Madoff Trustee Asks Supreme Court to Let Him Sue Banks

By PETER LATTMAN

Updated, 7:27 p.m. | The trustee seeking to recover money for the victims of Bernard L. Madoff’s Ponzi scheme asked the Supreme Court on Wednesday to review a ruling that prohibits him from suing several of the world’s largest banks that he contends aided the fraud.
In June, a federal appeals court in Manhattan decided that the trustee, Irving H. Picard, did not have standing to sue JPMorgan Chase, UBS, HSBC and UniCredit Bank Austria on claims that they abetted the multibillion-dollar fraud, which lasted decades. That opinion upheld a lower-court ruling by Judge Jed S. Rakoff of Federal District Court in Manhattan.
On Wednesday, lawyers for Mr. Picard filed a petition to the Supreme Court requesting that it hear an appeal of the case.
“Bernard L. Madoff did not act alone,” Mr. Picard’s lawyers said. The scheme “could not have persisted for so long, or defrauded so many of so much, without a network of financial institutions, feeder funds and individuals who participated in his fraud or acquiesced in it — just like any large-scale financial fraud.”
In a statement, the lawyers for the trustee said the ruling by the United States Court of Appeals for the Second Circuit contradicted the decisions of other appeals courts across the country.
Such conflicts often provide an impetus for the Supreme Court to hear a case, though it accepts only a fraction of appeal requests. The court receives about 10,000 petitions for a so-called writ of certiorari each year, yet grants only about 75 to 80 of those cases, according to its Web site.
The legal issue in the Madoff case centers on whether the trustee has the right to pursue claims against a third party, like a bank, that collaborates with a broker — in this case Mr. Madoff — to defraud customers. The appeals court ruled that under the law, the trustee “stands in the shoes” of Mr. Madoff’s firm and thus cannot sue the banks for losses caused by Mr. Madoff’s fraud.
Mr. Picard’s lawyers said the appeals court ruling undermined the intent of the Securities Investor Protection Act.
“If this decision is allowed to stand, the law governing S.I.P.A. liquidations will be in turmoil, making collaboration with future Madoffs risk-free for big financial institutions,” wrote David B. Rivkin Jr., a lawyer for Mr. Picard at Baker Hostetler. “In other words, the bad guys win.”
Mr. Picard is trying to recover billions of dollars from the banks that he said turned blind eyes to clear warning signs of the Madoff fraud. He contends, for instance, that JPMorgan was “thoroughly complicit” in the fraud, having obtained many indications of misconduct and failed to report the suspicious activity.
The lawsuit filed against JPMorgan highlights several examples in which JPMorgan officials expressed concerns about Mr. Madoff’s business. On June 15, 2007, a senior risk-management officer at the bank e-mailed colleagues to report that another bank executive “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”
In another e-mail, a top private wealth management executive at the bank was routinely urging clients to avoid investments with exposure to Mr. Madoff because his “Oz-like signals” were “too difficult to ignore.”
Federal prosecutors continue to investigate whether JPMorgan failed to properly alert regulators about Mr. Madoff’s business, said people briefed on the investigation. A JPMorgan spokesman declined to comment.
Cash losses from the fraud are estimated at about $17 billion, but the paper wealth that was wiped out totaled more than $64 billion. Mr. Picard has thus far recovered about $9.4 billion and continues to pursue lost money.
Mr. Madoff is serving a 150-year sentence in a federal prison in North Carolina after pleading guilty in March 2009.
While the trustee’s lawyers at Baker Hostetler try to pursue a case against JPMorgan, they have another legal connection to the banking giant. Mr. Rivkin and Oren J. Warshavsky are representing Bruno Iksil, the JPMorgan trader nicknamed the London Whale, who is cooperating with the government in its investigation into the bank’s record trading loss.

In addition, jury selection for the first criminal trial related to the Madoff case is under way in federal court in Manhattan. Five former employees of Mr. Madoff, including his longtime personal secretary and two computer programmers, are fighting charges that they helped their boss carry out his fraud. The trial is expected to take as long as five months.

Link: http://dealbook.nytimes.com/2013/10/09/madoff-trustee-appeals-to-supreme-court-in-suit-against-banks/?_r=0

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Madoff Trustee Asks Supreme Court to Let Him Sue Banks

By PETER LATTMAN
Updated, 7:27 p.m. | The trustee seeking to recover money for the victims of Bernard L. Madoff’s Ponzi scheme asked the Supreme Court on Wednesday to review a ruling that prohibits him from suing several of the world’s largest banks that he contends aided the fraud.

In June, a federal appeals court in Manhattan decided that the trustee, Irving H. Picard, did not have standing to sue JPMorgan Chase, UBS, HSBC and UniCredit Bank Austria on claims that they abetted the multibillion-dollar fraud, which lasted decades. That opinion upheld a lower-court ruling by Judge Jed S. Rakoff of Federal District Court in Manhattan.
On Wednesday, lawyers for Mr. Picard filed a petition to the Supreme Court requesting that it hear an appeal of the case.

“Bernard L. Madoff did not act alone,” Mr. Picard’s lawyers said. The scheme “could not have persisted for so long, or defrauded so many of so much, without a network of financial institutions, feeder funds and individuals who participated in his fraud or acquiesced in it — just like any large-scale financial fraud.”

In a statement, the lawyers for the trustee said the ruling by the United States Court of Appeals for the Second Circuit contradicted the decisions of other appeals courts across the country.

Such conflicts often provide an impetus for the Supreme Court to hear a case, though it accepts only a fraction of appeal requests. The court receives about 10,000 petitions for a so-called writ of certiorari each year, yet grants only about 75 to 80 of those cases, according to its Web site.

