Letter to the Editor of Caribbean360

Letter to the Editor, Caribbean360

August 22, 2011

Dear Sir or madam,

A story published in the August 18, 2011, edition of Caribbean360, “Investors question Antigua Stanford liquidators” makes several erroneous and unfortunate statements that only mislead and confuse victims of SIB’s failure.

I am a creditor of the Stanford International Bank (SIB), being a holder of Certificates of Deposit (CDs). As such I have one focus – what is the best way to maximize the estate of SIB and what is the best way to maximize the distribution of funds to the creditors. To this end, I have become a member of the Antiguan Liquidators’ Creditors Committee, and I can assure you it is our mission to assist the Joint Liquidators in expeditiously recovering victims’ assets in a process that is equitable and transparent.

Unfortunately, the article published on August 18 appears bent on upsetting and confusing victims. So please let me begin by setting some of the record straight.

First, the current liquidators, Marcus Wide and Hugh Dickson, both of Grant Thornton, were appointed only on May 12, 2011, by the High Court of Antigua. They replaced Nigel Hamilton- Smith and Peter Wastell of Vantis, who were removed by the Court. (Wide and Dickson were not nominated by the Government, or any of its agencies, but were the deliberate choice of victims). It is common knowledge that Vantis, the previous liquidators, owes the court and the estate an accounting of the claim for $18 million fees and expenses, and that a hearing will occur in October, 2011. These fees may be challenged by the estate, but that cannot be known until the accounting is presented to the court.

Second, let us not lose sight of the fact that SIB was an Antigua corporation, now in bankruptcy, and that Antiguan laws rule on Antigua bankruptcies. It is also a fact that 99.9% of the creditors of SIB are the holders of CDs in SIB. The Hon. Mr. Justice Mario Michel of the High Court in Antigua appointed Mr. Wide and Mr. Dickson liquidators of SIB, charged them with the collection of all assets of SIB, and the eventual distribution of the assets to the creditors. To also be clear, note that the Eastern Caribbean Supreme Court circuit, of which the Antiguan High Court is a part, is, like the US Courts, independent of government, and its authority to make this appointment, and therefore the authority of the Liquidators, has already been recognized by the Courts in Switzerland and the UK, countries where there are significant assets. While still on the issue of authority, let’s note that beyond the High Court there is the Eastern Caribbean Court of Appeal, with a final right of appeal to the British Privy Counsel (formerly known as the House of Lords), whose authority and competence is respected around the world.

Whereas the US courts have been recognized as the prosecutors of the SEC’s case against R. Allen Stanford and his assets, this does not, and can not, include authority for the bankruptcy of SIB.

Third, the extensive expertise of Grant Thornton, Mr. Wide, and Mr. Dickson, in the matter of liquidation, bankruptcies, and fraud, is well documented. Please refer to their bios in the website http://www.sibliquidation.com for more information. I will vouch that that they are very open and very conscious about their role in working for the creditors.

Fourth, Mr. Wide and Mr. Dickson, as required by the Order appointing them, delivered a report on Aug. 15, 2011, to the Court in Antigua that presents a detailed accounting of their work and accomplishments in the first 90 days of their mandate, and an outline of their planned recovery efforts. The report has been circulated to victims groups, provided to both the US Receiver and the US investors committee and posted on the liquidators’ website under “reports”.

In this very lucid report, which is highly recommend for immediate reading by any and all interested parties, the liquidators mention how both they and the previous liquidators have been handicapped by the U.S. Department of Justice, Ralph Janvey, the court-appointed receiver in the U.S., and now the Stanford Investors Committee, in attaining the maximum asset retrieval for the victims of the SIB bankruptcy. Included are issues where funds are frozen and not being managed, and where it appears that funds may be appropriated by the DOJ, which took “the position that criminal asset forfeiture has priority over the rights of officeholders or their estates” in order to uphold their freeze of assets in the UK and Switzerland. These issues have to be a major concern for all CD creditors.

The report also documents where an associate of R. Allen Stanford is attempting to sell off assets, at deeply discounted prices, bought with proceeds of the SIB CDs, for personal use by Mr. Stanford. The U.S. courts, without proper jurisdictional authority, have been powerless to claim these assets for the SIB estate. The operating expenses funds requested from, and granted by, the UK courts, will be used to recover these assets, estimated at $70 million or more, for all creditors.

