One of the few bright spots in the nearly 12-year effort by victims of The Stanford Group Ponzi scheme to recover some of their lost savings was the April ruling by a Texas arbitration panel ordering Pershing, a clearing firm for Stanford’s Houston-based brokerage, to pay $5.6 million in damages to a small group of investors.
Though the ruling didn’t affect many of the Baton Rouge victims of the Ponzi scheme, who are pursuing separate legal remedies, it did cover local contractor Blaine Smith, an outspoken advocate for Stanford Group victims, who lost $1.2 million when the brokerage collapsed in 2009.
Now, even the sweetness of that victory has soured: Smith recently received a letter from the court-appointed receiver in the federal government’s ongoing case against Stanford International Bank, saying the $458,000 settlement Smith received in the Texas case will be deducted from the nearly $1 million claim he has in the government’s case.
“This is the kind of sick, cruel, abuse and blatant discrimination against the victims the receiver has been allowed to continue to get away with,” Smith says. “And no one does anything about it.”
The receiver in the government case, Texas-based attorney Ralph Janvey, has been harshly criticized by Stanford Group victims, their lawyers and members of Congress for so far recouping only $500 million of the estimated $5 billion lost—and for pocketing nearly half of that in attorney’s fees.
That’s why Smith hired his own attorney to go after Pershing in the Texas case last year, and he says he should not be penalized for successfully pursuing his own litigation.
“Now that we won our case on our own, the receiver is deducting the total amount of the Pershing arbitration award from our initial claim determination and now tells us that we have been overpaid by the receiver due to our recovery in the Pershing case,” Smith says. “He did not even take into consideration the amount we paid our attorneys in fees, our lodging, time and expenses.”
An attorney for the receiver says he understands Smith’s frustration and shares it, noting that much of the money the receiver has recovered in court rulings remains tied up in appeals. He says the receiver is not penalizing Smith for winning a separate settlement in the case against Pershing, but, rather, is following court orders that spell out how recovered funds will be distributed to victims.
“The entire claims and distribution process for Stanford victims, like Mr. Smith, has been established by court order years ago,” says attorney Kevin Sadler of Baker Botts. “Pursuant to those orders, Mr. Smith’s claim was properly adjusted because his Stanford CD loss has been compensated, in part, from a source outside of the receivership.”
Sadler goes on to say that the receivership has a very limited, finite pool of funds from which to make compensation payments to investors, and “no single claimant has a higher priority than any other or is entitled to a greater than pro rata share of his net CD loss. Unlike Mr. Smith’s situation, there are thousands of Stanford CD victims whose only source of compensation for their losses is the receivership.”
February will mark 12 years since the collapse of the Stanford Group and many of the older retirees, who lost money in the scheme have since died. The challenges Smith faces shows how difficult the recovery process has been.
A class-action suit filed by Baton Rouge attorney Phil Preis on behalf of many local investors has continued to encounter roadblocks and shows no signs of a favorable resolution any time soon.
Members of Louisiana’s congressional delegation, meanwhile, continue to issue letters and press releases, from time to time, calling on international banks to release Stanford Group funds and urging the receiver to do more.
But so far, none of those efforts is proving successful.
Smith is irate.
“God help us,” he says. “Because no one else seems to be willing.”