Stanford Judge Approves Interim Distribution to Victims

By Tom Korosec & Andrew Harris

A plan by a court-appointed receiver to distribute assets recovered from R. Allen Stanford's Ponzi scheme to investors was approved by a federal judge in Dallas.

U.S. District Judge David C. Godbey accepted the plan by Ralph Janvey, the receiver appointed in 2009 to marshal and liquidate Stanford's personal and business assets, to make a $55 million interim distribution to about 17,000 claimants, or about 1 cent for each of the $5.1 billion lost in the fraud scheme.

"We will follow it up in a subsequent distribution as the money comes in," Janvey's attorney, Kevin Sadler of Baker Botts LLP, told Godbey at a court hearing in April.

Ponzi scheme victims of Bernard L. Madoff, who was arrested in December 2008, recovered more than $5.4 billion. Clients of the MF Global Inc. brokerage were paid about $4.9 billion after its parent, MF Global Holdings Ltd., failed in October 2011. Victims of a scheme by Peregrine Financial Group Inc. founder Russell Wasendorf, who prosecutors last year said stole $215 million, received an interim distribution of $123 million.

A federal jury in Houston last year found Stanford, 63, guilty of lying to investors about the nature and oversight of certificates of deposit issued by his Antigua-based bank. The jurors decided he must forfeit $330 million in accounts seized by the U.S. government.

The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

Source.

 

Read the ORDER APPROVING RECEIVER'S INTERIM DISTRIBUTION PLAN.

STANFORD RECEIVERSHIP CERTIFICATION NOTICE

Before making distribution payments under the Interim Plan, the Receiver is required to send a Certification Notice to the Investor CD Claimants. This Certification Notice must ask each Investor CD Claimant for certification regarding whether they have applied for or received compensation for their claimed losses from sources other than the Receivership and, if so, the amount of such compensation. Investor CD Claimants must timely respond to this Certification Notice as a condition of receiving payment under the Interim Plan.
EXHIBIT B: CERTIFICATION NOTICE

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Allen Stanford Told to Disgorge $6.7 Billion in SEC Case

April 26, 2013
By Andrew Harris

R. Allen Stanford, the Texas financier convicted last year of leading an investment fraud scheme, was ordered to disgorge more than $6.7 billion by the judge in a U.S. Securities and Exchange Commission lawsuit.

U.S. District Judge David Godbey in Dallas issued the order yesterday against Stanford, his Stanford Group Co. and the Antigua-based Stanford International Bank Ltd.

The order may clear the way for Godbey to grant a court- appointed receiver's request to make an interim $55 million payout to investors who lost money after buying certificates of deposit issued by the Stanford Bank.

"The fraud perpetrated was obviously egregious, was done with a high degree of scienter, caused billions in losses and occurred over the course of a decade," Godbey said, using the legal term to describe the mental state of intent to deceive.

A federal jury in Houston convicted Stanford of lying to investors about how their money was being handled.

"The truth is that he flushed it away," Justice Department lawyer William Stellmach told jurors in his closing arguments at the March 2012 trial. "He told depositors he was using their money in one way and the truth was completely different."

Stanford, 63, was sentenced to 110 years in prison. Maintaining his innocence, he has appealed the verdict.

Parallel Judgment

Godbey referred to the jury's guilty finding in granting the SEC's request he render a parallel judgment in their case filed in February 2009, four months before the financier was indicted. The judge also cited the August 2009 guilty plea by Stanford Group Chief Financial Officer James Davis.

"The court finds that $5.9 billion is a reasonable approximation of the gains connected to Stanford's fraud," Godbey said of the sum he would order disgorged. He then added more than $861 million in interest for a total of $6.76 billion. Davis too is jointly liable.

Finally the judge imposed a $5.9 billion penalty on Stanford and a $5 million assessment against Davis, who received a five-year prison sentence.

The court-appointed receiver, Ralph Janvey, asked Godbey this month for permission to begin repaying some of the losses incurred by the more than 17,000 claimants. At an April 11 hearing, the judge told Janvey's lawyer, Kevin Sadler, he was concerned about doing so before a final order had been entered against Stanford.

