Donnerstag, 14. März 2013

KLS Stanford Update - SEC Litigation

March 14, 2013
In our last update, we notified you that the magistrate judge in our SEC class action denied the Government's request to stay all discovery. We are summarizing here the outcome of the discovery hearing which was held in Miami on February 14, 2013. One of the key hurdles to overcome in an action against the Government is the discretionary function exception. The magistrate made clear that this hurdle has been overcome and the court had already ruled on the sovereign immunity issue. The magistrate also held that "it is not obvious that [the Government's second motion to dismiss] will succeed." A copy of this ruling is attached for your review. Following this ruling, we have moved forward with discovery and we continue to wait for the district court to rule on the Government's second motion to dismiss.

In view of the delays caused by the Government's motion to stay discovery, we requested that the Court push back certain pre-trial and trial deadlines to allow us adequate time to pursue the discovery required to prove our case. We are happy to report that the Court granted our request and pushed back discovery deadlines to afford us this opportunity, which also resulted in a new trial date set for April 7, 2014.

In accordance with the foregoing and the undersigned's rulings in open Court, it is ORDERED and ADJUDGED as follows:
1.- The Motion to Stay Discovery [D.E. 50] is DENIED.

2.- The Motion to Compel [D.E. 51] is DENIED WITHOUT PREJUDICE as to Request No. 1 and Interrogatory No. 6 based on Defendant's agreement to supply the names and contact information of the SEC Fort Worth District Office staff members in response to Interrogatory No. 1. Such information is hereby designated as "CONFIDENTIAL, FOR ATTORNEYS' EYES ONLY", and shall be provided to Plaintiff's counsel by February 19, 2013.

3.- The Motion to Compel [D.E. 51] is DENIED WITHOUT PREJUDICE as to Request Nos. 2, 13-16 and Interrogatory Nos. 1-5, 7-8 subject to the following terms. Plaintiffs may notice a Rule 30(b)(6) deposition of the SEC, designating as categories the information sought in their discovery requestes, but narrowed in terms of time, entity and scope as more fully explained at the February 14, 2013 hearing. Within one week of receipt of the Rule 30(b)(6) Notice of Deposition, Defendant may submit a letter to the undersigned setting forth any objections to the designated categories at the undersigned's e-file address, Plaintiffs may respond to any such objections, by the same means, within one week. Thereafter, the undersigned will rule on the objections or, if necessary, set a telephonic hearing to address them. The parties' letters will be appended to the Order on the objections.
The Rule 30(b)(6) deposition of the SEC shall be scheduled on a date that is mutually agreeable to the parties, and at a time when the undersigned will be available to rule on any disputes that may arise regarding its scope. To this end, counsel may contact Chambers to coordinate the deposition date. Further, the parties may submit a proposed confidentiality order prior to the deposition.

Read more:

Visit the Stanford International Victims Group - SIVG official forum

Mittwoch, 13. März 2013

Stanford U.S. Receiver Has Deal With Antigua Counterpart

March 13, 2013
By Laurel Brubaker Calkins
R. Allen Stanford's Antiguan- appointed liquidators agreed to stop seeking control of the convicted financier's assets in a deal that may allow defrauded investors to recover some of the $300 million Stanford stashed in accounts outside the U.S.

Receivers appointed by the U.S. and the Antiguan courts have battled for four years to control assets recovered from Stanford's financial-services empire. Stanford, 62, was convicted last March of leading a $7 billion investment fraud based on bogus certificates of deposit at his Antigua-based bank. He was sentenced to 110 years in prison.

"The funds that are the subject of this agreement represent the largest available source of investor money that Allen Stanford had not already spent by the time his Ponzi scheme collapsed," Kevin Sadler, lead attorney for U.S. receiver Ralph Janvey, said in an e-mail today. "In the absence of this agreement, these funds would remain out of reach of the Stanford victims for years to come."

For dropping their dispute with Janvey and the U.S. Justice Department, the Antiguan liquidators will receive fees of $36 million from Stanford's frozen funds in the U.K., according to a statement jointly released by both receivers today.

