$83.5M Suit Says Willis Group Aided Stanford Fraud

By Law360

A group of holders of Stanford Financial Group CD accounts claims that Willis Group Holdings Public Limited Co. helped perpetuate Robert Allen Stanford's $7 billion Ponzi scheme, according to an $83.5 million class action removed from Florida state court Monday.

The plaintiffs, 64 citizens of El Salvador, Nicaragua, Panama, the United States and Spain who claim combined losses of more than $83.5 million, say that when they made their investments in Stanford Financial CDs, they relied on "safety and soundness" letters issued by Willis asserting that Stanford International Bank and its products were protected by certain insurance policies and were highly liquid.

"In fact, the Stanford Financial CDs were not CDs at all, but unregistered, unregulated securities sold illegally from Stanford Financial's home base in the United States," the plaintiffs say in their complaint. "These investments had no insurance and were fraught with risk."

The case is not the first to lay such accusations against Willis. In 2009, a class of between 1,200 and 5,000 Venezuelan clients sought $1.6 billion over claims they were allegedly lured into the scheme by the insurance brokers' assurance that Stanford CDs were sound, insured investments. And in another suit that year, Mexican investors implicated Willis, claiming the defendants contributed to a fraud that cost them roughly $1 billion.

Stanford was sentenced in June 2012 to 110 years in prison after being convicted on charges he misappropriated billions of dollars in investor funds, including some $1.6 billion he allegedly moved to a personal account. His $7 billion Ponzi scheme was second only to Bernie Madoff's record-setting scam.

From about August 2004 through 2008, Willis provided Stanford Financial with an undated form letter that said Willis was the insurance broker for Stanford International Bank and had placed directors and officers liability insurance and a bankers blanket bond with Lloyds of London, according to the current complaint.

The letters played a crucial role in Stanford's fraud because Stanford Finanical was an offshore bank and thus not insured by the Federal Deposit Insurance Corp. Willis' letters helped Stanford get around that obstacle by claiming the CDs "were even safer than U.S. Bank-issued CDs because of the unique insurance policies Willis had obtained," the complaint says.

"The Willis letters were specifically designed to win investors' trust and confidence in Stanford Financial's fraudulent scheme," the plaintiffs say in their complaint, noting that for investors with more than $1 million in their accounts, Stanford Financial advisors could get personally addressed letters from Willis.

"Willis' message to potential investors was this: Trust us, you can invest with confidence and security in Stanford Financial CDs," they add.

All of the plaintiffs in the current case made their purchases through Stanford Financial's Miami office, which the complaint says accounted for more than $1 billion in CD sales.

Willis of Colorado Inc. filed the notice of removal of the class action on the grounds of diversity between plaintiffs and defendants, of the Securities Litigation Uniform Standards Act of 1998 and that the Northern District of Texas has exclusive jurisdiction in Stanford receivership cases.

The notice of removal also claims that defendants Willis Group Holdings Public Limited Co. and Willis Ltd., which are based in Ireland and the United Kingdom, respectively, have been fraudulently joined in an effort to defeat diversity jurisdiction. It says that the plaintiffs' claims are on letters issued only by the subsidiary Willis of Colorado and "no reasonable possibility" exists of the plaintiffs recovering damages from the other entities.

Counsel for both sides could not be reached for comment late Tuesday.

The plaintiffs are represented by Luis Delgado and Christopher King of Homer & Bonner PA and Ervin Gonzalez of Colson Hicks Eidson PA.

Willis is represented by Edward Soto of Weil Gotshal & Manges LLP.

The case is Nuila de Gadala-Maria et al. v. Willis Group Holdings Public Limited Co., case number 1:13-cv-21989, in the U.S. District Court for the Southern District of Florida.

Read the Willis Group NOTICE OF REMOVAL.

Read the Willis Group Exhibit A.

Read more: http://sivg.org/article/2013_64_victims_Say_Willis_Group_Aided_Stanford_Fraud.html

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

KLS Stanford Update - SEC Litigation

March 14, 2013
By KACHROO LEGAL SERVICES, P.C.

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, otazo-reyes@flsd.uscourts.gov. 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.

Zelaya Order on Motion to Stay and Motion to Compel.

