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

By Michael Lindenberger
mlindenberger@dallasnews.com

Shown here in 2002, former SEC enforcement official Spencer Barasch has been reinstated to practice law before the Security and Exchange Commission, about one year after he was suspended. Government officials say he helped steer investigators the other way when convicted schemer R. Allen Stanford was defrauding investors of $7 billion.

The Dallas lawyer accused by the U.S. Department of Justice’s inspector general of single-handedly using his position at the Securities and Exchange Commission to let 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.

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.

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.

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

SEC wins dismissal of lawsuit over handling of $7 bln Stanford fraud

Published: Tuesday, 13 Aug 2013 | 12:40 PM ETBy: Jonathan Stempel



* SEC protected by exception to Federal Tort Claims Act

* Victims say SEC knew of Stanford Ponzi scheme in 1997

* Stanford serving 110-year prison term for $7.2 bln fraud

Aug 13 (Reuters) - A federal judge in Florida has thrown out a lawsuit accusing the U.S. Securities and Exchange Commission of negligence for failing to report that the now-imprisoned swindler Allen Stanford was running a $7.2 billion Ponzi scheme.

U.S. District Judge Robert Scola in Miami said the market regulator was shielded under an exception to the Federal Tort Claims Act that bars claims arising from misrepresentation or deceit.

The plaintiffs, Carlos Zelaya and George Glantz, said they lost a combined $1.65 million with Stanford, and sought class-action status on behalf of investors who were victims of his fraud. They plan to appeal Monday's decision, their lawyer Gaytri Kachroo said. SEC spokesman Kevin Callahan declined to comment.

Stanford, 63, is serving a 110-year prison sentence after he was convicted on criminal charges in March 2012 for a fraud that the government said was centered in certificates of deposit issued by his Antigua-based Stanford International Bank.

Zelaya and Glantz claimed that the SEC considered Stanford's business 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 SEC filed civil charges against Stanford in February 2009, two months after the multibillion-dollar Ponzi scheme of New York-based swindler Bernard Madoff was uncovered. In a typical Ponzi scheme, investors are promised high or consistent returns relative to the amount of risk taken, and older investors are paid with money from newer investors.

Last September, Scola let the lawsuit against the SEC go forward, saying the plaintiffs could argue that the regulator had breached a duty to report Stanford's misconduct.

But on Monday, he said the FTCA exception barring claims of misrepresentation deprived him of jurisdiction.

"The plaintiffs claim that they were induced into entering disadvantageous business transactions because of the SEC's misrepresentation," he wrote. "The plaintiffs' cause of action is a classic claim for misrepresentation."

Their lawyer Kachroo said: "We believe that the judge did not draw the appropriate distinction between a claim based on a misrepresentation and our claim based on a failure to warn in line with the SEC's mandatory duty to notify SIPC."

In 2010, the SEC's inspector general criticized the regulator, finding that it knew as early as 1997 that Stanford was likely running a Ponzi scheme.

Earlier this year, federal appeals courts in New York and California dismissed lawsuits against the SEC by victims of Madoff's fraud.

The case is Zelaya et al. v. U.S., U.S. District Court, Southern District of Florida, No. 11-62644.

Read more: http://sivg.org/forum/view_topic.php?t=eng&id=103

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

SEC Order Against Stanford

April 25, 2013
By U.S. District Judge David C. Godbey

Securities and Exchange Commission, Plaintiff, vs. Stanford International Bank LTD., et al. Defendants. Civil Action No. 3:09-CV-0298-N

This Order addresses Plaintiff Security and Exchange Commission's ("SEC") motion for partial summary judgment [1779]. The Court grants the motion. The Court also denies Defendant R. Allen Stanford's motion for extension of time [1807].

The Court grants the SEC's motion for summary judgment. The Court enjoins Stanford from violating the Exchange Act § 10(b), Rule 10b-5, the Securities Act § 17(a), and the Advisers Act § 206(1) and (2), enjoins Davis violating the Exchange Act § 10(b), Rule 10b-5, the Securities Act § 17(a), and enjoins SGC and SIB from violating the Exchange Act § 10(b), Rule 10b-5, the Securities Act § 17(a), the Advisers Act § 206(1) and (2), and the Investment Company Act § 7(d). The Court finds Stanford, Davis, SGC, and SIB jointly and severally liable to disgorge the $5.9 billion fraudulently acquired by Stanford's scheme. The Court adds $861,189,969.06 of prejudgment interest to this total, for a total disgorgement liability of $6,761,189,969.06. Finally, the Court imposes a civil penalty of $5.9 billion on Stanford and $5 million on Davis.

Read the complete Order of U.S. District Judge David C. Godbey.


