Friday, May 15, 2009

Stanford’s Antiguan Liquidator Seeks Bankruptcy Case

Stanford International Bank Ltd.’s Antiguan liquidator asked a U.S. judge to overrule federal regulators, tax authorities and the bank’s U.S. receiver and let the Caribbean receiver pursue assets belonging to alleged Ponzi scheme mastermind R. Allen Stanford in U.S. bankruptcy courts.

The bank’s Antiguan liquidator repeated an earlier request to U.S. District Judge David Godbey for rights to use a 2005 provision in the U.S. Bankruptcy Code, Chapter 15, which gives preferential treatment to foreign companies when they seek to recover assets within the U.S.

Godbey is overseeing the U.S. Securities and Exchange Commission lawsuit accusing the Texas billionaire, two associates and Antigua-based Stanford International Bank, or SIB, of defrauding investors of $8 billion through the sale of bogus certificates of deposit.

“It appears the U.S. receiver and SEC are more interested in maintaining their positions than cooperating with liquidators to maximize the recovery for SIB’s creditors,” Weston Loegering, a lawyer for the bank’s Antiguan liquidators, said in papers filed today in federal court in Dallas.

Godbey froze all of Stanford’s corporate and personal assets when the SEC sued on Feb. 17 and placed them under the control of receiver Ralph Janvey. Two days later, the Antiguan government seized Stanford’s assets on the Caribbean island and placed them under the control of Nigel Hamilton-Smith and Peter Wastell of Vantis Plc.

$1 Billion in Assets

In a separate letter to investors, dated May 13, 2009, posted on the Antiguan receivers’ business Web site, Hamilton- Smith and Wastell said their investigations show the bank owes depositors about $7.2 billion and may have less than $1 billion in assets.

“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.”

Stanford, 59, hasn’t been charged with a crime. “I’m not a damn swindler,” the Mexia, Texas, native told Bloomberg News in an April 21 interview in which he denied any civil or criminal wrongdoing.

U.S. Opposition

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

Kevin Callahan, a spokesman for the SEC, and Janvey’s spokeswoman, Nancy Sims, didn’t immediately respond to requests for comment on the Antiguan filing.

The U.S. entities urged Godbey to keep control of Stanford’s assets in the U.S., where Stanford’s brokerage operation -- Stanford Group Co. -- was located and most of his companies were based.

Stanford International Bank’s incorporation in Antigua “is of little significance to this case’s larger context,” the SEC said in a May 11 court filing. “To the extent Stanford’s fraud touched on areas outside the United States, the connection to Antigua is tenuous,” the SEC said.

‘Fraction’ of Assets

Janvey reported this month that he has found only a “fraction” of the assets that purportedly backed up the $7.2 billion in open CDs listed on Stanford International Bank’s books.

As of Feb. 18, the day before the bank was seized by the Antiguan government, the bank had $46 million cash on hand in accounts in Antigua, Canada, the U.K. and the U.S., according to Wastell and Hamilton-Smith.

The Antiguan appointees said they’ve identified another $472 million in investments held by financial institutions and an additional $470 million in equity investments or loans the bank made to other companies.

“Total assets values could therefore be below $1 billion against depositor liabilities of $7.2 billion,” they told depositors. They said they are continuing to assess the value of the bank’s real estate and other holdings, which haven’t yet been fully explored.

Alleged Ponzi Scheme

The SEC accused Stanford of providing clients with unrealistically high returns through a Ponzi scheme in which early investors were repaid with funds taken from later investors. Stanford is fighting the SEC’s allegations and Janvey’s control of his assets.

Stanford’s lawyers said today in a court filing that he can’t comply with an earlier order to file his tax return for 2007 because he doesn’t have access to papers that would enable him to do so or funds to pay lawyers and accountants.

The lawyers also said in court records that a 2007 return was filed for Stanford by an accountant in the U.S. territory of St. Croix, and that his estranged wife and her accountant have prepared their own return, which Stanford is providing to the court.

Stanford’s lawyers also told Godbey they fear filing a second 2007 return that isn’t identical to the St. Croix filing -- the only copy of which was turned over to U.S. authorities pursuant to a subpoena -- “could violate the law or otherwise prejudice Mr. Stanford.”

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