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

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

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.

Source.

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

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

Cassidy, Deutch Introduce Improving SIPC Act of 2013

February 28, 2013
By Dr. Bill Cassidy

WASHINGTON, D.C. - This week, Congressman Bill Cassidy, M.D. (R-LA) and Congressman Ted Deutch (D-FL) re-introduced the Improving Security for Investors and Providing Closure Act, or Improving SIPC Act of 2013. The legislation would provide victims of Ponzi schemes a quicker path to financial restitution, including those harmed by R. Allen Stanford and the Stanford Financial Group.

"It has been four years since the Stanford Financial Group was placed in receivership and its victims learned their savings were gone," said Congressman Bill Cassidy. "Yet there are still victims who have not been given financial restitution. These are working men and women who cannot wait for the conclusion of a long, drawn-out legal process. This bill allows them to quickly recoup some of their losses. This is a common-sense plan which should be enacted."

"Every victim of the despicable Ponzi scheme orchestrated by the Stanford Financial Group of course has the right to pursue any and all litigation in this case," said Congressman Ted Deutch. "Yet those who cannot afford to continue this lengthy legal battle or simply want to move on with their lives deserve the opportunity to recoup some of their losses. This is a commonsense, bipartisan bill and I look forward to working with Congressman Cassidy to advance it in the 113th Congress."

This legislation creates an avenue for SIPC to offer individual Stanford victims a one-time payment of up to $500,000.00, to at least partially recoup them of their losses. Stanford victims who accept the offer would consequently exclude themselves from any further claims against the SIPC fund. Stanford victims who wish to continue their lawsuits against SIPC can bypass this option and continue those suits. In summary, this legislation allows both parties to settle on existing claims for a negotiated amount, as both SIPC and countless victims reportedly hoped to do as early as 2011.

Additionally, since all settlements for Stanford victims would come from the SIPC fund, no taxpayer money will be required to fund this legislation and no increase to the national debt will occur if enacted.

Source.

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

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

The District Court Rules in Favor of the Receiver in His Claim to Recover Net Winnings Paid to Stanford "Net Winner" Investors

January 23, 2013
By U.S. Receiver (Ralph Janvey)

On January 23, 2013, the District Court entered a summary judgment order in favor of the Receiver finding that the Receiver is entitled to recover from Stanford investors any funds they were paid in excess of the principal they deposited in the Stanford fraud scheme. The Court ruled that the net winner investors' contracts with Stanford are void and unenforceable and that the investors did not provide value for amounts they received from Stanford in excess of the amounts they deposited. As a result, the Court held that that allowing the net winner investors "to keep their fraudulent above-market returns in addition to their principal would simply further victimize the true Stanford victims, whose money paid the fraudulent interest." Although the District Court's order is not a final judgment, the District Court certified the order for appeal, which means that it will likely be appealed in the near future to the US Court of Appeals for the Fifth Circuit.

The Receiver is pleased with the Court's ruling today that those investors who profited from the Stanford ponzi scheme do not have the right to retain those profits. This decision represents an important milestone in the very long and difficult process of unwinding the massive Stanford ponzi scheme. In his ruling, Judge Godbey agreed with the Receiver's position that the fictitious interest payments that Stanford made to investors on their Stanford International Bank certificates of deposit simply represented money taken from one set of investors and paid to another; it was just part of Stanford's efforts that kept the ponzi scheme going for well over a decade.

Based on his investigation, the Receiver identified over $220 million in net winnings or fictitious interest that was paid to over 800 investors. The Receiver intends to use this ruling to pursue recovery of these funds for the benefit of the thousands of investors who sustained significant losses on their Stanford CDs. Once recovered, these funds can be distributed to the victims of the Stanford fraud, which would be in addition to the $55 million that the Receiver has already proposed for distribution.

The Receiver is continuing to pursue recovery through litigation of other funds that can be distributed to victims, and he continues to work cooperatively with the U.S. Department of Justice and the Antiguan-appointed Liquidators to reach a final agreement to make available for distribution approximately $300 million in funds and assets currently frozen in foreign countries.

Click here to view the Order.

