the QMS, the SIPC will automatically become a preferential creditor of the "Distribution Fund" of the Receivership.
FAQ:
1.Q. What decided the SEC on June 15?
A.The SEC, in exercising its full authority over the SIPC liquidation ordered start of the QMS.
2.Q. What is SGC?
A. The Stanford Group Company ("SGC") is a broker operating through 29 offices located in U.S. territory, with a single owner: R. Allen Stanford. The brokerage firm was principally engaged in the sale in the United States certificates of deposit ("CDs") issued by the Stanford International Bank Limited ("SIBL"). The Stanford Group Venezuela, Mexico, Peru, Ecuador, and so on. Stanford entities are different from the Casa de Bolsa (SGC) U.S., registered with the SEC and member of SIPC.
3. Q.What does it mean in practice under SIPA liquidation of the SGC?
A.It means that investors with brokerage accounts in the SGC, who bought CDs SIBL through the GSC are included under the umbrella SIPA.
4. Q.What is a brokerage account?
A.It is a brokerage account, through which a broker-dealer is buying or selling securities on behalf of the client. For SIPA coverage, according to the SEC's decision last June 15, it is essential that the potential claimant has opened and maintained a brokerage account at Pershing LLC or JP Morgan Clearing Corporation, through the QMS.
5. Q.What benefit investors receive coverage included under the SIPA?
A.Receive up to $ 500,000 per customer. Only recognized net investment (principal). Excludes interest.
6. Q.What should I do if I am eligible happy to receive this benefit?
A.Wait for instructions from the SEC and / or the SIPC. BEWARE unscrupulous lawyers who want to fish in troubled waters!
7. Q.What should I do if I am eligible to be included within the coverage SIPA?
A.Join Covisal to continue pressuring the US Government in all scenarios. Support Covisal in all its actions and contribute monthly with its operating expenses.
8. Q.How does the payment of this economic relief to the "Distribution Fund" of the Judicial Administration in the U.S.?
A.As I explained in October 2010, economic relief from the SIPC is only a loan against repayment guaranteed by the Heritage of the Receivership. For this reason when the SIPC pays the economic relief to the victims, clients of the QMS, the SIPC will automatically become a preferential creditor of the "Distribution Fund" of the Receivership.
Wednesday, 15 June 2011
SEC Concludes That Certain Stanford Ponzi Scheme Investors Are Entitled to Protections of SIPA
Washington, D.C., June 15, 2011 – The Securities and Exchange Commission today concluded that certain individuals who invested money through the Stanford Group Company – a U.S. broker-dealer owned and used by Allen Stanford to perpetrate a massive Ponzi scheme – are entitled to the protections of the Securities Investor Protection Act of 1970 (SIPA).
In exercising its discretionary authority under SIPA and based on the totality of the facts and circumstances of the case, the Commission asked the Securities Investor Protection Corporation (SIPC) to initiate a court proceeding under SIPA to liquidate the broker-dealer.
According to its 2009 complaint, the SEC alleged that Allen Stanford operated a Ponzi scheme in which certain investors were sold certificates of deposit (CDs) issued by Stanford International Bank Ltd. (SIBL) through the Stanford Group Company (SGC). SGC is a SIPC Member.
In an analysis provided to SIPC, the SEC explains that, on the specific facts of this case, investors with brokerage accounts at SGC who purchased the CDs through the broker-dealer qualify for protected “customer” status under SIPA.
In reaching its determination, the SEC cited the conclusions in the report of the court appointed-receiver for SGC, who noted that the many companies controlled and directly or indirectly owned by Stanford “were operated in a highly interconnected fashion, with a core objective of selling” the CDs.
Among other things, the receiver also noted that “[c]orporate separateness was not respected within the Stanford empire. ... Money was transferred from entity to entity as needed, irrespective of legitimate business need. Ultimately, all of the fund transfers supported the Ponzi scheme in one way or another, or benefitted Allen Stanford personally.”
The Commission further determined that, in light of all of the facts and circumstances in this case, the customers’ claims should be based on their net investment in the fraudulent CDs used to carry out the Ponzi scheme.
A SIPA liquidation proceeding would allow investors with accounts at SGC to file claims with a trustee selected by SIPC. The trustee would decide whether the investors have “customer” claims that are protected by the statute. An investor who disagreed with the trustee’s determination could seek court review.
The Commission has authorized its staff to file an action in federal district court under SIPA to compel SIPC to initiate a liquidation proceeding in the event SIPC does not do so.
