Our Texas securities fraud law firm has been bringing you the latest legal news developments in the efforts of defrauded investors to recoup their losses stemming from the $7 billion Stanford Ponzi scam. While the fate of R. Allen Stanford has already been sealed-he is serving 110 years in prison, which is essentially the rest of his life-for many of his victims how and when all of them will recover their losses still remains a big question mark.
On Friday, the US Supreme Court agreed to hear three petitioners’ appeals over the sale of bogus certificates of deposits from Stanford’s Antigua bank. The requests come from insurance brokerage Willis Group Holdings Plc., which has been accused of being involved in the bogus CD sales that Stanford used to defraud his clients, and two law firms that used to represent Stanford himself. They want the court to determine whether or not under the Securities Litigation Uniform Standards Act plaintiffs can assert state-law class action claims against the petitioners.
While a federal judge said in 2011 SLUSA does preempt such state law cases, the U.S. Circuit Court of Appeals for the fifth circuit later went on to revive the securities lawsuits. Now, it will be up to the nation’s highest court to make the final call.
The defendants want the lawsuits against them dismissed because while the CDs were not covered securities, per SLUSA, they say that the state class action claims are still subject to SLUSA preclusion because plaintiffs are contending that it was misrepresentations made claiming that the CDs were backed by SLUSA-covered securities that persuaded them to make the purchases. The way the Supreme Court chooses to go in this matter could define the breadth (or lack thereof) of SLUSA preclusion in more complex cases involving multi-layered transactions impacted by alleged fraud.
In other Stanford-related news, Ralph Janvey, the receiver appointed to settle Stanford’s estate, submitted a plan proposing that bilked investors are to get an initial $55 million payment for their claims. About 18,000 investors who were victims could benefit. However, Stanford Victims Coalition director Angela Shaw believes that the fees collecting the money would cost are much greater than the payout.
Also, James M. Davis, the star witness for the prosecution in the fraud trial against Stanford, has been sentenced to five years in prison. Davis, who was the former billionaire’s CFO, pleaded guilty to three fraud and conspiracy charges in 2009. At the criminal trial in 2012, Davis admitted to assisting his ex-boss by generating bogus documents and falsifying bank profits to conceal the scam.
Supreme Court to Hear Stanford Ponzi Lawsuits, Insurance Journal, January 21, 2013
Allen Stanford victims to receive $55 million under receiver plan, Reuters, January 11, 2013
Securities Litigation Uniform Standards Act (PDF)
More Blog Posts:
Texas Securities: SEC Says District Court is Mistaken In Not Forcing SIPC to Act for Stanford Ponzi Scam Victims, Stockbroker Fraud Blog, January 19, 2013
Clearing House Association Wants Greater Protections for Clearing Members, Institutional Investor Securities Blog, December 31, 2012
District Court in Texas Dismisses Securities Fraud Case Against Sports Franchisor, Stockbroker Fraud Blog, December 15, 2012