Ponzi Receiver Can’t Take Mogul’s $88M

January 20, 2017
By David Lee

DALLAS (CN) – A Dallas federal jury Wednesday told the court-appointed receiver for R. Allen Stanford’s $7 billion international Ponzi scheme that he could not take $88 million from billionaire investor and film producer Gary Magness.

The seven-member jury unanimously concluded that Magness’ investment entities acted in good faith when they took out $88 million in loans from a Stanford affiliated bank in October 2008.

The jurors found the defendants had notice that Stanford’s certificate of deposit investment scheme may have been a fraud and failed to investigate, but that investigation would have been futile.

“An investigation would be futile if a diligent inquiry would not have revealed to a reasonable person that Stanford was running a Ponzi scheme,” the jury charge stated. “To establish futility the Magness parties are not required to prove that they actually conducted a diligent inquiry.”

Magness is chairman of Denver-based Magness Investment Group LLC, a private holding company that manages his investment portfolio and businesses. Magness and his wife, Sarah Siegel-Magness, founded Smokewood Entertainment, the production company behind the Oscar-nominated film, “Precious: Based on the Novel Push by Sapphire.”

He also owns Magness Land & Cattle and is a significant stockholder in the cable industry, according to his website.

Receiver Ralph S. Janvey, an attorney with Krage Janvey in Dallas, sued Magness for the money in February 2015.

Janvey has filed dozens lawsuits to claw back money investors lost to Stanford’s Ponzi scheme. Defendants have included the Miami Heat basketball team, New Orleans-based law firm Adams & Reese, Baton Rouge-based law firm Breazeale Sachse & Wilson, the University of Miami, Texas A&M University, the PGA Tour, the ATP tennis tour, and several Stanford entity investors, members and officers.

In April last year the Texas Supreme Court rejected Janvey’s claim against The Golf Channel for $6 million a Stanford entity paid for advertising. The court concluded the advertisements had “reasonably equivalent value” under Texas law.

Stanford is serving a 110-year prison sentence.

From Courthouse News.

Allen Stanford Ponzi Victims Get $35 Million From Law Firm

May 9, 2016
By David Lee
DALLAS (CN) — Victims of R. Allen Stanford’s $7 billion Ponzi scheme reached a $35 million settlement with the Chadbourne & Parke law firm before the Fifth Circuit ruled that the law firm was immune from the lawsuit, court papers indicate.
U.S. District Judge David C. Godbey granted the parties’ Agreed Motion to Dismisswithout prejudice investors’ claims against former Stanford Financial general counsel Pablo M. Alvarado.
Lead plaintiff Samuel Troice sued Chadbourne & Parke, Alvarado, the Proskauer Rose law firm and former Chadbourne & Proskauer partner Thomas V. Sjoblom in 2009 in Federal Court.
The plaintiffs claimed Sjoblom knew about Stanford’s scheme as early as August 2005, but turned a blind eye and helped stall an SEC investigation by using legal tactics to avoid releasing the company’s books.
Court-appointed receiver Ralph Janvey and the Official Stanford Investors Committee filed a separate federal lawsuit against both law firms and Sjoblom in 2013.
Stanford, 65, was sentenced in 2012 to 110 years in federal prison for 13 of 14 counts of conspiracy, wire fraud and mail fraud.
In a May 2 Status Report, the plaintiffs say they, Janvey and the committee reached a $35 million settlement with Chadbourne. They say the settlement was reached before the Fifth Circuit ruled in March that immunity shields both law firms in the case.
The Fifth Circuit dismissed based on a 2015 Texas Supreme Court ruling that concluded “fraud is not an exception to attorney immunity” under state law.
Since his appointment, Janvey has tried to recover investor money by filing several dozen lawsuits against defendants that include the Miami Heat basketball team, New Orleans-based law firm Adams & Reese, Baton Rouge-based law firm Breazeale Sachse & Wilson, the University of Miami, Texas A&M University, the PGA Tour, the ATP tennis tour, and several Stanford-entity investors, members and officers.
Stanford’s victims were dealt another blow by the Texas Supreme Court in April when it concluded that Janvey could not demand the return of $6 million a Stanford entity paid to The Golf Channel for advertising, because the ads had “reasonably equivalent value” under state law.

