Mittwoch, 21. Dezember 2011

KLS complaint against the U.S. Government/SEC

December 21, 2011
By Dr. Gaytri D. Kachroo
Ft. Lauderdale, FLA - A class action lawsuit was filed against the United States on December 13, 2011, for the billions in losses suffered by investors in the Allen Stanford international Ponzi scheme.

The case, filed in the United States District Court for the Southern District of Florida seeks to hold the SEC responsible for its failure to stop Stanford and his registered investment advisor and broker/dealer company Stanford Group Company ("SGC"), who the SEC investigated several times between 1997 and 2004. The suit claims that the SEC was grossly negligent in its actions following each investigation in failing to take any action to stop Stanford, whom SEC official had determined was operating a Ponzi scheme. The class action against the SEC was filed the day after the SEC filed suit against the Securities Investor Protection Corporation ("SIPC") for its refusal to reimburse investors for their losses.

"This case is unique because the SEC knew all along that this was a fraud and did nothing," said lead attorney Dr. Gaytri Kachroo of Kachroo Legal Services, P.C. (KLS), who is representing investors in the class action. "If the SEC had simply refused to register SGC for any of its various securities laws violations or reported to SIPC that SBC was a Ponzi scheme and insolvent, the SEC could have stopped this scheme over a decade ago."

In government investigations in 1997, 1998, 2002, and 2004, the SEC determined that Stanford was operating a Ponzi Scheme, but failed to take action to prevent his fraud. After increasing pressure from the Madoff collapse, the SEC finally acted in 2009, filing a case in federal court against Stanford and his companies, but only after investors had been defrauded of over $7 billion. The suit also alleges that the court-appointed SEC receiver has only been able to recover $100 million, net of expenses, out of the $7 billion investors lost because of the SEC's negligence.

The case is Zelaya et al. v. United States of America, Case No. 11-CV-62644-RNS (S. D. Fla. 2011).


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Donnerstag, 15. Dezember 2011

Grant Thornton Letter to Senators Vitter, Shelby, Cochran, and Wicker

December 15, 2011
By Marcus A. Wide
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 Counsil. 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 many of its agencies.

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. As far as we know, we are the first to engage the creditors/victims directly to ask what they want...


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Dienstag, 13. Dezember 2011

Madoff's case bigger, but Stanford's messier

Madoff vs Stanford December 13, 2011
By Loren Steffy

From the beginning, the collapse of R. Allen Stanford's financial empire was unlike other financial scandals, and the aftermath of his alleged $7 billion
Bernard Madoff vs Allen Stanford.
fraud has been messier than normal for investors in such cases.

Bernard Madoff, after all, orchestrated a Ponzi scheme almost 10 times bigger than the one Stanford is accused of running, yet Madoff pleaded guilty and is serving a lifetime prison sentence.

A receiver (Irving Picard) has recovered billions that is being distributed to investors, and an insurance pool funded by the brokerage industry is covering at least some of the additional losses.

Not so in the Stanford case. Investors are likely to recover almost nothing from the receiver Ralph Janvey, and on Monday, the Securities and Exchange Commission sued the industry insurance fund, the Securities Investor Protection Corp., which since June has refused the SEC's order to pay.

Stanford Financial was an SIPC member, and it slapped the fund's logo on its investment offerings. While the SIPC doesn't provide blanket insurance - it only protects against securities that are lost or stolen in brokerage failures, not losses on the value of investments - it was happy to allow Stanford to use its name to foster a false aura of security.

It now argues that those same investors don't deserve coverage because Stanford brokers were peddling certificates of deposits issued by Stanford's Caribbean bank.

But investors I've spoken with said their money went through, and perhaps never left, Stanford's brokerage with the SIPC seal on the door.

The distinction between the Stanford and Madoff cases is most stark in how investors have been treated by the organizations that are supposed to protect them.

Madoff was, after all, a Wall Street insider who catered to other well-connected financiers and movie stars. The SIPC agreed to cover their losses. Kevin Bacon, it seems, will have a lesser degree of separation from his wealth than the average Stanford investor. Similarly, when MF Global, a commodities trader run by the former U.S. senator and Goldman Sachs honcho Jon Corzine, tanked on bad investments in European markets, the SIPC rushed in to repay some of the losses for the firm's wealthy hedge fund clients.