The legal issue in the Madoff case centers on whether the trustee has the right to pursue claims against a third party, like a bank, that collaborates with a broker — in this case Mr. Madoff — to defraud customers. The appeals court ruled that under the law, the trustee “stands in the shoes” of Mr. Madoff’s firm and thus cannot sue the banks for losses caused by Mr. Madoff’s fraud.

Mr. Picard’s lawyers said the appeals court ruling undermined the intent of the Securities Investor Protection Act.
“If this decision is allowed to stand, the law governing S.I.P.A. liquidations will be in turmoil, making collaboration with future Madoffs risk-free for big financial institutions,” wrote David B. Rivkin Jr., a lawyer for Mr. Picard at Baker Hostetler. “In other words, the bad guys win.”

Mr. Picard is trying to recover billions of dollars from the banks that he said turned blind eyes to clear warning signs of the Madoff fraud. He contends, for instance, that JPMorgan was “thoroughly complicit” in the fraud, having obtained many indications of misconduct and failed to report the suspicious activity.

The lawsuit filed against JPMorgan highlights several examples in which JPMorgan officials expressed concerns about Mr. Madoff’s business. On June 15, 2007, a senior risk-management officer at the bank e-mailed colleagues to report that another bank executive “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”

In another e-mail, a top private wealth management executive at the bank was routinely urging clients to avoid investments with exposure to Mr. Madoff because his “Oz-like signals” were “too difficult to ignore.”

Federal prosecutors continue to investigate whether JPMorgan failed to properly alert regulators about Mr. Madoff’s business, said people briefed on the investigation. A JPMorgan spokesman declined to comment.

Cash losses from the fraud are estimated at about $17 billion, but the paper wealth that was wiped out totaled more than $64 billion. Mr. Picard has thus far recovered about $9.4 billion and continues to pursue lost money.

Mr. Madoff is serving a 150-year sentence in a federal prison in North Carolina after pleading guilty in March 2009.

While the trustee’s lawyers at Baker Hostetler try to pursue a case against JPMorgan, they have another legal connection to the banking giant. Mr. Rivkin and Oren J. Warshavsky are representing Bruno Iksil, the JPMorgan trader nicknamed the London Whale, who is cooperating with the government in its investigation into the bank’s record trading loss.

In addition, jury selection for the first criminal trial related to the Madoff case is under way in federal court in Manhattan. Five former employees of Mr. Madoff, including his longtime personal secretary and two computer programmers, are fighting charges that they helped their boss carry out his fraud. The trial is expected to take as long as five months.

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=138

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Court receiver Marika Tolz begins serving prison sentence

Court receiver Marika Tolz begins serving prison sentence
View Slideshow
Marika Tolz


South Florida Business Journal
Another Miami judge on Friday sentenced court receiver and bankruptcy trustee Marika Tolz, after which she reported to authorities to begin serving her time.
Miami-Dade Circuit Judge Matthew Destry on Friday sentenced Tolz to 81 months – the same sentence she received in her federal case – to be served at the same time as the federal sentence.
Tolz spent years as a trusted fiduciary for the federal and state court systems, but was hit with federal charges in March for misappropriating $16 million and pocketing about $2.4 million.
In July, she became the second receiver in South Florida to be imprisoned for fraud in a year. In 2010, receiver Lewis Freeman was sentenced to eight years and four months for using his position to misappropriate almost $7 million over 11 years, pocketing about $2.6 million.
Tolz’s state case mirrored the federal charges, but revolved around a more specific set of circumstances, where Tolz misappropriated money from the estate of a deceased man, James Christensen, which she was supposed to be overseeing.
Destry also ordered her to repay $550,000 missing from that account and $200,000 for attorneys fees from the case. She was previously ordered to repay all the missing funds as part of her federal sentence.
Tolz’s attorney, Benedict P. Kuehne, said she reported to authorities after the state sentence was handed down late Friday afternoon.
“Tolz is now in custody, having commenced the service of her concurrent sentences. She anticipates being transferred to her federal prison designation soon. She fully anticipates the restitution she has tendered to the United States Attorney’s Office will be sufficient to repay all funds in full,” Kuehne said. “[She] … has done all she could to correct the consequences of her wrongful conduct, and now looks forward to her return to the community, where she will endeavor to return to her life of good works and family.”
Tolz and Kuehne have said that she began dipping into accounts when her mother fell ill years ago.

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=134

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Investors fleeced in $6B Stanford scheme get a penny on the dollar from court-appointed receiver: Oct 11. 2013

WHITE-COLLAR CRIME
Investors fleeced in $6B Stanford scheme get a penny on the dollar from court-appointed receiver
Posted Oct 11, 2013 11:10 AM CDT
By Martha Neil


Investors fleeced of $6 billion by now-imprisoned swindler R. Allen Stanford have gotten restitution checks from a court-appointed receiver.

They range from $2.18 to $110,000, amounting to less than a penny of recovery for each dollar lost, reports the Center for Public Integrity.

The receiver, Ralph Janvey, and his team recovered $234.9 million from Stanford's bankrupt company and charged about $124 million for doing so.

Attorney Kevin Sadler of Baker Botts is working with Janvey on the recovery effort, and said unwinding the 18-year operation was a complex undertaking. At one time, companies in the Texas-based Stanford Financial Group had offices in 23 states and 13 foreign countries, and over 3,000 employees

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=136

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

U.S. justices divided in Allen Stanford Ponzi scheme case: 10/7/2013

U.S. justices divided in Allen Stanford Ponzi scheme case


October 8, 2013, 8:08 am

WASHINGTON (Reuters) - On the first day of its new term on Monday, the U.S. Supreme Court appeared divided over whether lawyers, insurance brokers and others who worked with convicted swindler Allen Stanford could avoid lawsuits by investors seeking to recoup losses incurred in his $7 billion (4.3 billion pounds) Ponzi scheme.

