SIPC: $5.44 BILLION NOW DISTRIBUTED TO MADOFF VICTIMS

April 1, 2013
By Ailis Aaron Wolf

Madoff Trustee's Third Distribution Sends Approximately $506.2 Million to Customers With Allowed Claims.

With the distribution of approximately $506.2 million to victims in the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS), a total of $5.44 billion will now have been distributed to BLMIS customers with allowed claims. The Securities Investor Protection Corporation (SIPC) today applauded the hard work of Trustee Irving H. Picard and his attorneys in their continued efforts to recover and return funds to BLMIS customers.

When combined with the funds already returned to BLMIS customers from the Customer Fund and advances from SIPC, more than 50 percent of the total Madoff accounts with allowed claims will be fully satisfied following the third interim pro rata distribution. A total of 1,106 accounts will be fully satisfied following the third interim distribution out of a total of 2,178 accounts with allowed claims.

Since December 2008, $9.32 billion has either been recovered or agreements reached to recover funds to return to BLMIS customers. This amount is more than 53 percent of the approximately $17.5 billion in principal estimated to have been lost by BLMIS customers who filed allowed claims. The Trustee's recovery of more than $9.32 billion has been made possible through advances provided by SIPC, which is funded by the securities industry. To date, SIPC has committed approximately $807 million to pay customer claims and over $718 million to fund the liquidation proceeding. No monies recovered by the Trustee have been used to pay any administrative expenses. All recoveries made by the Trustee benefit customers.

SIPC President Stephen Harbeck said: "Thanks to the significant Tremont Funds settlement, which allocated more than $1 billion to the BLMIS Customer Fund, and additional funds recovered by Trustee Picard and his team since last fall, additional distributions continue to be made in an effort to fully satisfy as many BLMIS allowed claims as possible. We applaud the hard work Trustee Picard has undertaken to recover monies and distribute them to customers at the failed BLMIS brokerage. His successful efforts have resulted in the ability to fully satisfy more than half of the BLMIS accounts with allowed claims, a significant achievement. SIPC is pleased to continue to facilitate the work of the Trustee to make possible the maximum recovery and return of funds to customers."

ABOUT SIPC

The Securities Investor Protection Corporation is the U.S. investor's first line of defense in the event of the failure of a brokerage firm owing customers cash and securities that are missing from customer accounts. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds.

The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities - such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims for customer cash and/or securities held in custody with the broker for up to a maximum of $500,000 per customer. This figure includes a maximum of $250,000 on claims for cash. From the time Congress created it in 1970 through December 2011, SIPC has advanced $ 1.8 billion in order to make possible the recovery of $ 117.5 billion in assets for an estimated 767,000 investors.

Read more: http://sivg.org/article/2013_SIPC_6_BILLION_DISTRIBUTED_TO_MADOFF_VICTIMS.html

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ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

September 7, 2012
By Dr. Gaytri D. Kachroo

THIS MATTER is before the Court on the Defendant's Motion to Dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) (ECF No. 12). For the reasons explained in this Order, the Motion to Dismiss is granted in part and denied in part.

A. The Plaintiffs Have Adequately Alleged That The Securities and Exchange Commission Failed To Comply With a Nondiscretionary Duty to Report Stanford's Company To The Securities Investor Protection Corporation, Pursuant to 15 U.S.C. § 78eee(a)(1).

B. The Plaintiffs Have Not Adequately Alleged That The Securities and Exchange Commission Failed To Comply With a Nondiscretionary Duty Regarding Stanford's Company Re-Registration As an Investment Advisor, Pursuant to 15 U.S.C. § 80b-3(c).

While the determination of whether a broker/dealer is in or approaching financial difficulty is inherently discretionary, once the SEC concludes that a broker/dealer is in or approaching financial difficulty a nondiscretionay duty to report this information to the SIPC arises. However, the SEC's treatment of an investment advisor's amendment to its Section 80b-3 registration application involves an element of judgment grounded in policy considerations, and thus falls under the discretionary function exception of the FTCA.