Societe Generale

In a separate filing today, a group of Stanford investors asked Godbey to grant them a judgment of at least $95 million in a lawsuit against a unit of Paris-based Societe Generale SA. (GLE)

The lender's Societe Generale Private Banking (Suisse) unit took the money from a Stanford bank account with his permission in December 2008 to repay a loan made to him four years earlier, according to court papers.

The financier had caused a business funded by Stanford investor-depositor money to guarantee the loan in 2007, the investors alleged, while those depositors received no benefit. The transfer of that money to Societe Generale just two months before the SEC sued Stanford and shut down his businesses was a fraudulent transfer, the investors claimed in today's filing.

Ken Hagan and Jim Galvin, New York-based spokesman for the French bank, did not immediately reply to voicemail messages seeking comment on the allegations.

Slush Fund

Davis, the CFO, testified at Stanford's trial that the financier maintained a Societe Generale Swiss bank account, funded by investor deposits.

"It was a slush fund, just used for whatever the holder wanted to use it for," Davis said during the Houston federal court trial in February 2012.

The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

The investors' case is Rotstain v. Trustmark National Bank, 09-cv-02384, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

Source.

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Louisiana officials want release of SEC report in Stanford case

April 22, 2013
By BILL LODGE

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."

Source.

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OPEN LETTER FOR IMMEDIATE RELEASE

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.

OPEN LETTER FOR IMMEDIATE RELEASE

March 12, 2013
FOR IMMEDIATE RELEASE

TO:
Mr. Ralph Janvey
Mr. Marcus Wide
Mr. Hugh Dickson

CC:
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.

Sincerely,
The real victims of the Stanford fraud

Sign the open letter to Janvey and JLs. ( View how many victims have accepted this letter)


------------ Versión en español ------------

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.

CARTA ABIERTA PARA SU DIFUSIÓN INMEDIATA

Marzo 12, 2013
PARA PUBLICACIÓN INMEDIATA

PARA:
Sr. Ralph Janvey
Sr. Marcus Wide
Sr. Hugh Dickson

CC:
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.

Sinceramente,
Las verdaderas víctimas del fraude de Stanford

Firmar la carta abierta para Janvey y JLs. ( Ver cuantas víctimas han aceptado esta carta)

Read more: http://sivg.org/article/2013_OPEN_LETTER_TO_JANVEY_AND_JLs.html

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Complaint against PROSKAUER ROSE, LLP, CHADBOURNE & PARKE, LLP, and THOMAS V. SJOBLOM

August 8, 2012
By ATTORNEYS FOR THE OSIC

Ralph S. Janvey, in his capacity as the Court-Appointed Receiver for the Stanford Receivership Estate, and the Official Stanford Investors Committee file this First Amended Complaint (the "Complaint") against Defendants PROSKAUER ROSE, LLP, CHADBOURNE & PARKE, LLP, and THOMAS V. SJOBLOM (collectively, the "Defendants").

Defendant Proskauer Rose, LLP ("Proskauer") is a limited liability partnership organized under the laws of the State of New York. Defendant Proskauer has already appeared in this action.

Defendant Chadbourne & Parke, LLP ("Chadbourne") is a limited liability partnership organized under the laws of the State of New York. Defendant Chadbourne has already appeared in this action.

Together, Defendants Proskauer and Chadbourne are collectively referred to as the "Law Firm Defendants".

Defendant Thomas V. Sjoblom ("Sjoblom") is an individual who currently resides in the State of Virginia. Defendant Sjoblom has already appeared in this action.

Defendants Proskauer and Chadbourne are liable for the tortious acts of their employee, Defendant Sjoblom. From the time that Sjoblom joined the conspiracy described herein in June 2005 until sometime in August 2006, Sjoblom was employed by Chadbourne. Thereafter, from August 2006 through late 2009, Sjoblom was an employee of Proskauer. Sjoblom was acting within the course and scope of his respective employments with Proskauer and Chadbourne, and in furtherance of said law firms' respective businesses, when he engaged in the wrongful conduct described herein.