New York-based law firms Chadbourne & Parke and Proskauer Rose and insurance brokerage Willis Group Holdings Plc were all sued by former Stanford investors.

They are part of a consolidated case along with two other defendants, financial services firm SEI Investments and insurance company Bowen, Miclette & Brittin, for which the Supreme Court heard a one-hour argument on Monday.

The defendants sought Supreme Court review after the New Orleans-based 5th U.S. Circuit Court of Appeals in March 2012 said the lawsuits brought under state laws by the former Stanford clients could go ahead.

The former Stanford clients are keen to pursue state law claims because the Supreme Court has previously held that similar so-called "aiding and abetting" claims cannot be made under federal law.

The defendants have argued that under the Securities Litigation Uniform Standards Act (SLUSA), the claims cannot be heard under state law either.

The class action lawsuits filed by the former investors accused Thomas Sjoblom, a lawyer who worked at both law firms, of obstructing a Securities and Exchange Commission probe into Stanford, and sought to hold the other defendants responsible as well.

Stanford's fraud involved the sale of certificates of deposit by his Antigua-based Stanford International Bank. Much of the litigation centres on whether these qualified as securities under applicable laws.

Stanford is serving a 110-year prison sentence.

ORAL ARGUMENT

During Monday's oral argument, the justices questioned to what extent a ruling in favour of the plaintiffs would affect the SEC. The Obama administration, representing the SEC, sided with the defendants.

The administration said in court papers it was against the lawsuits because they would conflict with Congress's intent to give the SEC the "ability to protect the securities markets against a variety of different forms of fraud."

Justice Department lawyer Elaine Goldenberg told the justices that lawsuits like those filed by the Stanford investors have "a very particular effect on investor confidence and the integrity of the markets, which is one of the purposes of the securities laws."

Several justices, including Justice Elena Kagan and Justice Stephen Breyer, indicated they would be uncomfortable with allowing such lawsuits to proceed in state court, although they also seemed keen for some kind of limit to federal authority.

Justice Anthony Kennedy, often the swing vote in close cases, questioned whether the claims made by the Stanford investors were any different from similar cases that courts already have determined to be excluded from state law claims.

But Justice Anthony Scalia signalled support for the plaintiffs on the language of the federal law in question, which says that state lawsuits are barred in relation to activity "in connection with the purchase or sale" of a covered security.

"There has been no purchase or sale here," he said.

A ruling in the case is expected before the term ends in late June.

The cases are Chadbourne & Parke LLP v. Troice et al, U.S. Supreme Court. No. 12-79; Willis of Colorado Inc et al v. Troice et al, U.S. Supreme Court, No. 12-86; and Proskauer Rose LLP v. Troice et al, U.S. Supreme Court, No. 12-88.

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=130

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

SEC lifts suspension for Dallas attorney accused of helping Stanford’s $7 billion fraud avoid detection

The Dallas lawyer accused by the inspector general of the Securities and Exchange Commission of letting R. Allen Stanford get away with defrauding investors of $7 billion is free to practice law again before the SEC.
Spencer Barasch worked 17 years for the SEC, including seven years as its chief of enforcement at the division office located in Fort Worth. After he resigned in 2005, he began representing Stanford before the SEC.

The inspector general’s report concluded that over the years as enforcement chief he had repeatedly denied federal investigators’ pleas to investigate suspicious aspects of Stanford’s offshore investment accounts, which later were determined to have been frauds.
Barasch denied wrongdoing at the time. He paid $50,000 to the Department of Justice to settle civil claims alleging impropriety stemming from his later decision to take Stanford on as a client, a decision he eventually reversed.

Stanford was indicted in 2009 and convicted last year. He is serving a 110-year sentence in federal prison.
Last year, the SEC suspended Barasch from practicing before the commission, and said he could apply for readmission in one year. Barasch’s attorney released a statement at the time saying that Barasch had accepted the suspension to save on legal bills. The settlement order specifically stated that Barasch neither admitted nor denied the wrongdoing described in the order.

Barasch was head of enforcement for the SEC’s Fort Worth office from 1998 to April 2005. After leaving the government, he represented Stanford before the SEC in 2006.

A 2010 article in The Dallas Mornings News about the inspector general’s report included this anecdote:
In 2005, the report said, an SEC staff attorney presented the agency’s latest findings at a regional meeting of securities law enforcers attended by Barasch. The audit showed growing concern that the alleged Ponzi scheme was growing and putting billions of dollars at risk.

During the presentation, Barasch was said to look “annoyed.” Afterward, he reportedly told the attorney he had “no interest” in bringing action against Stanford.

“I thought I’d turned in a good piece of work and was talking about it to significant players in the regulatory community,” Victoria Prescott, the attorney, said in the report. “And I no sooner sit down, shut up and the meeting ended, but then I got pulled aside and was told this has already been looked at and we’re not going to do it.”

Some former colleagues defended him, however, with one telling The News that, at worst, he had used bad judgment.

