Stanford Update: March 30, 2009

Activity in the SEC’s federal suit in Dallas picked up last week. The Receiver filed a motion to obtain court approval for implementing a process whereby Stanford investors with brokerage accounts that remain frozen may submit information to the Receiver seeking the release of those funds. The process will apply to the approximately 4,000 brokerage accounts held by Pershing and JP Morgan Chase which are still frozen because the account holder has ties to CDs at Stanford International Bank (SIB) in Antigua. The Receiver estimates that these accounts have $1.7 billion.

The Court will grant the Receiver’s motion in the near future because it is unopposed. Significantly, by submitting a form requesting release of funds, each account holder will agree that the Court in Dallas is the proper jurisdiction for all disputes related to the accounts. Also, the investor agrees to pay back any funds later found to be the proceeds of fraudulent activity. The application form to release the accounts will be posted on the Receiver’s web site in coming days, but a copy is located here:

It has been reported that the form will require you to waive any claims against the Receiver, but this requirement is not found in the form accessed by the above link. This appears to be a legitimate effort to limit the frozen accounts to assets that are expressly linked to the SIB CDs, but we will review the actual form as soon as it is posted.

The Court has not ruled on the objections by the SEC and Receiver to the interventions, and to the ancillary litigation in other jurisdictions. Like other lawyers representing intervenors, we filed a reply to their objections last week. The Receiver also objected to a motion filed by several former Stanford brokers requesting that an Examiner be appointed to represent the interests of former Stanford customers. The Court has not yet made clear when the pending motions, interventions, and objections will be heard. Many intervenors continue to withdraw their interventions now that the Receiver has released their brokerage accounts.

The United States Receiver (Janvey) and the Antiguan Receiver (Vantis) are wrangling over who has jurisdiction over the Stanford assets located in Antigua. To the extent the United States Receiver (Janvey) loses this argument, he will have fewer assets available to distribute to Stanford customers in the United States. The Antiguan Receiver has already stated that he believes that there will be “a significant shortfall of assets.”

The Fox Business Network sued the SEC for failing to respond to an expedited request for information under the Freedom of Information Act. Fox asked for government records “regarding the SEC’s past and current receipt of, and response to complaints, tips, or other information regarding potential violations of the securities laws or any other wrongdoing by R. Allen Stanford, Stanford Financial Group, and/or any of its affiliates….” It will be interesting to see what information is revealed when those documents are ultimately produced.

Finally, Allen Stanford is still seeking legal representation, and has reportedly been in discussions with Dick DeGuerin, a prominent Houston criminal defense attorney for representation. Additionally, Laura Pendergest-Holt has apparently filed a claim against her prior counsel.