The Stanford Financial companies, and therefore the Receiver and/or the Committee, have suffered the loss of billions of dollars in assets that were proximately caused by the wrongful conduct of Defendants and their conspiracy with Allen Stanford and others as described herein. In the alternative, Defendants Chadbourne, Proskauer and Sjoblom are liable for all damages caused to Stanford Financial, and therefore to the Receiver and/or the Committee, during the time period from 2005 to 2009 when the Defendants participated in the conspiracy to obstruct the SEC investigation of Stanford Financial's, SIBL's, and SGC's fraudulent sales practices. In addition, the Receiver and/or the Committee are entitled to recover their just and reasonable attorneys' fees, subject to Court approval, for it would be inequitable not to award such fees to them. The Receiver and/or the Committee have retained the undersigned attorneys and have agreed to pay them a reasonable attorneys' fee for their work.

The Receiver and the Committee request that the Defendants be summoned to answer this Complaint, that the case be tried before a jury, and that upon final judgment the Receiver and the Committee recover their damages as alleged herein, including their actual damages, punitive damages, and their costs and expenses of suit, including reasonable attorneys' fees. The Receiver and the Committee pray for such other relief to which they may be justly entitled.

Source.

Related article:
Stanford Investors Accuse Lawyer, Law Firm of Aiding Fraud

Insight: How Allen Stanford kept the SEC at bay

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

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

Stanford Judge Lets Receiver Raise Fee, Retains 20% Discount

April 5, 2012
By Andrew Harris and Edvard Pettersson

The court-appointed receiver for R. Allen Stanford can bill his time starting this year at 2012 rates with a 20 per cent discount in spite of objections by Stanford investors who haven't received any money so far.

U.S. District Judge David C. Godbey in Dallas, in an order yesterday, imposed a 10 per cent "holdback" on out-of-pocket expenses. In a separate order today, Godbey approved the payment of $1.6 million in fees and expenses that the receiver, Dallas lawyer Ralph Janvey, had requested and said he could apply later for the held-back amount of $382,253.

Janvey's outside counsel, Kevin Sadler, argued at a hearing yesterday that the receiver's team has been working at the same pay rates since 2009. Sadler said that Janvey, who regularly charges his clients $500 an hour, has been billing $340 an hour on the Stanford case and then discounting that by 20 per cent.

A federal jury in Houston last month found Stanford, 62, guilty of fraud in what prosecutors said was a $7 billion scheme involving bogus certificates of deposit at his Antigua-based bank. He's scheduled to be sentenced on June 14. Janvey, whom Godbey appointed in February 2009 -- four months before Stanford was indicted -- and his outside professionals, including Baker Botts LLP (1143L), have been paid more than $52 million. That sum doesn't include a court-imposed $16 million hold-back.

RESPONSE OF THE OFFICIAL STANFORD INVESTORS COMMITTEE

The Official Stanford Investors Committee (the "Committee"), respectfully submits this Response to the Receiver's Motion for Approval of Request to Amend Fee Structure and Holdback [Doc. No. 1543].

The Committee, which speaks for the more than 20,000 investor victims of Allen Stanford's Ponzi scheme, opposes the relief requested by the Receiver and his team of professionals. The Receiver's professionals have been well compensated in the 3 years of this Receivership, having collected well in excess of $52 million in fees (with an additional almost $16 million in reserve via the holdback). During this same time period the investor victims have not recovered a single penny as there have been no distributions. Given the current state of this receivership, the Committee cannot agree to giving the Receiver's professionals what is widely perceived within the investor community as a "raise".

Therefore the Committee opposes the relief requested.

Response of the official Stanford investors committee to Receiver's motion to amend fee structure and Holdback.

Related documents:

The Examiner John J. Little does not oppose the Receiver's request to increase the rates billed by the Receiver and his professionals.

