Senator Vitter's Letter to Sharon Bowen

Senator Vitter's Letter to Sharon Bowen

 
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U.S. Senator sets hurdle for CFTC hopeful Bowen

(Reuters) - A U.S. senator questioned a candidate for the Commodity Futures Trading Commission over a decision that left victims of the Allen Stanford fraud out of pocket, raising a hurdle she must jump to get the job.

 In a letter on Friday, Louisiana Republican David Vitter asked Sharon Bowen - who has been nominated by President Barack Obama to join the derivatives regulator - a series of 10 questions about her role in the decision.

 Bowen is the acting head of the Securities Investor Protection Corporation (SIPC), the body that seeks to recoup money for investors if their broker goes under.

 SIPC holds there is no basis in law to refund people who lost money in the $7 billion Ponzi scheme set up by Allen Stanford, who is serving a 110-year jail sentence.

 The Securities and Exchange Commission (SEC) lost a court case in which it contested that decision, though an appeal in the case is still pending. A group of 14 senators and fraud victims are supporting the SEC's legal fight.

 "It seems that SIPC continues to prioritize protecting its Wall Street members by hiring lawyers to fight the SEC in court rather than protect investors," Vitter said in his letter.

 SIPC, created under the Securities Investor Protection Act (SIPA), is funded by Wall Street firms.

 Vitter also asked whether SIPC had received any outside funding for its legal defense, whether its decision had been influenced by the banks, and wanted to know whether Bowen had received any gifts while at SIPC.

 Bowen and two other nominees to the five-strong CFTC met little pushback in a Senate committee at a confirmation hearing on March 6, but it is no surprise that the Stanford scandal is coming to haunt Bowen. Thad Cochran, the highest-ranking Republican on the Committee, mentioned the scandal during the meeting, though he did not pursue the issue.

 The agency - down to just two Commissioners, one Democrat and one Republican - is facing a leadership vacuum just as it is implementing some of the most fundamental reforms of financial markets after the 2007-09 credit meltdown.

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

U.S. lawmakers seek fix to help investors file claims against brokers

Nov 20 (Reuters) - A bipartisan group of U.S. House and Senate members is seeking to make it easier for investment fraud victims to seek compensation, after investors in Allen Stanford's Ponzi scheme were deemed ineligible under current law to file claims.

The bill, introduced by Louisiana Republican Senator David Vitter, New York Democratic Senator Charles Schumer, New Jersey Republican Rep. Scott Garrett and New York Democratic Rep. Carolyn Maloney, would bestow U.S. securities regulators with greater powers to oversee the process of determining whether customers of failed brokerages qualify for compensation.

The legislative proposal comes as the Securities and Exchange Commission awaits a crucial decision from a U.S. appeals court over the fate of the Stanford victims.

The SEC is trying to get the court to force an industry-backed fund that protects investors to start court proceedings so Stanford victims can file claims to recover a least a portion of the millions they lost.

The Securities Investor Protection Corp., or SIPC, which administers the fund, has refused the SEC's request, saying Stanford investors do not meet the legal definition of "customer" under the federal law designed to protect investors if their brokerage collapses.

SIPC uses funds paid by the brokerage industry to compensate investors in the event of a bankruptcy, such as the one that occurred at Lehman Brothers in 2008.

 Allen Stanford was sentenced in 2012 to 110 years in prison for bilking investors with fraudulent certificates of deposit issued by Stanford International Bank, his bank in Antigua.

Many of the investors who purchased the products, however, did so through his Houston, Texas-based brokerage, Stanford Group Co.

SIPC argues that investors in the scheme entrusted their money to the offshore, unregulated Antiguan bank and not to the U.S. broker-dealer. Moreover, it says that Stanford's investors actually did receive their certificates of deposit, as promised, even though they turned out to be virtually worthless.

A federal district judge agreed with SIPC's legal position in July 2012, and tossed out the SEC's lawsuit.

The SEC appealed the ruling before the U.S. Court of Appeals for the District of Columbia in October, and is awaiting a decision.

 SIPC's refusal to let Stanford victims file claims has frustrated many lawmakers on Capitol Hill, including Vitter, who has been among the most vocal in fighting for the Stanford victims.

"The Stanford Ponzi scheme devastated many Louisiana families who invested their hard-earned savings in good faith that it would be there for them when they retire," Vitter said in a statement issued on Wednesday.