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

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

THE SECURITIES AND EXCHANGE COMMISSION APPEAL AGAINST SIPC

January 11, 2013
By SEC

The Commission has shown that SIPC should be required to file an application for a protective decree as to Stanford Group Company in the District Court for the Northern District of Texas.

In denying the Commission's application, the district court made two reversible errors:
First, it incorrectly applied a heightened preponderance standard of proof to the Commission's application rather than the more appropriate probable cause standard. Congress created in SIPA a specific process, within the context of a SIPA liquidation, in which investors must prove their claims for coverage under the Act, including their "customer" status, by a preponderance of the evidence. It makes no sense to apply the same standard to the Commission in proving "customer" status on behalf of investors in this preliminary, summary proceeding.

Moreover, Congress's overarching goals of promoting investor confidence in the securities markets by providing speedy relief for investors indicate that a lesser standard of proof should apply to the initial question of whether SIPC should initiate a liquidation. Indeed, perhaps in recognition of this, SIPC itself is held to a lesser standard when it applies to begin a liquidation. The district court was therefore incorrect in applying a higher standard of proof to the Commission, which is SIPC's plenary supervisor.

The district court's error in this regard was based upon the mistaken belief that the application of the provisions of the Exchange Act to SIPA shows a congressional intent to apply the preponderance standard. But there is no sound basis to analogize plenary proceedings under Exchange Act Section 21(e)—used to finally determine whether a permanent injunction should be granted—to this preliminary, summary proceeding used to determine whether SIPC should be required to apply to begin a liquidation proceeding.

Second, the district court incorrectly interpreted SIPA's customer definition to exclude investors who, because of the unusual operation of the Stanford companies, should be deemed to have deposited cash with SGC. The record here provides at least probable cause to believe that the purported legal separateness of SGC and SIBL should be disregarded, such that, by depositing cash with SIBL, SGC accountholders who purchased SIBL CDs through SGC were effectively depositing cash with SGC. Courts facing similar circumstances have disregarded the corporate separateness of SIPC members and non-member affiliated companies, with SIPC's support. The district court's contrary approach improperly elevates form over substance by strictly adhering to the corporate boundaries of the Stanford entities which were designed to perpetrate an egregious fraud.

Even apart from the lack of genuine separateness of the corporate entities, SIPA's "customer" definition includes those who can be deemed to have deposited cash with a broker-dealer under the Old Naples and Primeline cases. Those cases rejected the notion that "customer" status requires that cash be deposited directly with the broker-dealer, and held that investors in certain circumstances fell within the "customer" definition. Those cases are materially indistinguishable from this one, and the district court's belief otherwise was based on a misunderstanding both of those cases and of the record here.

Finally, the Commission's interpretation of SIPA's "customer" definition is the correct one and is, at the very least, a reasonable one entitled to deference under Chevron. The district court declined to give such deference because it perceived an inconsistency between the interpretation and certain past statements of the Commission. The Commission's past statements, however, clearly state only a general presumption and are fully consistent with the Commission's interpretation in this matter.

INITIAL BRIEF OF THE SECURITIES AND EXCHANGE COMMISSION, APPELLANT.

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

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

SEC MOTION TO INTERVENE AND TO SUSPEND THE MEMORANDUM OPINION AND ORDER OF JULY 3, 2012

August 22, 2012
By Matthew T. Martens

Applicant U.S. Securities and Exchange Commission ("SEC" or "Commission") respectfully submits this memorandum of law in response to Robert Cheatham's Motion To Intervene and To Suspend the Memorandum Opinion and Order of July 3, 2012 ("Motion To Intervene").

Mr. Cheatham contends that he may intervene as of right in this proceeding pursuant to Federal Rule of Civil Procedure 24(a)(2). That provision states that intervention must be granted as of right, "[o]n timely motion," to anyone who "claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest." In other words, the right of a party to intervene depends on the following four factors:

(1) the timeliness of the motion; (2) whether the applicant "claims an interest relating to the property or transaction which is the subject of the action"; (3) whether "the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest"; and (4) whether "the applicant's interest is adequately represented by existing parties.".

SEC Motion To Intervene and To Suspend the Memorandum Opinion and Order.