Golden Receivers – Trustees make a killing mopping up frauds

Golden Receivers – Trustees make a killing mopping up frauds
By JAMES DORAN
New York Post | August 12, 2009
Link to article

There’s a bull market on Wall Street.
Not for investors, but for a handful of elite lawyers and financial pros acting as court-appointed receivers or trustees of firms whose principals have been snagged by authorities and charged with running Ponzi schemes.
These lucky few, whose jobs most times are built around retrieving assets and winding down operations, can earn anywhere from $4,500 an hour to almost $2 million a week.
In the larger cases, professionals can earn $100 million over the life of the case.
And with the economy in recession and a surge in fraud cases being filed — from Bernie Madoff to R. Allen Stanford, Tom Petters and Ezra Merkin — there is no shortage of work.
“Many of the receivers I know are pretty busy,” said Robb Evans, whose firm has been appointed receiver in 28 cases this year through July, including the $1.5 billion fraud at WG Trading, which snared New Yorkers Paul Greenwood and Stephen Walsh.
Over the same period last year, Evans was appointed in 11 cases.
Ralph Janvey, the receiver winding down Stanford Financial Group, asked the court to approve more than $27 million of fees for just a few months’ work on the case. Janvey will pay accountants and lawyers at 14 different firms with the funds.
When the Securities and Exchange Commission and investors objected to Janvey’s massive fees, he told them he had already given them a 20 percent discount “out of concerns for the victims.”
While it is hard to pinpoint exactly what percentage of the total assets in any fraud will be eaten up by the professional fees of these “Golden Receivers,” in one recent $6.6 million fraud, the receiver distributed 43 percent of the assets to the victim — the rest went to professionals.
The percentage of assets eaten up by professional fees in the larger, $1 billion-plus cases, is expected to be lower.
“It’s a gravy train,” said Billy Procida, CEO of Procida Inc, who for a short time was appointed receiver to The Petters Group Worldwide after its founder, Tom Petters, was accused of running a $4 billion Ponzi scheme.
Procida, a Donald Trump protégé who was asked to become the receiver by a group of Petters creditors, was forced aside when a Minnesota court appointed Doug Kelley, a local lawyer and former Republican gubernatorial candidate, to wind down the business.
“I have dealt with a number of receiverships, and for these lawyers it’s like the full employment act,” Procida said.
In all, five $1 billion-plus frauds and alleged frauds have been unearthed in the last year.
Irving Picard, the court-appointed trustee in the Madoff fraud, is also raking in the dough. Picard last week asked for more than $15 million of fees for just 15 weeks of work — but got only $12.6 million.
Bart Schwartz, one of two receivers presiding over Merkin’s investment funds in New York, has had his fees capped by the court at just $150,000 a month but isn’t going to finish soon.
“There is a strong possibility that this receivership will last a fairly long time,” he said. “It is our job to make as much money for the investors as possible. Given current market conditions, it might be better to wait until things improve before we liquidate some of these assets.”
And while Schwartz is waiting, the meter is still running.
Procida believes the Golden Receivers should be paid on performance, not on time taken to complete their task. “They should get paid a percentage of their net proceeds, not gross. This would stop them from spending a million dollars to recoup hundreds.”
One of Madoff’s former investors filed court papers asking Picard to make public his time sheets, so the victims could see how the receiver spends his $1 million a week
Picard has said his work on the Madoff case could last at least five years, which means he could make upwards of $250 million if the court continues to allow his billing at the current rate.
“If he drags it out long enough,” said Helen Davis Chaitman, a lawyer representing hundreds of Madoff victims, “he will make more money than Madoff.”
Tags: Billy Procida, Doug Kelley, James Doran, New York Post, Ponzi Schemes, Receiver, Tom Petters
Share and Enjoy:

One Response to “Golden Receivers – Trustees make a killing mopping up frauds”
Laser Haas says:
November 25, 2009 at 5:32 pm
You have published a story that has hit the nail on the proverbial head.
Receivers, Trustees and others that are elite. Need not compete for jobs. As is evident by the comments within the story Procida. He was not removed for excess billings or bad performance. He was removed so that a “good ole boy” could be placed within.
.
Doug Kelley was initially hired by PGW and even went public stating Creditors are a last consideration. Then he was made a Federal Receiver – violating Ethics, Model Rules and common sense.
.
Being that the law is being cast assunder – the Judge gave Doug Kelley and his counter Hansen Judicial Immunity.
.
Exactly where does one find the Federal authority to hand out Judicial Immunity?
.
Then Doug Kelley – with willful blindness of the US Trustee (the police of the system) – where the US Trustee even then overtly Helped Doug Kelley to illegally become the Trustee.
.
Even the American Bar Association states that once a bankruptcy is filed the Receiver is moot.
.
This means the Bankruptcy Judge joined the fray in permitting skirts of the Law.
.
When ordinary citizens skirt (break) the Law – they go to jail!
.
We barked about Petters, Traub and others for years now. Even with all the arrests and pleads of guilt – felony violations and Collusions continue – including the Polaroid sale(s) etc.
.
This website fits the bill – for cronyism & corruption we must kill!
Sincerely
Laser@petters-fraud.com

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=133

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

What The SEC-SIPC Lawsuit Is All About

Source: Securities Investor Protection Corporation

What The SEC-SIPC Lawsuit Is All About

• The SEC has brought an unprecedented lawsuit demanding that the Securities Investor Protection Corporation ("SIPC") guarantee the value of offshore certificates of deposit ("CDs") issued by the Stanford International Bank Ltd. in Antigua.
• SIPC disagrees with the SEC’s position because it is in conflict with the Securities Investor Protection Act, the legislation that created SIPC and has guided it for the last 40 years.
• SIPC is limited by law to protecting customers against the loss of missing cash or securities in the custody of failing or insolvent SIPC-member brokerage firms. SIPC was not chartered by Congress to combat fraud or guarantee an investment’s value, and its protections also do not cover investments with offshore banks or other firms that are not SIPC members.