"Our bill will fix a key problem we've seen with the system, which currently allows SIPC's Wall Street members to benefit economically from the SIPC guarantee while denying the claims of legitimate victims," he added.

The legislative proposal by the four lawmakers will be vetted in a hearing before a subcommittee of the House Financial Services Committee on Thursday.

Among the witnesses scheduled to testify are Stephen Harbeck, the president of SIPC, a representative from Wall Street's leading brokerage trade group, and Angie Kogutt, a Stanford victim in charge of the Stanford Victims Coalition.

The 19-page bill would amend the definition of "customer" to ensure that investors who deposit cash to buy securities can still be covered by SIPC protection, even if the money is initially given to a firm that is not a SIPC member.

 It would also give the SEC more authority to force SIPC to act without the need for court approval.  

Read More: http://sivg.org.ag/topic235.html  

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Louisiana officials want release of SEC report in Stanford case

A Louisiana senator told officials of the Securities and Exchange Commission Friday that he wants immediate release of a year-old report by the commission's inspector general on efforts to recover money for victims of a multibillion-dollar fraud. 

U.S. Sen. David Vitter, R-La., described as incompetent efforts by a court-appointed receiver to find and distribute assets of convicted con man Robert Allen Stanford. 

Stanford, 63, of Houston, is serving a 110-year prison sentence for a fraud conviction that followed estimated worldwide losses of approximately $7 billion. About $1 billion of those losses were from about 1,000 investors in the Baton Rouge, Lafayette and Covington areas, according to estimates by state Sen. Bodi White, R-Central, and Baton Rouge attorney Phillip W. Preis.

 "The fraud caused an absolute tragedy for many Louisiana families who invested their hard-earned retirement savings in good faith that it would be there for them when they retired,"

Vitter said Friday in a letter to Mary Jo White, who chairs the SEC. Vitter said the receiver in the case, Dallas attorney Ralph Janvey, spent $100 million to collect $55 million for Stanford's victims.

 "In the best light, Janvey's actions can only be seen as incompetent," Vitter told White in that letter. He urged White to release the SEC inspector general's report on Janvey, noting that it was completed in March 2012.

 There are more than 20,000 Stanford victims across more than 100 countries.

 A retired Zachary couple, Louis and Kathy Mier, saw $240,000 of their savings stolen by Stanford's fraudulent scheme.

 "Whatever any of our congressmen do to shed light on the truth of what happened, and whatever they can do to help us get our money back and be whole again, would make Louis and me very, very happy," Kathy Mier said Friday.

 John J. Nester, a spokesman for the SEC, said in an email Friday that neither he nor other SEC officials would comment on Vitter's request before White issues a response to the senator's letter.

 U.S. Sen. Mary Landrieu, D-La., released a statement through her staff: "The Stanford victims deserve answers, and the immediate release of the IG's report is the very least the SEC can do."

 U.S. Rep. Bill Cassidy, R.-Baton Rouge, said through his staff: "I strongly urge the SEC … to release the full results of the inspector general's report. The victims of this crime were hard working Louisiana families, and they are entitled to see the details of the report."

 Vitter noted that Janvey, against the SEC's wishes, unsuccessfully sued some Stanford victims in an effort to seize money those victims retrieved before Stanford's operations were shut down in February 2009.

 "Given the demonstrated incompetence of the court-appointed receiver, it makes you wonder how bad this (inspector general's) report gets," Vitter added. "The Stanford victims deserve to see."

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The Stanford International Victims Group Forum

Antiguan Liquidators letter to Senators re Senate Resolution 436

The Honorable David Vitter
SH-516
United States Senate
Washington, DC 20510

The Honorable Richard C. Shelby
SR -304
United States Senate
Washington, DC 20510

The Honorable Thad Cochran
SD-113
United States Senate
Washington, DC 20510

The Honorable Roger Wicker
SD-555
United States Senate
Washington, DC 20510

12 December, 2011

Dear Sirs,
Re: Senate Resolution 346
Re: Stanford International Bank Limited in Liquidation

I am writing in response to your recent introduction of Senate Resolution 346 which takes exception to certain alleged actions by the Government of Antigua and Barbuda (GoAB) related to the fraud perpetrated by Robert Allen Stanford and by implication the process for the liquidation of Stanford International Bank Limited (SIBL). I believe it is important to correct and/or clarify a number of assertions contained in the resolution as they relate to the activities of the Joint Liquidators of SIBL.