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

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

Motion To Intervene and To Suspend the Memorandum Opinion and Order of July, 3, 2012

July 24, 2012
By Richard R. Cheatham

Pursuant to Fed. R. Civ. P. 24 Richard R. Cheatham moves to intervene in this action in order to protect his interest in the subject of the action and pursuant to Fed. R. Civ. P. 59 to suspend the Court's Memorandum Opinion and Order of July, 3, 2012 pending reconsideration in light of the facts presented in connection Intervener's Motion to Intervene.

In support of this motion, Richard R. Cheatham relies on the Court's Memorandum Opinion and Order of July, 3, 2012 and his Memorandum In Support of Motion To Intervene and To Suspend Memorandum Opinion and Order of July, 3, 2012.

Motion To Intervene and To Suspend the Memorandum Opinion and Order.

SENATE and HOUSE letter to Schapiro

July 2012 Senate Letter to Schapiro.

July 2012 House Letter to Schapiro.

SIPC OPPOSITION TO MOTION TO INTERVENE

On July 24, 2012, Richard Cheatham filed a motion to intervene and to "suspend" the Court's July 3 Opinion—three weeks after the fact. Although he provides no documentary evidence in support of his assertions, Cheatham contends that brokers from the Stanford Group Company ("SGC") purchased Stanford International Bank, Ltd. ("SIBL") CDs for him without his knowledge, and that the SEC failed to consider the "atypical" nature of these CD purchases in pursuing its case. The Court should reject Cheatham's thirteenth-hour motion for three separate and independent reasons...

Read the complete SIPC OPPOSITION TO MOTION TO INTERVENE.

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

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

Bill Cassidy request that SEC file an appeal

July 12, 2012
By Bill Cassidy

Dear Chairwoman Schapiro,
I write to respectfully request that the Securities & Exchange Commission (SEC) file an appeal with the U.S. Court of Appeals, District of Columbia Circuit, seeking to overturn the July 3, 2012 ruling by U.S. District Court Judge Robert L. Wilkins in the matter of SEC v. Securities Investors Protection Corporation (SIPC), Civil Action No. 11-mc-678.

As you know, this case involves the matter of restitution for the victims of the former Stanford Financial Group under the Securities Investor Protection Act (SIPA) of 1972. In July of 2011, in its capacity as the regulator of SIPC, the SEC ordered a liquidation and payment under SIPA to certain affected customers of the former Stanford companies. SIPC however, refused to comply with the SEC’s order, which led to the court proceedings and ultimately, the decision rendered by Judge Wilkins denying SIPA coverage for the Stanford victims.

In the Sixth Congressional District of Louisiana and throughout the country, financial restitution under SIPA represents the last hope for many of Stanford’s victims to regain that which was taken from them more than three years ago. All I ask on behalf of these American citizens is for the SEC to honor the commitment they made back in July of 2011 by continuing to pursue all legal avenues which could result in the determination by the SEC that Stanford’s victims are entitled to SIPC coverage.

As the United States Representative for the area perhaps hardest hit by this tragedy, I have been confronted almost daily since my service began in 2009 with the heartbreaking stories and tragic outcomes that have befallen my constituents affected by Stanford. Enclosed with this letter is a message sent to me by one of those Louisiana citizens, Jean Ann Mayhall, who speaks both of the devastating impact of this ruling and offers a number of compelling arguments for the SEC to consider as you to decide whether to pursue an appeal. Ms. Mayhall’s words undoubtedly represent the hopes of thousands of Stanford victims who will quite literally see any chance for strongly consider those views during your deliberative process.

Once again, I ask you to continue to pursue the course of action that began when the SEC declared, rightfully, that many of the Stanford victims are entitled to coverage from SIPC by filing to appeal the ruling by Judge Wilkins. If I can provide any assistance or support to you or the SEC, please contact me at 202-225-3901. Thank you.

Sincerely,
Bill Cassidy
Member of Congress

Source.