From Courthouse News.

Ponzi Can’t Claw Back Golf Channel Ad Money

April 4, 2016
By David Lee
AUSTIN, Texas (CN) – The receiver for R. Allen Stanford’s $7 billion Ponzi scheme cannot demand the return of $6 million paid to The Golf Channel for advertising, which had “reasonably equivalent value” under Texas law, the Texas Supreme Court ruled Friday.
The ruling is the first time the high court has weighed in on the notorious Ponzi scheme that involved the sale of phony certificates of deposits.
Stanford, 65, was sentenced in 2012 to 110 years in federal prison after being convicted in Houston Federal Court of 13 of 14 counts of conspiracy, wire fraud and mail fraud.
Since his appointment, receiver Ralph Janvey has tried to recover investor money by filing several dozen lawsuits against defendants including the Miami Heat basketball team, New Orleans-based law firm Adams & Reese, Baton Rouge-based law firm Breazeale Sachse & Wilson, the University of Miami, Texas A&M University, the PGA Tour, the ATP tennis tour, and several Stanford-entity investors, members and officers.
Janvey sued The Golf Channel in 2011 in Dallas Federal Court.
A three-judge panel with the Fifth Circuit ruled last year that the channel must return the $6 million because it provided “no value to the debtor’s creditors.” Stanford signed a two-year advertising agreement in 2006 that provided for 682 commercials per year, live coverage of a championship tournament for which Stanford was a title sponsor and promotion of Stanford’s products and brand.
The New Orleans-based appeals court later vacated the ruling on rehearing and sent a certified question to the Texas Supreme Court, asking the high court to define the term “reasonably equivalent value” from the “creditor’s viewpoint” to establish an affirmative defense under the Texas Uniform Fraudulent Transfer Act. A transfer cannot be subject to clawbacks under the act if the recipient provides something of “reasonable equivalent value” and takes the money in good faith.
Justice Eva Guzman’s 35-page opinion concluded something of “reasonable equivalent value” was provided due to evidence that “the transferee (1) fully performed under a lawful, arm’s-length contract for fair market value, (2) provided consideration that had objective value at the time of the transaction, and (3) made the exchange in the ordinary course of the transferee’s business.”
Guzman was not persuaded by Janvey’s argument that the advertising services provided had no value to creditors because they “would only attract new investors, and enable the Ponzi scheme to continue and thrust it further into insolvency.”
“We hold the Texas Uniform Fraudulent Transfer Act does not contain separate standards for assessing ‘value’ and ‘reasonably equivalent value’ based on whether the debtor was operating a Ponzi scheme,” she wrote. “Transactions for consumable goods and services may deplete a debtor’s leviable assets, but that factor alone does not render the exchange valueless.”
The Golf Channel had argued that using Janvey’s value analysis would “wreak economic havoc if good-faith merchants are required to forfeit their earnings” unless they can prove the transfer gave some kind of secondary or residual benefit or did not further the debtor’s insolvency.
The Fifth Circuit previously ruled in 2012 that several Republican and Democratic political committees must return over $1.6 million in Stanford contributions to Janvey.
Janvey’s attorney, Kevin Sadler with Baker Botts in Palo Alto, California did not immediately respond to an email message requesting comment Friday afternoon.

From Courthouse News.

