Senate panel ponders if Stanford Ponzi scheme victims should be compensated

Sen. David Vitter, R-La., reiterated his dissatisfaction Wednesday with the Securities Investor Protection Corp. for failing to provide compensation for investors who bought fraudulent certificates of deposit from Texas businessman Allen Stanford.

Vitter told a Senate subcommittee Thursday that many brokers “plaster the SIPC logo across their doors,” offering assurances that they won’t be victimized by a fraudulent investment.

“Investors believe that if their broker dealer fails, SIPC will be there to help them,” Vitter told the subcommittee. “I can tell you from experience watching the Stanford case, trying to help them however I can, that is just patently false.”

Vitter said thousands of Louisiana investors, many from Baton Rouge, were left in the cold when the SIPC rejected a request from the Securities & Exchange Commission to compensate the victims.

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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group – SIVG official Forum


Investor frustration peaking over stockbroker insurance

“The more you learn about what’s going on down [on Wall Street], the more you learn is that it’s not a safe place to invest,” said Boston University economist Lawrence Kaltikoff.


You get blindsided in a wreck, and you expect your insurance company to pay.

Your bank goes belly up, and you expect the Federal Deposit Insurance Corporation to reimburse your losses up to $250,000.

Your stock broker fails, and you expect the Securities Investor Protection Corporation to be good for your losses up to $500,000.

But five years after Allen Stanford’s $7 billion fraud on his investors, SIPC has paid them nothing.

“I call Wall Street ‘Fraud Street’ these days,” said Boston University economist Lawrence Kaltikoff. “Because the more you learn about what’s going on down there, the more you learn is that it’s not a safe place to invest.”

Not safe, he said, because the SIPC — which is supposed to protect investors when brokerages fail — has done nothing to protect the victims of Allen Stanford.

“If SIPC wasn’t behind Stanford, he never would have been able to run a business as he did,” said Mary Oliver.

She and scores of others went to Stanford’s office in The Crescent office building in Dallas and invested their 401k money back in 2008. The seal of the Securities Investor Protection Corporation was on her broker’s business card, and on the office door.

The market was nervous, and SIPC insurance was a prime inducement to place her money with Stanford.

Five years later, the SIPC claims all those Stanford losses aren’t its problem. In fact, the SIPC says investors who lose money in some brokerage failures could actually owe money to the SIPC.

In addition, this summer a federal appeals court upheld a ruling that what Allen Stanford sold investors weren’t Wall Street securities, but certificates of deposit. Therefore, the SIPC should not be on the hook for the investor losses.

It was all in the small print, the SIPC argued.

“The Allen Stanford victims were supposed to read somewhere in 30 pages of documents when they signed up that their investments were [certificates of deposit], and not covered by SIPC,” Kaltikoff said. “I think [the] SIPC should be ashamed of themselves. I would be embarrassed to be doing what they’re doing.

“I couldn’t sleep at night to do that to people who’ve already been victimized,” he added.

Mary Oliver joined the Stanford Victims Coalition, which went to Washington to try to change the law. Their goal: To make SIPC more responsive to fraud, and to get some of their money back.

House Bill 3482, which would do that, has been knocking around Congress for a year. It’s been held up in the House Financial Services Committee, chaired by Rep. Jeb Hensarling of Dallas.

Hensarling is a big recipient of campaign donations from the brokerage industry, which funds SIPC insurance through premiums. Those premiums could potentially go up if the SIPC were reformed.

In the 2013-14 election cycle, Hensarling received $41,000 from two Wall Street brokerages alone.

We asked him for an interview to discuss House Bill 3482. He was “unavailable.”

In a written statement, Hensarling said he sympathizes with the Stanford victims, but “concerns regarding SIPC’s actions […] are best addressed by the courts.”

He blamed the Stanford debacle on regulatory failures by the Securities and Exchange Commission.

“When Congress reconvenes early next year, I expect there will be a renewed debate about the purpose and scope of SIPC,” Hensarling said in the statement.