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

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

Stanford Officer to Plead Guilty

	June 18, 2012 By VANESSA O'CONNELL Stanford Financial Group's top investment executive, Laura Pendergest-Holt, is expected to plead guilty to obstruction of justice Thursday for her alleged role in a $7 billion Ponzi scheme that was among the largest frauds in U.S. history, a person familiar with the case said. A spokeswoman for the Justice Department declined comment. The expected plea by Ms. Pendergest-Holt, Stanford's chief investment officer, follows the sentencing last week of convicted Ponzi schemer R. Allen Stanford to 110 years in prison. That punishment amounts to a life sentence for Mr. Stanford, 62 years old, who for years enjoyed the life of a billionaire aboard jets, yachts and in homes around the globe. He remains in federal custody until the U.S. Bureau of Prisons decides where he will serve the time.
Laura Pendergest-Holt
A Federal Bureau of Investigation affidavit filed in U.S. District Court in Dallas had alleged that Ms. Pendergest-Holt misled Securities and Exchange Commission investigators who took her testimony in the probe of alleged fraud at Stanford International Bank, Mr. Stanford's Antigua-based offshore bank. Ms. Pendergest-Holt was scheduled to go on trial in September. An obstruction charge can carry a three-year sentence.

Source.

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

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

Stanford sentenced to 110 years over Ponzi scheme

June 14, 2012
By The Wall Street Journal

R. Allen Stanford, the once-highflying financier convicted of masterminding a $7 billion Ponzi scheme, was sentenced Thursday to 110 years in federal prison.

The punishment amounts to an effective life sentence for Stanford, who is 62 years old and used to live extravagantly aboard yachts, jets and homes around the world.

"I didn't run a Ponzi scheme, I didn't defraud anybody and there was never any intent to defraud anybody," Stanford, wearing a green prison jumpsuit, told US District Court Judge David Hittner before he was sentenced.

In a rambling statement, marked with long pauses as he choked up and wiped away tears, Stanford accused the government of using "Gestapo tactics" and blamed it for the billions of dollars in losses to his investors.

Stanford's sentence was 40 years less than the prison term given to Bernard Madoff, but 100 years more than his lawyers had asked for.

The sentence ends the three-year criminal prosecution of Stanford, who in March was convicted by a federal jury on 13 of 14 counts including fraud, obstructing investigators and conspiracy to commit money laundering.

Though investors continue to seek hundreds of millions of dollars from Stanford in a civil proceeding, the end of the criminal case closes a chapter on one of the most flamboyant figures in the annals of white-collar crime.

Source.

Read more: http://sivg.org/article/2012_Stanford_sentenced_to_110_years.html

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

Stanford verdict could boost civil claims

March 7, 2012
By Leigh Jones

The conviction of Allen Stanford on Tuesday for orchestrating a $7 billion Ponzi scheme could be bad news for two prominent law firms and an attorney facing civil lawsuits arising out of the Texas financier's crimes.

Attorney Thomas Sjoblom and New York-based law firms Chadbourne & Parke and Proskauer Rose are defendants in several class actions and other lawsuits brought by Stanford Financial investors, who claim they lost hundreds of millions of dollars as a result of the fraud.

Filed mostly in Texas, the lawsuits allege that Sjoblom, who worked at Chadbourne & Parke from 2002 to 2006 and at Proskauer Rose from 2006 to 2009, helped Stanford cover up the Ponzi scheme and evade authorities. Investors claim that the firms failed to properly supervise Sjoblom and were negligent in hiring him.

Sjoblom and the law firms also are defendants in a $1.8 billion lawsuit filed in January in Washington, D.C., federal court by the receiver for Stanford Financial, who alleges claims similar to those filed by the investors.

Legal experts said that Tuesday's jury verdict against Stanford on 13 counts of fraud could bolster the class actions and individual cases against the firms and Sjoblom.

"We now know there were bad actors and people suffered. The only question left is who should pay for it," said Michael Downey, a legal malpractice attorney with law firm Armstrong Teasdale who is not involved in the Stanford matter. "The issue will be 'should we make these poor innocent investors bear the losses or the lawyers who helped make it all happen.'"

Daniel Richman, an evidence professor at Columbia Law School, said the criminal conviction does not guarantee a win in the civil actions. But the verdict could mean that information favorable to the civil cases about the scheme will "shake out," he said.

"It may well reveal the nature of any co-conspirators," he said.