In exercising its discretionary authority under SIPA and based on the totality of the facts and circumstances of the case, the Commission asked the Securities Investor Protection Corporation (SIPC) to initiate a court proceeding under SIPA to liquidate the broker-dealer.
According to its 2009 complaint, the SEC alleged that Allen Stanford operated a Ponzi scheme in which certain investors were sold certificates of deposit (CDs) issued by Stanford International Bank Ltd. (SIBL) through the Stanford Group Company (SGC). SGC is a SIPC Member.
In an analysis provided to SIPC, the SEC explains that, on the specific facts of this case, investors with brokerage accounts at SGC who purchased the CDs through the broker-dealer qualify for protected “customer” status under SIPA.
In reaching its determination, the SEC cited the conclusions in the report of the court appointed-receiver for SGC, who noted that the many companies controlled and directly or indirectly owned by Stanford “were operated in a highly interconnected fashion, with a core objective of selling” the CDs.
Among other things, the receiver also noted that “[c]orporate separateness was not respected within the Stanford empire. ... Money was transferred from entity to entity as needed, irrespective of legitimate business need. Ultimately, all of the fund transfers supported the Ponzi scheme in one way or another, or benefitted Allen Stanford personally.”
The Commission further determined that, in light of all of the facts and circumstances in this case, the customers’ claims should be based on their net investment in the fraudulent CDs used to carry out the Ponzi scheme.
A SIPA liquidation proceeding would allow investors with accounts at SGC to file claims with a trustee selected by SIPC. The trustee would decide whether the investors have “customer” claims that are protected by the statute. An investor who disagreed with the trustee’s determination could seek court review.
The Commission has authorized its staff to file an action in federal district court under SIPA to compel SIPC to initiate a liquidation proceeding in the event SIPC does not do so.
Tuesday, 7 June 2011
HSBC Agrees to Pay $62.5 Million to Settle U.S. Class-Action Madoff Suit
The following article raises the question are HSBC not also liable for acting as custodian for Allen Stanford?
HSBC Holdings Plc (HSBA), Europe’s biggest bank, agreed to pay $62.5 million to settle a group lawsuit in New York, filed by investors in a fund that lost money in Bernard Madoff’s fraud while the bank acted as custodian.
The accord, which needs court approval, applies to a class- action case against several HSBC units and other defendants by investors in the Ireland-based Thema International Fund Plc, whose assets were invested with Bernard L. Madoff Securities LLC, HSBC said in a statement today.
The settlement “shall in no way be construed” as an admission of fault, HSBC said in the statement. The London-based bank, which faces other Madoff-related lawsuits in Germany, Luxembourg and other countries, has “good defenses” against them, it said.
Thema Fund, a so-called Madoff feeder fund, was controlled by Bank Medici AG, according to a statement by the fund’s law firm, Chapin Fitzgerald Sullivan & Bottini LLP. Bank Medici with its founder Sonja Kohn is part of a $59 billion suit by the trustee liquidating Madoff’s firm.
HSBC units acted as custodian for Thema and other funds that funneled money to Madoff. Irving Picard, the trustee liquidating New York-based Bernard L. Madoff Investment Securities LLC, in December sued HSBC and a dozen feeder funds for $9 billion in U.S. Bankruptcy Court in Manhattan, saying they should have known of the fraud.
HSBC Losses
HSBC didn’t know of the fraud and lost $1 billion of its own money investing in funds that in turn put money with Madoff, the bank said last month in court papers seeking dismissal of Picard’s lawsuit.
The bank was warned twice by auditors that entrusting as much as $8 billion in client funds to Madoff opened it up to “fraud and operational risks,” according to KPMG LLP reports obtained in March by Bloomberg News. The investors claim HSBC failed to act on the warnings.
According to HSBC’s May filing, Picard, who sued HSBC saying he was doing so on behalf of Madoff investors, is competing with the feeder funds and investors that have sued HSBC, and intends to claim any money they recover from the U.K. bank to give it to other investors.
“He is attempting to steal their claims, along with the funds’ claims, and planning to provide the fruits of any recoveries to other parties,” on the principle of “robbing Peter to pay Paul,” HSBC said as it asked a judge to dismiss Picard’s suit.
Amanda Remus, a Picard spokeswoman, declined at the time to comment.
Alpha Suit
On May 27, Alpha Prime Fund Ltd. and Senator Fund SPC, two funds sued along with HSBC by the Madoff firm’s trustee, filed so-called cross claims against HSBC to try to recoup “hundreds of millions of dollars” in losses they incurred in the fraud.
