Diario Judío México - The Antiguan receiver for Stanford International Bank Ltd., the bank at the center of a suspected Ponzi scheme allegedly run by R. Allen Stanford, asked a U.S. judge to delay approving a request for $20 million in legal fees by Ralph Janvey, the bank’s U.S. receiver.
Antiguan receivers Nigel Hamilton-Smith and Peter Wastell, who were given authority over the bank’s assets by the island government two days after U.S. regulators accused Stanford of an $8 billion fraud scheme, said Janvey’s request may improperly siphon assets that could be used to repay depositors holding Stanford’s bogus certificates of deposit.
Lawyers for the U.S. Securities and Exchange Commission also filed papers today urging the judge to delay paying Janvey’s fees and to reduce his bill by 20 percent. The SEC cited concerns that Janvey’s request could consume too much of what remains of Stanford’s assets.
“The receivership estate is currently in dire financial straits,” David Reece, the SEC’s lead lawyer in the Stanford case, said in court papers. “The Commission believes it would be inappropriate to distribute at this time to the receiver and other professionals” funds that would “deplete nearly 30 percent of the cash recovered and under the receiver’s control as of mid-May.”
The Antiguans “must assume that the receiver will use SIB’s assets to pay for the professionals’ services, which may or may not have related to or benefited SIB,” Weston Loegering, the Antiguan receivers’ lawyer, said in papers filed today in federal court in Dallas, referring to the offshore bank by its initials. “Approval and payment of nearly $20 million in fees without regard to the separateness of legal entities in inappropriate.”
The SEC sued Stanford and the bank, along with two other executives and two affiliated companies, on allegations they defrauded investors through the sale of certificates of deposit. U.S. District Judge David Godbey in Dallas froze all of Stanford’s personal and corporate assets on Feb. 17 and placed them under the control of Janvey, a Dallas securities lawyer.
The SEC said Janvey has reported just $60.3 million in cash in Stanford accounts now under his control. If the receiver is able to recover additional assets, Reese suggested Godbey might allow Janvey to apply for some of the discounted sums.
Kevin Callahan, an SEC spokesman, and Nancy Sims, a spokeswoman for Janvey, didn’t immediately respond to e-mails or voice-mails seeking comment on the Antiguan receivers’ filing.
Janvey and SIB’s Antiguan receivers have been fighting over who has the authority to recover Stanford’s international assets and which has the obligation to repay holders of $7.2 billion in the bank’s outstanding certificates of deposit. Both receivers have issued reports stating they have located less than $1 billion in assets, far less than needed to repay the depositors.
The Antiguan receivers asked Godbey to defer approval of Janvey’s fees until he’s ruled on their request to place SIB under Chapter 15 of the U.S. bankruptcy code, a move Janvey opposes. Hamilton-Smith and Westell seek to deal with SIB separately in bankruptcy court, leaving Janvey to handle the remaining Stanford companies through his receivership.
Loegering said in today’s filling that Janvey’s fee request attempts to aggregate about 200 Stanford companies into a single survivor entity and co-mingle assets and creditor claims. The largest Stanford creditor identified so far — in addition to the CD investors — is the U.S. Internal Revenue Service, which seeks $227 million in personal back taxes from Stanford and his estranged wife.
Stanford, who denies any wrongdoing, is the sole shareholder of all the Stanford Financial Group of companies, including SIB.
“Since the vast majority of the assets appear to be SIB assets,” Loegering said, “any aggregation of one or more of the Stanford entities with SIB, and certainly the aggregation of all other Stanford entities with SIB, would substantially harm SIB’s creditors by requiring that SIB assets be used to pay the liabilities of other Stanford persons and entities.”
Hamilton-Smith hasn’t yet disclosed his own expenses to date as Stanford’s Antiguan receiver. He said it would be improper to disclose his fees before he’s presented his bill to the Antiguan government.
“But they are substantially less than Mr. Janvey’s,” Hamilton-Smith told Bloomberg News in a June 1 interview. “Significantly less than what he’s seeking, hugely so.”
$20 Million Request
Janvey submitted a request May 15 for $20 million in expenses for his first two months’ work as Stanford’s receiver, noting that he and dozens of forensic accountants, lawyers and other professionals tracking Stanford’s assets had discounted their fees by about 20 percent.
“I don’t know what work he’s done for SIB, and he’s requested repayment for work he’s conducted on behalf of a whole host of Stanford companies,” Hamilton-Smith said. “He doesn’t break down the fees between any of the constituent companies.”
The SEC said Janvey didn’t submit documentation to support his fee request, particularly breakdowns on billings by attorneys and accountants, some of whom charged $500 an hour.
“From the information provided, it is likely that these activities are the type of activities that warrant a particularly steep discount from the normal rates” such firms charge, Reese said. “The fees sought are simply not appropriate in this particular enforcement proceeding.”
The case is SEC v. Stanford International Bank, 3:09-cv-00298-N, U.S. District Court, Northern District of Texas (Dallas).
To contact the reporter on this story: Laurel Brubaker Calkins in Houston at [email protected].