Stanford's investors for the most part are more pedestrian. They were well-off but not wealthy. Most invested for retirement, and while much was made of the ridiculous interest rates promised on Stanford CDs, investors said what attracted them most was the safety. They were looking for a shelter from turbulent markets, and CDs, Stanford brokers told them, were a safe move.

Many didn't go to Stanford, Stanford came to them. The firm built its brokerage by recruiting investment advisers from other firms who brought clients with them. Seduced by the green marble desktops and cherry-wood interiors, they knowingly or not lured into Stanford's web clients with whom they'd built up trust over many years.

Stanford's investors also were hurt by bad timing. Their plight came just months after Madoff dominated the national news, and it was overshadowed by a mounting recession, looming bank failures and government bailouts.

And so, amid national disinterest and regulatory foot-dragging, Stanford investors have become the alleged victims of a forgotten fraud. It's not surprising, then, that their fate depends on the unprecedented legal action by the SEC against the SIPC.

For three years, they've had to fight just for a chance to grab the safety net that was thrown to investors in other scandals.

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Montag, 12. Dezember 2011

SEC sues insurance fund in Stanford case

December 12, 2011
By Loren Steffy
The Securities and Exchange Commission, in an unprecedented move, sued a national brokerage insurance fund to force it to cover potential investor losses from R. Allen Stanford's alleged $7.2 billion Ponzi scheme.

The lawsuit, filed in federal court in Washington, would require the Securities Investor Protection Corp., or SIPC, to begin a liquidation proceeding for Stanford's U.S. brokerage, which was based in Houston. The liquidation would let customers file claims under federal investor protection laws.

The court action comes after months of negotiations between the SEC and SIPC failed to produce an agreement. SIPC, which is funded by the brokerage industry, has resisted covering losses in the 2009 collapse of Stanford Financial Group, saying the investments were certificates of deposit with an offshore bank rather than securities.

"It's time to get even tougher in our fight for the victims," said Sen. David Vitter, R-La., who led the fight in Congress on behalf of Stanford investors. "I've been urging SIPC Chairman Johnson to act quickly for months, but the victims still haven't received an up-or-down answer. This move by the SEC is encouraging and should significantly help the process."

Last week, Vitter pressed SEC Chairman Mary Schapiro to sue.

The SEC, which has oversight authority for SIPC, argued that the CDs constituted securities and were sold to investors through Stanford's SIPC-insured brokerage.

In June, the commission ordered SIPC to cover investor losses, much as it has for those who lost money in Bernard Madoff's Ponzi scheme, but SIPC's board didn't respond to the order.

"Because SIPC has declined to take steps to initiate the proceeding for the protection of Stanford customers, the commission filed suit today asking a court to compel it to do so," the SEC said in a statement.

Why it's fighting back

SIPC officials said they intend to fight the suit.

"After careful and exacting analysis, we believe the SEC's theory in this case conflicts with the Securities Investor Protection Act, the law that created SIPC and has guided it for the last 40 years," fund chairman Orlan Johnson said in a prepared statement.

Stanford's membership in SIPC reassured investors like Carl Rabenaldt, who works for a Houston engineering firm. He invested his retirement in the CDs in part because he thought his money was covered by SIPC. "Then, when there's a claim against it, they're finding reasons not to pay it," he said.

R. Allen Stanford is accused of defrauding thousands of investors by selling them certificates of deposit from his bank in Antigua, assuring them that the investments were safe.

He then allegedly used the money for other purposes, including funding a lavish lifestyle for himself and investing it in highly speculative private businesses.

Settlement offered?

SIPC last week offered to cover a portion of the Stanford investors' losses, but the SEC found the offer unacceptable, according to a person familiar with the discussions.

At a closed-door meeting Wednesday, the commission decided to proceed with the suit, the person said, adding that SIPC may still make another settlement offer.

SIPC, created in 1970, is designed to insure investors if a brokerage fails and cash or securities are missing from customer accounts. It isn't designed to cover losses from declines in investments' value.

SIPC officials had argued that the Stanford case is different than Madoff's. Stanford investors sent money to buy CDs directly to Stanford's Antiguan bank and therefore they weren't "customers" of the brokerage under the definition of the law, they said. In addition, they argued that Stanford's CDs, while worthless, did exist, and therefore insurance coverage isn't warranted.

The SEC contends the money investors thought was being used to buy the CDs was diverted for other purposes and the CDs were never actually purchased. Because the CDs were sold through the SIPC-insured brokerage, the insurance pool should cover the losses, it argued.