Sjoblom did not respond to messages seeking comment. Prior to private practice, he was an attorney with the U.S. Securities and Exchange Commission's enforcement division. He is now a solo practitioner in Washington.

Proskauer Rose, which has about 650 attorneys, did not respond to a request for comment. Chadbourne & Parke, which has about 440 lawyers, declined to comment.

BETTER POSITION

Stanford was accused of defrauding about 30,000 investors for more than 20 years in 113 countries with high-interest certificates of deposit at Stanford National Bank, based in Antigua. He denied the allegations, but the jury on Tuesday convicted him of fraud, conspiracy and obstructing an investigation by the SEC. He was found not guilty on one count of wire fraud. He could face up to nearly 20 years in prison.

Edward Valdespino, an attorney representing some of the investors suing the law firms and Sjoblom, said that the conviction likely will give him better access to employees at the firm who were questioned by prosecutors in the criminal case but who were unable or unwilling to talk to him.

"It puts us in a better position," Valdespino said.

And Jesse Castillo, a lawyer representing about 350 plaintiffs in class actions against Sjoblom and the firms, said the criminal conviction "reinforces" his cases.

"It's satisfying to our clients," he said.

Source.

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

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

Stanford Told Investors "Lie After Lie" and now he is trying to "game the system"

January 28, 2012

Stanford's lawyer told the panel that the CDs sold by the Stanford bank weren't securities and that Stanford's clients had no say over how their money was invested.

Robert Scardino, one of Stanford's court-appointed lawyers called those CD purchasers "sophisticated investors" whom he said "know what a CD was and what it wasn't."

They also received promotional materials from Stanford's business disclosing that past performance was no guarantee of future success and that an investor could lose the entirety of an investment.

Well, it seems Scardino and defense lawyer Ali Fazel should look at these promotional materials from Stanford's business!

Gregg Costa, the lead federal prosecutor, has said that Mr. Stanford is trying to "game the system."

"You're still pushing that?" Judge Hittner responded incredulously when he heard from the defense lawyers that Mr. Stanford was unable to participate fully in his defense.

Trial Set for Financier Accused in Decades-Long Ponzi Scheme

Stanford Told Investors "Lie After Lie"

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

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

SEC Said to Prepare Vote on Cases Against Ex-Stanford Execs

January 10, 2012
By Joshua Gallu

U.S. Securities and Exchange Commission investigators have proposed sanctions against at least five former Stanford Financial Group Co. executives and brokers for their roles in selling investments that fueled R. Allen Stanford's alleged $7 billion Ponzi scheme, according to two people with knowledge of the matter.

The SEC's five commissioners are scheduled to vote Jan. 12 on whether to authorize the enforcement actions, which target brokers and senior executives at Stanford's Houston-based brokerage, the people said, speaking on condition of anonymity because the matter isn't public. The vote by the commissioners could still be delayed or tabled, the people said.

The actions, which seek to bar the executives and brokers from working in the industry and claw back sales commissions, come almost three years after the SEC sued Stanford and a federal grand jury indicted him on 21 criminal counts alleging he used his U.S. brokerage to sell bogus certificates of deposits for his Antigua-based bank.

The SEC lawyers claim the employees ignored red flags signaling that they were selling fraudulent products, such as above-market returns promised on the CDs and outsized commissions to the brokers who sold them, one of the people said.

The investigators are treating the cases as a legal test of whether they can sanction brokers for failing to conduct due diligence on in-house products, the people said. If successful, the cases could be replicated against more ex-Stanford brokers over time, said the person.

Former NASD Official

One of the former Stanford employees whose actions were reviewed by investigators was Bernerd Young, the former regulator who later became Stanford's chief compliance officer. Young received a notice in June 2010 from SEC investigators that they planned to recommend an enforcement action against him for his role in the Stanford matter, according to his broker records.

Young became the top compliance official at Stanford's brokerage in 2006 after having worked for nearly two decades at the National Association of Securities Dealers, which later became the Financial Industry Regulatory Authority, the brokerage industry's self-regulator. He headed the NASD's Dallas office from 1999 to 2003, Finra said in a 2009 report. Young now works at Magnolia, Texas-based MGL Consulting LLC.