For the reasons detailed in this Order, the Defendant's Motion to Dismiss (ECF No. 25) is DENIED in part with regard to the Plaintiffs' claims relating to the SEC's alleged breach of its duty under 15 U.S.C. § 78eee(a)(1). The Motion to Dismiss is GRANTED in part regarding the Plaintiffs' claims relating to the SEC's alleged breach of its duty under 15 U.S.C. § 80b-3(c). The Plaintiffs shall file an Amended Complaint on or before September 21, 2012, consistent with this Order. The Defendant's answer is due fourteen days after the Plaintiffs' Amended Complaint is filed.

Source.

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Opposition to the USA's motion to dismiss the complaint

April 6, 2012
By Dr. Gaytri D. Kachroo

Plaintiffs hereby oppose the United States of America's Motion to Dismiss the Complaint (the "Motion"). This Court has subject matter jurisdiction over this action because the government fails to demonstrate that the discretionary function exception shields from liability the Securities and Exchange Commission's ("SEC") negligent failure to follow statutorily prescribed courses of action in the wake of its discovery of Robert Allen Stanford's Ponzi scheme.

The government's strategy on this Motion is to paint with a very broad brush. Thus, the government argues that "the manner in which the SEC chooses to regulate the securities industry" is discretionary conduct protected by the discretionary function exception in the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 2680(a). Generalized this way, the government's argument obviously cannot be contested. But framing the issue this way only creates a paper tiger. The conduct challenged in this case is not the SEC's regulation of the industry writ large, but rather its failure to comply with two specific, non-discretionary mandates. The government's over-generalization of the issue is an effort to move the battle to safer ground. This misdirection does not survive scrutiny.

Moreover, such a macro approach to the discretionary function exception results in the reverse of what Congress intended, which was to construe the remedial provisions of the FTCA liberally and the exceptions narrowly. If every claim against the SEC were to be construed as an attack on "the manner in which the SEC chooses to regulate the securities industry," then this narrow exception would swallow the general waiver and afford the SEC virtual immunity, contrary to Congress' intent. Indeed, as the government itself points out, Congress considered exempting the SEC from the FTCA entirely, but ultimately, did not do so.

Thus, the crucial first step in determining whether the exception applies is to isolate the specific conduct actually being challenged. Here, the Complaint does not make a broad attack on the manner in which the SEC regulates the securities industry, but rather, challenges two specific instances of SEC inaction: (1) a failure to notify the Securities Investor Protection Corporation ("SIPC") that U.S. registered broker-dealer Stanford Group Company "SGC") was in financial difficulty, after concluding that it was; and (2) a failure to deny continued registration to SGC as an investment advisor in light of the SEC's determination that SGC failed to satisfy registration requirements.

These negligent omissions violated statutorily mandated duties to take prescribed courses of action and thus, were not and could not have been permissible policy choices. As the Supreme Court has explained and courts have consistently held, where there exists a mandatory responsibility, there is no room for a policy choice. Moreover, even if the government could show that the SEC's negligent omissions involved the exercise of judgment, the government also fails to demonstrate, as it must, that such judgment was grounded in considerations of public policy.

Source: PLAINTIFFS' OPPOSITION TO THE UNITED STATES OF AMERICA'S MOTION TO DISMISS THE COMPLAINT

Related documents:

Motion to dismiss plaintiffs' complaint and incorporated memorandum of law.

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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).

CLASS ACTION AND INDIVIDUAL COMPLAINT.

Related article:
Stanford Investors Sue SEC for Losses in Alleged Swindle (Edward Gonzales)

Source: http://sivg.org/article/KLS_complaint_against_SEC.html

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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.

Source.

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...

Read the complete letter here.

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.

Source.

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.

Read the complete letter here.

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Cassidy Leads Effort to Send Letter to SIPC Chairman Regarding Stanford Ponzi Scheme

November 30, 2011
PRESS RELEASED By centralSpeaks

WASHINGTON, D.C. – Today, Congressman Bill Cassidy, M.D., along with 26 Members of Congress, signed a bi-partisan letter to Chairman Orlan M. Johnson of the Securities Investor Protection Corporation.

The letter urges Chairman Johnson to act more quickly to compensate the victims of the Stanford Ponzi scheme. It has been more than five months since the SEC determined that certain victims of the Stanford Ponzi scheme were entitled to SIPC protection for their losses, and the victims in the sixth Congressional District and around the country are still waiting for answers.