HSBC in December was sued by a group of 650 mainly private German investors in Luxembourg seeking compensation for losses they suffered through Herald (Lux) US Absolute Return Fund, which placed assets with Madoff. That suit seeks about 25 million euros ($36.6 million) in damages.
Thema and another fund, AA (Alternative Advantage) Plc, sued HSBC in January 2009 in Dublin’s High Court.
HSBC is facing about 50 investor complaints in Ireland for allegedly failing in its duties as custodian for Thema, a European-Union regulated fund, and AA (Alternative Advantage) Plc. Both funds suspended redemptions after Madoff’s fraud was uncovered. Custodians are responsible for oversight of funds, and manage deposits and payments to investors.
Dublin Court
A court in Dublin in January ordered HSBC to disclose a report on the status of the Thema fund without ruling on whether HSBC had made the necessary data available. Almost all of the funds invested in Thema “are currently lost, apparently as a result of the fallout from the collapse of the Madoff empire,” Judge Frank Clarke said in the Jan. 10 order in a case filed by French investor Aforge Finance SAS, which lost about 54 million euros in Thema.
HSBC’s Luxembourg unit was also custodian for the Herald (Lux) fund, which had assets of $225.7 million as of Oct. 31, 2008, according to Bloomberg data. The fund was forced to dissolve because of Madoff-related losses.
The Luxembourg-based liquidators of the Herald Lux fund are suing HSBC for the return of lost assets. Luxembourg’s financial market regulator in November 2009 ordered HSBC Securities Services in Luxembourg to review its internal rules related to its role as custodian bank of local mutual funds.
Luxembourg Liquidators
In Luxembourg, the liquidators may be the only possibility for Herald (Lux) investors to recoup some of their lost money after a March 4 ruling by a commercial court that liquidators alone can recover capital assets.
Documents from Madoff’s company show the value of HSBC- serviced funds as of Nov. 30, 2008, was about $8.4 billion, including fake profit from Madoff’s Ponzi scheme, according to HSBC’s statement. The funds’ actual transfers to Madoff’s firm minus their actual withdrawals during the period HSBC acted as custodian, totaled about $4.3 billion, it said.
The settlement provides for a $10 million litigation fund that will allow investors to try to recover money from defendants that haven’t settled, said Thema Fund’s law firm in the statement.
HSBC Holdings Plc (HSBA), Europe’s biggest bank, agreed to pay $62.5 million to settle a group lawsuit in New York, filed by investors in a fund that lost money in Bernard Madoff’s fraud while the bank acted as custodian.
The accord, which needs court approval, applies to a class- action case against several HSBC units and other defendants by investors in the Ireland-based Thema International Fund Plc, whose assets were invested with Bernard L. Madoff Securities LLC, HSBC said in a statement today.
The settlement “shall in no way be construed” as an admission of fault, HSBC said in the statement. The London-based bank, which faces other Madoff-related lawsuits in Germany, Luxembourg and other countries, has “good defenses” against them, it said.
Thema Fund, a so-called Madoff feeder fund, was controlled by Bank Medici AG, according to a statement by the fund’s law firm, Chapin Fitzgerald Sullivan & Bottini LLP. Bank Medici with its founder Sonja Kohn is part of a $59 billion suit by the trustee liquidating Madoff’s firm.
HSBC units acted as custodian for Thema and other funds that funneled money to Madoff. Irving Picard, the trustee liquidating New York-based Bernard L. Madoff Investment Securities LLC, in December sued HSBC and a dozen feeder funds for $9 billion in U.S. Bankruptcy Court in Manhattan, saying they should have known of the fraud.
HSBC Losses
HSBC didn’t know of the fraud and lost $1 billion of its own money investing in funds that in turn put money with Madoff, the bank said last month in court papers seeking dismissal of Picard’s lawsuit.
The bank was warned twice by auditors that entrusting as much as $8 billion in client funds to Madoff opened it up to “fraud and operational risks,” according to KPMG LLP reports obtained in March by Bloomberg News. The investors claim HSBC failed to act on the warnings.
According to HSBC’s May filing, Picard, who sued HSBC saying he was doing so on behalf of Madoff investors, is competing with the feeder funds and investors that have sued HSBC, and intends to claim any money they recover from the U.K. bank to give it to other investors.
“He is attempting to steal their claims, along with the funds’ claims, and planning to provide the fruits of any recoveries to other parties,” on the principle of “robbing Peter to pay Paul,” HSBC said as it asked a judge to dismiss Picard’s suit.
Amanda Remus, a Picard spokeswoman, declined at the time to comment.
