Nov 17 (Reuters)(corrected) - Victims of Allen Stanford's
alleged $7.2 billion Ponzi scheme may soon have a chance to
submit claims, though it remains unclear how much of their
losses they might ultimately recover or when that recovery
might take place.
Ralph Janvey, the court-appointed receiver for Stanford's
firm, asked a federal judge in Dallas for permission to set up
a claims process, 2-1/2 years after the financier's arrest, a
Wednesday court filing shows.
Approval could pave the way for investors to eventually
recover at least some money lost in Stanford's alleged fraud.
Stanford, 61, faces 14 criminal charges and U.S. Securities and Exchange Commission civil charges over allegations he
deceived investors who bought fake certificates of deposit from
his Antiguan bank, Stanford International Bank Ltd.
The February 2009 lawsuit by the SEC came two months after
Bernard Madoff's Ponzi scheme was uncovered.
Wednesday's filing is "a major step" toward returning money
to victims, Kevin Sadler, a partner at Baker Botts representing
Janvey, said in an email.
Though court-appointed examiner John Little and a committee
of Stanford investors expressed disagreements over parts of the
process at an Oct. 13 court conference, "the court made clear
at the status conference that the process should begin, and the
receiver has acted accordingly," he added.
It is unclear how much money will be distributed, how any
payouts will be calculated, and when distributions will begin.
"For investor claimants, the amount of the investor's net
investment in the Ponzi scheme will be one of the most
significant factors" in determining payouts, Janvey said.
Peter Morgenstern, a lawyer for the investors' committee,
on Thursday declined immediate comment.
Little, in an email, said he would have preferred that the
parties "fully explored" opportunities to cooperate in creating
a claims process with Antiguan liquidators and the Securities
Investor Protection Corp, which handles claims for investors
whose brokerages fail. He also said the claims process will be
expensive, and that the receivership has "limited" assets.
HUNDREDS OF MILLIONS SOUGHT
According to court papers, the receivership as of Oct. 31
had $80.1 million of unrestricted cash, after accounting for
professional fees and costs, and $96.6 million of "material"
assets. It was also seeking $955.3 million through litigation.
This latter sum included $610 million from other Stanford
investors and vendors, and $335 million in British, Canadian,
Swiss and other accounts. Liquidators in Antigua have sought
control of some of these accounts, court papers show.
The $7.2 billion figure reflects CDs on Stanford's books
when the receivership was set up, not investor losses.
At the Oct. 13 conference, Sadler said at least $2 billion
of investor funds had been lost through a series of backdated
fictitious loans. "If one wanted to consider a floor of money
that's gone, that certainly would be a candidate," he said.
Stanford recently moved to a Houston federal detention
center from the Butner Federal Correctional Complex in North
Carolina, where he was treated for an addiction to an
anti-anxiety medication.
His criminal trial is expected to begin in January in the
federal court in Houston. Stanford is scheduled to be arraigned
under his most recent indictment on Nov. 28. That proceeding
had been delayed because of his treatment at Butner.
On Thursday, U.S. District Judge David Hittner, who
oversees the criminal case, barred Stephen Cochell, a lawyer
for Stanford in the SEC case, from meeting his client at the
Houston detention center until the criminal case is finished.
The judge said public comments by Cochell about Stanford's
current mental status could impact the criminal trial. Cochell
did not immediately respond to a request for comment.
Madoff is serving a 150-year prison term at Butner.
The civil case is SEC v. Stanford International Bank Ltd,
U.S. District Court, Northern District of Texas, No. 09-00298.
The criminal case is U.S. v. Stanford, U.S. District Court,
Southern District of Texas, No. 09-00342.
For the SEC: David Reece and other attorneys of the SEC.
For Stanford: Ruth Schuster of The Brewer Law Group.
(Reporting by Jonathan Stempel)
Follow us on Twitter: @ReutersLegal
(A previous version of this story incorrectly referred to a
federal judge in Houston in paragraph two. It is a federal
judge in Dallas.)