Stanford Depositors To Be Barred From Individual Motions

by Glen Shapiro, LawAndTax-News.com, New York

20 March 2009

The court-appointed receiver in the Stanford Group Companies case, Ralph Janvey, and the US Securities and Exchange Commission (SEC) have requested a court order blocking 45 law suits by groups of investors and creditors in the SEC’s suit against Allen Stanford. Janvey has underlined that including the extra suits would cause ’chaos’, reassuring that he would endeavour to ‘implement a distribution plan for the benefit of all investors, not just a select few.’

Bargaining with the court judge David C. Gobey, Janvey urged that “allowing all the investors to intervene in the enforcement action would destroy any hope of an efficient distribution of assets,” adding: “[We are working] as quickly as possible to release more accounts through the certification process created to deal with all frozen funds not directly linked to the suspected fraud.”

An SEC release informed that progress had been made to this effect with the release of USD4.6bn from 28,000 frozen accounts.

The SEC has announced that customers can immediately begin the process of obtaining control of their accounts by arranging to transfer their accounts to a new broker-dealer.

Typically, the first step in opening a new account is for the customer to obtain and complete an account transfer form and a new account opening form. These forms are available from broker-dealers directly or on their websites. The completed forms are then submitted to the new broker-dealer who in turn will provide appropriate instruction to Pershing LLC and JP Morgan Clearing Corp. regarding the transfer of the accounts. There is typically a small fee associated with the transfer of accounts from one broker to another.

Concluding its guidance on the matter, the SEC notes that funds will remain frozen, for further investigation, in cases where the following conditions apply:

• They are owned by Stanford shareholders, directors, and certain employees;
• They are owned for the benefit of Stanford companies;
• They are managed by Stanford companies;
• They secure unpaid balances owed by customers or non-purpose loans made to customers;
• They are related to accounts in any of these categories by social security number, address or other similar indicators.

Around 4,000 accounts remain frozen, holding more than USD1bn. The government is still undertaking an investigation into the frozen accounts with links to Stanford International Bank to determine whether they benefited from the fraud. A taskforce headed by Janvey is working to locate assets and bank accounts held in the names of almost 200 Stanford companies worldwide.

The Internal Revenue Service has also filed a request to join the case to pursue USD226.6m in back income taxes, interest and penalties from 1999-2003, and is also chasing taxes for the period of 2007-2008.

Allen Stanford and Chief Financial Officer James Davis remain uncharged at present and have quoted the fifth amendment invoking their right against self-incrimination. Both are refusing to cooperate with the investigation. Stanford’s assets, estimated to be worth in the region of USD2.2bn by Forbes magazine, have been frozen.

Stanford Chief Investment Officer Laura Pendergest-Holt has been charged with criminal obstruction and released on USD300,000 bail. She protests her innocent in the matter, her lawyer claiming that she had cooperated with investigators until she was arrested on February 25.

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