"SIPC has an obligation to live up to its responsibilities, and I am hopeful that they will provide the Stanford Victims with the news they have been waiting for since this tragedy began. This letter is just one part in a three year effort by the members of Congress who represent the victims to continue to push for a final resolution," said Congressman Cassidy.

The US Congress has written to the Securities Investor Protection Corporation (SIPC) demanding action in the payment of victims of the alleged R Allen Stanford Ponzi Scheme.

The letter was sent to Chairman Orlan Johnson on November 22th.

The Congress wants a "satisfactory update" or a decision on the matter by December 15. Failing this, it has threatened to recommend a formal inquiry by the House Financial Services Committee.

Source.

Read the complete Letter to SIPC Chairman.

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Compensating Stanford's Investors

	June 20, 2011 The Securities and Exchange Commission froze the assets of R. Allen Stanford's financial empire almost two years ago. But authorities are still figuring out whether investors can get compensated for some of their losses. The S.E.C. is pushing for investors who bought more than $7.2 billion in allegedly bogus certificates of deposit from Mr. Stanford's Antiguan bank to be treated as brokerage customers by the Securities Investor Protection Corporation. If that happens, clients could get at least some of their money back.
Richard Carson/Reuters R. Allen Stanford arrives at a federal court in August 2010 for a hearing in his alleged fraud case.
SIPC provides a measure of protection for customers when a broker becomes insolvent, paying up to $500,000 per customer that includes $250,000 in cash. The program, which is not intended to provide insurance against fraud, only covers the brokerage firm's customers and not those who dealt with an affiliate, like an offshore bank, that is not qualified to participate in the program. Mr. Stanford's financial empire included a brokerage firm, called the Stanford Group Company, which promoted the C.D.'s to investors by promising above-market returns. The actual issuer of the C.D.'s, however, was his Antiguan bank, Stanford International Bank. The entity was not a broker-dealer and so it fell outside of the protections afforded by SIPC.

White Collar Watch

In a letter sent in August 2009 to the trustee appointed to gather assets for Mr. Stanford's investors, SIPC denied that it was required to provide any coverage because the C.D.'s were bought from the offshore bank, even though the brokerage arm marketed them. The agency explained that the Stanford Group Company was merely an "introducing" broker that was not responsible for maintaining any securities on behalf of customers. As such, the agency was not responsible when the Antiguan bank collapsed and the C.D.'s became worthless.

The S.E.C. took a different position last week. In an analysis of the case, the S.E.C. told SIPC that it was putting form over substance by focusing solely on which of the various entities controlled by Mr. Stanford had issued the C.D.'s. Under the S.E.C.'s rationale, Mr. Stanford ignored those legal niceties and treated the various companies as one source of money for his alleged Ponzi scheme, taking money from each as if it were his personal piggy bank. "Credible evidence shows that Stanford structured the various entities in his financial empire," according the S.E.C. "for the principal, if not sole, purpose of carrying out a single fraudulent Ponzi scheme."

The S.E.C. asserted in its analysis that SIPC should cover investors. In effect, the agency said Mr. Stanford effectively stole from customers of the brokerage firm by selling worthless C.D.'s, much like the Ponzi scheme perpetrated by Bernard L. Madoff in which fictitious securities totaling $64 billion were credited to client accounts when it collapsed.

But the S.E.C. also makes it clear that any calculation of victim claims should not be based on the purported value of the C.D.'s reflected on the account statements provided by Stanford International Bank, but instead only the actual amount invested. Not surprisingly, this is the same position taken by the trustee appointed to liquidate Mr. Madoff's firm, Irving H. Picard, and SIPC in dealing with investors in that Ponzi scheme.

The S.E.C. urged SIPC to initiate a liquidation proceeding like the one undertaken by Mr. Picard, including the appointment of a trustee to weigh claims from investors. This is more than just a request, however, because the S.E.C. has supervisory authority over SIPC. The last line of its analysis was a rather unsubtle hint to compensate investors:

"In a further exercise of its discretion, the Commission has authorized its staff to file in district court an application under Section 11(b) of [Securities Investor Protection Act] to compel SIPC to initiate a liquidation proceeding in the event SIPC refuses to do so."

