Stanford Group Co. investors can soon submit data and explanations to persuade a court-appointed receiver to unlock about 4,000 accounts still frozen during an $8 billion fraud probe involving R. Allen Stanford.
Ralph Janvey, Stanford’s receiver, filed papers in Dallas federal court last night containing forms and procedures investors can use to prove more than $1.7 billion in still- frozen funds aren’t tainted by suspected fraudulent activity. Janvey asked U.S. District Judge David Godbey to approve the forms and procedures so that customers could begin the application process.
The procedures “will provide an orderly and efficient process for the receiver to review the frozen accounts and determine which, if any, should be released from the freeze order,” Timothy Durst, one of Janvey’s attorneys, said in the papers. To get their money back, account holders will have to agree to abide by the Dallas court decisions and not sue Stanford entities anywhere else.
The U.S. Securities and Exchange Commission sued Stanford, two associates and three of his companies on Feb. 17, accusing them of orchestrating a “massive ongoing fraud” through the sale of certificates of deposit issued by Antigua-based Stanford International Bank. Godbey froze all of Stanford’s personal and corporate assets and placed them under the control of Janvey, a Dallas lawyer.
Maintain the Freeze
Earlier this month, Godbey released roughly 28,000 frozen accounts, containing about $4.6 billion, after Janvey determined those accounts had no links to the alleged fraud. Godbey maintained the freeze on about 15 percent of the accounts, which Janvey said are either owned by certain Stanford employees or executives or which conducted business with the offshore bank. Accounts related to those categories of funds by address or social security number also remain frozen.
Under Janvey’s proposed procedures, Stanford investors who submit account data must detail any activity they’ve conducted with Stanford International Bank, including what they did with any interest earned on or redemptions of the offshore CDs.
Account holders must also provide a statement explaining why Janvey shouldn’t view them as someone who “has participated in or benefited from fraudulent activities,” Durst wrote, “and they must be prepared to provide the receiver with information and documentation supporting their explanations.”
Waive Rights
To regain access to their funds, account holders must also sign a declaration submitting to the exclusive jurisdiction of the Dallas federal court and irrevocably waiving all rights to object to that court’s decisions regarding their money or to sue the Stanford entities in another court.
Hundreds of investors have already sued various Stanford entities in 10 other jurisdictions, although most of those actions have been stayed at Janvey’s request.
Houston attorney Michael Stanley, who represents scores of brokers and investors suing Stanford for fraud and Janvey for wrongly freezing their accounts, said investors who accept Janvey’s terms could be blocked from suing to recover their CD investments through the Antiguan receiver, who claims authority over the offshore bank.
Stanley also said Janvey’s proposal drops an earlier suggestion that unsatisfied investors could appeal the receiver’s decisions to mediators or the Dallas judge overseeing the SEC case.
“This is a power grab by the receiver, pure and simple,” Stanley said. “This proposal gives investors no opportunity to be heard. It’s just take it or leave it, and all the while they have your property.”
There is no timetable for Godbey to approve Janvey’s procedures so that investors can begin submitting applications. The receiver said he intends to post the information on his Web site and mail packets to holders of frozen accounts.
The case is SEC v. Stanford International Bank, 3:09-cv- 00298-N, in the U.S. District Court, Northern District of Texas (Dallas).
Source:http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aGgduOHUYqJY
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