It’s been five years since the Stanford fraud came to light. So far, investors have received one penny for every dollar they’ve invested.

None of it came from the SIPC.

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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group – SIVG official Forum

Stanford Investors Want SEC Negligence Claims Revived

Investors in Robert Allen Stanford’s $7 billion Ponzi scheme asked the Eleventh Circuit to reinstate their class negligence claims against the U.S. Securities and Exchange Commission, arguing that the agency failed in its statutory duty to properly report the massive scheme.

The investors’ attorney Gaytri Kachroo of Kachroo Legal Services PC told an Eleventh Circuit panel that the SEC has a nondiscretionary duty mandated by Congress to immediately notify the Securities Investor Protection Corp. if it learns that a broker-dealer is in financial difficulty.

The SEC’s Dallas-Fort Worth, Texas, office conducted several investigations of the Stanford Group between 1997 and 2004, and concluded that the Stanford Group was a Ponzi scheme but failed to report the investigations to SIPC, according to court documents.

This mandatory duty to notify SIPC should not fall under the misrepresentation and discretionary function exceptions of the Federal Tort Claims Act, Kachroo said. Otherwise, the FTCA fails in its legislative objective, she said.

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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group – SIVG official Forum

UPDATE 1-U.S. SEC won’t appeal ruling against Stanford’s Ponzi victims

The U.S. Securities and Exchange Commission will not appeal a recent court decision that thousands of victims of financier Allen Stanford’s Ponzi scheme were ineligible under federal law to file claims to recoup their losses, an SEC spokesman said on Friday.

 On July 18, a federal appeals court in Washington rejected the SEC’s bid to force the Securities Investor Protection Corp (SIPC) to start paying an estimated 7,800 former customers of Stanford Group Co.

 The court concluded that these victims did not qualify as “customers” eligible for compensation by SIPC, which liquidates failed brokerages. It upheld a July 2012 ruling by a federal district judge.

 SEC spokesman John Nester on Friday said in an email that the regulatory agency decided “after very careful deliberation” not to pursue the case further.

 He also said the SEC remains committed to Stanford’s victims, and will work with the Stanford firm’s receiver, the U.S. Department of Justice and others to maximize recoveries.

 Stanford, 64, is serving a 110-year prison term following his March 2012 conviction for running an estimated $7.2 billion fraud.

 The scheme was centered on bilking investors with fraudulent certificates of deposit issued by his Antigua-based Stanford International Bank.

 Angela Shaw Kogutt, founder of the Stanford Victims Coalition, called the SEC decision “a complete injustice” to Stanford victims.

 “Unfortunately, Stanford victims have no private right of action against SIPC,” she said in an email. “The Commission has caved to an organization it is supposed to oversee.”

 The case had been the first time the SEC had sued to force SIPC to start a court-supervised liquidation.

 While the SIPC has handled other big liquidations, including that of Bernard Madoff’s former firm, it contended that Stanford’s customers did not qualify for help because the Antigua bank was not a member of SIPC, unlike Texas-based Stanford Group.

 In ruling for SIPC, Circuit Judge Sri Srinivasan had written for the appeals court that “we fully agree” with the district court judge, who expressed that he had been “‘truly sympathetic to the plight’ of the victims.” (Editing by Meredith Mazzilli and Jonathan Oatis)

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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group – SIVG official Forum

Will SIPC’s Brokerage Insurance Scam Help Allen Stanford Walk?

If you experience an insured loss and the insurance company doesn’t pay, you know you’ve been scammed. As I’ve discussed in a series of columns posted at, SIPC (the Securities Investor Protection Corporation) is running an enormous scam in claiming to insure our brokerage accounts against fraud. SIPC’s refusal to pay the legitimate claims of most Madoff victims and all Stanford victims makes this abundantly clear.

 Even worse, SIPC is placing all brokerage account holders at enormous additional risk by standing ready to sue them if they earn a return on their investments and spend the proceeds. In fact, thanks to precedents SIPC established in the Madoff case, SIPC can declare the loss of your securities to be the result of a Ponzi scheme and sue you for up to every dollar you withdrew in the up to six years prior to the fraud’s discovery!