By way of background, Hugh Dickson and I, from the international firm of Grant Thornton, were appointed Joint Liquidators of Stanford International Bank Limited (SIBL) by the High Court of Antigua (Court), part of the Eastern Caribbean Court Circuit based in St Lucia. The final court of appeal from the High Court of Antigua is to the Law Lords of the British Privy Council. Mr. Dickson and I are experienced Liquidators with collectively sixty years of work in the field. Our appointment resulted from an application to Court by a group of victims not the GoAB or its agencies.

We note that S Res 346 seems not to draw a distinction between the Court ordered liquidation (bankruptcy) of SIBL in Antigua, and the GoAB itself. As Court officers we are independent of the GoAB, do not report to the GoAB, do not take direction from the GoAB, and, if necessary, we will be adverse to the GoAB and any of its agencies. Finally any funds we recover cannot be accessed by GoAB. That we are in some way associated with or an Agent of GoAB is a falsehood perpetuated by certain parties in the US.

Our appointment arises from the International Business Corporations Act (IBCA) of Antigua, under which the bank was incorporated. This contains a statutory obligation to gather in the assets of SIBL, and distribute them to its creditors under a process set out in the IBCA and the 1986 English Insolvency Rules. In short, our mission is to recover an estimated $4.5 billion in losses stemming from the fraud perpetrated by Allen Stanford and return the money to all 21,000 creditors/victims (of which around 16% by depositor number and 22% by value are American) in the shortest time possible.

We are guided by an uncompensated Creditors Committee composed of victims who are not allowed to profit from the Liquidation. We have held two web-based creditor meetings. The first meeting resulted in over three thousand creditor emails expressing their concerns, and what they would like to see happen to maximise their recovery. The second meeting results are still coming in. We intend to do this regularly. As far as we know, we are the first to engage the creditors/victims directly to ask what they want.

The Receiver has reported to the US court that he has ceased any proceeding outside the US. We believe that there are substantial recoveries available in a number of international jurisdictions. We are vigorously pursuing these for the benefit of the creditor/victims.

With this background in mind we are concerned that SR. 346 is in part based on a misunderstanding of the facts.

Firstly the GoAB does not have control of any of the SIBL lands. These are in our possession. We are devising a strategy, with expert advice, to maximise value for the creditor/victims.

An equity receiver, such as Mr. Janvey (Receiver) appointed at the request of the US Securities and Exchange Commission (SEC) has significant limitations to his authority. Our only intent is to provide a solution to some of these limitations through the exercise of remedies not available to the Receiver but available to us through Chapter 15. This will increase total recoveries to victims. We have stated our intent often and to confirm it we drafted and delivered a detailed proposal for cooperation to the Receiver. This proposal was rejected out of hand. Any standing granted will be subject to control by the US Court. To be clear we are not seeking to intervene in anyway with the plethora of entities over which the Receiver has control except for this limited purpose in SIBL under the control of the US Court.

Receiver was not recognised in Antigua largely as a consequence of these limitations in authority. However we are advised by our own legal counsel that the Receiver was, and is, entitled to appear in any proceeding in Antigua with respect to SIBL. We have no objection to him doing so as confirmed in the draft cooperation proposal he rejected. The Receiver has terminated his legal counsel in Antigua and presumably chosen not to appear.

There is criticism of us for not attempting to collect sums allegedly due from the GoAB. SIBL’s records fail to provide evidence that SIBL advanced money to GoAB, as confirmed by sworn reports of the Receiver and his forensic expert filed in Dallas last week. In this the loans referred to appear to have been advanced to GoAB through other entities, mostly under the Receiver’s control. He has not advanced those claims to date.

The process under which the Department of Justice (DoJ) seeks to “repatriate” assets to the US does not in our view allow these funds to be equitably, quickly and cheaply distributed to victims. On the contrary had these funds been allowed to flow into the Liquidation at the outset, a large distribution to creditor/victims could already have taken place. We have met with officials of the Asset Forfeiture and Money Laundering Section (AFMLS) at DoJ and we have also met with officials of the SEC, to try to find a mechanism to work together to achieve the common goal of maximising recoveries for the victims. We intend to continue these dialogues.

We have provided documents to the DoJ to assist them in the prosecution of Mr. Stanford and will continue to assist them where we can.