Professional Fees

The Antiguan liquidators have already received $20 million from the U.K. accounts, so the additional payment will boost their professional fees to $56 million -- almost as much as Janvey's receivership team has been paid since U.S. securities regulators seized Stanford's operations in February 2009.

Janvey's professionals had been paid $63.3 million in fees and expenses as of Feb. 7, according to his latest status report. That represents about a quarter of the $230.2 million Janvey has recovered for the estate. He has paid out an additional $53.3 million in costs to wind up Stanford's business interests.

Janvey recently proposed a $50 million interim distribution be paid to investors, pending court approval.

Angie Shaw, a founder of the Stanford Victims Coalition, denounced the agreement as "ransom" that rewards the Antiguan liquidators at the investors' expense.

"While the agreement does end a four-year international turf war that has cost the victims untold millions of dollars, the only true beneficiary of the agreement is the Antiguan liquidators," Shaw said in an e-mail today. "The Antiguan liquidators are essentially getting a ransom fee in exchange for dropping their litigation for control over the frozen foreign accounts holding what is left of the victims' life savings."

Dallas Judge

While Janvey was awarded control over all Stanford assets by the Dallas judge in charge of the U.S. Securities and Exchange Commission case against Stanford, courts in the U.K., Switzerland and Canada initially awarded control of about $320 million in foreign accounts to Antiguan court-appointed liquidators Marcus Wide and Hugh Dickson of Grant Thornton.

The Justice Department placed an administrative hold on the European funds, and it has been trying to repatriate the money since Stanford and his co-conspirators were convicted last year.

The Antiguan liquidators have fought to retain control and have filed some asset-recovery lawsuits that duplicate actions already initiated by Janvey, according to court filings. Wide and Dickson haven't publicly stated how much they've been able to recover for Stanford's investors.

Stanford Victims

Edward H. Davis Jr., one of the Antiguan liquidators' attorneys, said in an e-mail today that Dickson and Wide have already recovered and frozen more than $227 million in Stanford assets "independent of the amounts recovered by Janvey and in addition to the approximately $300 million frozen" in overseas accounts.

"The joint liquidators have conducted intensive investigations and lodged claims and are in the process of launching additional lawsuits that have the potential to yield billions of dollars in recoveries to pay the victim creditors," Davis said. "To suggest that the joint liquidators held the estate for ransom demonstrates a fundamental misunderstanding about how a liquidation process maximizes recoveries for victim creditors."

Peter Morgenstern, a lawyer who sits on the Official Stanford Investors Committee, said the investors should be allowed to decide whether the Antiguan liquidators receive more fees or whether the U.S. government should continue fighting to recover Stanford's frozen European funds through international accords designed to recover criminal proceeds.

Significant Assets

"The issue is how significant assets recovered by the U.S. government for the benefit of Stanford victims should be spent," Morgenstern said in an e-mail. Much as creditors have a say in how bankruptcy proceeds are distributed, he said, the defrauded investors should also be consulted before such a large part of the estate is paid in professional fees.

Janvey has asked U.S. District Judge David Godbey in Dallas to hold a hearing at which investors can express their opinions of the deal. No hearing has been set.

Under terms of the agreement announced today, the Antiguan liquidators will distribute the $44 million remaining in the U.K. accounts to investors after the liquidators have received their $36 million in working capital. Wide and Dickson will also distribute about $60.5 million of the funds currently frozen in Switzerland, according to the joint statement.

Fund Transfers

About $23 million in Canadian funds and $132.5 million in Swiss funds will be transferred to the Justice Department and Janvey for distribution to investors through a system the U.S. receiver is establishing, according to the joint statement.

The agreement "creates a plan for the distribution of almost 90 percent of the frozen assets from the U.K., Canada and Switzerland pursuant to which distributions will be made as soon as the necessary approvals are obtained from the pertinent authorities in those countries," the Antiguan liquidators said in the joint statement.

Courts in the U.S., Antigua and the U.K. must still sign off on the deal before any funds are transferred, according to the statement.