SEC PLAINTIFF'S RESPONSE TO RECEIVER'S MOTION TO AMEND FEE STRUCTURE AND HOLDBACK.

APPENDIX IN SUPPORT OF PLAINTIFF'S RESPONSE TO RECEIVER'S MOTION TO AMEND FEE STRUCTURE AND HOLDBACK.

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Judge Hands SEC Initial Victory in Suit Against Insurance Fund

February 10, 2012
By ANDREW ACKERMAN

A federal judge Thursday handed the Securities and Exchange Commission a partial victory in its suit against an agency that insures U.S. brokerage accounts to force it to pay investors in R. Allen Stanford's alleged $7 billion Ponzi scheme.

U.S. District Court Judge Robert Wilkins ruled the SEC didn't need to go through a full-fledge civil trial to force the Securities Investor Protection Corp. to start a liquidation proceeding to begin compensating Mr. Stanford's victims.

Judge Wilkins ruled that a trial, which SIPC sought, didn't comport with the agency's purpose of providing "prompt, summary proceedings" when a securities firms fails. Instead, he ordered a "summary proceeding," that would be fully briefed by the end of February.

But it wasn't a total legal victory for the SEC. The agency had essentially argued that it could determine on its own if SIPC had failed in its responsibilities. "This contention is untenable," Judge Wilkins wrote. "This determination must be made by the court, not unilaterally by the SEC."

In a statement, SEC Chief Litigation Counsel Matthew Martens said the agency is pleased with the judge's decision to expedite the case in lieu of "full-blown litigation that could drag on for years and greatly delay relief to the Stanford investors."

"We look forward to a prompt resolution of this important matter so that claimants can have the chance to seek judicial review of their claims," he said.

A spokesmen for SIPC couldn't be reached for comment.

Federal prosecutors and the SEC charged Mr. Stanford in 2009 with fabricating high returns to lure investors around the world to buy about $7 billion of fictitious certificates of deposit from Stanford International Bank Ltd. in Antigua, the island where he was knighted. Mr. Stanford is alleged to have misappropriated billions of dollars of investor money and invested an undetermined amount in unprofitable private businesses he controlled. He has denied the charges and his trial began last month.

The SEC filed its lawsuit against SIPC in December, after negotiations between the two agencies reached an impasse on the Stanford matter. It is the SEC's first lawsuit against SIPC in the insurance fund's 42-year history.

The dispute hinges on how SIPC's mission is interpreted and builds on the SEC's bid to protect investors more aggressively in the wake of several high-profile missed cases. SIPC maintains a special reserve fund authorized by Congress to compensate investors who lose money in failed brokerage firms.

The SEC, several lawmakers and numerous Stanford customers contend SIPC should use its powers to help Mr. Stanford's alleged victims. SIPC says it can't do so because Mr. Stanford's alleged victims didn't lose money in a failed brokerage firm; they bought CDs issued by a bank and continue to hold those assets, even if they are worthless.

The SEC said in June that it disagrees with SIPC's stance and authorized the lawsuit if SIPC didn't begin a liquidation of Stanford Group, a U.S.-based broker-dealer through which Mr. Stanford sold the certificates to American investors.

Roughly 7,800 people bought their CDs through Stanford Group, which is a SIPC member, according to estimates by the court-appointed receiver in the case, Ralph Janvey. In its June analysis, the SEC argued that SIPC's position elevates form over substance and ignores the fact that Stanford allegedly structured the various entities of his financial empire principally to carry out a single fraudulent Ponzi scheme.

Even if the SEC ultimately prevails in its suit against SIPC, Judge Wilkins signaled Thursday it wouldn't immediately lead to relief for Mr. Stanford's victims. A Texas court overseeing Mr. Janvey would ultimately decide on the merits of any claims filed by former customers, Judge Wilkins said.

Source.

You can find here the complete information in pdf file:

Judge Wilkins Opinion regarding SEC SIPC Order.

Order to SIPC to Show Cause.

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

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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

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Madoff's case bigger, but Stanford's messier

	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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