Stanford’s swindled victims want his political donations

Convicted financier has given millions to GOP, Democrats
By Emily Wilkin, Houston Chronicle

WASHINGTON – Before his arrest, convicted swindler R. Allen Stanford was a
prodigious political donor, a billionaire financier who along with his
employees had given nearly $2.4 million to both Democrats and Republicans
since 2001.
But Stanford’s victims and the court-appointed receiver assigned to recover
money stolen by Stanford are demanding politicians return the money to them
– claiming the funds are ill-gotten gains in the form of campaign
The result has been a complex legal battle that pits politicians – including
eight members of the Texas congressional delegation – against some of their
constituents in an unusual matchup that has both sides crying foul.
“At every turn, someone is there to in some way limit or reduce the recovery
for Stanford victims, “There are so many facts of this case, and none are
working to the advantage of the victim.”
Stanford was convicted on 13 counts of fraud earlier this year after running
a $7 billion Ponzi scheme for decades.
As is the custom when politicians discover that a donor is enmeshed in
scandal, many of the recipients – such as Texas Republican Sens. Kay Bailey
Hutchison and John Cornyn – gave their Stanford donations to charity.
The court-appointed receiver working to get back the funds has sent letters
to all recipients of political contributions from Stanford and his company’s
political action committee asking them to return the donations. The list of
those yet to repay, according to the receiver, includes five national party
committees, one Texas-based PAC, both Texas senators and six Texas
representatives – Pete Sessions of Dallas, Pete Olson of Sugar Land, Kevin
Brady of The Woodlands, Lamar Smith of San Antonio, Sam Johnson of Plano and
Joe Barton of Ennis.
Committees Sued
The situation has gotten so contentious that the receiver, Ralph S. Janvey,
sued five political party committees, both Democratic and Republican, to
recover Stanford’s contributions plus legal fees. The committees allege that
the fees are too high.
Brian Walsh, a spokesman for the National Republican Senatorial Committee,
said that his committee, which received about $83,000 from Stanford, “has
made a good faith effort to resolve this issue.”
“Unfortunately, those efforts were rejected by attorneys for the receiver
who appear more focused on lining their own pockets than ensuring Allen
Stanford’s victims receive some justice,” said Walsh.
Request ‘appropriate’
Kevin Sadler, the lead lawyer for the court-appointed receiver working to
get back the funds, said the receiver believes the request is “appropriate
given the size, the scope and the complexity and the difficulty of work he
and his professional team is undertaking.”
The battle has left everyone dissatisfied.
“(The fees) have been excessive, I believe,” the Stanford victim said. “But
the court has said they’ve been fair.”
All but Brady and Olson said they had made charitable donations equal to the
amounts Stanford gave to their campaigns, and Olson’s office maintains that
he also returned all of Stanford’s contributions to the receiver.
Sadler said lawmakers giving the money to charity was a “meaningless act.”
“The fact they gave money away to some other charity doesn’t mean they’re
not in possession of money that doesn’t belong to them,” Sadler said.
Melanie Sloan, director of Citizens for Responsibility and Ethics, a
Washington-based watchdog group, said the case is a complicated for
“I think they thought they would be doing the right thing (by donating to
charity),” Sloan said. “It doesn’t matter what’s correct or not. It matters
what the political ads will say.”
None of the representatives and senators responded to questions about why
they chose to give the funds to charity rather than the victims, with the
exception of Cornyn, who said it was his standard procedure in these
instances to donate the funds to charity.
“It’s personally kind of insensitive, If you are going to return money, give
it to the victims that it came from. If we had wanted to make a donation to
charity, we would have done that.”
Transfer a tough sell
But it’s been a tougher sell to get lawmakers to transfer the donations to
the victims’ fund. According to the receiver, four Texas lawmakers – Rep.
Randy Neugebauer, R-Lubbock; Rep. Lloyd Doggett, D-Austin; Rep. Mike McCaul,
R-Austin; and Rep. Charles A. Gonzalez, D-San Antonio – have sent the
receiver donations given by Stanford.
Olson, a Republican from Sugar Land, has paid back $3,300 of the $5,300 he
received from Stanford, according to the receiver. However, an Olson
spokesperson said the $3,300 was all he and his campaign were given by
A Texas district court determined last June that the committees have to
repay all contributions plus attorney’s fees, but the committees have
appealed the decision. It will be argued in appeals circuit court May 1.