Why The Securities Investor Protection Act Does Not Cover The Stanford-Antigua Situation

---

• This case is about investments in certificate of deposits ("CDs") issued by the Stanford International Bank Ltd. in Antigua. Stanford International Bank Ltd. is an offshore bank: it is not a SIPC-member brokerage firm and has never been a SIPC member.
• The Securities Investor Protection Act only covers the custodial function of a SIPC-member brokerage, by offering limited protection to customers against the loss of missing cash or securities when a SIPC-member brokerage firm is holding cash or securities for an investor but fails financially.
• The Act does not authorize SIPC to protect monies invested with offshore banks or other firms that are not SIPC members. The Act also does not protect investors against a loss in value of a security, including because of mismanagement or fraud.
• In addition, this case involves CDs that were delivered, not a situation in which a SIPC-member brokerage firm had custody of securities but failed before delivery could occur.

The Facts

• This case is about investments in CDs issued by the Stanford International Bank Ltd. in Antigua. Stanford International Bank Ltd. is a chartered bank formed under the laws of Antigua and Barbuda. This Antiguan bank is in liquidation in Antigua under the administration of liquidators in Antigua.
• Stanford International Bank Ltd. advertised interest rates that were higher (often much higher) than banks in the U.S., but its CDs now have the value, if any, of a debt instrument issued by a failed bank.
• Stanford International Bank Ltd. is not a SIPC-member brokerage firm and has never been a SIPC member.
• Investors received Disclosure Statements from Stanford International Bank Ltd. stating that these investments were not “covered by the investor protection or securities insurance laws of any jurisdiction such as the U.S. Securities Investor Protection Insurance Corporation….”

SIPC Letter of August 14, 2009 to Ralph S. Janvey, Receiver, Stanford Financial Group Receivership

Stanford - Madoff: The Key Differences

SIPC protection is available for investors who had brokerage accounts directly at Bernard L. Madoff Investment Securities LLC (“Madoff Securities”). Madoff Securities was a SIPC-member brokerage firm. Customer cash and securities were placed in the custody of Madoff Securities and were missing from the customer’s accounts when the firm failed. SIPC protection is thus available to protect customers, within limits, against the loss of their net equity balances.
By contrast, the Stanford case is about CDs that investors purchased from the Stanford International Bank Ltd. in Antigua. Stanford International Bank Ltd. is not a SIPC-member brokerage firm and has never been a SIPC member.
The Securities Investor Protection Act does not authorize SIPC to protect investors against the loss of monies invested with offshore banks or other firms that are not SIPC members. The Act also does not protect investors against a loss in value of a security, including because of mismanagement or fraud. In addition, this case involves CDs that were delivered, not a situation in which a SIPC-member brokerage firm had custody of securities but failed before delivery could occur.

Why SIPC Is Not The FDIC And Does Not Protect Against Securities Fraud

---

The Federal Bureau of Investigation, state securities regulators and experts have estimated that investment fraud in the U.S. totals $40 billion a year.¹ Market manipulation schemes alone generate an estimated $6 billion in losses annually.²
With a reserve of slightly more than $1 billion, SIPC could not continue operations for long if its purpose was to compensate all victims with losses due to investment fraud. SIPC is limited by law to protecting customers against the loss of missing cash or securities in the custody of failing or insolvent SIPC-member brokerage firms.
It is important to understand that SIPC is not the equivalent of the banking industry's Federal Deposit Insurance Corporation ("FDIC") for investment fraud. Congress considered whether to guarantee investment losses and rejected that sort of protection as unrealistic and inappropriate.

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Law professors support SIPC in dispute with SEC over Stanford fraud

An amici brief filed by renowned law professors supports the industry-backed Securities Investor Protection Corp. in its dispute with the Securities and Exchange Commission over the liquidation of convicted Ponzi schemer R. Allen Stanford’s brokerage firm.

Phyllis Skupien (Westlaw Journal Securities Litigation and Regulation).

In an appeal before the District of Columbia U.S. Circuit Court of Appeals, the SEC seeks. to force the SIPC to liquidate Stanford Group Co. for the benefit of investors.

Like Bernard Madoff’s Ponzi scheme, which cost investors an estimated $17 billion, Allen Stanford’s fraud dwarfed most others and is estimated to have cost investors over $7 billion.

The SEC says Stanford’s victims are entitled to protection under the Securities Investor Protection Act, 15 U.S.C. § 78aaa, which compensates investors when their brokers become insolvent.

Prior proceedings

In 2009 the SEC charged Stanford and Stanford Group, which is currently in court-ordered receivership, with violating federal securities laws. SEC v. Pendergest-Holt et al., No. 09-CV-298, complaint filed (N.D. Tex. Feb. 17, 2009).

Stanford was sentenced to 110 years in prison in a related criminal proceeding last year for defrauding investors with fraudulent certificates of deposit issued by Stanford International Bank, his bank in Antigua. United States v. Stanford et al., No. 09-CR-00342, defendant sentenced (S.D. Tex., Houston June 14, 2012).

According to the SEC’s suit against the SIPC, the agency directed the SIPC in June 2011 to initiate proceedings to liquidate the Stanford Group, but the SIPC has refused to do so.

In July 2012 U.S. District Judge Robert L. Wilkins of the District of Columbia denied the SEC’s request for an order compelling the liquidation, and this appeal followed.

Not ‘customers’

The SIPC maintains it has no responsibility to the investors because the SEC cannot show that the Stanford Group ever physically possessed their funds at the time of their purchases.

The amici brief supports the SIPC and says the investors were not “customers” of the domestic broker-dealer because they lent money to the offshore Antigua bank — a foreign institution not subject to regulation under U.S. law.

The amici brief was filed by Professor Joseph A. Grundfest of Stanford Law School, former SEC Commissioner Paul S. Atkins, former SEC General Counsel Simon M. Lorne, Emory Law School professor William J. Carney and Stanford Law School professor emeritus Kenneth E. Scott.

