Friday, May 15, 2009

Stanford Receiver Requests $20 Million for Expenses

Stanford Financial Group Co.’s court- appointed U.S. receiver asked a judge for $20 million to cover fees and expenses during two months of work on behalf of investors allegedly swindled by financier R. Allen Stanford.

The receiver, Dallas lawyer Ralph Janvey, has hired investigators, attorneys and forensic accountants from 14 firms to track assets scattered worldwide, according to a filing by his lawyers today in federal court in Dallas.

Janvey previously told Bloomberg News the alleged fraud is “far more complicated” than New York financier Bernard Madoff’s admitted $65 billion Ponzi scheme.

“Madoff made up bogus brokerage accounts and lied about his investment strategy,” Janvey said April 23 in an interview. “He didn’t have a worldwide empire with over 100 companies, numerous different businesses, customers and operations in 15 companies, and more than 3,000 employees, like Stanford did.”

The U.S. Securities and Exchange Commission sued Stanford, finance chief James M. Davis, Chief Investment Officer Laura Pendergest-Holt and three Stanford businesses on Feb. 17, claiming they ran an $8 billion fraud through the sale of certificates of deposit by Antigua-based Stanford International Bank.

At the SEC’s request, Janvey was appointed by the court on Feb. 16. U.S. District Judge David Godbey froze all of the Stanford executives’ corporate and personal assets and placed them under Janvey’s control, pending the outcome of the SEC suit.

Angry Client

“Wow! When you see these sorts of numbers, it makes our client very angry that the SEC has refused to release a measly few thousand dollars of her assets so she can pay basic living expenses,” Jeffrey Tillotson, a civil attorney for Pendergest- Holt, said in an e-mail. “I sure hope this doesn’t include them billing for the time they spent rummaging through my client’s underwear drawer.”

Pendergest-Holt is fighting Janvey’s authority over her personal assets and has complained that Janvey’s lawyers improperly searched her home, including her dresser drawers, during a February raid on her home in Baldwyn, Mississippi.

“I am not a damn swindler,” Stanford told Bloomberg News in an April 21 interview in which he denied any civil or criminal wrongdoing. He has not been charged with a crime and has denied running a Ponzi scheme in which early investors were repaid with funds taken from later investors. Pendergest-Holt has been indicted on two counts of obstructing the investigation into the alleged scheme.

SEC Opposed

Steve Korotash, the SEC’s associate regional director for enforcement, said the agency will oppose Janvey’s fee application and will ask Godbey to “authorize substantially reduced payments.”

“We recognize that the receiver and those working for him were dropped into the middle of a storm,” Korotash said in an e-mail. “They have confronted unprecedented challenges that necessitated an extraordinary level of effort, and they have performed admirably. Nonetheless, in light of the staggering losses that investors will suffer in this case, billing rates that would be supportable in traditional business litigation are not appropriate here.”

Dan Cogdell, Pendergest-Holt’s lawyer in her criminal case, and Davis’s lawyer, David Finn, didn’t immediately respond to requests for comment. Davis hasn’t been criminally charged and is cooperating with investigators.

Dick DeGuerin, Stanford’s lawyer in the criminal case, said Janvey’s fee request “certainly supports” the Texas financier’s request for the court to unlock $10 million of his frozen assets so he can pay a legal defense team.

‘Burning Up’ Assets

“Janvey is burning up Allen Stanford’s money and assets while denying Stanford the ability to fight,” DeGuerin said in an e-mail. “It’s no wonder he filed his request on a Friday afternoon, when most of the public is headed home or away for the weekend, so it would be less likely to be noticed.”

Kevin Sadler, a lawyer for Janvey, said the receiver discounted his fees by 20 percent, or more than $5 million, “at the request of the SEC, in the public interest, and because the final results to be obtained for investors and other claimants are still unknown,” according to today’s filing.

Also today, receivers appointed by the government of Antigua and Barbuda, where the Stanford International Bank Ltd., or SIB, was based, petitioned Godbey to allow them to place the bank in bankruptcy so that they can recover assets for its depositors.

The Antiguan receivers, Nigel Hamilton-Smith and Peter Wastell of Vantis Plc, told bank depositors in a letter posted to the firm’s Web site their investigations show the bank owes depositors about $7.2 billion, yet may have less than $1 billion is assets.

Significant Shortfall

“At this time it has not been possible to fully explain the very significant shortfall of the bank’s assets against its liabilities,” they said in the letter.

“It would appear,” the receivers said, that a Ponzi scheme “has been in operation, although further work will have to be carried out over the forthcoming months to properly establish the reasons for SIB’s failure and lack of assets.”

Janvey, the SEC and the U.S. Internal Revenue Service opposed the Antiguan liquidator’s request in court papers filed this week in Dallas.

The Antiguan government owes the bank about $140 million and that political considerations, not the rule of law, are driving the Antiguan receiver’s action, Sadler said in a May 11 filing.

The case is SEC v. Stanford International Bank, 3:09-cv-00298-N, U.S. District Court, Northern District of Texas (Dallas).