(Reuters) - A federal appeals court said on Monday the
United States is not liable to victims of Allen Stanford's fraud who claimed
that the Securities and Exchange Commission was incompetent for having taken
too long to uncover the swindler's $7.2 billion Ponzi scheme.
A panel of the 11th U.S. Circuit Court of Appeals in
Miami said the government is entitled to sovereign immunity.
U.S. not liable for alleged SEC negligence in Stanford fraud: court
A
federal appeals court said on Monday the United States is not liable to
victims of Allen Stanford's fraud who claimed that the Securities and
Exchange Commission was incompetent for having taken too long to uncover
the swindler's $7.2 billion Ponzi scheme.
A panel of the 11th U.S. Circuit Court of Appeals in Miami said the government is entitled to sovereign immunity.
Stanford's
victims accused the SEC of negligence for having waited until 2009 to
uncover the Ponzi scheme, despite having had evidence of it as early as
1997.
But the court said the SEC
had discretion to decide how to enforce securities laws, and could not
be liable for certain misrepresentations. It said this justified
shielding it from claims raised by the victims under the Federal Tort
Claims Act.
"We reach no
conclusions as to the SEC's conduct, or whether the latter's actions
deserve plaintiffs' condemnation," Circuit Judge Julie Carnes wrote for a
three-judge panel. "We do, however, conclude that the United States is
shielded from liability for the SEC's alleged negligence."
Victims
claimed that the SEC thought Stanford's business was a fraud after each
of four examinations between 1997 and 2004, but failed to advise the
Securities Investor Protection Corp, which compensates victims of failed
brokerages.
The plaintiffs were
led by Carlos Zelaya and George Glantz, who claimed to lose a combined
$1.65 million, and sought class-action status. Monday's decision upheld
rulings in 2013 by U.S. District Judge Robert Scola in Miami.
Gaytri Kachroo, a lawyer for the plaintiffs, did not immediately respond to requests for comment.
The U.S. Department of Justice, which represented the SEC in the appeal, did not immediately respond to similar requests.
In
2013, federal appeals courts in New York, Philadelphia and Pasadena,
California, dismissed lawsuits accusing the SEC of incompetence in
investigating Bernard Madoff.
Stanford,
65, is appealing his March 2012 conviction and 110-year prison term for
what prosecutors called a scam centered on his sale of fraudulent
high-yielding certificates of deposit through his Antigua-based Stanford
International Bank.
The SEC's inspector general in 2010 criticized the regulator for being too slow to uncover Stanford's fraud.
The case is Zelaya et al. v. U.S., 11th U.S. Circuit Court of Appeals, No. 13-14780.