They say the SEC’s actions would dramatically expand the scope of persons covered by the SIPC and should be rejected.

The SEC’s proposal to “deem” purchasers of CDs issued by a foreign bank to be “customers” of a domestic broker-dealer is contrary to the Securities Investor Protection Act and is “at odds with 40 years of judicial precedent,” the amici say.

The SEC’s expansion of the definition of the term “customer” would substantially increase the financial exposure of the SIPC fund, they add.

The agency has presented no economic analysis for the implications of this expanded coverage, the professors say, noting that the industry itself must pay fees to support the SIPC fund.

The professors urge the appeals court to reject the SEC’s “unprecedented interpretation” of the term “customer” and affirm Judge Wilkins’ decision.

The Securities Industry and Financial Markets Association and the Financial Services Institute also filed amici briefs supporting the SIPC.

Securities and Exchange Commission v. Securities Investor Protection Corp., No. 12-5286, amici brief filed (D.C. Cir. Apr. 19, 2013)

Source: http://sivg.org/forum/view_topic.php?t=eng&id=69

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

SEC Can't Force Help For Stanford Victims, DC Circ. Told

The Securities Investor Protection Corp. asked the D.C. Circuit on Monday to affirm a landmark district court ruling declaring it doesn’t owe compensation to victims of Robert Allen Stanford’s $7 billion Ponzi scheme, suggesting the U.S. Securities and Exchange Commission succumbed to political pressure in bringing the suit.

The SIPC asked the appeals court to affirm U.S. District Judge Robert L. Wilkins’ decision dismissing the agency’s application to compel the SIPC to pay the fraud victims’ claims through a liquidation proceeding.

A top agency official had originally agreed that the SIPC did not owe funds under the Securities Investor Protection Act, SIPC claims, but that changed after U.S. Senator David Vitter, R-La., threatened to block the nominations of two SEC officials in June 2011, the SIPC said.

“The record shows that the SEC's general counsel agreed that SIPA did not apply to the Stanford case,” the SIPC said. “It was only two years later that the SEC sought to force SIPC's hand, apparently bowing to pressure from a U.S. senator,” referencing a June 14, 2011, press release from Vitter.

The corporation, funded by the brokerage industry to cover investors who lose money in failing firms, also claims the SEC didn’t seek a liquidation until two years after its 2009 case against Stanford.

“If the SEC had thought the Stanford fraud was within the scope of what SIPA protects, it was under a legal obligation to notify SIPC immediately,” the SIPC said. “The SEC did not do so, even though it filed an enforcement action against Stanford and secured the appointment of a receiver over U.S. Stanford assets in February 2009.”

On July 3, Judge Wilkins ruled that Stanford's U.S.-based Stanford Group Co. was a member of the SIPC, but that the Antigua-based Stanford International Bank was not. Stanford International Bank Ltd. was an offshore bank, not a registered broker-dealer, which is what the SIPC oversees, Judge Wilkins said.

Judge Wilkins’ decision was a major blow to victims of the Ponzi scheme, who together lost upwards of $7 billion in certificates of deposit administered by Stanford International Bank. It also carried broader legal significance, marking the first time since the enactment of SIPA 42 years ago that a federal court had ruled on how much power the SEC has to command a SIPC liquidation.

The U.S. Supreme Court has ruled that brokerage customers cannot force such proceedings, but that the SEC has the authority to do so.

Because of its precedential nature, a key issue in the Stanford dispute was the standard of proof required of the SEC. The agency argued for a more lenient standard than the SIPC did, describing its burden as merely probable cause supported by hearsay. Judge Wilkins ultimately chose the higher standard requested by the SIPC: a preponderance of the evidence. In an SIPC liquidation, an investor must meet a preponderance standard to prove the validity of his or her claim.

In its appellate brief filed in January, the SEC said Judge Wilkins had taken a too-narrow view of the term "customer." The agency argued that transactions with both Stanford entities should be treated the same way under SIPA because the company operated “as a single fraudulent enterprise that ignored corporate boundaries.”

“This interpretation of the statute to allow for flexibility in certain circumstances is the correct one, and it is at least a reasonable one that was entitled to deference by the district court,” the SEC said.

The SEC added that it was not seeking customer status for all Stanford investors, but only for those who held accounts with Stanford Group Co., purchased fraudulent certificates of deposit through SGC and deposited funds with Stanford International Bank Ltd.

But SIPC said Monday that the terms of its mission were clear: to protect investors when a member brokerage fails, adding that Judge Wilkins' purportedly narrow view of the term 'customer' was appropriate.

"By its terms, the statute does not insure against fraud or investment losses, instead protecting only the 'customer' property that an SIPC-'member' brokerage firm holds in custody when the brokerage fails,” the corporation added.

The corporation also said the SEC’s case was unprecedented because it has not made similar requests in proceedings related to the downfall of a major financial institution.

“In 40 years and over 300 liquidation proceedings — including the recent liquidations ofLehman Brothers Inc., Madoff Investment Securities LLC, and MF Global Inc. — this is the first the the SEC had ever tried to compel a liquidation. '

Stanford was sentenced in June to 110 years in prison for his role in the fraud.

SIPC is represented by Edwin John U, Eugene F. Assaf Jr., John C. O'Quinn, Michael W. McConnell and Elizabeth M. Locke of Kirkland & Ellis LLP.

The case is U.S. Securities and Exchange Commission v. Securities Investor Protection Corp., case number 12-5286, in the U.S. Court of Appeals for the District of Columbia Circuit.