The coverage would apply to about 7,800 of Stanford's 20,000 investors worldwide.
The SEC has authorized its Division of Enforcement to bring an action in district court against SIPC to compel the institution of a proceeding to liquidate SGC under SIPA.

The Commission has determined that the statutory requirements for instituting a SIPA liquidation are met here. SGC is insolvent and the subject of a receivership. And for the reasons discussed below, the Commission has concluded that SGC has failed to meet its obligations to customers. Based on the totality of the facts and circumstances of this case, the Commission has determined (in an exercise of its discretion) that SIPC should initiate a proceeding under SIPA to liquidate SGC.

In concluding that investors who purchased the SIBL CDs through SGC qualify for protected "customer" status, the Commission finds two lines of cases applying SIPA particularly relevant. First, courts have held that, under certain circumstances, an investor may be deemed to have deposited cash with a brokerdealer for the purpose of purchasing securities-and thus be a "customer" under Section 16(2) of SIPA - even if the investor initially deposited those funds with an entity other than the broker-dealer. Second, courts have held that when securities purportedly acquired for customers by a broker-dealer are actually fraudulent vehicles for carrying out a Ponzi scheme, customers' "net equity" claims under SIPA can be measured by the net amount of cash customers invested and not by the purported but unreal value of the fraudulent securities (including fictitious "profits").

In In re Old Naples, the Eleventh Circuit addressed whether claimants who had deposited cash with an affiliate of a broker-dealer in order to purchase securities could nonetheless qualify as customers of the failed broker-dealer. The court held that the investors should be deemed to have deposited cash with the broker-dealer based on evidence supporting the bankruptcy court's findings that (1) the investors "had no reason to know that they were not dealing with" the broker-dealer; and (2) the funds investors deposited with the affiliate "were used by, or at least for," the broker-dealer, who "diverted some of the investors' money from [the affiliate] for personal use, and... used much of the money to pay [the broker-dealer's] expenses."

The totality of facts and circumstances in this case supports a similar conclusion about the status of the investors with accounts at SGC who purchased SIBL CDs, i.e., that by depositing money with SIBL, investors were effectively depositing money with SGC. Based on the findings of the Receiver and his expert investigators, the separate existence of SIBL, SGC, STC, and their ultimate, sole owner, Stanford should be disregarded.

In so doing, the court focused on the substance of the transactions rather than their form.

Credible evidence shows that Stanford structured the various entities in his financial empire, including SGC and SIBL, for the principal, if not sole, purpose of carrying out a single fraudulent Ponzi scheme. These many entities (controlled and directly or indirectly owned by Stanford) were operated in a highly interconnected fashion, with a core objective of selling fraudulent SIBL CDs.

Additionally, as in Old Naples, there are facts that could have led SGC account holders who purchased SIBL CDs through SGC to believe they were depositing cash with SGC for the purpose of purchasing the CDs. Defrauded CD investors have submitted affidavits stating that they were told by their SGC financial advisors that SGC and SIBL were both members of the "Stanford Financial Group," and that Stanford financial advisers frequently referred simply to "Stanford" without clearly distinguishing between SGC and SIBL. Affidavit of Sally Matthews

Both SGC and SIBL had the word "Stanford" in their names and used the same logo, and SGC provided at least some customers with "advisory statements" bearing that logo that listed their SIBL CD positions.

There is also credible evidence that, as in Old Naples, the funds deposited with SIBL were diverted for Stanford's personal use and used to pay the expenses of SGC.

In an August 14, 2009 letter to the Receiver, SIPC President Stephen P. Harbeck stated that "if SGC and SIBL are consolidated ... the CDs are, in effect, debts of SGC, and are part of the capital of SGC. Such a relationship negates 'customer' status under 15 U.S.C. § 78lll(2)(B) [as amended, § 78lll(2)(C)(ii)]." The Commission disagrees for the reasons the courts in C.J. Wright, Old Naples, and Primeline rejected similar arguments advanced by the SIPA Trustee as grounds for denying customer status. In C.J. Wright, the court found that claimants "believed they were depositing funds for the purchase of securities and were not told and were not aware that their investment was to become part of debtor's capital."

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Donnerstag, 8. Dezember 2011

Stanford's donations still stain lawmakers' hands

December 8, 2011
By Loren Steffy
In the battle over insurance coverage for investors who lost money in the collapse of Stanford Financial's U.S. brokerage, it's difficult to know who's on investors' side.