Source: http://sivg.org/article/2013_SEC_Order_Against_Stanford.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/

KLS - Stanford Update March 2013

March 14, 2013
By KACHROO LEGAL SERVICES, P.C.
In our last update, we notified you that the magistrate judge in our SEC class action denied the Government's request to stay all discovery. We are summarizing here the outcome of the discovery hearing which was held in Miami on February 14, 2013. One of the key hurdles to overcome in an action against the Government is the discretionary function exception. The magistrate made clear that this hurdle has been overcome and the court had already ruled on the sovereign immunity issue. The magistrate also held that "it is not obvious that [the Government's second motion to dismiss] will succeed." A copy of this ruling is attached for your review. Following this ruling, we have moved forward with discovery and we continue to wait for the district court to rule on the Government's second motion to dismiss.

In view of the delays caused by the Government's motion to stay discovery, we requested that the Court push back certain pre-trial and trial deadlines to allow us adequate time to pursue the discovery required to prove our case. We are happy to report that the Court granted our request and pushed back discovery deadlines to afford us this opportunity, which also resulted in a new trial date set for April 7, 2014.

In accordance with the foregoing and the undersigned's rulings in open Court, it is ORDERED and ADJUDGED as follows:
1.- The Motion to Stay Discovery [D.E. 50] is DENIED.

2.- The Motion to Compel [D.E. 51] is DENIED WITHOUT PREJUDICE as to Request No. 1 and Interrogatory No. 6 based on Defendant's agreement to supply the names and contact information of the SEC Fort Worth District Office staff members in response to Interrogatory No. 1. Such information is hereby designated as "CONFIDENTIAL, FOR ATTORNEYS' EYES ONLY", and shall be provided to Plaintiff's counsel by February 19, 2013.

3.- The Motion to Compel [D.E. 51] is DENIED WITHOUT PREJUDICE as to Request Nos. 2, 13-16 and Interrogatory Nos. 1-5, 7-8 subject to the following terms. Plaintiffs may notice a Rule 30(b)(6) deposition of the SEC, designating as categories the information sought in their discovery requestes, but narrowed in terms of time, entity and scope as more fully explained at the February 14, 2013 hearing. Within one week of receipt of the Rule 30(b)(6) Notice of Deposition, Defendant may submit a letter to the undersigned setting forth any objections to the designated categories at the undersigned's e-file address, otazo-reyes@flsd.uscourts.gov. Plaintiffs may respond to any such objections, by the same means, within one week. Thereafter, the undersigned will rule on the objections or, if necessary, set a telephonic hearing to address them. The parties' letters will be appended to the Order on the objections.
The Rule 30(b)(6) deposition of the SEC shall be scheduled on a date that is mutually agreeable to the parties, and at a time when the undersigned will be available to rule on any disputes that may arise regarding its scope. To this end, counsel may contact Chambers to coordinate the deposition date. Further, the parties may submit a proposed confidentiality order prior to the deposition.

To read the Zelaya Order on Motion to Stay and Motion to Compel: http://sivg.org/article/2013_KLS_Stanford_Update_SEC_Litigation.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 U.S. Receiver Has Deal With Antigua Counterpart

R. Allen Stanford’s Antiguan- appointed liquidators agreed to stop seeking control of the convicted financier’s assets in a deal that may allow defrauded investors to recover some of the $300 million Stanford stashed in accounts outside the U.S.
Receivers appointed by the U.S. and the Antiguan courts have battled for four years to control assets recovered from Stanford’s financial-services empire. Stanford, 62, was convicted last March of leading a $7 billion investment fraud based on bogus certificates of deposit at his Antigua-based bank. He was sentenced to 110 years in prison.
“The funds that are the subject of this agreement represent the largest available source of investor money that Allen Stanford had not already spent by the time his Ponzi scheme collapsed,” Kevin Sadler, lead attorney for U.S. receiver Ralph Janvey, said in an e-mail today. “In the absence of this agreement, these funds would remain out of reach of the Stanford victims for years to come.”
For dropping their dispute with Janvey and the U.S. Justice Department, the Antiguan liquidators will receive fees of $36 million from Stanford’s frozen funds in the U.K., according to a statement jointly released by both receivers today.

Professional Fees

The Antiguan liquidators have already received $20 million from the U.K. accounts, so the additional payment will boost their professional fees to $56 million -- almost as much as Janvey’s receivership team has been paid since U.S. securities regulators seized Stanford’s operations in February 2009.
Janvey’s professionals had been paid $63.3 million in fees and expenses as of Feb. 7, according to his latest status report. That represents about a quarter of the $230.2 million Janvey has recovered for the estate. He has paid out an additional $53.3 million in costs to wind up Stanford’s business interests.
Janvey recently proposed a $50 million interim distribution be paid to investors, pending court approval.
Angie Shaw, a founder of the Stanford Victims Coalition, denounced the agreement as “ransom” that rewards the Antiguan liquidators at the investors’ expense.
“While the agreement does end a four-year international turf war that has cost the victims untold millions of dollars, the only true beneficiary of the agreement is the Antiguan liquidators,” Shaw said in an e-mail today. “The Antiguan liquidators are essentially getting a ransom fee in exchange for dropping their litigation for control over the frozen foreign accounts holding what is left of the victims’ life savings.”

