DALLAS – The court-appointed receiver who took over companies owned by troubled Texas billionaire R. Allen Stanford filed a lawsuit Wednesday seeking to recover more than $40 million paid to dozens of former Stanford financial advisers, including a Mississippi man.
The receiver, Texas attorney Ralph Janvey, said in a statement that the Stanford Financial Group paid more than $40 million to financial advisers in the form of commissions, loans and compensation for advising clients to buy certificates of deposit at Stanford International Bank. Those CDs are central to what the federal government said is an $8 billion fraud committed by Stanford and his company’s top financial officer.
The 66 financial advisers named in the lawsuit, which was filed in federal district court in Dallas, each received more than $200,000 apiece in CD-related compensation in the most recent two-year period, according to court papers.
At least 11 of the financial advisers received more than $1 million in CD-related compensation. Four of them received more than $2 million apiece, according to the lawsuit.
Neal Clement of Saltillo, received more than $260,000 in fraudulent commissions from January 2007 to January 2009, according to the complaint.
Clement served as co-manager of the firm’s Tupelo office and was a principal with Jackson-based EFP Wealth Management, which was sold to Stanford Financial in 2006.
In the statement, Janvey said that “the brokerage services performed by the financial advisers in exchange for the compensation payments were not legitimate and did not confer any benefit on their customers.” Therefore, “the financial advisers have no rightful ownership interest that could justify their retaining possession of the funds.”
If Janvey is successful in recovering the money, it will be redistributed to investors who were allegedly defrauded.
Stanford has denied wrongdoing and said he is innocent of orchestrating what the Securities and Exchange Commission called “a massive Ponzi scheme.”
An SEC lawsuit, filed in February, said Stanford’s Antigua-based bank advertised its CDs in a brochure touting an investment philosophy “anchored in time-proven conservative criteria.” But rather than maintaining diversified investments, the Stanford bank’s portfolio was “misappropriated by Defendant Allen Stanford and used by him to acquire private equity investments and real estate.”
The SEC alleges that by the end of last year, one of the largest segments of the bank’s portfolio consisted of at least $1.6 billion in undocumented loans to Stanford. Meanwhile, Stanford paid high commission rates, bonuses and forgivable loans to financial advisers as incentives to sell CDs to clients.
The only criminal charge so far filed in the wind-ranging case was against Laura Pendergest-Holt, the chief investment officer of the Stanford Financial Group. The Baldwyn native was charged with obstructing the SEC’s investigation. One of her attorneys has said she is not guilty and was “set up” by Stanford and his finance chief, James M. Davis.
An attorney for Davis, also from Baldwyn, has promised his client’s full cooperation with federal investigators looking into the case.
Jeff Carlton/The Associated Press