Recently, 27 lawmakers sent a letter to the Securities Investor Protection Corp., which is funded by the brokerage industry and overseen by the government, demanding that SIPC cover investors for their losses. SIPC granted similar coverage to clients of Bernard Madoff and the recently bankrupted commodities trader MF Global.

The 23 Republicans and four Democrats threatened to convene hearings in Washington next week if SIPC didn't act. That, apparently, is easier than living up to their own shortcomings.

Seven of the lawmakers who signed the letter received campaign contributions from Stanford. Only two - Rep. Michael McCaul, R-Austin, and Rep. Rep. Charles Boustany, R-La. - returned the money. Five others - Republicans Pete Sessions of Dallas, Lamar Smith of San Antonio and Vern Buchanan and Ileana Ros-Lehtinen of Florida, as well as Democrat Steve Cohen of Tennessee - owe Stanford's estate money, according to the court-appointed receiver in the company's bankruptcy.

The firm's namesake, R. Allen Stanford, liked to spread cash around Washington. The receiver has been trying to recover political donations for almost two years. About $1.8 million remains outstanding, and only about $142,000, has been returned.

Even more disturbing, five committees of the two political parties - the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, the National Republican Congressional Committee, the Republican National Committee and the National Republican Senatorial Committee - have refused to return a combined $1.6 million. Check please the complete list of Political contributions here.

In other words, while lawmakers are quick to call on the brokerage industry to insure the losses of Stanford's investors, they are far less willing to demand the same of themselves or their political parties.

Many of the elected officials who received campaign contributions from Stanford - including both Texas senators and Sessions - donated them to charity. That, however, doesn't let the politicians off the hook.

If Stanford was a fraud as the government contends, then the money is stolen. Donating stolen money doesn't eliminate the potential theft. Even if no theft is proved, the receiver is operating under a court order to recover money on behalf of investors, and donating it doesn't absolve lawmakers of the court's order.

Meanwhile, the Securities and Exchange Commission, which is charged with overseeing SIPC, ordered the fund to pay investors in June. So far, it hasn't. As recently as last week, SIPC's chairman sent a letter to one member of Congress saying SIPC disagrees with the SEC's decision.

Sen. David Vitter, R-La., had been trying to arrange some sort of settlement between the SEC and SIPC. Those efforts apparently fell through.

"The SEC needs to take definite action before the end of the year, and I'm afraid that's going to mean suing SIPC," he told SEC Chairman Mary Schapiro.

The SEC, of course, is making up for past mistakes. Having bungled earlier investigations into Stanford, it then took more than two years to reach a decision on SIPC coverage.

It may be getting tough now, but suing SIPC means investors, who have been strung along for almost three years, must wait even longer to find out if their losses are covered. Sadly, in this case, that's progress.

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Mittwoch, 7. Dezember 2011

SIPC Rebuffs Stanford Investors Demands to Cover Losses

December 7, 2011
By Scott Cohn
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.
SIPC Chairman Orlan Johnson's Letter to Congressman Cassidy
Dear Congressman Cassidy:

This is in reply to your letter dated November 22, 2011, concerning the certificates of deposit ("CD") issued by the Stanford International Bank Ltd. in Antigua ("Stanford Antiguan Bank") to your constituents and others...
Letter to Securities Industry and Financial Markets Association (SIFMA)
The SIB CDs did not exist as anything more than a vehicle to steal customer funds. By all definitions, the SIB CDs were never legitimate securities, and customer funds never went to SIB in Antigua. SGC customers had the legitimate expectation they were purchasing actual securities and instead, as the SEC and DOJ have alleged, their funds were stolen in a Ponzi scheme. SGC management, including Chief Financial Officer James Davis, were fully aware of the misappropriation of customer funds and that the CDs were entirely fictitious, yet enticed its Registered Representatives to sell the SIB CDs in order to fund SGC's operations and pay previous customers.

The SEC has alleged in its civil suit against Stanford, et al, the Stanford Financial Group of Companies operated a "massive Ponzi scheme." Additionally, the SEC has taken the position in litigation related to the Stanford Receivership that an entity that operates as a Ponzi scheme "is, as a matter of law, insolvent from its inception." An insolvent entity cannot issue real securities and the SIPA has previously been used to protect investors "regardless of the fact that that the securities were fictitious."