Alpha Suit
On May 27, Alpha Prime Fund Ltd. and Senator Fund SPC, two funds sued along with HSBC by the Madoff firm’s trustee, filed so-called cross claims against HSBC to try to recoup “hundreds of millions of dollars” in losses they incurred in the fraud.
HSBC in December was sued by a group of 650 mainly private German investors in Luxembourg seeking compensation for losses they suffered through Herald (Lux) US Absolute Return Fund, which placed assets with Madoff. That suit seeks about 25 million euros ($36.6 million) in damages.
Thema and another fund, AA (Alternative Advantage) Plc, sued HSBC in January 2009 in Dublin’s High Court.
HSBC is facing about 50 investor complaints in Ireland for allegedly failing in its duties as custodian for Thema, a European-Union regulated fund, and AA (Alternative Advantage) Plc. Both funds suspended redemptions after Madoff’s fraud was uncovered. Custodians are responsible for oversight of funds, and manage deposits and payments to investors.
Dublin Court
A court in Dublin in January ordered HSBC to disclose a report on the status of the Thema fund without ruling on whether HSBC had made the necessary data available. Almost all of the funds invested in Thema “are currently lost, apparently as a result of the fallout from the collapse of the Madoff empire,” Judge Frank Clarke said in the Jan. 10 order in a case filed by French investor Aforge Finance SAS, which lost about 54 million euros in Thema.
HSBC’s Luxembourg unit was also custodian for the Herald (Lux) fund, which had assets of $225.7 million as of Oct. 31, 2008, according to Bloomberg data. The fund was forced to dissolve because of Madoff-related losses.
The Luxembourg-based liquidators of the Herald Lux fund are suing HSBC for the return of lost assets. Luxembourg’s financial market regulator in November 2009 ordered HSBC Securities Services in Luxembourg to review its internal rules related to its role as custodian bank of local mutual funds.
Luxembourg Liquidators
In Luxembourg, the liquidators may be the only possibility for Herald (Lux) investors to recoup some of their lost money after a March 4 ruling by a commercial court that liquidators alone can recover capital assets.
Documents from Madoff’s company show the value of HSBC- serviced funds as of Nov. 30, 2008, was about $8.4 billion, including fake profit from Madoff’s Ponzi scheme, according to HSBC’s statement. The funds’ actual transfers to Madoff’s firm minus their actual withdrawals during the period HSBC acted as custodian, totaled about $4.3 billion, it said.
The settlement provides for a $10 million litigation fund that will allow investors to try to recover money from defendants that haven’t settled, said Thema Fund’s law firm in the statement.
Monday, 6 June 2011
Treasures of alleged Ponzi schemer Stanford auctioned
While Texas financier Allen Stanford awaits trial on charges of running a $7 billion Ponzi scheme, hordes of buyers waited on Saturday at a sweltering warehouse for an auction of his possessions.
People lined up around the northeast Houston warehouse for a chance to bid on items like a $55,000 Baccarat crystal eagle -- a symbol prominent in Stanford's company logo -- and an arsenal of guns and rifles, including 30 Glock semi-automatic pistols still in their original packaging.
"I got pretty excited over the wine," said Eric Worstell, one of three brothers who make up the third generation of auctioneers in the 57-year-old Seth Worstell Auction Company which won a bid to liquidate Stanford's property.
More than 1,000 bottles of wine, champagne and other spirits were part of the treasure trove of items on the auction block that included art, antiques, silver, crystal, and china, much of which appeared unused.
Worstell said the company expected to collect at least $250,000 in the six-hour auction, which included a Chevrolet Suburban and a Ford Taurus. After the auction house gets its cut, the balance will go to a court-appointed receiver.
Stanford was arrested in June 2009 and charged with mail and wire fraud in connection with a $7 billion scheme linked to certificates of deposit issued by his Antigua-based banking company.
Authorities have said the one-time billionaire used proceeds in part to fund other ventures and a lavish lifestyle that included several yachts and private jets, and homes around the world, most of which have been liquidated by the receiver.
Stanford, 61, has denied any wrongdoing and remains incarcerated without bail in a federal detention facility.
Artwork at the auction house varied widely in value, from a bronze sculpture to posters with motivational messages about pride and attitude.
A pallet of 34 laptop bags were heaped on a table across from marble-based lamps, Chinese dragons and two-foot-tall cut-glass vases.
Coffee mugs with the company logo were boxed up near five tables of embossed leather books, including a 134-volume set of Civil War records, medical and legal texts, and novels by William Faulkner and Jules Verne.