Stanford investors hoping to recover losses in alleged fraud

Members of the Stanford Victims Coalition from Louisiana and Texas are scheduled to meet today in Washington, D.C., with Mary L. Schapiro, head of the Securities and Exchange Commission.

They will ask Schapiro to require financial-industry coverage of billions in fraud losses allegedly caused by jailed Texas financier Robert Allen Stanford, John Wade of Folsom said Friday.

Wade is a partner in a small business that lost more than $1 million in pension funds in the Stanford case.

Members of Louisiana’s congressional delegation support the effort to help victims of the alleged fraud.

“I’m all for it,” U.S. Rep. Bill Cassidy said Friday.

Added Robert Sawicki, press secretary for U.S. Sen. Mary Landrieu: “Sen. Landrieu supports extending (this) protection to the victims of Allen Stanford’s Ponzi scheme.”

The coverage under discussion — up to $500,000 per investment account — repeatedly has been denied by the Securities Investor Protection Corp. since Stanford was indicted in Houston in June. Stanford remains in federal custody and faces trial in January on charges that he masterminded $7.2 billion in frauds against more than 25,000 investors around the world.

SIPC was created by Congress in 1970, but it is funded by member brokers and dealers across the nation.

The nonprofit corporation granted more than $500 million in coverage to fraud victims of confessed swindler Bernard Madoff of New York. Madoff is serving a 150-year prison term.

As many as 1,000 residents of the Baton Rouge, Lafayette and Covington areas lost as much as $1 billion to Stanford’s promotions, Baton Rouge lawyer Phillip W. Preis and state Rep. Bodi White, R-Central, have estimated.

And residents of other states have lost additional billions to Stanford, but SIPC repeatedly has refused to help them.

Wade said SEC and SIPC officials base that denial on the fact that most of Stanford’s investors lost money earmarked for his offshore Stanford International Bank.

Wade added, though, that he and many other investors sent their payments to Stanford Group Co., a member of SIPC, and bank statements show those funds were never sent to Stanford’s bank on the Caribbean island of Antigua.

“A lot of people didn’t even know they were dealing with Antigua,” Wade said. “They were dealing with Stanford Group Co. That’s our message.”

Preis, the Baton Rouge attorney who represents more than 100 Stanford investors, said the policy technically favors Schapiro’s and SIPC’s current stance against extending coverage to his clients.

But Preis noted that Schapiro easily could authorize an exception in the Stanford case.

“If Ms. Schapiro were to focus on who is more deserving between the Madoff and Stanford victims, she would have to conclude the Stanford victims are more deserving of SIPC coverage,” Preis added.

“Most of the Madoff victims were not retirees,” Preis said. “Most were very wealthy people.

“The Stanford victims, as a group, are smaller investors and retirees,” Preis said.

In November, Cassidy, R-La., spearheaded a request by the entire Louisiana congressional delegation and 40 other federal lawmakers for a directive from Schapiro that would require SIPC coverage.

“I am elated that the Stanford victims are having a chance to meet with Schapiro,” Cassidy said Friday.

In a written statement, Landrieu, D-La., added that she and 16 other senators are pushing a bill that would enable individual Stanford investors to deduct as much as $1.5 million of their losses from their income taxes.

“The massive fraud perpetrated by the Stanford Financial Group robbed people of their entire life savings and of their trust in our financial institutions and in our government’s capacity to regulate markets,” Landrieu said. “That’s why it is so important for us to act quickly in correcting this injustice.”

