Stanford: Victims suffer amid fight over control of assets

By Patsy R. Brumfield/NEMS Daily Journal

Tupelo businessman Al Pleasants can’t forget the day nearly three years ago when he realized he’d lost his $425,000 savings in the Stanford financial crash.
“It was unbelievable,” he recalls.
Pleasants says he’ll be watching with great interest as the defunct international company’s chief, R. Allen Stanford, goes on trial today in Houston, Texas.
“I want to see that justice is done,” Pleasants said.
He and more than a thousand other Mississippians lost their savings and retirement funds when Stanford Financial Group’s assets were frozen in February 2009 by a federal court order after the U.S. Securities and Exchange Commission accused its top officers of fraud.
Stanford had offices in Tupelo, Jackson and Memphis, Tenn.
Some 22,000 investors worldwide find themselves in the same spot, even today, with the sure knowledge they must hold on even longer to find out if they ever will get any money back.
Tupelo’s Walt Walton was retired and forced to go back to work when his $455,108 nest egg evaporated from his control, invested like so many others’ in certificates of deposit sold through Stanford International Bank Ltd.
They wrongly believed the CDs to be federally insured.
Walton and Oxford attorney Guthrie Abbott were among many who unsuccessfully sued their local Stanford financial advisers to recoup their accounts – Abbott’s at $750,000 including his, his wife’s and his sister-in-law’s savings.
Virtually all those lawsuits were dismissed or are on hold until the court-appointed receiver says it’s time.
Meanwhile, Stanford properties from gold coins and jet planes to yachts and a private Caribbean island have been up for sale to recoup funds for the victims.
So far, the receiver has spent at least $103 million on litigation, wind-down costs and other expenses, while collecting less than $212 million in cash and material assets since the SEC sued Stanford in February 2009.
Critics worry there won’t be anything left by the time it’s over.
An attorney for receiver Ralph Janvey told Bloomberg News last week that it’s too soon to say when investors may see some of the money.
“I know that’s frustrating,” said lawyer Kevin Sadler, of Houston-based Baker Botts LLP, hired to do the legal work. “Investors want to know when and how much.”
Last November, under pressure by U.S. District Judge David Godbey in Dallas to start compensating investors, Sadler and Janvey asked court permission to set up an investor repayment plan and a claim filing cut-off date.
Unlike Stanford, news reports say repayment processes have moved forward for claimants in the Bernard L. Madoff fraud case and the bankruptcy of MF Global Holdings Ltd., the parent of commodities broker MF Global Inc.
Sadler told Bloomberg that Stanford investors are owed about $5 billion in principal.
The largest known pot of assets – about $350 million – is Stanford’s foreign accounts, largely beyond Janvey’s reach.
U.K. and Swiss courts awarded control to Stanford International Bank Ltd. liquidators appointed by an Antiguan branch of the Eastern Caribbean Supreme Court.
Edward Davis, the liquidators’ Miami lawyer, told Bloomberg in a phone interview this month that Stanford’s global depositors could be paid as soon as the second quarter of this year.
At current recovery levels, investors would receive about 10 percent of their money, more if the liquidators are able to invest small amounts of recovered funds to make it easier to sell some Stanford properties, Davis said.
Fighting for control
But Janvey’s fighting with the foreign courts, who are sparring with Godbey to determine which receiver gets control of the estate.
An attempt to resolve that dispute through mediation failed.
Outside experts say that Madoff’s fraud was easier to unwind because the stolen money remained within a defined circle of people where it could be identified and recovered.
With Stanford, it’s more complicated – prosecutors say he blew through the money – he either lost it or he spent it.
Meanwhile, the SEC sued the U.S. Securities Investor Protection Corp. to force a path to a victims’ recovery. A hearing is set for Jan. 24 in Washington, D.C.
Walt Walton went back to work three years ago, acknowledging that his retirement was over.
Pleasants says he’s just keeping his head up.
“I just hope the courts will resolve this and force SIPC to do what it’s supposed to do – pay the victims.”

Follow trial at starting later today.

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