(Photography by Brian Baiamonte: Attorney Phil Preis)
It’s been more than six years since federal agents stormed the offices of the Stanford Financial Group, and more than three years since Allen Stanford was convicted of running a multibillion-dollar Ponzi scheme. Back in 2009, Stanford’s victims, many of whom had lost their entire retirement savings, held public forums with their elected leaders and pleaded for someone, anyone, to make them whole again.
The victims have been much quieter lately. A website belonging to the Stanford Victims Coalition seems not to have been updated in years, and it hosts a purported link to a Louisiana victims group that leads nowhere. Business Report tried to contact local victims who have spoken out in the past; they either did not return the call or declined to be interviewed, explaining that they’re burned out on talking about their plight.
But the fight to obtain some sort of compensation for Stanford’s victims continues.
“There’s a lot going on,” says Baton Rouge attorney Phil Preis, who is pursuing a class action on behalf of the victims. “I remain optimistic that, within the next six months to a year, there are going to be some major recoveries. I know a lot of people are spending a lot of time trying to make it happen.”
There have been setbacks. Last year, a District of Columbia appellate court ruled that, unlike Bernie Madoff’s victims, people swindled by Stanford were not entitled to money from the industry-funded Securities Investor Protection Corp. because Stanford’s Antigua-based bank was not an SIPC member.
But the Stanford Financial Receivership, headed by Dallas attorney Ralph Janvey, is fighting on many fronts. A number of those claims have been successful, although so far investors have received only a penny or two on the dollar, Preis says.
The receiver is going after interest payments to “net winner” investors who profited from their Stanford deposits before the Ponzi scheme collapsed, as well as commissions paid to 66 Stanford financial advisers in connection to the scheme. It is so far unclear whether claims against the advisers will be settled in arbitration or in court.
“I suspect that over the last seven years a lot of those assets have been transferred or spent, so there’s not going to be a lot of recovery,” Preis says of claims against the advisers.
So Janvey is casting a wide net. That includes working with the U.S. Department of Justice, liquidators in Antigua and Swiss authorities to go after some $208 million in Stanford assets that were stashed in Switzerland.
“Because of the complexity and difficulty involved in the Swiss proceedings, we do not yet know when the assets in Switzerland will be released for distribution,” Janvey told investors last year.
$45 MILLION IN WINS
Janvey and the Official Stanford Investors Committee claimed a win in May against the law firms of Adams & Reese and Breazeale, Sachse & Wilson and other defendants, including former Stanford director Cordell Haymon and the estate of former director Thomas Frazer. The settlement totals about $4.9 million, and the defendants, accused of aiding the fraud, did not admit wrongdoing. Claims against Breazeale Sachse Baton Rouge partner Claude Reynaud over legal services he provided to Stanford entities were part of the settlement, but claims against him stemming from his “activities as an officer or director of the Stanford Trust Company” were not.
Also in May, Janvey secured a $40 million settlement from global consulting firm BDO, which audited Stanford companies. BDO similarly admitted no wrongdoing.
Janvey is even going after the Golf Channel, seeking $5.9 million in payments by Stanford entities for advertising and sponsorships. While a Texas district court stated that “Golf Channel looks more like an innocent trade creditor than a salesman perpetrating and extending the Stanford Ponzi scheme,” an appellate court ruled for the receiver. Both sides are awaiting clarification of the law from the Supreme Court of Texas.
Meanwhile, Preis is among those pursuing a class action against entities that plaintiffs argue aided and abetted the Ponzi scheme. His chief target is SEI, an international firm that worked for Stanford as an administrator.
“They’re a billion dollar company, and they clearly have the resources as well as the insurance to participate in a major resolution,” Preis says.
He says SEI should have performed due diligence on Stanford. It was sending monthly statements to investors, so it should have made some effort to ensure the information in the statements was accurate, he argues. The plaintiffs, citing a U.S. Supreme Court decision from last year, say SEI was negligent in its failure to exercise “reasonable care” and obtain the value of the underlying assets.
In its court filings, SEI says the relevant law requires “an ability to control the specific transaction or activity upon which the primary violation is based.” Since SEI did not control the creation, marketing or sale of the fraudulent certificates of deposit, it is not liable, the firm’s attorneys argue.
The class has been certified in state court, and Preis expects to find out soon whether a federal court will approve the certification, which he says would increase the odds of a settlement. He doesn’t predict how big the settlement might be.
“Is it going to be more than 50% of the loss? No, [that isn’t likely],” he says. “Could it be as high as a third of what somebody lost? Yeah, I think there’s a good chance of that.” But there are no guarantees.
Baton Rouge money-makers
Receiver Ralph Janvey is attempting to collect some $40 million in commissions, front-end loans and other compensation from 66 Stanford Group financial advisers. The names of Baton Rouge area-based advisers, and the amount of their allegedly ill-gotten commissions obtained between January 2007 and January 2009, are listed below as they appeared in a 2009 court filing.
Hank Mills: $1,406,450
Grady Layfield: $642,263
James Fontenot: $418,726
Ron Clayton: $383,225
Tim Parsons: $308,642
Charles Jantzi: $210,665
Gary Haindel: $206,150