U.S. appeals panel weighs Stanford "clawback" claims

A U.S. appeals panel had tough questions on Monday for the receiver in Allen Stanford’s civil fraud case, who is suing to recover proceeds from several hundred investors in the firm’s offshore bank.
Stanford, 59, faces civil and criminal charges for masterminding an alleged $7 billion Ponzi scheme centered on fraudulent certificates of deposit issued by Stanford International Bank Ltd in Antigua.
At issue is whether receiver Ralph Janvey has a right to pursue “clawback” claims for principal from Stanford clients who redeemed their certificates of deposit (CDs) in the weeks before civil fraud charges were filed and the firm’s assets were seized and customer accounts frozen.
Janvey has said the clients named in his lawsuit unfairly cashed out and were paid with money stolen from other Stanford clients.
“All of these people were paid with someone else’s money,” Kevin Sadler, an attorney representing Janvey, told the appeals panel.
U.S. District Court Judge David Godbey in Dallas ruled in July that Janvey only has a right to sue the investors for the interest on their certificates of deposit and not the principal, so the matter was sent to the Fifth Circuit Court of Appeals in New Orleans.
But the three-judge panel in New Orleans took issue with some of the case law Janvey used to support his appeal and questioned why the receiver, rather than the plaintiff in the case — the U.S. Securities and Exchange Commission — was suing the investors.
“What gives you statutory authority to sue people the SEC did not?” Senior Judge Will Garwood asked. “It seem to me that the plaintiff or defendant ought to be the ones … Frankly, in a sense, you’re nobody. You are neither one.”
The SEC has also objected to Janvey’s lawsuit, saying it would wrongly penalize the victims of a fraud.
Michael Quilling, a lawyer representing the investors, told the appeals panel his clients, who have had their accounts frozen since February, have suffered enough.
“This has been nine months,” Quilling told the court. “These investors need their money now. Retirees, many of them, have been getting their interest for eight years. They can’t get their principal. They are victims.”
About $275 million in funds are being held in accounts at Bank of New York Mellon Corp’s Pershing LLC, JP Morgan Chase & Co and SEI Investments Co.

Stanford receiver pinpoints $1.5bn

Investors in Sir Allen Stanford’s alleged $7bn Ponzi scheme may be able to recover about one-fifth of their principal, according to the receiver appointed by the US courts to administer the estate’s assets.

Sir Allen, who is facing a criminal indictment as well as a civil suit filed by the Securities and Exchange Commission, has denied all the allegations against him.
In a report filed late on Wednesday, Dallas lawyer Ralph Janvey said cash on hand at the Stanford estate totalled $128.8m, and that he was trying to recover a further $894m.
“We have identified over $1.5bn in assets that ultimately could be available to the victims of the Stanford fraud,” he said in a statement. “We may be able to return to them as much as 20 cents on the dollar, just based on activities to date.”
Mr Janvey has been aggressive in his attempts to recover cash and other assets of the complex Stanford empire, which stretched from Houston to Venezuela.
The epicentre of the alleged fraud – Stanford International Bank, which issued high-yielding certificates of deposit to investors around the world – was domiciled in Antigua.
Among the assets listed was Sir Allen’s yacht, the Sea Eagle, which the Texan businessman bought for $3.9m and on which he spent an additional $16m in “upgrades” such as replacing the teak interior with mahogany and putting in a new galley kitchen, according to court papers.
Some of the receiver’s methods – which have included attempts to claw back principal and interest from victims of the alleged fraud and to recoup money paid to former employees – have irked the SEC. The regulator has accused Mr Janvey of overstepping his authority in the matter.
The receiver has also faced criticism regarding his fee requests. Mr Janvey has billed the estate for more than $35m to date, according to court documents. The sum covers the services provided by the receiver and the small army of lawyers, consultants and forensic accountants assisting in the recovery effort, which began in February.
According to the report, more than 40 per cent of the cash on hand has been allocated towards covering those operational and professional expenses.
John Little, the examiner appointed to represent the interests of the Stanford investors, has objected to Mr Janvey’s requests, noting the fees will have to be paid out of the limited cash pool that will ultimately be used to reimburse depositors. Mr Little opposed the receiver’s clawback requests on similar grounds, saying the costs of litigation would likely outstrip the cash recovered.
Kent Shaffer, Sir Allen’s criminal defence attorney, told the Financial Times the receiver and his colleagues were “looting the revenues” of the Stanford companies.
Mr Janvey told the FT the criticisms were “simply part of a tired and fruitless effort to shift attention away from Stanford, who is responsible for a worldwide multibillion dollar financial fraud that has hurt tens of thousands of people”.