We are also trying to co-ordinate the claims process in both jurisdictions so that only one claim need be filed with a single pool from which victims’ claims are paid, overseen by both the US and Antiguan Court. If we are successful, this will significantly mitigate costs.

We are investigating the issue of Bank of Antigua (BoA)and its expropriation by the Eastern Caribbean Central Bank (ECCB), the Central Bank for all nine Eastern Caribbean countries. There is an independent valuation report by Ernst & Young, which indicates the shares BoA, a domestic bank serving Antiguans, had negative value, and that a bailout, with an injection of capital by ECCB was required to protect innocent depositors.

We cannot comment on other issues raised in S Res 346 outside the Liquidation of SIBL.

In summary, we have put significant effort into our attempts to co-ordinate our work with that of the US DoJ, SEC and the Receiver, in order to maximize the total return to the creditor/victims in a manner consistent with our statutory obligations, the direction of Antiguan High Court, and with respect to any standing granted in the US, the US Court. We are deeply concerned that language such as that proposed in your resolution may inadvertently be detrimental to this process.

To this end we would welcome a meeting with you to expand on our comments so you can determine your position on the matter based on all the facts.


Yours truly

Marcus A. Wide, Joint Liquidator
For the Joint Liquidators of Stanford International Bank Limited

Copies. Department of Justice
Securities and Exchange Commission

SIPC Rebuffs Stanford Investors Demands to Cover Losses

The agency that insures U.S. brokerage accounts has again rebuffed demands it provide coverage to investors in Allen Stanford's alleged $7 billion Ponzi scheme, making it increasingly likely the issue is headed to court.

In a December 2 letter to members of Congress, obtained by CNBC, the head of the Securities Investor Protection Corporation (SIPC) says the organization has a "fundamental disagreement" with the Securities and Exchange Commission, which demanded in June that SIPC pay the investors or be sued.

Thousands of investors lost everything in the 2009 collapse of Stanford Financial Group, which the SEC alleges was a global Ponzi scheme involving bogus certificates of deposit.

In the letter to members of Congress, SIPC Chairman Orlan Johnson says providing the coverage would be "unprecedented," because the investors "chose to purchase CDs issued by an offshore bank in Antigua," which is not covered by SIPC.

The investors have countered that most of the CDs were purchased through Stanford's U.S. broker-dealer, a SIPC member.

In June, the SEC sided with the investors and threatened to sue SIPC to force the coverage, which provides as much as $500,000 per account.

SIPC promised to reconsider its position at its September board meeting, but instead has remained publicly silent on the issue.

In the letter to Congress, Johnson claims that privately, SIPC and the SEC have been working "in good faith" to resolve their disagreement.

Neither SIPC nor the SEC would comment on the discussions, which apparently are aimed at settlement to avert a lawsuit by offering a partial payout to investors.

Meantime, patience among the investors and members of Congress is wearing thin.

On Tuesday, Sen. David Vitter, Republican from Louisiana, urged SEC Chairwoman Mary Schapiro to make good on the threat to sue.

"This again is dragging on, six months after your positive, concrete action," Sen. David Vitter, told Schapiro at a Senate Banking Committee hearing.

"I think the SEC needs to take definite action again before the end of the year in a positive way, and I'm afraid that's going to mean suing SIPC," Vitter said.

"I share deeply your concern about this and that we not take longer than is absolutely necessary," said Schapiro in response. But she was non-committal about filing suit.

Schapiro said the SEC is working on "the best possible result for victims."

But the main group representing Stanford's 28,000 investors says they are entitled to full coverage, and in a letter to the SEC's general counsel this week, the Official Stanford Investors Committee echoed Vitter's call for the SEC to go through with the court action.

SIPC is essentially caught between the SEC and its own members--brokerage firms that would bear the cost of any payout while they are already compensating customers of Bernard Madoff and MF Global.

Wall Street's main trade group, the Securities Industry Financial Markets Association (SIFMA), has come out against coverage for Stanford investors. SIFMA argues SIPC coverage does not extend to fraud, but only guarantees the return of investors' cash and securities. In the case of Stanford, SIFMA contends, those securities are the certificates of deposit which are now worthless.

A SIFMA spokesperson would not comment on the possibility of a partial payout to investors.

The SEC sued Stanford and his companies in February 2009, putting them out of business. Stanford, 61, has denied wrongdoing.

Senate Resolution Seeks Sanctions Against Antigua

Caribarena
Monday, 12 December 2011 02:30 Colin Sampson

Antigua St John's - A group of United States senators has again asked the US Senate to recommend the imposition of economic and financial sanctions on Antigua & Barbuda.

