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?
Tuesday, 6 December 2011
Saturday, 3 December 2011
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.
(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.
Thursday, 1 December 2011
Submit your Questions to Grant Thornton for the Webinar
Dear Creditor/Victims –
As you are aware, the Joint Liquidators of Stanford International Bank, Ltd. will be holding the 2nd online presentation to update the creditors/victims about the current state of the liquidation on Wednesday, December 7 at 11:00 a.m. EST.
The Joint Liquidators invite you to submit your questions in advance of the presentation to Stanford.enquiries@uk.gt.com. They will then use part of the presentation to address specific creditor/victims questions. In addition, you will have the opportunity to submit questions during the session.
If you have not already registered for the presentation, please visit https://event.onlineseminarsolutions.com/eventRegistration/EventLobbyServlet?target=registration.jsp&eventid=381101&sessionid=1&key=2A3109A3D79DDD225E9351E56676104E&sourcepage=register to complete registration. There is no cost to attend this presentation.
As you are aware, the Joint Liquidators of Stanford International Bank, Ltd. will be holding the 2nd online presentation to update the creditors/victims about the current state of the liquidation on Wednesday, December 7 at 11:00 a.m. EST.
The Joint Liquidators invite you to submit your questions in advance of the presentation to Stanford.enquiries@uk.gt.com. They will then use part of the presentation to address specific creditor/victims questions. In addition, you will have the opportunity to submit questions during the session.
If you have not already registered for the presentation, please visit https://event.onlineseminarsolutions.com/eventRegistration/EventLobbyServlet?target=registration.jsp&eventid=381101&sessionid=1&key=2A3109A3D79DDD225E9351E56676104E&sourcepage=register to complete registration. There is no cost to attend this presentation.
Tuesday, 29 November 2011
Allen Stanford Mental Fitness Hearing Scheduled for Dec. 20
By Andrew Harris and Laurel Brubaker Calkins
Nov. 29 (Bloomberg) -- R. Allen Stanford, the Texas financier accused of leading a $7 billion investment fraud, faces a Dec. 20 hearing to determine whether he is mentally fit to stand trial next year.
Stanford, 61, returned to Houston earlier this month after a nearly nine-month stay at a U.S. Bureau of Prisons hospital at Butner, North Carolina. He was treated there for a dependency on anti-anxiety drugs given to him in prison and evaluated for the after-effects of a head injury sustained in a jailhouse assault.
Houston U.S. District Judge David Hittner today scheduled the competency hearing to determine if Stanford can assist in his defense. In a separate order, the judge said Stanford’s criminal trial would start with jury selection on Jan. 23.
The former chairman and chief executive officer of Houston- based Stanford Group Co. is accused of misleading investors about the nature and oversight of certificates of deposit issued by his Antigua-based Stanford International Bank Ltd.
Stanford, who maintains his innocence, has been in custody since June 2009, when he was indicted by a federal grand jury in Houston. The court has twice postponed previously scheduled trial dates.
Aiding Defense
Ali Fazel, one of his defense attorneys, today declined to comment on the hearing and trial dates, citing an earlier order from Hittner barring attorneys from discussing the case publicly.
Justice Department spokeswoman Laura Sweeney didn’t immediately respond to a request for comment on the trial date. She has previously declined to comment because of the gag order.
If he’s found unable to help his attorneys prepare his defense, Stanford could return to Butner for further treatment, said Eric Sussman, a former federal prosecutor now in private practice in Chicago, in an interview earlier this month.
If Hittner finds Stanford can’t sufficiently recover his faculties, the judge would be required to decide whether the financier must be committed to a long-term care facility, said Sussman, now a partner in the Chicago office of New York-based Kaye Scholer LLP.
For Stanford to be permanently institutionalized, “he’d have to be deemed a danger to himself or others,” said Sussman, who isn’t involved in the case. “To the extent the judge finds he can’t be restored to competency, they may have to drop the charges,” he said.
Doctors
Houston attorney Wendell Odom, who convinced a jury that Andrea Yates was insane when she drowned her children, said if the government’s doctors have found Stanford fit for trial, it will be difficult for the defense to prove otherwise. Stanford will have an even tougher time proving he’s so permanently incapacitated that he can never be tried, Odom said.
“Mental competency is an incredibly low standard, not the same as insanity,” said Odom, a former federal prosecutor. “It basically means you are cognizant of what’s going on and you can talk to your attorney.”
The case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston).
Nov. 29 (Bloomberg) -- R. Allen Stanford, the Texas financier accused of leading a $7 billion investment fraud, faces a Dec. 20 hearing to determine whether he is mentally fit to stand trial next year.
Stanford, 61, returned to Houston earlier this month after a nearly nine-month stay at a U.S. Bureau of Prisons hospital at Butner, North Carolina. He was treated there for a dependency on anti-anxiety drugs given to him in prison and evaluated for the after-effects of a head injury sustained in a jailhouse assault.
Houston U.S. District Judge David Hittner today scheduled the competency hearing to determine if Stanford can assist in his defense. In a separate order, the judge said Stanford’s criminal trial would start with jury selection on Jan. 23.
The former chairman and chief executive officer of Houston- based Stanford Group Co. is accused of misleading investors about the nature and oversight of certificates of deposit issued by his Antigua-based Stanford International Bank Ltd.
Stanford, who maintains his innocence, has been in custody since June 2009, when he was indicted by a federal grand jury in Houston. The court has twice postponed previously scheduled trial dates.
Aiding Defense
Ali Fazel, one of his defense attorneys, today declined to comment on the hearing and trial dates, citing an earlier order from Hittner barring attorneys from discussing the case publicly.
