Stanford investors get fleeced again
It’s bad enough being a victim of a Ponzi scheme. But it’s rubbing salt in the wound when the court-appointed receiver charged with cleaning up the mess makes things worse for investors fleeced in the scam.
Yet that’s just what the receiver appears to be doing in the case of R. Allen Stanford, who has been accused of running a $7 billion Ponzi scheme.
In an unusual turn of events, the receiver, Ralph Janvey, again finds himself doing battle with the Securities and Exchange Commission, which recommended the Dallas attorney’s appointment back in February. A month ago, the SEC opposed a $20 million fee application that Janvey had submitted, saying the receiver’s compensation request was excessive.
Now the SEC is asking the Texas federal court judge who approved Janvey’s appointment to strip the Dallas attorney of the power to bring so-called “clawback” lawsuits against innocent investors. The SEC contends the lawsuits are unnecessarily punitive and not supported by either “logic or law.”
A clawback suit is a favorite remedy of receivers in fraud cases to recapture earlier payouts to investors who may have either had some knowledge of the scam, or received preferential treatment from the Ponzi ringleader.
Janvey, who didn’t return a phone call, already has filed a number of clawback suits against former Stanford brokers, contending that they benefited financially by selling Stanford’s high-yielding certificates of deposit that prosecutors say were bogus.
The SEC says it has no problem with those lawsuits, but it is drawing the line at actions that target investors who simply had the good fortune of cashing in some of their Stanford CDs early.
Worst of all, it’s not even clear the investor suits will bring in enough money to justify the effort. A court-appointed examiner in the Stanford case says it appears that Janvey is willing “to expend $2 in attorneys’ and accountants’ fees chasing a recovery of only $1.”
Cleaning up the Texas-sized mess Stanford created with his offshore bank in tiny Antigua shouldn’t be about generating hefty fees for the receiver and his team.
The SEC should do more than simply seek to limit Janvey’s powers. It’s time to remove him from the case and get a new receiver. (Editing by Martin Langfield)