The proposed sanctions are outlined in Senate Resolution No 346, placed before the Senate on December 8.

The full text of Senate Resolution 346 is appended below.

The resolution deals extensively with matters relating to actions taken by the Government of Antigua & Barbuda (GOAB) in response to the Allen Stanford debacle.

Resolution 346 describes Antigua & Barbuda as committing “numerous acts against the interest of US citizens,” violating “the order of the United States District Court for the Northern District of Texas,” and challenging “the authority of the (said) Court” as well as “the authority of the United States Department of Justice”.

The resolution accuses the GOAB of benefitting from Stanford International Bank (SIB) certificates of deposit to the tune of US$85M, and demands the return of the money. It also points to a March 2010 statement by the GOAB which shows that Antigua & Barbuda knew – or ought to have known – that SIB was operating outside accepted banking international standards.

In this connection, Resolution 346 accuses Antigua & Barbuda of harbouring former FSRC CEO Leroy King by failing to extradite him to the US to stand trial. The role played by former finance minister Dr Errol Cort, and his law firm, Cort & Cort, was not overlooked. The resolution alleges that over US$1M of Stanford investor funds found its way either to Cort or the firm.

Most striking, perhaps, is the specific mention of the expropriation by the GOAB of the Half Moon Bay resort property. This matter is prominently referred to in Resolution 346, and among the several remedies (acts of restitution and subordination) that the US Senate is asked to require from Antigua & Barbuda is a demand that Antigua & Barbuda fulfill its obligations regarding the expropriation.

The ultimate punch line of Resolution 346 is found in the final paragraph, which reads as follows:

“The Secretary of the Treasury should direct the United States Executive Directors of the International Bank for Reconstruction and Development and the International Development Association (commonly known as the “World Bank'') and the International Monetary Fund to use the voice and vote of the United States to ensure that any future loan made by the World Bank or the International Monetary Fund to the Government of Antigua and Barbuda is conditioned on providing complete redress of the matters, and satisfaction of the requirements, described under paragraph (1).”

The resolution was read into the Congressional Record and referred to the Senate Committee on Foreign Relations for further consideration before being returned to the floor of the Senate for possible action.

The Senate Committee on Foreign Relations is chaired by John Kerry (D) Massachusetts – no stranger to Antigua & Barbuda. However Richard Lugar (R) Indiana is Ranking Member (Leader of the Minority). Something of a Republican activist, Lugar is seen as likely to take the matter up by scheduling a hearing before the committee.

This is not the first time the United States Senate has been asked to adopt a resolution of this kind. In 2009, the Senate passed a comparable resolution, on that occasion sponsored by a group of seven senators led by Senator Richard Shelby (R) Alabama.

In 2010, Congressman Mike Coffman (R) Colorado introduced a similar measure into the House of Representatives. Coffman is expected to revive his own resolution in support of the latest action in the Senate.

The House Committee on Foreign Relations is chaired by Congresswoman Ileana Ross-Lehtinen (R) Florida. Ross-Lehtinen represents a state where many investors lost huge sums in the fall of the Stanford Empire. She has already indicated her willingness to hold hearings in the matter.

After hearings – most likely early in 2012 - the House and Senate committees may bring the matter to the floor of their respective chambers with a recommendation to proceed with a general vote.

Senate Resolution No 346 is sponsored by senators David Vitter (R) Louisiana, Thad Cochran (R) Mississippi, Roger Wicker (R) Mississippi, and Richard Shelby (R) Alabama. All these senators represent states where many citizens have been severely damaged by the collapse of the alleged Allen Stanford “Ponzi Scheme”.

Senator Vitter is a member of the Senate Committee on Banking and the Committee on Small Business & Entrepreneurship – among others.

Ranking Member (Leader of the Minority) on the powerful Senate Appropriations Committee, Cochran fulfills the same role on the Subcommittee on Defense, and serves on the Subcommittee on Homeland Security.
Senator Wicker is an active member of the Senate Committees on Banking, Commerce and Armed Services.

Possibly the most powerful of the resolution’s four co-sponsors, Senator Shelby is Leader of the Minority on the Senate Banking Committee. He also serves on several Subcommittees, including Economic Policy, Financial Institutions and International Trade & Finance.

