Allen Stanford was convicted in 2012 on 13 felony charges related to America’s second-largest Ponzi scheme ever.
WASHINGTON — Even tucked away inside a high-security federal prison in Central Florida, former Houston billionaire banker Allen Stanford is still thinking big — and flouting the rules.
Stanford filed a 299-page brief last month with the 5th U.S. Circuit Court of Appeals in New Orleans, making no fewer than 15 lengthy arguments about why he should be set free. He was convicted in 2012 on 13 felony charges related to America’s second-largest Ponzi scheme ever and sentenced to 110 years in prison.
Before being halted by a federal judge in Dallas in 2009, Stanford’s fraud had drawn in more victims than any other investment scheme in American history. There are more than 18,000 outstanding claims from defrauded investors and thousands more under review.
Investors had deposited about $5.5 billion with Stanford, and so far just $72 million has been repaid to investors.
Kevin Sadler, the attorney for Ralph Janvey, the Dallas-based court-appointed receiver, said that nearly 1,400 verified claims totaling $455 million have been filed by investor groups with at least one victim living in Texas. There are 111 claims worth nearly $51 million with ties to Dallas residents.
Stanford’s verbose appeal is his best and probably only chance to die a free man. The court has given him until Monday to file the appeal again, at about half its current length.
Since he fired his court-appointed attorney, Stanford is writing his own appeal. In it, he divides his chief arguments into two broad attacks — that the U.S. didn’t have jurisdiction over his offshore business and that his trial in Houston was bungled.
The charges against him were improper, he writes, since his bank was in Antigua, not the United States, and offered clients certificates of deposit, not “securities” as defined by the U.S. statutes.
“Simply put, Stanford International Bank was regulated by — and only by — Financial Services Regulatory Commission of Antigua and Barbuda,” Stanford writes.
That part of his appeal is based in part on Morrison vs. Australian National Bank, a 2009 Supreme Court decision that ruled that Americans defrauded by the Australian bank couldn’t sue under U.S. law, even though incidental parts of the bank’s operations were in America.
Yet the high court in the Morrison case held that a key question that determines whether an offshore bank fraud triggers U.S. securities laws is whether it marketed its products to Americans.
“They are going to look at the Houston-based company and determine whether there was enough links between it and the CDs sold by Stanford’s bank in Antigua,” said securities law professor Stavros Gadinis of the University of California at Berkeley.
William J. Carney, professor emeritus of corporate law at Emory University in Atlanta, agreed.
“The difference between the Australian case and Stanford’s is that the Australian company didn’t do business in the U.S. and didn’t offer its securities here,” he said.
Carney said Stanford’s other argument, that the CDs he sold aren’t properly “securities,” has a long history in securities litigation.
“The question of whether CDs are securities is really a closer call,” he said.
Stanford also argues in his appeal that he never got a fair trial, thanks to a series of factors all stemming from a savage beating he took from another inmate just five months after he was placed in a federal detention center.
“This assault resulted in a traumatic brain injury … required extensive reconstructive surgery, and was followed by over-medication of psychotropic drugs,” Stanford writes, describing injuries that prosecutors say he later tried to milk to avoid trial. “All of which, combined, profoundly affected his ability to communicate with his attorneys and prepare his defense.”
The beating and all the problems it caused later are probably his strongest grounds for a new trial, said Ali Fazel, who along with his partner Richard Scardino defended Stanford during his seven-week trial.
Before Stanford was indicted in 2009, U.S. District Judge David Hittner ordered Stanford to prison rather than allowing him to post bond. In court records, Hittner said he considered Stanford — who had traveled to 30 nations and five continents in the previous four years — an exceptional flight risk.
In September of that year, Stanford was badly beaten in prison.
“While sitting in a chair, he was grabbed from behind and fell backwards, hitting the back of his head on the concrete floor resulting in a concussion and loss of consciousness,” his lawyers asserted in a court filing before the trial. Unconscious, he was beaten even more severely. His assailant then smashed Stanford’s face with a steel pole, the filing said.
In 2011, Hittner ruled that Stanford was unfit to stand trial and ordered him sent to a prison medical facility for a four-month treatment. And that delay in the trial grew.
When officials at the facility said Stanford needed another four months of care, Hittner reluctantly delayed the trial until January 2012.
The delays meant further suffering for the victims. Hundreds of millions of dollars remained frozen until the outcome of the trial, which kept getting pushed back.
After Stanford’s eight months of treatment were over, his lawyers asked for yet another postponement, citing testimony from a string of psychiatrists that Stanford was still not competent.
Federal prosecutors pounced. They alleged in court papers that despite his injuries, Stanford’s continued efforts to avoid trial were just one more fraud.
They said Stanford had conveniently claimed to have now forgotten “all his past life events … as well as details of his business and banking operations.”
A psychologist at the facility concluded he was malingering and reported that Stanford performed so poorly on a test he administered that “mentally retarded children do much better.”
Fazel said he and his partner recognized, even at the time, that the handling of the trial would be Stanford’s best grounds for an appeal.
“It’s really a shame that a trained and talented appellate attorney didn’t get their hands on the trial record,” Fazel said. “There were lots of issues preserved in the record that would give a trained appellate lawyer a lot of room to work.”
The delay cost virtually every single one of Stanford’s fraud victims. The only sizable trove of recovered assets — $300 million worth — had been frozen overseas. Under the law, even those funds could not be distributed to victims until Stanford was convicted and there was a finding of fraud by the court.
Most of that $300 million is still frozen, pending appeal.
“Unquestionably the delays at trial, and now with [Stanford] dragging out his appeal by shuffling through attorneys and filing these overlong briefs, have meant a delay of at least two years — and counting,” said Sadler, the attorney for the receiver.
Beyond the dollars, the human impact of the delay, and of the fraud itself, has been enormous.
Among the victims in Texas: a retired businesswoman who lost $1.3 million, money she was relying on to treat a rare genetic disease that would kill her without a kidney transplant; a retired cattle rancher who lost everything and found himself in and out of a hospital intensive-care unit repeatedly as doctors feared the stress was killing him; and a retired railway man and honored Vietnam veteran who feared that he had no money left to take care of a wife disabled with Parkinson’s.
Mary Oliver and her husband were living in Dallas in late 2007 when they began investing their retirement funds — about $1 million — with Stanford. Like most victims, they’ve recovered less than 1 percent of their losses.
“Allen Stanford ruined the lives of thousands of hard-working, tax-paying investors by stealing their life savings,” Oliver said. “He lied, cheated and stole from innocent victims. He deserves to be in jail for the rest of his life on earth.”
Stanford’s appeal is his best shot at avoiding that fate, but even as he prolongs his case, the thousands of people he defrauded have little prospect of ever being made whole.
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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group – SIVG official Forum http://sivg.org.ag/