The gun collection appeared to be a big draw for many who paid the $100 registration fee, including engineer Isaac Fox.
"I've never been to an auction before, so I was kind of curious," he said. "This one has a little notoriety about it."
Fox's friend, Brent Aronson, was also interested in the guns, but was eyeing the piles of computer equipment -- much of it still in the box -- and a chair for his wife.
Trina Fowlkes, who works in the financial industry, said she showed up mostly for the spectacle, but was not greatly impressed.
"He supposedly had so many fabulous things, but this is mostly office furniture," Fowlkes said. "If we don't pass out from the heat, we'll stick around."
An assortment of burled and carved wood antique furniture stood side-by-side with office cubicle components in the 20,000-square-foot warehouse where industrial fans provided the only relief from temperatures in the mid-90s.
IT coordinator Steve Shapiro said he came out to look for a bargain to add to his crystal collection, but the Stanford connection offered no extra cachet.
"I'm certainly not paying any more than its actual value just because it was his," Shapiro said. "If it had belonged to Jackie Kennedy Onassis maybe."
People lined up around the northeast Houston warehouse for a chance to bid on items like a $55,000 Baccarat crystal eagle -- a symbol prominent in Stanford's company logo -- and an arsenal of guns and rifles, including 30 Glock semi-automatic pistols still in their original packaging.
"I got pretty excited over the wine," said Eric Worstell, one of three brothers who make up the third generation of auctioneers in the 57-year-old Seth Worstell Auction Company which won a bid to liquidate Stanford's property.
More than 1,000 bottles of wine, champagne and other spirits were part of the treasure trove of items on the auction block that included art, antiques, silver, crystal, and china, much of which appeared unused.
Worstell said the company expected to collect at least $250,000 in the six-hour auction, which included a Chevrolet Suburban and a Ford Taurus. After the auction house gets its cut, the balance will go to a court-appointed receiver.
Stanford was arrested in June 2009 and charged with mail and wire fraud in connection with a $7 billion scheme linked to certificates of deposit issued by his Antigua-based banking company.
Authorities have said the one-time billionaire used proceeds in part to fund other ventures and a lavish lifestyle that included several yachts and private jets, and homes around the world, most of which have been liquidated by the receiver.
Stanford, 61, has denied any wrongdoing and remains incarcerated without bail in a federal detention facility.
Artwork at the auction house varied widely in value, from a bronze sculpture to posters with motivational messages about pride and attitude.
A pallet of 34 laptop bags were heaped on a table across from marble-based lamps, Chinese dragons and two-foot-tall cut-glass vases.
Coffee mugs with the company logo were boxed up near five tables of embossed leather books, including a 134-volume set of Civil War records, medical and legal texts, and novels by William Faulkner and Jules Verne.
The gun collection appeared to be a big draw for many who paid the $100 registration fee, including engineer Isaac Fox.
"I've never been to an auction before, so I was kind of curious," he said. "This one has a little notoriety about it."
Fox's friend, Brent Aronson, was also interested in the guns, but was eyeing the piles of computer equipment -- much of it still in the box -- and a chair for his wife.
Trina Fowlkes, who works in the financial industry, said she showed up mostly for the spectacle, but was not greatly impressed.
"He supposedly had so many fabulous things, but this is mostly office furniture," Fowlkes said. "If we don't pass out from the heat, we'll stick around."
An assortment of burled and carved wood antique furniture stood side-by-side with office cubicle components in the 20,000-square-foot warehouse where industrial fans provided the only relief from temperatures in the mid-90s.
IT coordinator Steve Shapiro said he came out to look for a bargain to add to his crystal collection, but the Stanford connection offered no extra cachet.
"I'm certainly not paying any more than its actual value just because it was his," Shapiro said. "If it had belonged to Jackie Kennedy Onassis maybe."
Friday, 27 May 2011
Allen Stanford Investors Sue His Accounting Firm
Nearly two years after Texas financier Allen Stanford was indicted in an alleged massive Ponzi scheme, investors have just filed a $10 billion proposed class action suit against his auditor—the giant accounting firm BDO.
The suit—filed Thursday in federal court in Dallas—says BDO did not only aid and abet the $7 billion dollar fraud...it was a "co-conspirator."
“BDO’s cozy relationship with the Stanford Financial Group was steeped in conflicts of interest and required ongoing deceptive and duplicitous manipulation of the facts to allow the Ponzi scheme’s exponential growth for over a decade,” the complaint says. “The result of this deception is the loss of thousands of investors’ life savings.”