SEC is urged to sue over Stanford victims' claims

Reuters
3:24 p.m. EST, December 6, 2011

A senator is calling on federal securities regulators to take legal action against a brokerage industry-backed fund for failing to cover claims for the victims of Allen Stanford's alleged Ponzi scheme.

Republican Senator David Vitter, a Senate Banking Committee member, said that the Securities and Exchange Commission needs to compel the Securities Investor Protection Corp to take action because victims have now been waiting since Stanford's arrest in 2009 for a resolution.

"Sue SIPC on behalf of the Stanford victims now," the Louisiana lawmaker said in a statement after discussing his concerns publicly during a congressional hearing.

Stanford, 61, was arrested in 2009 and faces a 14-count criminal indictment over an alleged $7 billion scheme linked to certificates of deposit issued by his Antigua-based bank. The SEC has also filed civil charges against him.

Investigators accused the one-time billionaire of using Ponzi scheme proceeds to fund other ventures and a lavish lifestyle that included several yachts, private jets, and homes around the world. Stanford has denied wrongdoing.

SIPC, which handles claims for investors if their brokerage fails, had previously said in 2009 that it did not believe Stanford victims who bought certificates of deposit through the U.S. brokerage arm of Stanford's company were eligible to receive compensation because the customers, rather than the brokerage, held custody of the CDs.

After two years of mulling it over, however the SEC rejected SIPC's argument in June and issued a statement that called on SIPC to institute a liquidation proceeding.

In that statement, the SEC said it would be forced to file a court action if SIPC did not comply.

SIPC's board met on September 15 to review the matter, but has still not taken any action and remains in talks with the SEC.

Spokespeople for the SEC and SIPC both declined to comment on Vitter's statement.

Securities industry's stance on Stanford case undermines investor confidence

By LOREN STEFFY, HOUSTON CHRONICLE
Updated 12:44 a.m., Saturday, December 3, 2011
Loren Steffy

R. Allen Stanford's investors didn't lose their money the right way.

That's the securities industry's quixotic stance on whether to grant insurance coverage for U.S. investors who claim they were fleeced by Stanford's brokerage business.

For almost three years, investors caught in the collapse of what regulators say was a $7 billion Ponzi scheme have awaited a decision by the Securities Investor Protection Corp. During that time, the Securities Industry and Financial Markets Association, which represents about 650 brokers nationwide, has been urging SIPC not to pay.

SIPC is an insurance fund backed by member brokerages, and while it isn't designed to cover investment losses, it is supposed to pay if a brokerage collapses from alleged fraud.

Yet the association has steadfastly opposed any payment for Stanford investors. When the Securities and Exchange Commission - after taking more than two years to make a decision - told SIPC this summer to pay up, association general counsel Ira Hammerman wrote to SIPC's board insisting that the SEC was wrong, in part because Stanford's investors shouldn't legally be considered customers.

Stanford brokers urged investors to buy certificates of deposit sold through Stanford's bank in Antigua, but in most cases, investors' money was sent directly to the bank, rather than being held by the brokerage. That, Hammerman argued, means that while investors were brokerage clients, they weren't customers under the narrow definition of the law that created SIPC.

If that sounds bizarre, think how it sounds to the 7,800 of Stanford's 20,000 investors who fall into this category.

The money that investors sent to the bank wasn't used to buy the CDs. Some of it was sent back to the brokerage to help pay compensation and referral fees for the brokers that Stanford was wooing away from other firms in hopes of drawing their clients into the alleged scheme, the SEC found.


At a snail's pace

Despite the SEC's instruction, SIPC dragged its feet. Its board dawdled for three months before even considering the issue, and even then it failed to make a decision. That was in late September.

Although the SEC has the authority to sue SIPC to force it to comply, it hasn't done so yet. Recently, 18 members of Congress - including Rep. John Culberson and Rep. Michael McCaul, both Republicans who represent the Houston area - sent SIPC's chairman a letter threatening congressional hearings if the board doesn't decide by Dec. 15.

That, by the way, is less than a week before Stanford himself is to appear before a federal judge to determine if he's competent to stand trial in January.

Meanwhile, Sen. David Vitter, R-La., has been working with SIPC and the SEC to resolve the coverage issue. His press secretary, Luke Bolar, said Friday that SIPC is expected to make a settlement offer to the SEC this week.

Vitter, however, doesn't know what the offer will entail or how it might affect Stanford investors.