"Aggressive Defense"

"If the Commission authorizes the Staff to bring a formal action against Bernie, it will be met with a fierce and aggressive defense," Melinda G. LeGaye, founder and president of MGL Consulting, said in a statement today. The SEC staff "has repeatedly changed its focus in an attempt to secure Commission authorization to bring a formal action against him."

Young "has continued to cooperate and provide documentation and detailed explanations to not only refute the Staff's allegations but also to assist in their understanding of events while Bernie was at Stanford Financial Group," LeGaye said.

Randle Henderson, an attorney for Young, said in a phone interview that he didn't know whether the SEC was considering sanctions against Young. He said he has submitted multiple briefs to the SEC in defense of his client.

Trial Date

Stanford, 61, has denied the fraud allegations and last month requested that his Jan. 23 trial date be delayed by three months after his expert witnesses quit because they weren't being paid. He is being held without bail. Stanford's former accountants and heads of finance and investment also face criminal and civil claims.

The SEC has been reviewing the case for more than two years as Stanford customers and lawmakers criticized investigators for not catching the alleged scheme sooner. The SEC's inspector general said the agency didn't conduct a meaningful probe of Stanford's business until 2005, even though examiners suspected fraud eight years earlier.

Source.

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

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

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.

Source.

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

US-Committee in opposition to Grant Thornton

December 5, 2011
By the US-Committee

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

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

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

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

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

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

Source.

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

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.

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

Investors in Allen Stanford's Ponzi scheme are now at the mercy of a floundering receivership

October 8, 2011 Ralph Janvey was dealt a tough hand. The 61-year-old Dallas attorney was appointed in February 2009 to extract assets from the wreckage of R. Allen Stanford's empire on behalf of harmed investors. The Texas Ponzi schemer's businesses included 145 separate entities and assets spread out across more than a dozen countries. However, critics contend that Janvey is making a mess of an already complicated proceeding. Two and a half years into his term as receiver, Janvey has spent a lot and produced little. Some investors are complaining that Janvey's strategy is flawed, and accuse him of mismanaging funds.

Investors state that Ralph Janvey has taken all US$120 million of the assets thus far collected by him and already existing in the estate.

The Securities and Exchange Commission, which picked Janvey for the job, criticized his tactics and his spending early on, but since then has been quiet; the agency is now under scrutiny for possible lapses in its oversight of its receiver. Tensions between investors, the receiver, and the SEC are reaching a boiling point.

Contrast Janvey's progress to that of Irving Picard, the Baker & Hostetler partner and appointed trustee in the Securities Investors Protection Corp (SIPC) - supervised liquidation of Bernard Madoff's businesses. Picard has recovered more than $10 billion of $70 billion lost and, as of February, had spent about $290 million - 0.3 percent of recovered assets - on legal and professional fees. Janvey, by contrast, had recovered $209 million as of July, including $63 million in cash balances already in Stanford accounts when he was appointed. Out of $7.2 billion in vanished CD investments, only about 3 cents had been recovered per dollar lost. And nearly half had already been spent: $49.2 million toward professional fees and $49.2 million in costs related to the winddown of Stanford operations.

And things are not looking promising moving forward. Even if every penny is recovered from the frozen Stanford accounts abroad and from the 1.000 - plus defendants in 54 clawback and fraudulent conveyance suits - and outcome that Janvey recently called very inlikely - Stanford's investors are still looking at getting back a maximum of just 14 cents per dollar.

In fairness, receivership experts say that Janvey, of four-lawyer Dallas litigation boutique Krage & Janvey, inherited a far different situation than Picard. The Madoff trustee has recovered billions of dollars in settlements with Madoff "feeder funds", while Janvey has no low-hanging fruit to go after. Stanford subsidiaries, not feeder funds, funneled new investors into the sham CDs issued by Stanford's Antiguan bank. Moreover, Stanford's companies never relied on the deep-pocketed audit firms, which have been the targets of other receivers. Janvey's efforts to find and recover Stanford assets, unlike Picard's, have been mired in cross-border jurisdictional disputes, with a parallel Antiguan liquidation proceeding successfully vying for control abroad. Janvey has been shut out of $335 million in known Stanford accounts in Canada and Europe, and has been barred from Antiguan warehouses holding Stanford records that may contain information about additional money.

