Receiver, liquidators end fight over Stanford assets

Ponzi schemer R. Allen Stanford’s Antiguan liquidators have agreed to cooperate with his U.S. receiver and federal prosecutors to jointly control the convicted financier’s remaining assets, the liquidators said.

The receiver and liquidators have battled for control of Stanford’s assets since U.S. regulators seized his companies in February 2009.

The agreement announced Thursday by liquidators Hugh Dickson and Marcus Wide, and independently confirmed by Kevin Sadler, a lawyer for the court-appointed U.S. receiver, clears one of the last obstacles to compensating victims of Stanford’s investment scheme.

The parties “reached an agreement in principle that, if finalized and approved by the relevant authorities,” would result in coordination of victim claims, increased information sharing and cooperation on asset recovery, Wide and Dickson said in an e-mailed statement.

An estimated 20,000 investors were defrauded of more than $7 billion through a Ponzi scheme that Stanford created around bogus certificates of deposit sold by Antigua-based Stanford International Bank Ltd.

Stanford, 63, was convicted in March of leading the fraud and stealing more than $2 billion to finance a lavish lifestyle and an array of money-losing ventures, ranging from Caribbean resort developments to cricket tournaments.

He is serving a 110-year sentence in a federal prison in Florida as he appeals his conviction and sentence.

Ralph Janvey was appointed receiver by a federal judge in Dallas to marshal Stanford’s assets and wind down his companies in the U.S. and abroad. London-based Wide and Dickson were appointed by an Antiguan court to do the same.

“This is a multistep process that will play out over the next several weeks, which is definitely under way,” Sadler said. “We’re not leaving some disputes to be resolved later.”

The Justice Department obtained an administrative freeze on more than $300 million in overseas accounts.

The accord also represents “a resolution of pending disputes concerning funds now frozen in the U.K., Canada and Switzerland, and a release of funds for distribution to Stanford’s investor victims,” the liquidators said.

Sadler, Janvey’s lead lawyer, confirmed in an e-mail that the cooperation accord had been reached but didn’t disclose details.

Joint Statement of the U.S. Receiver (Ralph Janvey), the Joint Liquidators (Marcus Wide and Hugh Dickson), and the U.S. Examiner (John Little)

Joint Statement of the U.S. Receiver (Ralph Janvey), the Joint Liquidators
(Marcus Wide and Hugh Dickson), and the U.S. Examiner (John Little)
Agreement reached in principle

ANTIGUA-December 5, 2012— After extensive negotiations, and with the input of United States DOJ and SEC representatives, the U.S. Receiver (Ralph Janvey), the Joint Liquidators (Marcus Wide and Hugh Dickson), and the U.S. Examiner (John Little) have reached an agreement, in principle, that, if finalized and approved by the relevant authorities, would result in (a) coordination between the U.S. Receiver and the Joint Liquidators concerning their respective claim processes, (b) increased sharing of information, (c) cooperation with respect to the asset recovery and some of the other litigation efforts, (d) a resolution of pending disputes concerning funds now frozen in the United Kingdom, Canada and Switzerland, and (e) a release of funds for distribution to Stanford’s investor-victims.

We are working on finalizing a definitive settlement agreement, which we hope to be able to present in the near future for public comment and court approval. To facilitate their discussions, all of the participants have agreed to keep these negotiations confidential until definitive agreement is reached or the parties conclude that no agreement will be possible.  The U.S. Receiver, the Joint Liquidators and the U.S. Examiner have agreed to release this statement so that Stanford victims know that the various participants are continuing to work to reach an agreement that will achieve the goals set forth above.   We continue to have your interests at the forefront and we understand the very difficult circumstances you face as victims.

Judge approves Stanford class action lawsuit

By Bill Lodge
Advocate staff writer

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

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

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

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

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

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

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

 Additional investors’ money was drawn into the scheme through Stanford Group Co. “Some of them lost all of their money,” Caldwell said of the victims. “Some of them lost hundreds of thousands of dollars, and some of them lost millions.”

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

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

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

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

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

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

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

 “The role of OFI is to regulate, not to ensure that those who invest in companies subject to OFI regulation will never lose money as a result of criminal actions,” OFI attorney David Latham wrote in one court filing.

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

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

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

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

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

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

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

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

Stanford’s Coconspirators Guilty of Fraud

By Teresa Ambord

 It wasn’t our fraud! That was a big part of the overall defense presented by two men accused of helping Texas financier R. Allen Stanford cover his tracks when he bilked trusting investors out of $7 billion. The jury took sixteen hours of deliberation over a three-day period to find the men guilty of conspiracy to hide a massive wire fraud scheme.

Stanford’s chief accounting officer, seventy-year-old Gilbert Lopez, and global controller, forty-year-old Mark Kuhrt, were each convicted of nine out of ten wire fraud counts and one count of conspiracy to commit fraud.  

The Ponzi scheme
 Stanford’s fraud involved the selling of bogus certificates of deposit at Stanford International Bank, Ltd. based in Antigua. According to prosecutors, Stanford advised investors that their funds were being put into conservative liquid assets and overseen by international money managers. In reality, evidence showed that Stanford and his finance chief, James M. Davis, controlled about 80 percent of the money. Stanford used the money to pay for yachts, private jets, and waterfront mansions. He also used some to finance his own risky business ventures, like cricket tournaments, a Caribbean airline, and resort developments.

Stanford himself was convicted last March and is now serving 110 years in a Florida federal prison. His attorneys are appealing his sentence. Davis is awaiting sentencing, after he pled guilty and testified against Stanford.  

Where do Lopez and Kuhrt fit into the scheme?
 Defense attorneys for Lopez and Kuhrt told jurors that their clients never intended to falsify records or break any laws. They relied on investment returns given them by Davis and Stanford. Those figures were used to create what turned out to be false financial statements, which unsuspecting investors relied on. In fact, the attorneys said, Lopez and Kuhrt tried to get Davis to publicly disclose that Stanford himself borrowed most of the funds that were supposed to be in investments, but they were overruled by Davis.

 “There’s no doubt whatsoever there was a massive fraud going on, but it was a Stanford and Davis fraud, not a Lopez and Kuhrt fraud,” said Kuhrt’s attorney, Richard Kuniansky.

However, prosecutor Jason Varnado told jurors, “They knew the bank was doing one thing and promising investors another, and they helped hide it. The only explanation for that is a criminal explanation.”

 Other employees were also involved in tracking the stolen funds, but Lopez and Kuhrt are the last to face criminal trial. Following their convictions, the government recommended allowing the men to remain free on bail until they appear before District Judge David Hittner (who presided over the trial) for sentencing on February 14. However, Hittner ordered both men taken into custody.

 “Based on the facts in this case, and this being an international scheme, I believe there are enough potential contacts out there that I decline to allow them to remain free,” Hittner said.

 Attorneys for both men will appeal.