Source: http://www.sivg.org/article/2013_SEC_Cant_Force_Help_For_Stanford_Victims.html

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Stanford fighting SEC fines

Convicted Ponzi-scheme operator R. Allen Stanford, who continues to protest what he says was an unfair criminal trial, is now fighting the government’s quest to squeeze billions of dollars in penalties out of him in a related civil lawsuit.
Stanford, currently serving a 110-year prison sentence, this week filed an objection to the Securities and Exchange Commission’s bid to impose billions of dollars in monetary penalties against him and several other defendants in a civil securities fraud lawsuit. He was convicted last year of criminal charges that he defrauded investors out of about $7 billion.
In court papers, the SEC argues that Stanford’s criminal conviction validates the similar claims it makes in its civil suit. The agency says Stanford, two of his businesses and one of his former associates should, at a minimum, face a penalty of $5.9 billion — the amount that federal prosecutors have ordered Stanford to forfeit in the criminal proceeding.

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Obama chooses lawmaker accused of corrupt ties with Chavez to attend funeral

Obama chooses lawmaker accused of corrupt ties with Chavez to attend funeral
By Julian Pecquet - 03/07/13 06:43 PM ET


President Obama is sending a lawmaker whose relationship with Hugo Chavez has come under scrutiny in the past to represent the United States at the Venezuelan strongman's funeral on Friday.

Rep. Greg Meeks (D-N.Y.) allegedly met with Chavez in 2006 at the bequest of one of his donors, indicted Ponzi schemer Allen Stanford, to request a criminal probe into a Venezuelan banker who had fallen out with Stanford, The Miami Herald reported in 2009. The banker, Gonzalo Tirado, was charged with tax evasion and theft a year after the meeting with Meeks.


Meeks said at the time that the trip was aimed at thanking Chavez for providing heating oil for poor Americans through Citgo, a subsidiary of the state-owned Petroleos de Venezuela. Citgo is the primary donor of heating oil to Citizens Energy, a nonprofit organization led by former Rep. Joseph Kennedy (D-Mass.) that provides discounted heating oil to poor families.

“I am honored to be a part of a delegation that will represent the United States at the Funeral of Venezuelan President Hugo Chavez on Friday, March 8,” Meeks said in a statement Thursday. “My deepest sympathies go out to the family of President Chavez and the people of Venezuela. Venezuela is an important nation to the Western Hemisphere. I remain committed to building the relationship between our nations. As always, I stand in continued support of the Venezuelan people especially at this time of mourning.”

His office did not respond to a query about his ties to Chavez.

Stanford's lawyer, Kent Schaffer, acknowledged at the time that his client had talked with Meeks about Tirado -- but denied anything improper happened, The New York Post reported.

"I know from my conversation with Allen Stanford that there's no reason to believe that anything illegal or unethical was asked of the congressman," he said.

"They were having problems with an employee they believed was stealing from the bank . . . and he simply was reporting what had happened. I'm not aware of him making any request for anything in particular."

The good-government group CREW has long accused Meeks of corruption.

“It’s one thing to accept gifts of real estate and cash. It’s a whole new level to reach out to dictators on behalf of any donor – the fact that it was Allen Stanford just makes it creepier,” CREW Executive Director Melanie Sloan said at the time the allegations first came to light. “It seems there is nothing Rep. Meeks won’t do for cash. He needs to be held accountable for his actions.”

Former Rep. Bill Delahunt (D-Mass.) will also attend Chavez's funeral, the State Department said. Delahunt met with Chavez in 2005 to strike a deal for discounted winter home heating oil for low-income Massachusetts residents, earning him accusations that he was coddling up to an anti-American dictator.

Chavez died of cancer at a Cuban hospital on Tuesday. Vice President Nicolas Maduro said he had been poisoned and expelled two American officials for allegedly plotting to overthrow the government.

State Department spokeswoman Victoria Nuland denied those accusations on Thursday.

“This is part of a tired playbook of alleging foreign interference as a political football in internal Venezuelan politics,” Nuland said. “And if we're going to get to a place that we can do better together, this kind of stuff has to stop.”

James Derham, the charge d'affaires at the U.S. embassy in Caracas, will represent the State Department at the funeral. Maduro said Thursday that Chavez's body will be permanently displayed in a special tomb.

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=34

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Cassidy, Deutch Introduce Improving SIPC Act of 2013

WASHINGTON, D.C. – This week, Congressman Bill Cassidy, M.D. (R-LA) and Congressman Ted Deutch (D-FL) re-introduced the Improving Security for Investors and Providing Closure Act, or Improving SIPC Act of 2013.  The legislation would provide victims of Ponzi schemes a quicker path to financial restitution, including those harmed by R. Allen Stanford and the Stanford Financial Group.

“It has been four years since the Stanford Financial Group was placed in receivership and its victims learned their savings were gone,” said Congressman Bill Cassidy.  “Yet there are still victims who have not been given financial restitution.  These are working men and women who cannot wait for the conclusion of a long, drawn-out legal process.  This bill allows them to quickly recoup some of their losses.  This is a common-sense plan which should be enacted.”

“Every victim of the despicable Ponzi scheme orchestrated by the Stanford Financial Group of course has the right to pursue any and all litigation in this case,” said Congressman Ted Deutch. “Yet those who cannot afford to continue this lengthy legal battle or simply want to move on with their lives deserve the opportunity to recoup some of their losses. This is a commonsense, bipartisan bill and I look forward to working with Congressman Cassidy to advance it in the 113th Congress.”

This legislation creates an avenue for SIPC to offer individual Stanford victims a one-time payment of up to $500,000.00, to at least partially recoup them of their losses. Stanford victims who accept the offer would consequently exclude themselves from any further claims against the SIPC fund.  Stanford victims who wish to continue their lawsuits against SIPC can bypass this option and continue those suits.  In summary, this legislation allows both parties to settle on existing claims for a negotiated amount, as both SIPC and countless victims reportedly hoped to do as early as 2011.