BDO not only audited Stanford's U.S. operations, it also did critical work in Antigua, where the alleged fraud was based.
Before his indictment in 2009, Stanford told CNBC about a task force he put together—including a "major accounting firm" to rewrite Antigua's banking laws.
“Back in the early '90s, I was asked by the then-government if I would put together a civilian team of professionals, which I got,” Stanford said. “Ex-FBI, ex-DEA, an ex-U.S. Attorney…a major accounting firm and others to come up with a strong, if not the strongest platform for international banking.”
Authorities and investors say that platform paved the way for the fraud. Stanford has denied wrongdoing. He faces a trial currently scheduled for September 12 on 14 criminal counts.
BDO has not had a chance to respond to the suit, but for months it has been fighting a civil subpoena for documents filed by the court-appointed receiver in the SEC’s lawsuit against Stanford.
In a court filing in April, BDO attorneys said the firm "has no clue as to what it may have done wrong." The filing called the subpoena “a fishing expedition.”
Stanford's 30-thousand investors have so far recovered just pennies on the dollar.
“BDO’s cozy relationship with the Stanford Financial Group was steeped in conflicts of interest and required ongoing deceptive and duplicitous manipulation of the facts to allow the Ponzi scheme’s exponential growth for over a decade,” the complaint says. “The result of this deception is the loss of thousands of investors’ life savings.”
BDO not only audited Stanford's U.S. operations, it also did critical work in Antigua, where the alleged fraud was based.
Before his indictment in 2009, Stanford told CNBC about a task force he put together—including a "major accounting firm" to rewrite Antigua's banking laws.
“Back in the early '90s, I was asked by the then-government if I would put together a civilian team of professionals, which I got,” Stanford said. “Ex-FBI, ex-DEA, an ex-U.S. Attorney…a major accounting firm and others to come up with a strong, if not the strongest platform for international banking.”
Authorities and investors say that platform paved the way for the fraud. Stanford has denied wrongdoing. He faces a trial currently scheduled for September 12 on 14 criminal counts.
BDO has not had a chance to respond to the suit, but for months it has been fighting a civil subpoena for documents filed by the court-appointed receiver in the SEC’s lawsuit against Stanford.
In a court filing in April, BDO attorneys said the firm "has no clue as to what it may have done wrong." The filing called the subpoena “a fishing expedition.”
Stanford's 30-thousand investors have so far recovered just pennies on the dollar.
Stanford Investors Sue Former Auditor BDO US for $10.7 Billion Over Fraud
BDO USA LLP and its parent, the ex- auditors of indicted financier R. Allen Stanford’s former company, were sued for $10.7 billion by investors claiming BDO ignored signs of potential fraud.
“Despite the pervasive fraud that infected Stanford Financial Group’s operations, BDO repeatedly issued unqualified audit opinions on its Stanford client’s annual financial statements,” Edward Snyder, a lawyer for Stanford investors, said in a complaint filed yesterday in federal court in Dallas.
Stanford’s companies “needed BDO’s unqualified audit opinions to satisfy securities regulators and to continue recommending” sales of the allegedly bogus certificates of deposit at Stanford International Bank Ltd. in Antigua, the investors said in the complaint.
U.S. Securities and Exchange Commission regulators seized Stanford’s operations in February 2009 on allegations they were involved in a “massive Ponzi scheme” that defrauded investors of more than $7 billion.
“We have yet to be served with the complaint and therefore are unable to comment at this time,” Jerry Walsh, a spokesman for BDO, said in an e-mail. “However, the fact that this complaint was not filed until now -- years after the Stanford fraud came to light and after many other investor complaints were filed -- reflects a transparent understanding that the allegations lack merit.”
Criminal Charges
Stanford, 61, has been incarcerated since June 2009 as a flight risk after he was indicted on parallel criminal fraud charges. He denies the charges and is scheduled for trial in federal court in Houston in September.
In addition to claims that auditors intentionally concealed fraudulent activity, the investors also contend four BDO executives played key roles in a Stanford-sponsored task force that assisted the Antiguan banking authorities in overhauling their banking regulations in the late 1990s, allegedly weakening them in ways that aided Stanford.
The Stanford task force rewrote Antigua’s money-laundering act “to ensure that ‘fraud’ and ‘false accounting’ did not fall under the Act’s prescribed list of violations,” the investors said. After the laws were rewritten in April 1999, the U.S. Treasury Department issued an advisory warning banks to give Antiguan financial transactions “enhanced scrutiny” because of money-laundering concerns, according to the complaint.