Dallas Judge

While Janvey was awarded control over all Stanford assets by the Dallas judge in charge of the U.S. Securities and Exchange Commission case against Stanford, courts in the U.K., Switzerland and Canada initially awarded control of about $320 million in foreign accounts to Antiguan court-appointed liquidators Marcus Wide and Hugh Dickson of Grant Thornton.
The Justice Department placed an administrative hold on the European funds, and it has been trying to repatriate the money since Stanford and his co-conspirators were convicted last year.
The Antiguan liquidators have fought to retain control and have filed some asset-recovery lawsuits that duplicate actions already initiated by Janvey, according to court filings. Wide and Dickson haven’t publicly stated how much they’ve been able to recover for Stanford’s investors.

Stanford Victims

Edward H. Davis Jr., one of the Antiguan liquidators’ attorneys, said in an e-mail today that Dickson and Wide have already recovered and frozen more than $227 million in Stanford assets “independent of the amounts recovered by Janvey and in addition to the approximately $300 million frozen” in overseas accounts.
“The joint liquidators have conducted intensive investigations and lodged claims and are in the process of launching additional lawsuits that have the potential to yield billions of dollars in recoveries to pay the victim creditors,” Davis said. “To suggest that the joint liquidators held the estate for ransom demonstrates a fundamental misunderstanding about how a liquidation process maximizes recoveries for victim creditors.”
Peter Morgenstern, a lawyer who sits on the Official Stanford Investors Committee, said the investors should be allowed to decide whether the Antiguan liquidators receive more fees or whether the U.S. government should continue fighting to recover Stanford’s frozen European funds through international accords designed to recover criminal proceeds.

‘Significant Assets’

“The issue is how significant assets recovered by the U.S. government for the benefit of Stanford victims should be spent,” Morgenstern said in an e-mail. Much as creditors have a say in how bankruptcy proceeds are distributed, he said, the defrauded investors should also be consulted before such a large part of the estate is paid in professional fees.
Janvey has asked U.S. District Judge David Godbey in Dallas to hold a hearing at which investors can express their opinions of the deal. No hearing has been set.
Under terms of the agreement announced today, the Antiguan liquidators will distribute the $44 million remaining in the U.K. accounts to investors after the liquidators have received their $36 million in working capital. Wide and Dickson will also distribute about $60.5 million of the funds currently frozen in Switzerland, according to the joint statement.

Fund Transfers

About $23 million in Canadian funds and $132.5 million in Swiss funds will be transferred to the Justice Department and Janvey for distribution to investors through a system the U.S. receiver is establishing, according to the joint statement.
The agreement “creates a plan for the distribution of almost 90 percent of the frozen assets from the U.K., Canada and Switzerland pursuant to which distributions will be made as soon as the necessary approvals are obtained from the pertinent authorities in those countries,” the Antiguan liquidators said in the joint statement.
Courts in the U.S., Antigua and the U.K. must still sign off on the deal before any funds are transferred, according to the statement.
Sadler, the U.S. receiver’s attorney, said the deal was the result of months of negotiations involving officials in five nations.
“This agreement is one of the most complex undertakings of its kind,” he said in an e-mail. “This was no easy task.”
The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas).

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

OPEN LETTER TO JANVEY AND JLs. FOR IMMEDIATE RELEASE

March 12, 2013
FOR IMMEDIATE RELEASE

TO:
Mr. Ralph Janvey
Mr. Marcus Wide
Mr. Hugh Dickson

CC:
Mr. John Little
Mr. Edward C. Snyder
Mr. Kevin M. Sadler
Mrs. Jennifer Ambuehl

Dear Mr. Janvey, Mr. Wide and Mr. Dickson,
Months have gone, it is March 2013 and the real victims of the Stanford fraud (hereinafter "we", "us") have not yet received any information about the distribution of our money located in the USA and abroad.

So far we have suffered from lack of information and transparency. However this should not happen because you are working for us.

As it was mentioned by the OSIC in January 22, 2013: "We (the OSIC) strongly believe that you, the victims of this horrible crime, should decide how your money is spent, and whether all available funds should be distributed to you, or to fund ongoing efforts by the receivership or the joint liquidators"

We demand that all the money collected so far to be immediately distributed to us.

We agreed all together with this petition and as both of you are working for us (and both of you have being paid so far with our money), you must listen to our petition. We have taken this decision, so please inform us as soon as possible:
1- how much money there is for distribution so far identified in the USA and abroad
2- how the complete distribution will be effectively implemented and how all the money will be paid to us.

We cannot keep waiting and waiting.

Sincerely,
The real victims of the Stanford fraud

Sign the open letter to Janvey and JLs. ( View how many victims have accepted this letter)

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

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