Making a mockery of it

While SIPC was never designed to be a blanket insurance policy against fraud, the handling of coverage in the Stanford case has made a mockery of the entire process. After all, SIPC paid investors for losses in Bernard Madoff's fraud case, and it has rushed in to assume losses in the bankruptcy of the commodities firm MF Global.

As Hammerman himself noted last year, the law's "fundamental purpose is to promote investor confidence in the U.S. capital markets by protecting customers against the loss of cash or securities resulting from the failure of the broker-dealer holding such property."

The industry's legal hair-splitting doesn't instill much confidence in the investing public.

While it is true Stanford's brokerage wasn't actually holding clients' funds or securities when it failed, it appears its brokers used the Antiguan bank like a bagman, a way to keep their fingerprints off their clients' money.

Many have now gone on to work at other SIPC-insured brokerages, which continue to operate under the illusion of investor protection.

How's that for inspiring confidence?

Is SIPC afraid of lawsuits in the Stanford case? (Updated)

Source: Loren Steffy (Chron.com)

(Updates with comments from Vitter’s office.)


For years, almost 8,000 investors who lost money in the collapse of Stanford Financial’s U.S. brokerage have been waiting for a decision on whether their losses will be covered by the Securities Investor Protection Corp. Back in June, the Securities and Exchange Commission said that they should. SIPC itself has yet to make a decision, and 18 members of Congress recently gave the insurance fund a Dec. 15 deadline for coming up with an answer.

Now, SIPC apparently is attempting to reach some sort of settlement with the SEC, though the details remain unclear. U.S. Sen. David Vitter, R-La., told the Advocate in Baton Rouge that in earlier discussions with him, SIPC Chairman Orlan Johnson “expressed concern that the organization could be sued in the Stanford matter by financial institutions who contribute to the fund, further delaying the compensation.”

Vitter’s press secretary, Luke Bolar, told me the senator has been working with SIPC and the SEC in hopes of reaching an agreement. SIPC is expected to present a settlement offer to the SEC next week, Bolar said. I haven’t heard back from SIPC’s spokeswoman yet.

The SEC, however, doesn’t have to agree. It has the authority to sue SIPC and force it to comply with the commission’s order in June. Presumably, some sort of agreement would speed any recovery to Stanford’s investors, who have been waiting for almost three years. SIPC already is covering losses for victims of Bernard Madoff’s Ponzi scheme and is planning to cover customers who lost money in the collapse of MF Global. Some of the brokerages that contribute to SIPC may be getting worried that they will be hit with big assessments to cover the payouts.

Unlike Madoff and MF Global, the Stanford case is more complicated. SIPC doesn’t typically cover certificates of deposit, which is what most Stanford investors bought, but the CDs were sold though Stanford’s SIPC-insured brokerage.

Meanwhile, Stanford Financial’s founder, R. Allen Stanford, is scheduled to appear at a hearing later this month to determine if he’s competent to begin his criminal trial, which is set to start in January.

SVC Claiming SIPC for US Victims Only

To all international victims who may be eligible for SIPC - Please read this latest communication from Angela Shaw to the SVC very carefully. She is negotiating with SIPC to limit any payment to only US citizens.

Instead of asking SiPC to reduce the ceiling of $500k per claim, and extend the net to all investors, which would be a much fairer distribution that every Stanford victim could benefit from, once again the US victims have shown their true colours, and their lack of consideration for anyone but themselves.

If the (mainly Louisiana) STC IRA account holders are to be included, then so should all the other investors who purchased through SGC registered representatives.

Angela is still claiming to the US Government she represents all 28,000 victims worldwide, and they are witless enough to believe her.


SVC Members,

Again, I don’t have a lot of news about the SIPC Board vote, but I do have some.

Yesterday, Senator Vitter spoke with SIPC Chairman Orlan Johnson and the feedback I have received is that the Senator continues to feel the SIPC Board is moving in the right direction and needs two to three more weeks of reviewing the facts and the law. Senator Vitter will meet again with the Chairman in two weeks.

Unfortunately, the Stanford entities’ records are still be reviewed by the SIPC Board and it will be another few weeks before a formal decision is announced.

Also yesterday, the SVC’s SIPA lawyer and I had a lengthy conference call with the SIPC General Counsel. She was unable to share where the Board is in its review process, but the detailed questions I was asked about the SVC’s demographic data was insightful. While this is purely speculation on my part, the line of questioning led me to believe the Board is leaning toward accepting the SEC’s request because they are trying to determine how many of the victims were SGC customers and if the SEC’s directive is followed, would that satisfy the investors the SVC’s counsel has represented in its arguments (which has always been all SGC US customers).

