Judge approves Stanford class action lawsuit

December 7, 2012
By BILL LODGE

A civil suit by 86 defrauded investors was certified by a Baton Rouge judge Wednesday as a class action against Louisiana's regulator of financial institutions and a Pennsylvania company that compiled customer financial statements on behalf of convicted swindler Robert Allen Stanford.

The ruling by state District Judge R. Michael Caldwell could open the door for some 1,000 investors damaged by Stanford's fraudulent $7.2 billion scheme to join the suit. Those people now have the option to join the original plaintiffs in seeking judgments against the Louisiana Office of Financial Institutions, or OFI, and the financial services firm of SEI Investments Co.

If investors win that suit, OFI and SEI could share liability for as much as $1 billion in losses in Louisiana, according to estimates by their attorneys.

SEI took investment-performance information from Stanford, now serving a prison term of 110 years, and used it for financial statements that went to investors. But both the Pennsylvania firm and OFI deny failing any obligations to investors.

"I do certify this lawsuit as a class action," Caldwell told a courtroom populated by former Stanford investors and attorneys for all sides in the litigation.

The judge noted his decision merely opens the door for more defrauded investors to join the lawsuit against OFI and SEI. Additional litigation will be needed to determine whether those investors are entitled to recover any money from the two defendants for allegedly failing an obligation to warn them of indicators of fraud on Stanford's part.

Many people lost their money, Caldwell said, adding that there were more than 1,000 investor accounts at Stanford Trust Co. in Baton Rouge.

Additional investors' money was drawn into the scheme through Stanford Group Co.

"Some of them lost all of their money," Caldwell said of the victims. "Some of them lost hundreds of thousands of dollars, and some of them lost millions."

Phil Preis, lead attorney for the plaintiffs, said Caldwell's ruling "affords the people of Louisiana their day in court." Preis said his clients "are overjoyed."

Zachary resident and Stanford victim Kathy Mier said, "I am very, very, very excited, very happy. Someone has listened, and I'm ready to go on."

Mier and her husband, Louis Mier, lost $240,000 of their retirement nest egg to Stanford, 62.

"For the first time in a long time, I felt like someone really listened to us, and we're moving forward with our fight," Kathy Mier said.

Debbie and Ken Dougherty, of Central, recovered their principal investment in Stanford's certificates of deposit at his bank on the Caribbean island of Antigua before federal officials shut down his operations in February 2009. But they continue to face demands from a court-appointed receivership in Dallas for return of more than $100,000 in profits.

"I know this is just one hurdle, but it's huge," Debbie Dougherty said after Caldwell's certification of the class action lawsuit. "If we can get something for those folks who got nothing, then this (court fight) will be worth it."

Attorneys for OFI and SEI, however, said long before Caldwell's ruling that the government agency and financial services corporation did not violate any obligations to investors and will fight investor claims in court.

"The role of 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 actions," OFI attorney David Latham wrote in one court filing.

In May 2011, however, former Stanford employee-turned-whistleblower Charles W. Rawl testified in Washington, D.C., before the House Financial Services Subcommittee on Oversight and Investigations. Rawl told members of Congress that he advised OFI officials of corrupt Stanford practices in 2008.

In late summer 2008, Rawl testified, OFI officials blocked future sale of additional Stanford bank certificates of deposit into Individual Retirement Accounts at Stanford Trust Co.

Preis said after Caldwell's ruling: "The state examined the trust company. For a period of four years, we allege, they (OFI officials) knew of (Stanford's) Ponzi scheme."

A Ponzi is not a legitimate investment program. From beginning to end, it is intended to do nothing more than drain money from investors and transfer those assets to criminals. Early investors are paid dividends in order to attract new investors, whose money prolongs the scheme.

Both the Securities and Exchange Commission and the U.S. Attorney's Office in Houston alleged in 2009 that Stanford's operations were fraudulent from the beginning. Federal judges in Dallas and Houston have since agreed with that assessment.

But those court rulings have yet to benefit any defrauded investors. And they did not target any blame toward OFI and SEI.

SEI attorney J. Gordon Cooney Jr. told Caldwell two months ago that SEI did not falsify any information in investors' financial statements, which routinely showed healthy profits, even as Stanford's worldwide empire was collapsing.

All financial information used in those statements was provided by Stanford or his employees, Cooney added. He said SEI did not knowingly participate in the dissemination of false information to investors.

