Those searching for Stanford dollars get twice as much as victims
BY BILL LODGE
June 23, 2014
Court-authorized professionals cleaning up the debris of one of the largest Ponzi schemes in U.S. history have been paid $64.2 million — more than twice the amount returned so far to victims — and are seeking more compensation.
Those professionals have recovered less than $300 million of the estimated $5.5 billion to $7 billion stolen from thousands of victims in Louisiana and in places as distant as Venezuela by convicted Houston swindler Robert Allen Stanford, whose company operated an office in Baton Rouge.
Attorneys, accountants and investigators searching since February 2009 for the mountains of money had been paid $64.2 million of the victims’ money recovered by the end of 2013.
Expenses incurred in the search by the court receivership team cost another $54.7 million, federal court records show.
That’s $118.9 million of victims’ money spent on the search for Stanford’s swindled dollars out of a total of $240.9 million recovered by Dec. 31 in the five-year effort.
Victims have received a combined $30 million — paid last year as a first distribution to some of the thousands of Stanford’s victims in Louisiana and other states. Another $25 million authorized by a judge for payment to victims has yet to be distributed.
Now, Dallas attorney Ralph S. Janvey, the court-appointed receiver in charge of the search, is asking U.S. District Judge David C. Godbey for permission to withdraw $5.8 million from a disputed pot of $17.3 million in fees for payment to members of his search team.
Don’t do it, a court-appointed examiner and the U.S. Securities and Exchange Commission have implored Godbey.
In Louisiana, some of Stanford’s victims have the same response.
Kathy and Louis Mier, of Zachary, were defrauded of $240,000 they invested with Stanford.
“Janvey, from day one, was trying to make money off us,” Kathy Mier, a 66-year-old retired schoolteacher, said. “We resent the fact that those lawyers take advantage of us. They’re fighting over our money.”
Richard Cochran, 82, of Baton Rouge, who declined to specify his total loss, noted that he received 21.7 percent of his investment in the form of interest payments before the SEC shut down Stanford’s operations in February 2009.
Now, the Korean War veteran said, Janvey’s team has demanded that he make payments into the Stanford receivership equal to that 21.7 percent.
Cochran said he refused, noting that compliance would increase his Stanford loss to 100 percent.
“Janvey said in the beginning all we’re going to get is pennies on the dollar,” Cochran recalled. “He’s making that come true.”
Added Cochran: “He (Janvey) probably ought to get what we get on our claims — 1 percent.”
In his filings in Dallas, Janvey has told the judge his team should receive $5.8 million of the disputed $17.3 million that Janvey contends has already been earned.
By the middle of March, Janvey reported to Godbey, the receivership had recovered another $23 million in stolen investor funds.
John J. Little, a Dallas attorney who has served as court-appointed examiner of the Stanford receivership for the past five years, argued June 9 that the judge should not release any portion of the $17.3 million to Janvey’s team.
“What we know at present is that the receiver and his professionals have not identified any significant Stanford assets or accounts that were not identified in the earliest days of the receivership,” Little said.
In addition, Little told Godbey, Janvey has not distributed $25 million of $55 million the judge authorized for pro rata payment last year to Stanford victims.
Janvey’s 2009 demand was opposed by both the SEC and the investors lucky enough not to have lost all their money.
The receiver’s motion for seizure of their remaining money also was denied by Godbey after SEC officials said commission policy is not to recover money from innocent fraud victims who lost more money than they received from a bogus investment operation.
But Janvey, spending recovered Stanford funds, appealed the decision to the 5th U.S. Circuit Court of Appeals in New Orleans, where he lost.
Both Little and the SEC now argue that the receivership’s record should be much closer to completion before the judge considers release of any of the $17.3 million withheld from Janvey’s team over the past five years.
“What has actually been distributed to Stanford’s investors — approximately $30 million — is less than half what has already been paid to the receiver’s professionals,” Little added.
Little said no more investor money should be paid to Janvey’s team until the total paid to the victims “significantly exceeds the amounts paid to the receiver and his professionals.”
Said SEC attorney David B. Reece: “The question is not whether the receiver and supporting professionals should receive compensation. The receiver’s team has been paid.”
Reece noted Janvey’s team has been paid $34 million more than Stanford’s victims.
“There is no reason to release further funds,” Reece told the judge.
Meanwhile, Stanford, 64, continues to maintain he is innocent of all charges for which he is serving a prison sentence of 110 years. He has filed an appeal in an effort to reverse his conviction.
The SEC and Godbey have concluded that Stanford and his companies operated a giant Ponzi scheme from the beginning of their operations.
Few, if any, investments are actually made in a Ponzi scheme. Instead, operators of the scheme skim most of the money that is put in by victims on the basis of false information provided by the criminals.
Some of the early investors receive small portions of their own money and that of later investors. While those investors believe the money is profit from actual operations, it is simply seed money designed to attract additional cash from people hearing of the program’s reputed success.
Stanford Group Co., insured by the federally chartered and industry-funded Securities Investor Protection Corp., received billions of dollars that victims were told would be secure at Stanford International Bank in the Caribbean nation of Antigua.
Instead, a Houston jury concluded, the majority of the money went to Stanford and several of his associates.
The SEC, in effect, directed SIPC to cover individual Stanford investor losses up to $500,000.
SIPC officials refused and won a judgment from a federal district judge in Washington, D.C. The SEC is appealing that decision.
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