If SIPC does liquidate Mr. Stanford's brokerage operation, not all investors may benefit, as some victims of Mr. Madoff are discovering.

Mr. Picard successfully argued in the federal bankruptcy court that those who withdrew more from their accounts with Mr. Madoff than they invested – the so-called "net winners" – are subject to clawback suits to repay their profits and have no claim for losses. The "net winners" issue was argued before the United States Court of Appeals for the Second Circuit in March, and a decision is likely to come in the near future.

It is not clear whether there were any "net winners" among Mr. Stanford's investors. But there is a good possibility that some investors closed their accounts and took profits before the scheme collapsed. Any investors who profited on the C.D.'s from the Antiguan bank could face a similar situation to the "net winners" targeted by Mr. Picard.

I expect there to be similar clawback suits filed if SIPC does accede to the S.E.C.'s request. Given how contentious the Mr. Picard's lawsuits against "net winners" have been, we can expect more of the same if SIPC liquidates Mr. Stanford's brokerage firm.

The S.E.C.'s announcement had another salutary effect. Just a day before it issued its analysis, Senator David Vitter, Republican of Louisiana, placed a hold on the nominations of two commissioners to the S.E.C. until it announced its position on whether the investors were protected by SIPC.

The hold on the nominations has been removed, and everyone – except perhaps SIPC – is a bit happier. But when Mr. Stanford's investors will receive some compensation for their losses is still unclear because a liquidation is only the start of the process, as the Madoff case shows.

Source.

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SIPC ISSUES WARNING ON "PHISHING" SCAM TARGETING INVESTMENT SCAM VICTIMS

June 17, 2011

The Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms, issued a warning today to consumers who are contacted by individuals falsely claiming to represent SIPC when asking for personal information or payments in order to return funds lost in investment scams.

SIPC officials said they have been contacted by several individuals alerting them to this scam, some of whom have lost money in the past to investment scams or were contacted by promoters of such schemes and then declined to invest.

In cases where an individual had lost money in the past to a fraudulent investment, they were contacted by email or phone and asked to pay a fee up-front to recover their lost money. Within a few weeks of declining to pay the fee, they are contacted by someone claiming to be from SIPC saying they have seized the assets of the company that defrauded them and wish to return the money to investors. The phony "SIPC agent" requests that the individual fill out a form with personal information and send it back.

SIPC President Stephen Harbeck reiterated: "When the liquidation of a brokerage firm is handled by SIPC, investors with missing stocks or cash do not pay a fee for recovery of those assets. Any individuals contacted by supposed representatives of SIPC who request an upfront fee or personal information should be extremely wary."

For more information, contact SIPC at asksipc@sipc.org or (202) 371-8300.

SIPC said that it has referred this scheme to the proper authorities for investigation.

ABOUT SIPC

The Securities Investor Protection Corporation is the U.S. investor's first line of defense in the event a brokerage firm fails, owing customers cash and securities that are missing from customer accounts. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds.

The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities - such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims for customer cash and/or securities held with the broker for up to a maximum of $500,000 per customer. This figure includes a maximum of $250,000 on claims for cash. From the time Congress created it in 1970 through December 2010, SIPC has advanced $ 1.6 billion in order to make possible the recovery of $ 109.3 billion in assets for an estimated 739,000 investors.

MEDIA CONTACT: Ailis Aaron Wolf, (703) 276-3265 or aawolf@hastingsgroup.com.
All investor inquiries of SIPC should be directed to asksipc@sipc.org or (202) 371-8300.

This information was sent by Lucy Komisar LK@lucykomisar.com | http://thekomisarscoop.com/

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Block SEC Nominees Until Stanford Victims Get Answers

June 14, 2011

(Washington, D.C.) – U.S. Sen. David Vitter today announced that he will block the nominations of two Securities and Exchange Commission members until the SEC responds to a request by victims of the alleged Stanford Group Co. Ponzi scheme who are seeking to receive Securities Investor Protection Corporation coverage for their losses.

"Unfortunately, the SEC has not yet given the Stanford victims an answer despite my repeated conversations with Chairwoman Mary Schapiro," said Vitter. "Many of these folks in Louisiana and along the Gulf region lost their life savings, and they at least deserve a direct answer on their request for coverage. After months of delay the commission has now met a number of times to consider SIPC coverage for Stanford's victims. It would be salt in the wound of these victims for Congress to force those discussions to start over by approving new commissioners.