Source.

More Info: http://sivg.org/article/2012_Judge_approves_Stanford_class_action.html

Visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

2 former Stanford brokers say SEC let them down

January 5, 2012
By Purva Patel, HOUSTON CHRONICLE

Former Stanford Financial Group brokers Charles Rawl, left, and Mark Tidwell say SEC attorneys promised them legal protection, but the receiver appointed to recover assets in the case sued both of them for hundreds of thousands of dollars. Photo: James Nielsen / © 2011 Houston Chronicle

Former Stanford Financial Group brokers Charles Rawl and Mark Tidwell say they helped regulators build a fraud case by supplying the government with emails, testimony and names of people to question.

They answered questions when Securities and Exchange Commission investigators camped out at the Stanford offices near the Galleria before shutting down the firm in February 2009.

All along, they say, SEC attorneys promised them legal protection to quell their concerns about retaliation by Stanford or being lumped together with anyone implicated in the investigation.

By the end of the year, however, the receiver appointed to recover Stanford's assets sued both brokers for hundreds of thousands of dollars in earnings the receiver claims are related to the sale of Stanford financial products.

"We've been totally shafted by the system," said Rawl, who has testified about his predicament before the House Financial Services Subcommittee on Oversight and Investigations.

The former head of the Houston firm, R. Allen Stanford, is scheduled for trial later this month on charges that he swindled investors who bought CDs issued by Stanford's bank in the Caribbean island nation of Antigua.

Three other former company executives are to be tried later. A Houston federal judge on Thursday denied the latest of several attempts by Stanford's lawyers to delay his trial.

The receiver is suing Rawl for $732,946 and Tidwell for $1.1 million. Neither has anything in writing from the SEC promising protection, though their attorney confirms being told his clients would be protected. An SEC spokeswoman declined to comment.

Kevin Sadler, an attorney for receiver Ralph Janvey, said the receiver was not a party to whatever discussions the brokers may have had with the SEC.

Loss of billions

"Rawl and Tidwell were compensated well for selling CDs that were fraudulent, and they have no legal, equitable or moral right to keep the bonuses and commissions they were paid for selling CDs," he said. "These two brokers still have that money, while thousands of investors have lost billions."

None of the more than 300 former Stanford employees the receiver has sued for about $215 million in CD-related proceeds has returned any of the money made from CD sales, he said.

Other lawyers who deal with receivers noted that receivers are appointed by the court and work for the court, even if regulators suggest them for appointment.

"It would certainly be in the receiver's purview because the receiver has an independent fiduciary duty to look out for the interest of all of the creditors and other parties who may have an interest in that property," said Michael Good, a California bankruptcy attorney.

Unless Rawl and Tidwell have written documentation of an agreement with the receiver, they may not have much of a case, Houston bankruptcy lawyer Wayne Kitchens said.

Witness protection?

It would be unusual for the SEC to offer a witness any protection except from action by the SEC itself, he said.

Rawl and Tidwell say they assumed they would be protected at all levels. They say they risked their jobs by alerting Stanford management about their complaints and taking their concerns to the SEC after resigning from the firm in 2007.

It wasn't until after they filed a lawsuit in state court and news of the Bernard Madoff fraud case broke in 2008 that the SEC sought more information about Stanford, the pair said.

Rawl and Tidwell, who had adjacent offices at Stanford Financial, started their own firm in 2007. But the pending lawsuit makes it difficult to get new business or licensing in other states, they said, and the litigation prompted the Certified Financial Planners Board of Standards to open inquiries into their certifications.

Lawsuits between the pair and Stanford Financial before the firm was shut down also fueled rumors that the two were responsible for the company's downfall.

In litigation that has since been put on hold as the government proceeds with its case against the firm, the pair said they were forced to resign because they didn't want to comply with certain business practices they found alarming. The firm countered with its own suit, calling them disgruntled employees who were fired and owed the company hundreds of thousands in loans that were part of their compensation packages.

"I did exactly what I was supposed to do. I did it without any protection from the law, and I'm the bad guy," Tidwell said. "It's disheartening to know that American citizens are relying on this system to protect them, and they're going to be more than disappointed."

Source.

Related article: How the SEC really treats "Whistleblowers" - Second Part.

Read more: http://sivg.org/article/2012_brokers_SEC_let_them_down.html

Visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/