Additionally, since all settlements for Stanford victims would come from the SIPC fund, no taxpayer money will be required to fund this legislation and no increase to the national debt will occur if enacted.

Read more: http://sivg.org/article/2013_Cassidy_Deutch_Improving_SIPC.html

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

Ex-Stanford Executives Get 20-Year Sentences

February 14, 2013
By DEBBIE CAI

Two former Stanford Financial Group executives were each sentenced to 20 years in prison for aiding convicted financier Robert Allen Stanford in perpetuating a massive Ponzi scheme, the Department of Justice said.

Gilbert T. Lopez Jr., former chief accounting officer of Stanford Financial Group Co., and Mark J. Kuhrt, former global controller of Stanford Financial Group Global Management, were convicted by a Houston federal jury in November of last year.

The men, both from Houston, were convicted of one count of conspiracy to commit wire fraud and nine counts of wire fraud, the DOJ said.

Judge David Hittner of the Southern District of Texas, who presided over the trial, sentenced Mr. Lopez and Mr. Kuhrt to serve three years of supervised release and ordered Mr. Lopez to pay a $25,000 fine, along with the prison terms. He also found that both men committed perjury at trial.

Evidence presented at the trial showed that Mr. Lopez and Mr. Kuhrt were aware of and tracked Stanford's misuse of Stanford International Bank's assets, kept the misuse hidden from the public and from almost all of Stanford's other employees, and worked behind the scenes to prevent the misuse from being discovered, the DOJ said.

Jack Zimmermann, lead counsel for Mr. Lopez, told Dow Jones Newswires that he is "very disappointed." The sentence was expected to be closer to that of James Davis, former finance chief of Stanford Financial who last month was given five years in jail for his role in the scheme. Mr. Zimmermann described Mr. Davis as the architect of the fraud. He plans to appeal the conviction.

Lawyers for Mr. Kuhrt weren't immediately available for comment.

Former Texas businessman Mr. Stanford is serving a 110-year sentence for stealing billions of dollars in investors' money and investing much of it in unprofitable private businesses he controlled. Laura Pendergest-Holt, Stanford's former chief investment officer, is serving a three-year sentence.

Read more: http://sivg.org/article/2013_ExStanford_Executives_Get_20Year_Sentences.html

For a full and open debate on the Stanford Receivership visit the Stanford International Victims Group - SIVG official forum http://sivg.org/forum/

THE SECURITIES AND EXCHANGE COMMISSION APPEAL AGAINST SIPC

January 11, 2013
By SEC

The Commission has shown that SIPC should be required to file an application for a protective decree as to Stanford Group Company in the District Court for the Northern District of Texas.

In denying the Commission's application, the district court made two reversible errors:
First, it incorrectly applied a heightened preponderance standard of proof to the Commission's application rather than the more appropriate probable cause standard. Congress created in SIPA a specific process, within the context of a SIPA liquidation, in which investors must prove their claims for coverage under the Act, including their "customer" status, by a preponderance of the evidence. It makes no sense to apply the same standard to the Commission in proving "customer" status on behalf of investors in this preliminary, summary proceeding.

Moreover, Congress's overarching goals of promoting investor confidence in the securities markets by providing speedy relief for investors indicate that a lesser standard of proof should apply to the initial question of whether SIPC should initiate a liquidation. Indeed, perhaps in recognition of this, SIPC itself is held to a lesser standard when it applies to begin a liquidation. The district court was therefore incorrect in applying a higher standard of proof to the Commission, which is SIPC's plenary supervisor.

The district court's error in this regard was based upon the mistaken belief that the application of the provisions of the Exchange Act to SIPA shows a congressional intent to apply the preponderance standard. But there is no sound basis to analogize plenary proceedings under Exchange Act Section 21(e)—used to finally determine whether a permanent injunction should be granted—to this preliminary, summary proceeding used to determine whether SIPC should be required to apply to begin a liquidation proceeding.

Second, the district court incorrectly interpreted SIPA's customer definition to exclude investors who, because of the unusual operation of the Stanford companies, should be deemed to have deposited cash with SGC. The record here provides at least probable cause to believe that the purported legal separateness of SGC and SIBL should be disregarded, such that, by depositing cash with SIBL, SGC accountholders who purchased SIBL CDs through SGC were effectively depositing cash with SGC. Courts facing similar circumstances have disregarded the corporate separateness of SIPC members and non-member affiliated companies, with SIPC's support. The district court's contrary approach improperly elevates form over substance by strictly adhering to the corporate boundaries of the Stanford entities which were designed to perpetrate an egregious fraud.

Even apart from the lack of genuine separateness of the corporate entities, SIPA's "customer" definition includes those who can be deemed to have deposited cash with a broker-dealer under the Old Naples and Primeline cases. Those cases rejected the notion that "customer" status requires that cash be deposited directly with the broker-dealer, and held that investors in certain circumstances fell within the "customer" definition. Those cases are materially indistinguishable from this one, and the district court's belief otherwise was based on a misunderstanding both of those cases and of the record here.

Finally, the Commission's interpretation of SIPA's "customer" definition is the correct one and is, at the very least, a reasonable one entitled to deference under Chevron. The district court declined to give such deference because it perceived an inconsistency between the interpretation and certain past statements of the Commission. The Commission's past statements, however, clearly state only a general presumption and are fully consistent with the Commission's interpretation in this matter.

Read more: http://sivg.org/article/2013_SEC_APPEAL_AGAINST_SIPC.html

For a full and open debate on the Stanford Receivership visit the SIVG official forum http://sivg.org/forum/