"We've known for some time that the SEC waited far too long to take action against Allen Stanford, and now they're dragging their feet in responding to the victims. I will continue to hold them accountable – including holding these nominations – until these fraud victims get an up-or-down answer from the SEC on SIPC so they can move forward in the process, and if necessary, file a judicial appeal."

At a U.S. Senate Banking Committee hearing last year, Vitter raised concerns about the SEC's misleading statements about its handling of the Stanford case. An Inspector General's report showed the SEC's examination office had been looking into the Stanford Group since 1997 and were concerned it was a "possible Ponzi scheme," but at a previous banking committee hearing, SEC officials claimed the investigations only began in 2004.

The SEC has five commissioners who are appointed by the President with the advice and consent of the Senate. Mr. Daniel M. Gallagher (a partner at the law firm Wilmer Cutler Pickering Hale & Dorr LLP) has been nominated to fill the seat being vacated by Commissioner Kathleen Casey and the Honorable Luis Aguilar is being re-nominated because the term for which he is now serving expires June 5, 2010. Vitter is concerned that because the Commission has claimed to be close to a ruling, bringing a new commissioner into the mix would unnecessarily slow down the pace.

Once the SEC issues a recommendation on the coverage of claims of Stanford's alleged victims, Vitter would release his hold on SEC nominees Luis Aguilar and Daniel Gallagher, his office said.

Some of Vitter's comments at the hearing:

"I unfortunately came away from today's hearing even more convinced that the SEC has been purposely misleading this committee about the agency's mishandling of the Stanford case," said Vitter. "The Inspector General's latest report clearly showed that the SEC's examination office had been looking into the Stanford Group since 1997 and were concerned it was a ''possible Ponzi scheme.'' Yet, at a Senate Banking Committee hearing last August, SEC officials claimed the investigations only began in 2004.

"As if the fraud Stanford committed wasn't bad enough, the agency's attempts to cover up its negligence pour salt on the wound of Stanford's victims, who have already lost much of their life savings.

"There are critical discrepancies between the IG report and the testimony we've heard from SEC officials, and Ms. Romero's answers to the Senate Banking Committee raise more questions about her credibility and those who helped her prepare her testimony. I'm going to continue demanding answers and working with the Senate Banking Committee to get the answers Stanford's victims deserve because it's not yet clear how high up the chain the deception goes at the SEC."

Source.

Boustany Seeks Justice for Stanford Victims

Washington, DC – U.S. Congressman Charles W. Boustany, Jr., MD (R-Southwest Louisiana), a leading voice in Congress for the victims of the Stanford Ponzi schemes, today praised his Senate colleague for pledging to stop the nominations to the Securities and Exchange Commission (SEC). U.S. Senator David Vitter announced he will block the nominations of Daniel M. Gallagher and Luis Aguilar to the SEC until the commission assists victims of the Stanford schemes with Securities Investor Protection Corporation coverage.

"We must continue to fight the Administration for the answers they are unwilling to provide," Boustany said. "These nominees should be withheld until the SEC answers the questions I've asked on behalf of the victims of this scheme. I am determined, along with Senator Vitter, to help Stanford victims gain financial relief and will continue to push for remedies through the SEC and in Congress."

In April, Congressman Boustany demanded answers from the SEC on their efforts to assist Stanford victims. The SEC response defended their two-year investigation but provided no further details.

Congressman Boustany also joined Representative Bill Pascrell, Jr. (D-NJ) to introduce the Ponzi Scheme Victim's Tax Relief Act of 2011. The bill expands the net operating loss carryback period for investors in a Ponzi-type scheme from five to 10 years. Victims who lost money in a Ponzi scheme can recoup the losses by declaring them as net operating losses during previous tax years and collecting refunds from those tax years.

Paul Coussan
Press Secretary
Rep. Charles Boustany, Jr. MD (LA-07)
1431 Longworth House Office Building
Washington, DC 20515
(337) 288-1665
Paul.Coussan@mail.house.gov
www.boustany.house.gov

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