$50 Million Coming to Stanford Ponzi Victims

February 18, 2016
By David Lee
DALLAS (CN) – The receiver for Allen Stanford’s $7 billion Ponzi scheme has $50 million to pay to fraud victims after settling lawsuits against Stanford’s attorneys and accountants.
Court-appointed receiver Ralph Janvey filed a motion for approval of a distribution plan on Feb. 12 in Federal Court. If approved, the distributions will be the third such payments since 2013.
More than $29.8 million will come from a settlement Janvey reached with accounting giant BDO USA. The Official Stanford Investors Committee sued BDO in 2012, claiming the auditor knowingly participated in the certificate of deposit investment fraud.
“Despite the pervasive fraud that infected Stanford Financial Group’s operations, BDO USA repeatedly issued unqualified audit opinions on its Stanford clients’ annual financial statements,” the complaint stated. “BDO USA’s audit opinions on SGC’s financial statements were critical to Stanford Financial Group’s success.”
BDO settled the lawsuit in 2015, agreeing to pay $40 million. At the time, it was the largest amount awarded to Stanford Ponzi victims. More than $9.9 million in attorneys’ fees were included in that settlement.
New Orleans-based law firm Adams and Reese and Baton Rouge-based law firm Sachse & Wilson agreed to pay $3.6 million for the latest distribution. Janvey sued those law firms and several of their attorneys in 2012, accusing them of sending false opinions to authorities and referring clients to Stanford in exchange for benefits.
Janvey said the law firms “embarked on their own campaign to enrich themselves at their other clients’ expense,” and that while providing legal services to Stanford Financial they referred their own clients to Stanford.
“Many of these clients purchased SIBL CDs,” the complaint stated. “Through these referrals, the two firms curried favor with their powerful new client, Stanford Financial, while enjoying the lucrative legal work that Stanford Financial sent the firms to reward them for adding to Stanford Financial’s bottom line. Of course, the law firms’ efforts to help Stanford Financial sell more SIBL CDs did not go unnoticed at Stanford Financial.”
The law firms settled the claims for $5 million last year, which included $1.2 million in attorneys’ fees.
Janvey said the remaining $16.5 million will be distributed from other receivership assets. He plans to make the payments “on a rolling basis” to victims when the distribution plan is approved by the court.

From Courthouse News.

Federal Jury Whacks Former Stanford Exec for $50 Million

October 12, 2015
By David Lee
DALLAS (CN) – A federal jury ordered a former Stanford Financial executive to pay $50 million to the receiver of R. Allen Stanford’s $7 billion Ponzi scheme for breaching her duties to Stanford’s Antiguan bank.
Court-appointed receiver Ralph S. Janvey sued former Stanford Financial treasury manager Patricia Maldonado in 2014 in Federal Court. The seven-member jury unanimously concluded on Oct. 2 that she had breached her fiduciary duties to the Stanford International Bank Ltd. and that “a relationship of trust and confidence” existed between the two.
Janvey, an attorney with Krage Janvey in Dallas, said Maldonado “failed to comply with those fiduciary duties in connection with numerous improper transfers from SIBL’s customer deposit accounts, including transfers of more than $200 million to fund a secret Swiss bank account that Allen Stanford and James Davis ultimately used to pay bribes” to authorities, according to an Oct. 7 statement .
After three hours of deliberations, the jurors concluded the business judgment rule did not protect Maldonado’s actions. The common law rule allows courts and juries the option of deferring to the business judgment of company executives.
Stanford, 65, was convicted in 2012 in Houston Federal Court of selling phony certificates of deposit to fund the $7 billion Ponzi scheme. He is serving 110 years in federal prison.
Janvey has filed about 50 lawsuits against Stanford money recipients since his appointment, according to the Courthouse News database.
His targets have included the Tiger Woods Foundation, the Miami Heat basketball team, Texas A&M University, the University of Miami, the PGA Tour and the ATP Tour.
In September, U.S. District Judge David C. Godbey in Dallas ordered several Stanford investors to hand over $2 million in profits they received in the scheme.
Godbey relied on a Fifth Circuit ruling that allowing net-winner investors to keep their profits would “further the debtors’ fraudulent scheme at the expense of other” investors. The Fifth Circuit concluded that any recovery would be paid out of money “rightfully belonging” to the victims of the Ponzi scheme, not from the Stanford entities’ own assets, “because they had no assets they could legitimately call their own.”
In February, a Dallas federal jury ordered former U.S. Ambassador to Ecuador Peter Romero to return more than $700,000 in fraudulent transfers from Stanford entities.

