R. Allen Stanford’s court-appointed receiver should continue to be blocked from suing investors to get back funds they received from an alleged $7 billion Ponzi scheme, U.S. securities regulators told an appeals court.
Ralph Janvey, receiver for the Stanford Financial Group of companies founded by the accused Texas financier, has no legal authority to sue 650 investors for almost $1 billion they retrieved before the collapse of Stanford’s alleged scheme, the U.S. Securities and Exchange Commission said in a filing with the U.S. Court of Appeals in New Orleans.
“Facing certain failure, the receiver has attempted an end run around the governing body of law,” the SEC said in the filing, arguing against Janvey’s bid to reverse a lower-court ruling limiting so-called clawback lawsuits. Janvey overstepped his authority by naming some investors as “relief defendants,” which the SEC claims only it has the power to do.
The SEC filing, posted yesterday on the court’s Web site, marks the third time the agency has opposed Janvey, who was put in charge of Stanford’s assets when the SEC sued the financier in February. With the SEC’s support, a federal judge blocked Janvey on July 31 from pursuing clawback suits seeking the return of principal paid to investors from certificates of deposit at Antigua-based Stanford International Bank Ltd.
‘Further Torment’
“The receiver does not stand in the shoes of the commission,” the SEC said in yesterday’s filing. The agency’s lawyers said allowing Janvey to take investors’ principal in the name of equalizing recovery for all victims “would be sanctioning further torment” of defrauded investors.
The SEC also has opposed Janvey’s fee requests, which it says are too high.
Janvey has said in court filings that he wants the targeted investors to return both principal and interest payments so individuals who profited from Stanford’s scheme won’t benefit at the expense of those who lost everything. The claw backs may be the best chance at recovering large sums to distribute to all fraud victims, he said.
Kristie Blumenschein, a Janvey spokeswoman, declined to comment on yesterday’s SEC’s filing.
John J. Little, the Stanford investors’ court-appointed examiner, and several groups of individual investors have urged the appeals court to reject Janvey’s appeal.
‘Innocent Investors’
“The receiver believes that the words ‘Ponzi scheme’ permits the trial court to issue an order depriving innocent investors of their property without notice, without hearing and without any evidentiary showing by the receiver,” Little said in a court filing. “The receiver is wrong. There is no special magic to the words ‘Ponzi scheme.'”
Stanford denies any wrongdoing over allegations he deceived investors about the safety and regulation of their deposits at his Antiguan bank as well as accusations that he skimmed more than $1 billion for his personal use. He is in jail awaiting trial on 21 felony counts that mirror the SEC allegations.
Also yesterday, Stanford’s lawyers said in a court filing that they will appeal Janvey’s request for almost $30 million in fees and expenses for work done by the receiver’s lawyers and accountants from February through August.
“This appeal is yet another example of frivolous pleadings filed by Stanford which continue to consume funds that otherwise would be available to compensate investors,” Blumenschein said in an e-mail.
The appellate case is Janvey vs. Alguire, 09-10761, U.S. Court of Appeals for the Fifth Circuit (New Orleans). The lower- court case is Securities and Exchange Commission v. Stanford International Bank Ltd., 09cv298, U.S. District Court, Northern District of Texas (Dallas).
Source:Bloomberg
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