‘Speculative Investments’
The investors also accuse BDO auditors of ignoring signs Stanford’s company was operating as an unregistered hedge fund “illegally disguising itself as a bank.” They claim investors were sold hedge fund shares “disguised as CDs,” and that clients’ cash was pooled by Stanford’s company to make “illiquid, speculative investments” instead of the safe, liquid portfolio promised to clients.
“BDO’s cozy relationship with the Stanford Financial Group was steeped in conflicts of interest and required ongoing deception and duplicitous manipulation of the facts to enable the Ponzi scheme to grow exponentially for over a decade,” investors said in the complaint. “The result is the loss of thousands of investors’ life savings.”
The complaint, which seeks to represent all Stanford investors, was filed on behalf of three Texans who lost more than $3.2 million on certificates of deposit issued by Stanford’s Antiguan bank. They seek $10.7 billion in damages from BDO, which is what they calculate Stanford investors worldwide collectively lost on the Antiguan CDs.
The case is Wilkinson v. BDO USA LLP, 3:11-cv-1115, U.S. District Court, Northern District of Texas (Dallas).
“Despite the pervasive fraud that infected Stanford Financial Group’s operations, BDO repeatedly issued unqualified audit opinions on its Stanford client’s annual financial statements,” Edward Snyder, a lawyer for Stanford investors, said in a complaint filed yesterday in federal court in Dallas.
Stanford’s companies “needed BDO’s unqualified audit opinions to satisfy securities regulators and to continue recommending” sales of the allegedly bogus certificates of deposit at Stanford International Bank Ltd. in Antigua, the investors said in the complaint.
U.S. Securities and Exchange Commission regulators seized Stanford’s operations in February 2009 on allegations they were involved in a “massive Ponzi scheme” that defrauded investors of more than $7 billion.
“We have yet to be served with the complaint and therefore are unable to comment at this time,” Jerry Walsh, a spokesman for BDO, said in an e-mail. “However, the fact that this complaint was not filed until now -- years after the Stanford fraud came to light and after many other investor complaints were filed -- reflects a transparent understanding that the allegations lack merit.”
Criminal Charges
Stanford, 61, has been incarcerated since June 2009 as a flight risk after he was indicted on parallel criminal fraud charges. He denies the charges and is scheduled for trial in federal court in Houston in September.
In addition to claims that auditors intentionally concealed fraudulent activity, the investors also contend four BDO executives played key roles in a Stanford-sponsored task force that assisted the Antiguan banking authorities in overhauling their banking regulations in the late 1990s, allegedly weakening them in ways that aided Stanford.
The Stanford task force rewrote Antigua’s money-laundering act “to ensure that ‘fraud’ and ‘false accounting’ did not fall under the Act’s prescribed list of violations,” the investors said. After the laws were rewritten in April 1999, the U.S. Treasury Department issued an advisory warning banks to give Antiguan financial transactions “enhanced scrutiny” because of money-laundering concerns, according to the complaint.
‘Speculative Investments’
The investors also accuse BDO auditors of ignoring signs Stanford’s company was operating as an unregistered hedge fund “illegally disguising itself as a bank.” They claim investors were sold hedge fund shares “disguised as CDs,” and that clients’ cash was pooled by Stanford’s company to make “illiquid, speculative investments” instead of the safe, liquid portfolio promised to clients.
“BDO’s cozy relationship with the Stanford Financial Group was steeped in conflicts of interest and required ongoing deception and duplicitous manipulation of the facts to enable the Ponzi scheme to grow exponentially for over a decade,” investors said in the complaint. “The result is the loss of thousands of investors’ life savings.”
The complaint, which seeks to represent all Stanford investors, was filed on behalf of three Texans who lost more than $3.2 million on certificates of deposit issued by Stanford’s Antiguan bank. They seek $10.7 billion in damages from BDO, which is what they calculate Stanford investors worldwide collectively lost on the Antiguan CDs.
The case is Wilkinson v. BDO USA LLP, 3:11-cv-1115, U.S. District Court, Northern District of Texas (Dallas).
Tuesday, 17 May 2011
Lawmakers rebuff pleas to return funds from alleged Ponzi schemer
While Allen Stanford was flying high, he and his colleagues spent more than $10 million on campaign contributions and lobbying payments to curry favor in Washington. But all that money was diverted from investors in what authorities have called an elaborate Ponzi scheme, second only to Bernard Madoff’s in U.S. history, according to court documents.