SGC was an insolvent broker dealer and SIPC member that misappropriated customers' funds for more than a decade. SGC sold its customers fictitious securities, then acquired its customers' funds to pay for commissions and bonuses for the Registered Representatives who sold the CDs; SGC's marketing and advertising; professional endorsements for SGC; and generally all of the expenses of the SIPC member.

In Old Naples Securities, the court reasoned that whether a claimant deposited cash with the debtor "does not … depend simply on to whom the claimant handed her cash or made her check payable, or even where the funds were initially deposited." Rather, the issue was one of "'actual receipt, acquisition or possession of the property of a claimant by the brokerage firm under liquidation.'"

SGC customers did not simply make a bad investment; a SIPC member stole our funds. We understand that SIPC was not created to protect investors from worthless securities or securities that decline in value; however, the SIB CDs have no value because the funds were stolen in a Ponzi scheme.

The SIB CDs did not exist and cannot be replaced. When missing securities cannot be replaced by SIPC, a customer is entitled to compensation of their net equity investments.
Investors Committee's Letter to SEC
Dear Mark:

As you know, it has been several months since the Securities and Exchange Commission ("SEC"), by a vote of the Commissioners, made a formal request to the Securities Investor Protection Corporation ("SIPC") Board of Directors to institute a liquidation proceeding of Stanford Group Company ("SGC") under the Securities Investor Protection Act of 1970 ("SIPA") and pay net equity claims to SGC customers who purchased Stanford International Bank certificates of deposit ("SIB CDs").

Despite an initial announcement by SIPC that its Board of Directors would vote on this matter at its September 15 meeting, a decision has apparently been indefinitely postponed. The continued delay by the SIPC Board to respond to the SEC has unnecessarily left the victims in limbo. Additionally, as members of our Committee have discussed with your staff in Washington, we anticipate a significant degree of coordination with a SIPC Trustee will be necessary to prevent unnecessary complications, delays and expenses related to the winding down of other Stanford entities.

In order to provide SGC customers with their mandated protections under SIPA, and to expedite the coordination of additional parties in the multiple legal proceedings, the Investors Committee asks the SEC to immediately exercise its plenary authority over SIPC by filing an application in the Federal District Court in Washington, D.C., to compel SIPC to properly discharge its statutory responsibilities under the SIPA by initiating a liquidation of SGC and paying net equity claims to investors who purchased SIB CDs from SGC.

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Montag, 5. Dezember 2011

US-Committee in opposition to Grant Thornton

December 5, 2011
By the US-Committee
The Official Stanford Investors Committee (the "Investors Committee") submits this brief in opposition to the Petition for Recognition of Foreign Main Proceeding Pursuant to Chapter 15 of Bankruptcy Code (the "Petition"). The Petition was originally filed by former liquidators, Nigel Hamilton-Smith and Peter Wastell, and is now championed by Marcus Wide and Hugh Dickson (the "Joint Liquidators").

The Investors Committee respectfully urges the Court to deny the Joint Liquidators any form of recognition under Chapter 15. Any recognition of these Joint Liquidators would be "manifestly contrary to the public policy of the United States". That is so for at least four separate reasons.

First, the appointment of the Joint Liquidators (and their predecessors) was pursued and obtained in violation of this Court's Orders. Granting these Joint Liquidators any form of Chapter 15 recognition, under these circumstances, would undermine fundamental regulatory and jurisdictional policies of the United States.

Second, there are significant conflicts of interest raised by the Joint Liquidators's request for recognition as the "foreign main" proceeding. The Receivership Estate has significant claims against the Antiguan government that will likely be frustrated (or abandoned) if the Joint Liquidators achieve "foreign main" recognition. The Investors Committee believes those conflicts are exacerbated by the multiple representations that have been undertaken in this proceeding by counsel for the Joint Liquidators.

Third, the recognition sought by the Joint Liquidators should be denied because it is very much a "one-way street." The Antiguan courts have already refused to recognize this Court's Receiver, finding both that the Receiver has "no legal entitlement to standing in Antigua and Barbuda" and that this Court's Order appointing the Receiver and taking sole possession of the assets of the various Stanford entities, including SIBL, was "unenforceable."

Fourth, recognition should be denied because it has become painfully obvious that the Antiguan government and the Antiguan judicial system have no real interest in prosecuting the individuals responsible for the Stanford fraud, nor in recovering assets for the benefit of Stanford's investor-victims.

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Freitag, 2. Dezember 2011

Is SIPC afraid of lawsuits in the Stanford case?

December 2, 2011
By Loren Steffy
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.

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