In the first 90 days, along with the court order freezing the $70 million of Stanford- controlled assets in Antigua, the liquidators have started an action against Mr. Stanford personally, entered into an agreement to sell a Stanford-owned buildings worth $4.5 million, and identified numerous other claims that belong to the liquidation estate that can be pursued for the benefit of victims.

Fifth, in spite of the August 18th letter claim that “the Stanford Investors Committee has asked Grant Thornton to agree to a cooperation protocol between the two proceedings,” such a protocol was one of the first issues dealt with co-operatively with the U.S. receiver, who the liquidators have been in discussion with. At the present time it appears to be scuttled by the Stanford Investors Committee, which has interjected with a demand for a protocol of their own design which we on the advising committee fear is only to maximize the committee’s projected fees that they are charging to the estate via the U.S. courts.

Sixth, Angela Shaw questions “why a liquidator would have to litigate to secure Stanford-owned properties in Antigua. That litigation shouldn’t be necessary.” Unfortunately, litigation is the only means that in the common law system, which the U.S. shares with Antigua, to take these assets away from those who currently hold them. While frustrating it is unavoidable.

Our Antiguan Liquidators’ Creditors Committee of seven is composed of six victims from different countries representative of the location of victims, and a seventh person was asked by a group of victims in Mexico to participate. The Committee, which has met no fewer than five times since its creation six weeks ago, is single minded; recover what rightfully belongs to the victims of Stanford International Bank in the maximum amounts possible, as soon as possible, and distribute the proceeds to the creditors. We have no other stake in the game, and we receive no compensation other than our share of what the creditors receive.

The story published August 18 in Caribbean360 has offered little to help our efforts. Rather, it pits one group against the other, creating a deadlock that only one person could enjoy – Allen Stanford. For the benefit of the creditors, this has to end.

Eric Cohen
Nassau, Bahamas

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Ex-McCarter Lawyer a Key Figure in New Madoff Film

Posted by Brian Baxter

Two years ago Gaytri Kachroo was chair of McCarter & English’s international practice. She resigned from the firm in July 2009 as a result of conflicts related to several cases she was pursing on her own probing the $20 billion Ponzi scheme perpartrated by Bernard Madoff.

Now, Kachroo can be seen on film relentlessly pursuing that goal in Chasing Madoff, a documentary about Harry Markopolos and his team, known as the Fox Hounds, and their quest to get someone, anyone, to listen to Markopolos’s long-held concerns about Bernard L. Madoff Investment Securities.

Kachroo, who serves as an associate producer on the film, began working with Markopolos in 2005 after the two met at a meeting hosted by the U.S. Chamber of Commerce in Cambridge, Mass. The meeting came around the same time that Markopolos, a former options trader turned financial fraud investigator, wrote a 19-page memo to the SEC titled “The World’s Largest Hedge Fund is a Fraud.”

Kachroo soon joined the Fox Hound team assembled by Markopolos. Other members of the self-appointed financial truth squad—which collected evidence on the Madoff enterprise and used it to implore the SEC to implement necessary regulatory changes—include research analyst Neil Chelo, hedge fund manager Frank Casey, and former financial journalist Michael Ocrant.

Since joining the Markopolos team, Kachroo has helped prepare the whistle-blower for testimony before Congress, advised the Fox Hound on a report compiled by the SEC inspector general that recommended revisions to the regulator’s mandate and the adoption of new whistle-blower protections, and brokered book and movie deals for Markopolos. The book and movie rights were not very lucrative, Markopolos told The New York Times, but brought much-needed attention to the issue of regulatory reform and whistle-blower rights.

In October 2009, Kachroo opened her own firm, Boston-based Kachroo Legal Services, where she employs three attorneys, one of whom is John Ray III, a former senior litigation associate at Ropes & Gray now suing the firm for discrimination.

Kachroo currently represents dozens of Madoff victims in lawsuits seeking compensation for investment losses and also serves as vice chair of a global alliance of 50 law firms representing former Madoff investors. She also represents a group of clients seeking to be reimbursed for investments made with R. Allen Stanford, another former financier alleged to have run a $7 billion Ponzi scheme.

Chasing Madoff opened Friday in New York.

S.E.C. Files Were Illegally Destroyed, Lawyer Says

August 17, 2011
By EDWARD WYATT – New York Times

An enforcement lawyer at the Securities and Exchange Commission says that the agency illegally destroyed files and documents related to thousands of early-stage investigations over the last 20 years, according to information released Wednesday by Congressional investigators.