 Reread that last sentence. It is saying that if you have made money investing with a broker, directly or indirectly, say through your IRA, you can not safely spend (or, indeed, withdraw and reinvest) your assets for up to six years from the time you’ve withdrawn them! But it is even worse than this. When you withdraw money from your IRA, you have to pay up to 40 percent in taxes. You can be sued for the amount you pay the IRS in taxes as well!

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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group – SIVG official Forum

SEC Says Stanford’s Criminal Conduct Charges ‘Slanderous’

By David McAfee

The U.S. Securities and Exchange Commission on Wednesday urged a Texas federal judge to reject convicted Ponzi schemer Robert Allen Stanford’s call to appoint a special prosecutor and advise the court of criminal conduct by a court-appointed officer, calling his allegations “slanderous, sensational and unsupported.”

The SEC says Stanford — who allegedly led a massive $7 billion Ponzi scheme by selling billions of dollars in self-styled certificates of deposit, promising return rates exceeding those offered by most banks — is falsely accusing the receiver and others of criminal conduct. Receiver Ralph Janvey was appointed to oversee Stanford International Bank Ltd. and its affiliated entities in February 2009, according to court documents.

“Over the course of two weeks, Stanford filed three motions, which do nothing but make slanderous, sensational and unsupported allegations against the receiver, the Department of Justice, the commission and a circuit judge for the U.S. Court of Appeals for the Fifth Circuit,” attorneys for the SEC wrote in their opposition brief. “Baldly accusing the court-appointed receiver of engaging in criminal conduct, Stanford appears to allege that the receiver’s actions, in collusion with the commission and the DOJ, prevented him from defending against the criminal action and resulted in his wrongful prosecution and conviction.”

Wednesday’s motion by the SEC marks the most recent development in the long-running case. The SEC said Stanford’s complaints about the criminal proceeding are “not relevant to this civil action” and should be addressed, if at all, on appeal of his criminal conviction.

Janvey also responded to Stanford’s miscellaneous motions, including his bids for a temporary restraining order and an asset freeze, on Wednesday. Janvey said most of Stanford’s “frivolous pleadings” have previously been litigated.

“There is no legal or factual basis either for the rambling and repetitive assertions contained in Stanford’s filings or for his requested relief,” counsel for Janvey wrote in the response brief. “For all of these reasons, Stanford’s motions should be denied.”

The parties’ responses come more than a year after a Texas federal judge ruled in the commission’s favor, ordering Stanford to pay $6.76 billion for claims related to his alleged $7 billion securities fraud plot.

U.S. District Judge David C. Godbey ordered Stanford to pay $6.76 billion to the SEC, a sum that includes the $5.9 billion the agency was originally looking for, plus $861 million interest. The ruling also rejected Stanford’s earlier argument that he should be able to continue challenging the validity of the civil case, which is based on information from his criminal conviction, because he claims he didn’t get a full and fair opportunity to defend himself at trial.

The judge said the SEC was entitled to summary judgment because both the criminal and civil cases involve the same facts, which had already been litigated in the government’s favor during Stanford’s criminal proceedings.

Stanford was sentenced in March 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.

All told, Stanford and his Houston-based company misused and misappropriated about $7 billion in certificates of deposit purchased by investors and administered by Stanford International Bank, according to the prosecutors.

The SEC went after him too, filing a suit in the Northern District of Texas basing its arguments on information from Stanford’s criminal conviction.

The SEC is represented by B. David Fraser and David B. Reece of the SEC.

Receiver Ralph S. Janvey is represented by Kevin M. Sadler, Scott D. Powers, David T. Arlington and Timothy S. Durst of Baker Botts LLP.

Robert Allen Stanford is representing himself.

The case is Securities and Exchange Commission v. Stanford International Bank Ltd. et al., case number 3:09-cv-00298, in the United States District Court for the Northern District of Texas, Dallas Division.

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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group – SIVG official Forum