Sadler, the U.S. receiver's attorney, said the deal was the result of months of negotiations involving officials in five nations.

"This agreement is one of the most complex undertakings of its kind," he said in an e-mail. "This was no easy task."

Read more:

Visit the Stanford International Victims Group - SIVG official forum

Dienstag, 12. März 2013

Stanford investors' lawsuit heads to federal court

March 12, 2013
By Bill Lodge
Eighty-nine investors defrauded by now-imprisoned Houston financier Robert Allen Stanford want $115 million from seven insurance companies in addition to claims that could total as much as $1 billion against the Louisiana Office of Financial Institutions and SEI Investments Co.

But six of the insurers responded Monday by transferring the investors' 4-year-old state court suit to Baton Rouge federal court, action the investors have fought hard in the past.

"We feel confident that this case should not be removed to federal court, because the state court has already ruled on it" and granted the investors class-action status, said Phillip W. Preis, Baton Rouge attorney for the investors.

Telephone and email requests for comment from three New Orleans attorneys for the insurance companies were not returned.

The investors sued OFI and Pennsylvania-based SEI in 19th Judicial District Court in Baton Rouge in 2009. That was soon after the Securities and Exchange Commission shut down Stanford's worldwide operations and alleged his investment program was nothing more than a fraudulent scheme.

But a federal judge in Dallas, where the SEC had filed its complaint, yanked the Louisiana investors' suit into his Texas court and then dismissed the case.

The Dallas judge ruled in 2011 that the Baton Rouge investors suit violated a Securities Litigation Uniform Standards Act prohibition against state court litigation that could negatively affect the nation's financial markets.

Last year, however, a three-judge panel of the U.S. 5th Circuit Court of Appeals overruled the Dallas judge and concluded that investors could pursue recovery of their losses in Baton Rouge state court.

That returned the investor claims to state District Judge Michael Caldwell, who held hearings on disputed allegations that OFI knew of Stanford's misdeeds and should have warned investors, as well as a complaint that SEI ignored a duty to tell investors that Stanford's assets were grossly overvalued. SEI's services were contracted by Stanford.

Caldwell issued a judgment last year that certified the investors' suit as a class action, meaning that all people who lost investments at Stanford Trust Co.'s Baton Rouge office could join the suit as plaintiffs against SEI, OFI and now SEI's seven insurers.

Caldwell has not yet scheduled a trial for the case.

The U.S. Supreme Court has agreed to hear arguments on appeals of related Stanford investor cases in October.

In Baton Rouge, attorneys for both SEI and OFI repeatedly have denied all allegations that their clients failed any responsibility to alert investors about Stanford's frauds.

"The role of the OFI is to regulate, not to ensure that those who invest in companies subject to OFI regulation will never lose money as a result of criminal behavior," OFI attorney David Latham told Caldwell in one court filing.

"SEI did not make any false statements" to Stanford investors, SEI attorney J. Gordon Cooney Jr. told Caldwell in September. Cooney later added: "SEI has not violated Louisiana securities law."

Court records show the investors added SEI's insurers to its list of defendants in an amended complaint that was filed Feb. 13 under seal.

Preis said Monday the amended complaint was filed under a nonpublic seal because it contains information related to OFI's exam reports on Stanford Trust, which Caldwell ruled earlier must remain confidential.

The six insurers that transferred the dispute Monday to U.S. District Judge James J. Brady are Allied World Assurance Co. (U.S.) Inc., Continental Casualty Co., Arch Insurance Co., Indian Harbor Insurance Co., Nutmeg Insurance Co. and certain underwriters at Lloyd's of London.

Those insurers told Brady a seventh firm — Endurance Specialty Insurance Ltd., of Bermuda — did not join their motion because Endurance officials had not yet been served with a copy of the investors' suit.

Stanford has been in federal custody since June 2009, when he was indicted by a federal grand jury in Houston for worldwide frauds alleged to exceed $7 billion. He was convicted on fraud charges last year and sentenced to a prison term of 115 years.