But Janvey's troubles are also a product of the choices he's made. While Picard's team has even earned the praise of opposing counsel, Janvey's team has managed to alienate many investors and other would-be allies like the SEC. "You know everyone in the courtroom is angry with you", the judge overseeing the Stanford receivership, Dallas federal district court judge David Godbey, said in August 2009.

A first, major misstep was Janvey's decision to freeze investor accounts and sue individual investors for the return of their principal, not just their profits, in a wholesale attempt to redistribute losses evently across all past and current investors. That is almost never done, say veterans of other Ponzi-scheme receiverships. The move prompted the SEC in June 2009 to ask Judge Godbey to rein in the receiver.

In another questionable move, in February 2011 Janvey's team sent out a spray of small-potatoes fraudulent conveyance claims that engendered a lot of ill will. His targets included a couple of children's hospitals, a Washington think tank, and a religious charity, among others. "These type of cases are very winnable, but it's very tough call to make politically", says Barnes & Thornburg partner John Mills III, who has represented receivers and examiners in Ponzi schemes.

Around the same time, Janvey lodged a slew of eight-to-low-nine-figure fraudulent conveyance claims against the PGA Tour, the Golf Channel, the Memphis Grizzlies, the Houston Rockets, and individual pro athletes seeking the return of money Stanford paid for endorsement contracts. Counsel says that such claims are much more difficult to win, since the contracts were fulfilled, and defendants are fighting them aggressively. "Under his theory, if Stanford made payments to Con Edison to keep his electricity on, it could be a potential target too", observes Akerman Senterfitt's Micahel Goldberg, an expert on Ponzi schemes.

Janvey declined to comment on these claims, but his lead counsel, Baker Bott's Kevin Sadler, notes that Stanford used investor money to promote the Stanford name, and it was instrumental in perpetuating the Ponzi deal.

Meanwhile, investor frustration has been growing. In July a group of investors led by Gaytri Kachroo, the former McCarter & English lawyer who vaulted to prominence as counsel to Madoff whistle-blower Harry Markopolous, filed a motion to intervene. The group claims that the seven member committee Janvey installed as the only investor voice with legal standing – which includes five lawyers and two investors - doesn't adequately represent investors' interests. Kachroo's clients allege that the lawyers on the committee, who have taken over suits originally developed by Janvey's legal team, are "double-dipping" in the estate. Under agreements approved by the judge earlier this year, the firms are eligible for a quarter of any recoveries. Those contingency fees, Kachroo asserts, come on top of retainers each firm had already signed with individual investors. (Retainer contracts ranged from $500 to $20.000 per investor, according to copies provided to The American Lawyer). "The committee filed dozens of identical, boilerplate lawsuits based on the receiver's investigation, and will be rewarded generously for little or no work", Kachroo charges. Butzel Long partner Peter Morgenstern, a committee member representing roughly 1.000 investors, counters by saying that the retainer fees cover matters such as processing individual claims in both Stanford proceedings, regular communications with clients, and filing class actions on behalf of investors. The double-dipping notion "is a nonissue", he says. "We're all working awfully hard, and the finger-pointing and personal attacks are not constructive". At press time the judge had not yet ruled on the motion.

But all of the noise created by unhappy investors has finally caught the attention of the SEC. In July, David Kotz, the agency's inspector general, announced an investigation into the SEC's handling of the receivership. Though the scope of the investigation is still being determined, the office will be looking at potential misconduct or negligence by SEC staff, Kotz says. And in August, after facing intense pressure on Capitol Hill, the SEC declared that Stanford's victims are entitled to relief from SIPC, and has asked it to take over the liquidation of one of the 145 Stanford entities. Should that happen, it would flip the Stanford brokerage unit over to the control of bankruptcy court and a new SIPC -appointed trustee- leaving Janvey's future role in recovery efforts up in the air. A decision was expected in late September.

"You know everybody in the court is angry with you", THE JUDGE OVERSEEING THE STANFORD RECEIVERSHIP SAID BACK IN 2009. It's still true.

Source.

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