Justice Department spokeswoman Laura Sweeney didn’t immediately respond to a request for comment on the trial date. She has previously declined to comment because of the gag order.
If he’s found unable to help his attorneys prepare his defense, Stanford could return to Butner for further treatment, said Eric Sussman, a former federal prosecutor now in private practice in Chicago, in an interview earlier this month.
If Hittner finds Stanford can’t sufficiently recover his faculties, the judge would be required to decide whether the financier must be committed to a long-term care facility, said Sussman, now a partner in the Chicago office of New York-based Kaye Scholer LLP.
For Stanford to be permanently institutionalized, “he’d have to be deemed a danger to himself or others,” said Sussman, who isn’t involved in the case. “To the extent the judge finds he can’t be restored to competency, they may have to drop the charges,” he said.
Doctors
Houston attorney Wendell Odom, who convinced a jury that Andrea Yates was insane when she drowned her children, said if the government’s doctors have found Stanford fit for trial, it will be difficult for the defense to prove otherwise. Stanford will have an even tougher time proving he’s so permanently incapacitated that he can never be tried, Odom said.
“Mental competency is an incredibly low standard, not the same as insanity,” said Odom, a former federal prosecutor. “It basically means you are cognizant of what’s going on and you can talk to your attorney.”
The case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston).
Monday, 28 November 2011
Stanford Still Not Competent for Ponzi Trial - Lawyer
Source: Scott Cohn (CNBC)
Despite nine months of court-ordered drug treatment, accused Ponzi schemer Allen Stanford is not yet competent to face charges he ran a $7 billion Ponzi scheme, his attorney told CNBC.
As a result, thousands of Stanford investors remain in limbo, nearly three years after the alleged scheme was exposed.
Stanford, who was released from a prison medical center earlier this month but remains in federal custody, was scheduled to be arraigned today on revised charges filed in May. But defense attorney Ali Fazel said in an e-mail that Stanford cannot be arraigned "until his competency status changes."
As a result, today's arraignment has been postponed.
In January, U.S. District Judge David Hittner ruled Stanford incompetent to stand trial after the 61-year-old financier became addicted to prescription drugs while in federal custody. Doctors testified that Stanford may also have suffered brain damage after being severely beaten by another inmate in 2009. Hittner ordered Stanford to undergo drug treatment at the Bureau of Prisons medical center in Butner, NC. With the treatment apparently completed earlier this month, Stanford was moved back to a federal detention in Houston. Because Hittner ruled he is a flight risk, Stanford is being held without bail pending his trial.
When that trial will take place remains uncertain. It is currently scheduled to begin January 20 according to a source close to the case, but questions about Stanford's competency would appear to make that date increasingly unlikely.
Specifics of Stanford's condition are difficult to come by in a case that is shrouded in an unusual amount of secrecy.
Earlier this month, a civil attorney for Stanford, Stephen Cochell, said in a court filing that his client "continues to suffer from short-term and long-term memory loss." That filing — despite being in a different court and a separate case — drew an angry rebuke from Hittner, who barred Cochell from further contact with his client in the civil case until after the criminal case is complete.
Attorneys in the criminal case are barred from discussing Stanford's condition under a broad gag order imposed by Hittner, who has also sealed much of the court docket since Stanford's medical problems came to light.
As a result, more than 28,000 investors remain in the dark. A court-appointed receiver attempting to recover assets has said much of that effort depends on the outcome of Stanford's criminal trial, since the vast majority of the funds are in foreign accounts that are inaccessible without a resolution in the case.
So far, investors have recovered just pennies on the dollar.
Despite nine months of court-ordered drug treatment, accused Ponzi schemer Allen Stanford is not yet competent to face charges he ran a $7 billion Ponzi scheme, his attorney told CNBC.
As a result, thousands of Stanford investors remain in limbo, nearly three years after the alleged scheme was exposed.
Stanford, who was released from a prison medical center earlier this month but remains in federal custody, was scheduled to be arraigned today on revised charges filed in May. But defense attorney Ali Fazel said in an e-mail that Stanford cannot be arraigned "until his competency status changes."
As a result, today's arraignment has been postponed.
In January, U.S. District Judge David Hittner ruled Stanford incompetent to stand trial after the 61-year-old financier became addicted to prescription drugs while in federal custody. Doctors testified that Stanford may also have suffered brain damage after being severely beaten by another inmate in 2009. Hittner ordered Stanford to undergo drug treatment at the Bureau of Prisons medical center in Butner, NC. With the treatment apparently completed earlier this month, Stanford was moved back to a federal detention in Houston. Because Hittner ruled he is a flight risk, Stanford is being held without bail pending his trial.
When that trial will take place remains uncertain. It is currently scheduled to begin January 20 according to a source close to the case, but questions about Stanford's competency would appear to make that date increasingly unlikely.
Specifics of Stanford's condition are difficult to come by in a case that is shrouded in an unusual amount of secrecy.
Earlier this month, a civil attorney for Stanford, Stephen Cochell, said in a court filing that his client "continues to suffer from short-term and long-term memory loss." That filing — despite being in a different court and a separate case — drew an angry rebuke from Hittner, who barred Cochell from further contact with his client in the civil case until after the criminal case is complete.
Attorneys in the criminal case are barred from discussing Stanford's condition under a broad gag order imposed by Hittner, who has also sealed much of the court docket since Stanford's medical problems came to light.
As a result, more than 28,000 investors remain in the dark. A court-appointed receiver attempting to recover assets has said much of that effort depends on the outcome of Stanford's criminal trial, since the vast majority of the funds are in foreign accounts that are inaccessible without a resolution in the case.
So far, investors have recovered just pennies on the dollar.