Stanford Receiver Janvey Gets Most of Fees Over SEC Objections

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Ralph Janvey, the court-appointed receiver for R. Allen Stanford’s businesses, will get paid most of the $27.5 million he requested for his first 14 weeks of work managing the accused con man’s estate.

U.S. District Judge David Godbey in Dallas yesterday approved most of the payment sought by Janvey while rejecting, at least for now, about $2 million in fees and expenses for accounting firms and consultants. Godbey also said he would impose what he called a 20 percent holdback on the remaining $25.5 million in reimbursement “to see how everything works out.”

Kevin Sadler, Janvey’s attorney, told Godbey during yesterday’s hearing that the receiver expects to seek $17.7 million more in fees this year.

“We now know from our investigations this was not an overnight Ponzi scheme,” Sadler said. “Had it been, it would have been far less difficult to dismantle.”

The U.S. Securities and Exchange Commission, which picked Janvey, calculated the cost of the receiver’s investigation at $4,500 an hour based on the request for fees and expenses incurred by his team from Feb. 17 to May 30. Janvey, who has worked for six months without pay, said he already had discounted his bill by 20 percent.

Janvey was put in charge of Stanford’s corporate and personal assets after the SEC sued the Texas financier, some of his associates and three of his companies on Feb. 17. The SEC claims Stanford ran a “massive” Ponzi scheme that repaid early investors “improbable if not impossible” returns by taking money from later CD customers at Antigua-based Stanford International Bank Ltd.

SEC Request

The SEC, along with investors who bought more than $7 billion of allegedly bogus certificates of deposit through the bank, had urged Godbey to slash Janvey’s fees out of concern the receiver was consuming too much of Stanford’s estate.

“We do not believe the status quo can go forward,” David Reece, an SEC lawyer, told Godbey yesterday.

The SEC asked Godbey last month to cut the receiver’s fees by an additional 20 percent out of concern for how little investors will get back.

Stanford, who denies all wrongdoing, is in jail awaiting trial on 19 felony counts that mirror the SEC’s fraud allegations.

John J. Little, the court-appointed examiner who represents investors in the proceedings, said Janvey’s fees and expenses amounted to a “burn rate” of about $1.1 million a week through the end of July. The receiver reported that he had recovered about $81.1 million cash and assets as of July 31.

Preparing Budget

“Judge Godbey also made it clear that the receiver needs to prepare a budget and review that budget with the SEC and the examiner,” Little said after yesterday’s hearing, “and that the receiver needs to be cognizant of the amounts he has recovered as they relate to the amounts he is spending.”

Janvey, who has hired more than 100 lawyers and accountants to help him locate and secure Stanford’s assets, has said he was trying to recover the most money possible for the largest number of investors.

The SEC and Little also have objected to Janvey’s efforts to claw back principal and interest from investors who got some money back before Stanford’s scheme collapsed. The agency previously asked Godbey to strip Janvey of any reimbursement for his pursuit of 600 Stanford investors in an attempt to take back almost $1 billion.

Janvey has said that investors who got their money out before Stanford International Bank collapsed shouldn’t benefit at the expense of investors who lost everything.

‘Poor Folks’

“We want to help the thousands, the poor folks who put the last $70 million in before the music stopped,” Sadler told Godbey at a July 31 hearing. That was the amount of money Stanford took in from CD buyers during the 30 days before the SEC’s lawsuit, Janvey said.

After the July hearing, Godbey ruled that Janvey could only pursue investors for the interest payments they received on Stanford CDs. He delayed his decision to give the receiver time to appeal. The U.S. Court of Appeals in New Orleans is scheduled on Nov. 2 to hear arguments on the clawback ruling.

Stanford’s criminal-defense lawyer, Dick DeGuerin, who has opposed Janvey’s fee requests, was turned down when he asked the judge overseeing Stanford’s criminal case to unfreeze at least $10 million of the financier’s assets to pay defense lawyers. DeGuerin asked to quit as Stanford’s lawyer after he and the financier had a disagreement over how DeGuerin would be paid.

“This receiver business is a racket,” DeGuerin said in an e-mail after yesterday’s hearing. “Almost $30 million for six months of work, yet not a penny for the defense. Nice job if you can get it.”

The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).


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