The destroyed files comprise records of at least 9,000 preliminary inquiries into matters involving notorious individuals like Bernard L. Madoff, as well as several major Wall Street firms that later were the subject of scrutiny after the 2008 financial crisis, including Goldman Sachs, Lehman Brothers, Citigroup and Bank of America.

The S.E.C. is the very agency that is charged with making sure that Wall Street firms retain records of their own activities, and has brought numerous enforcement cases against firms for failing to do so.

The agency’s records were routinely destroyed under an S.E.C. policy, since changed, that called for the disposal of records of a preliminary inquiry that was closed if it did not get upgraded to a formal investigation, according to Congressional records and people involved in inquiries into the matter. The agency believes that both the original policy and the new rules comply with federal document-retention laws.

John Nester, an S.E.C. spokesman, said that while the agency was not required to retain all documents, it changed its policy last year regarding destruction of files for “matters under investigation,” the category of initial inquiry by the S.E.C.’s enforcement division that is the subject of the current scrutiny.

Changes were made to the S.E.C. policy after questions about the document destruction were raised in early 2010 by Darcy Flynn. Mr. Flynn, an employee of the S.E.C.’s enforcement division for 13 years, began a new job in January 2010 helping to manage the disposition of records for the division. Mr. Flynn, who continues to work at the S.E.C., has sought protection under federal whistle-blower laws.

The document disposal, which was first reported by Rolling Stone magazine on Wednesday, is the subject of inquiries by the Senate Judiciary Committee; the National Archives and Records Administration, which oversees laws governing federal agency records; and the inspector general of the S.E.C., according to the records and to people involved in the investigations.

In addition to whether the document disposal violated federal laws about government records, officials are concerned that the S.E.C. policy might have hindered later investigations into the same people or companies or covered up wrongdoing.

“These records may contain critical information that could be extremely useful in piecing together complex cases, even if not immediately pursued,” Senator Charles E. Grassley, an Iowa Republican who is the ranking member on the Senate Judiciary Committee, wrote in a letter to the S.E.C. on Wednesday.

Mr. Nester declined to comment on Mr. Grassley’s letter or on a letter to Mr. Grassley from a lawyer for Mr. Flynn that laid out the allegations in detail.

H. David Kotz, the S.E.C. inspector general, said that he was investigating the issue and hoped to complete a report by the end of September. A spokesman for the National Archives did not respond to requests for comment late Wednesday afternoon.

The National Archives wrote to the S.E.C. last year, saying that it “appears that there has been an unauthorized disposal of federal records,” and asked for further information, according to Mr. Flynn’s chronology.

Mr. Flynn said that S.E.C. officials discussed whether to lie about the document destruction because they might be open to criminal liability. Unlawful and willful destruction of federal records is punishable by up to three years in prison.

The S.E.C. replied to the National Archives in a letter, saying that it was “not aware of any specific instances of the destruction of records” that should have been retained. It added that it “cannot say with certainty that no such documents have been destroyed over the past seventeen years.”

The letter from Mr. Flynn’s lawyer said that the old document destruction policy gave S.E.C. officials assurance that if they closed an inquiry without upgrading it to a formal investigation, there would be no record of their actions.

It is common for S.E.C. employees to leave the agency for the private sector and then begin representing clients before the agency. Mr. Flynn contends that the practice increases the likelihood that S.E.C. investigators could do undetected favors for former colleagues and their clients by quashing investigations.

Whether that revolving door led to the closing of an investigation in 2001 involving Deutsche Bank and the destruction of the files is part of the investigation by the S.E.C.’s inspector general.

CONSOLIDATED REPLY TO RESPONSES BY SECURITIES AND EXCHANGE COMMISSION, RECEIVER, EXAMINER AND OFFICIAL STANFORD INVESTORS COMMITTEE

CONSOLIDATED REPLY TO RESPONSES BY SECURITIES AND EXCHANGE COMMISSION, RECEIVER, EXAMINER AND OFFICIAL STANFORD INVESTORS COMMITTEE TO KLS STANFORD VICTIMS’ MOTION TO INTERVENE AND FOR APPOINTMENT TO THE OFFICIAL STANFORD INVESTOR COMMITTEE

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Grant Thornton First Report Of The Joint Liquidators

SIB First Report of the JLs 120811(function() { var scribd = document.createElement(“script”); scribd.type = “text/javascript”; scribd.async = true; scribd.src = “http://www.scribd.com/javascripts/embed_code/inject.js”; var s = document.getElementsByTagName(“script”)[0]; s.parentNode.insertBefore(scribd, s); })();