The SEC’s request is exactly what the SVC and our lawyer have pursued as his expert opinion is the law is limited to customers of a SIPC member, and he would not have made a broader legal argument to include affiliate entity investors like those who bought from SGC Venezuela (foreign affiliates are excluded in the statute).
That said, if there is a liquidation, those investors can likely file claims and have a court venue to dispute any denial of claims – a right they do not currently have.

I know this is complicated for some of you, but the corporate structure of the Stanford entities makes this case so very unique, and there are thousands of international investors who will likely not qualify for SIPC if the SIPC Board accepts the SEC’s request. My understanding is that all US investors were customers of SGC unless they bought the CDs from a Stanford rep in another country.

As I have mentioned before, I cannot determine how a SIPC trustee would determine whether someone was a brokerage customer, but from what I have seen almost 100% is that
all US investors and a couple of thousand international investors did purchase the CDs through SGC. The STC IRA accounts were included in the SEC’s recommendation also because those were sold by SGC registered representatives.

I think these developments are reason to be hopeful and I will continue to update you all when I know anything. I have emphasized with the SIPC staff and Board that it would ease a lot of minds if there was a defined time frame for this process. They are unable to do that right now, but continue to assure me that the Board is working as quickly as possible and that they do not intend to delay the decision any longer than absolutely necessary.

Keep praying, my friends!

Sincerely,

Angela

Director and Founder

Stanford Victims Coalition

Press Release from the Office of Gaytri Kachroo

Here is the latest information from the office of Gaytri Kachroo with regard to the news concerning SIPC. It is worth remembering that Kachroo Legal Services are the only attorneys that have SIPC experience – of any of the attorneys out there – because of their vast experience in the Madoff case.

I would urge all victims to make contact with Kachroo Legal Services to establish whether or not you may be eligible for coverage under this latest proposal Ms Kachroo and her staff will be able to help you and answer your questions. WE have a new fight on our hands now because the remaining victims who are not eligible under this new proposal now have to make sure that either SIPC is restricted to only being allowed access to SGC assets to recover advance (and there are no assets in SGC) or, if SIPC are determined to go after everything including the land in Antigua, money in Switzerland and the UK (and from what I am hearing this is going to be their strategy), then each and every victim has to be included under SIPC.

My own opinion is that the American Committee will be giving themselves a pat on the back and congratulating themselves on a job well done. From my own standpoint as the proposal stands at the moment they have sold most of us down the river and it will cost the majority of victims dearly. The next step is pushing for coverage for all victims and with this in mind the first thing you need to determine is if you are going to be eligible for SIPC. We then have to start protecting all of our assets except SGC and making sure that SIPC does not take what little we have.

As with our registration of interest against the SEC, we need the help and support of Gaytri to make sure SIPC either includes all victims in this latest proposal or they are restricted to only being able to claim against SGC. This is going to be a tough battle to have us all included, and we all need to be united in this.


Regards, Kate.

Here is a part-copy of the latest from KLS:

Dear KLS Stanford Client:

The SEC determination on the SIPC issue was released yesterday. SIPC coverage was determined to apply to all SGC customers!!!

We believe that the SVC has in large part played a key role in this positive outcome and we are very pleased that many of you will have full or partial recovery of the amounts you have deposited (less any withdrawals of income or principal from those deposits). Please note we sent our letter to the Chairman this week in support of SIPC coverage. We have also made our support known through several meetings in the past few weeks to those in positions of power over this outcome. Senator Vitter's ultimatum in the 11th hour to hold up Commission nominations until this determination was successful obviously helped to push this determination through! He has now dropped this roadblock. As you may know, I met with Sen. Vitter's office two weeks ago.

Eligibility: Many of you are up in the air about eligibility and the process given your connection through advisors with SGC, or STC. We will determine and push for your eligibility, as well as complete the claim forms for you so that you receive appropriate payment in a timely manner - for those who have signed up for Stanford Further Actions (SFA) and for those who continue to do so. Please note that SIPC will recover these monies from the liquidation in Antigua and Texas. KLS will play a key role in the recovery of assets in those jurisdictions and will keep you informed as part of the SFA package for which you have signed up.