Read more:

Visit the Stanford International Victims Group - SIVG official forum


It is very important that you participate in this action. You should decide how your money is spent, and whether all available funds should be distributed to you, or should be fund ongoing efforts by the receivership and/or the joint liquidators. Don't let few persons decide for you! Please read carefully the letter, proposed by one victim, and provide your acceptance in case you agree. We need as much victims as possible supporting this letter in order to make enough pressure to achieve a prompt distribution.
March 12, 2013
Mr. Ralph Janvey
Mr. Marcus Wide
Mr. Hugh Dickson

Mr. John Little
Mr. Edward C. Snyder
Mr. Kevin M. Sadler
Mrs. Jennifer Ambuehl

Dear Mr. Janvey, Mr. Wide and Mr. Dickson,
Months have gone, it is March 2013 and the real victims of the Stanford fraud (hereinafter "we", "us") have not yet received any information about the distribution of our money located in the USA and abroad.

So far we have suffered from lack of information and transparency. However this should not happen because you are working for us.

As it was mentioned by the OSIC in January 22, 2013: "We (the OSIC) strongly believe that you, the victims of this horrible crime, should decide how your money is spent, and whether all available funds should be distributed to you, or to fund ongoing efforts by the receivership or the joint liquidators"

We demand that all the money collected so far to be immediately distributed to us.

We agreed all together with this petition and as both of you are working for us (and both of you have being paid so far with our money), you must listen to our petition. We have taken this decision, so please inform us as soon as possible:
1- how much money there is for distribution so far identified in the USA and abroad
2- how the complete distribution will be effectively implemented and how all the money will be paid to us.

We cannot keep waiting and waiting.

The real victims of the Stanford fraud
Es muy importante que participen en esta acción. Usted debe decidir cómo se gasta su dinero, y si todos los fondos disponibles deberían distribuirse a usted, o deberían financiar los esfuerzos en curso por la receptoría de Janvey y/o los liquidadores conjuntos. No dejes que pocas personas decidan por usted! Por favor lea cuidadosamente la carta, propuesta por una victima, y proporcione su aceptación en caso de que usted acepta. Necesitamos a tantas víctimas como sea posible para apoyar esta carta a fin de hacer suficiente presión y lograr una rápida distribución.
Marzo 12, 2013
Sr. Ralph Janvey
Sr. Marcus Wide
Sr. Hugh Dickson

Sr. John Little
Sr. Edward C. Snyder
Sr. Kevin M. Sadler
Sra. Jennifer Ambuehl

Estimado Sr. Janvey, Sr. Wide y Sr. Dickson,
Ya han pasado meses, estamos en Marzo del 2013 y las verdaderas víctimas del fraude de Stanford (en adelante "nosotros", "nos") aun no han recibido ninguna informacion respecto a la distribucion de nuestro dinero ubicado en USA y en el exterior.

Hasta ahora hemos sufrido por falta de información y transparencia. Sin embargo esto no deberia ocurrir ya que ustedes estan trabajando para nosotros.

Como fué mencionado por el OSIC el 22 de Enero del 2013: "Creemos firmemente que, las víctimas de este horrible crimen, deben decidir cómo se gasta su dinero, y si todos los fondos disponibles deberían distribuirse a usted, o deberían financiar los esfuerzos en curso por la receptoría o los liquidadores conjuntos"

Nosotros exigimos que todo el dinero recogido hasta ahora sea distribuido inmediatamente a nosotros.

Nosotros estamos todos de acuerdo con esta petición y como ustedes trabajan para nosotros y ambos se han pagado hasta ahora con nuestro dinero, ustedes deben escuchar nuestra petición. Nosotros hemos tomado esta decisión, así que por favor infórmenos lo antes posible:
1 - Cuánto dinero ha sido identificado hasta ahora en los Estados Unidos y en el extranjero para ser distribuido
2 - Cómo se implementará con eficacia la distribución completa y cómo se pagará todo el dinero a nosotros.

Nosotros no podemos seguir esperando y esperando.

Las verdaderas víctimas del fraude de Stanford

Read more:

Visit the Stanford International Victims Group - SIVG official forum