Since Stanford’s arrest in 2009, a court-appointed receiver for the Houston-based Stanford Financial Group has been struggling to reclaim investor funds paid out to in-house and contract lobbyists, financial advisers and others whose services may have helped enable the scheme.
The receiver, Dallas lawyer Ralph S. Janvey, has been able to recover only about 5 percent of the political contributions he has targeted. Four of the principal national Republican and Democratic fundraising committees took in $1.6 million in Stanford donations, but they are vigorously fighting demands that they return it
At least 50 members of the House and Senate have either ignored restitution demands or donated some of Stanford’s campaign contributions to charity instead, according to the receiver and a survey by The Washington Post. Included are House Majority Leader Eric Cantor (R-Va.); Senate Rules Committee Chairman Charles E. Schumer (D-N.Y.); Sen. Bill Nelson (D-Fla.), who chairs a Finance Committee subcommittee; and Sen. John Cornyn (R-Tex.), a member of the Judiciary Committee.
After questioning by The Post, a few of the lawmakers say they are having second thoughts. “We’re prepared to send the money back if they’re prepared to send us a release,” a spokesman for Cantor’s fundraising committee said.
“A check will be cut shortly,” Nelson’s spokesman said, explaining that the senator earlier donated matching funds to charity in keeping with his practice for “individuals who run afoul of the law.”
Kevin M. Sadler, an Austin-based lawyer who speaks for Janvey, said no one in Washington has argued that Stanford, who is in federal custody while awaiting trial, is innocent. Instead, they have challenged the receiver’s legal standing or argued that he waited too long to litigate. “Such indifference to the victims of a massive fraud scheme is difficult to understand,” Sadler said.
Thus far, Janvey has filed 45 lawsuits as part of his global scramble to recover a fraction of the more than $7 billion that prosecutors allege Stanford stole from investors in 114 countries. His authority has been upheld twice in federal civil court, where an appellate panel affirmed last December that there was considerable evidence that “the Stanford enterprise operated as a Ponzi scheme.” It cited in particular the August 2009 guilty plea of Stanford aide James Davis, who said the firm had routinely reported false returns and used new income to pay client debts.
Noting this confession, Janvey forged a legal strategy that includes pursuing payments to lobbyists and advisers, arguing that the money represented fraudulent transfers and therefore is eligible for seizure.
Since Stanford’s arrest in 2009, a court-appointed receiver for the Houston-based Stanford Financial Group has been struggling to reclaim investor funds paid out to in-house and contract lobbyists, financial advisers and others whose services may have helped enable the scheme.
The receiver, Dallas lawyer Ralph S. Janvey, has been able to recover only about 5 percent of the political contributions he has targeted. Four of the principal national Republican and Democratic fundraising committees took in $1.6 million in Stanford donations, but they are vigorously fighting demands that they return it
At least 50 members of the House and Senate have either ignored restitution demands or donated some of Stanford’s campaign contributions to charity instead, according to the receiver and a survey by The Washington Post. Included are House Majority Leader Eric Cantor (R-Va.); Senate Rules Committee Chairman Charles E. Schumer (D-N.Y.); Sen. Bill Nelson (D-Fla.), who chairs a Finance Committee subcommittee; and Sen. John Cornyn (R-Tex.), a member of the Judiciary Committee.
After questioning by The Post, a few of the lawmakers say they are having second thoughts. “We’re prepared to send the money back if they’re prepared to send us a release,” a spokesman for Cantor’s fundraising committee said.
“A check will be cut shortly,” Nelson’s spokesman said, explaining that the senator earlier donated matching funds to charity in keeping with his practice for “individuals who run afoul of the law.”
Kevin M. Sadler, an Austin-based lawyer who speaks for Janvey, said no one in Washington has argued that Stanford, who is in federal custody while awaiting trial, is innocent. Instead, they have challenged the receiver’s legal standing or argued that he waited too long to litigate. “Such indifference to the victims of a massive fraud scheme is difficult to understand,” Sadler said.
Thus far, Janvey has filed 45 lawsuits as part of his global scramble to recover a fraction of the more than $7 billion that prosecutors allege Stanford stole from investors in 114 countries. His authority has been upheld twice in federal civil court, where an appellate panel affirmed last December that there was considerable evidence that “the Stanford enterprise operated as a Ponzi scheme.” It cited in particular the August 2009 guilty plea of Stanford aide James Davis, who said the firm had routinely reported false returns and used new income to pay client debts.
Noting this confession, Janvey forged a legal strategy that includes pursuing payments to lobbyists and advisers, arguing that the money represented fraudulent transfers and therefore is eligible for seizure.