From Courthouse News.

September 23, 2015
By David Lee
DALLAS (CN) – Two dozen investors in R. Allen Stanford’s $7 billion Ponzi scheme must return approximately $2 million in profits they received, a Dallas federal judge ruled Tuesday.
U.S. District Judge David C. Godbey granted in part court-appointed receiver Ralph S. Janvey’s motions for partial summary judgment in six lawsuits filed in 2009 and 2010 against investors who received more money than what they invested.
“The court previously granted the receiver’s motion for summary judgment against similarly situated net-winner defendants,” the 11-page order said. “The court found that the receiver had established Stanford operated a Ponzi scheme, and that the net-winner defendants had not provided ‘value’ to the Stanford entities for the interest payments they had received. Based on those conclusions, the court granted the receiver’s motion as to net winner defendants whose interest payments had been factually established. The Fifth Circuit subsequently affirmed the court’s orders.”
The appeals court ruled in Sept. 2014 that allowing net-winner investors to keep their profits would “further the debtors’ fraudulent scheme at the expense of other” investors. It concluded that any recovery would be paid out of money “rightfully belonging” to the other victims of the Ponzi scheme, not from the Stanford entities’ own assets “because they had no assets they could legitimately call their own.”
Relying on that ruling, Godbey wrote the defendants “have not suggested that the court’s analysis should be any different here” regarding their alleged failure to provide “value” for the payments.
The defendants include Anibal Morgado, David Morgado, and Vasco M. Diniz Morgado, who were ordered to return over $672,000. Chloee K. Poag and G. Dan Poag Jr. were ordered to repay over $247,000. The remaining individual defendants were ordered to repay $23,000 to $178,000.
Godbey also ruled that Janvey cannot recover $181,000 from Joyce S. Erfurdt and T. Mark Kelly, having addressed their objections to the receiver’s claims in a separate order.
He also declined to order payment from George and Dolores Rollar, concluding there is still an unresolved issue of fact over whether Janvey acted diligently in serving them.
Janvey has filed approximately 50 lawsuits against Stanford money recipients since his appointment, according to the Courthouse News database.

From Courthouse News.

BDO Pays $40 Million to Settle Stanford Ponzi Investor Suit

May 29, 2015
By David Lee
DALLAS (CN) – Accounting giant BDO USA will pay $40 million to settle claims it knowingly participated in R. Allen Stanford’s $7 billion Ponzi scheme.
Settlement terms were not disclosed in the May 15 federal court filing, in which BDO denied wrongdoing. The company said it agreed to pay the money to save “time and energy.”
The Official Stanford Investors Committee sued the company in 2012, claiming it repeatedly issued unqualified audit opinions for Stanford’s annual financial statements that were critical to Stanford’s apparent success.
Stanford was convicted in 2012 in Houston of selling phony certificates of deposit. He is serving 110 years in federal prison.
“BDO Seidman was never the auditor of Stanford International Bank (Ltd.), the entity where Robert Allen Stanford committed his fraud,” the company said in a statement Thursday. “BDO audited an affiliated company whose financial statements are not alleged by plaintiffs to have contained any material misstatements. However, after almost four years of litigation and the likelihood of more to come, this settlement makes the most sense for our partnership given our relevant insurance coverage and the costs, as well as the loss of time and energy, associated with continuing this case.”
Plaintiffs’ attorney Edward Valdespino, with Strasburger & Price in San Antonio, said the previous largest award for Stanford Ponzi victims was $5 million.
“It’s really the first significant settlement for the victims after six years,” he told the San Antonio Express-News. “In the scheme of things, it’s a small amount for each individual investor, but this is one of many lawsuits out there.”
The plaintiffs claimed BDO USA played a significant role in weakening banking laws in Antigua, where Stanford based his Ponzi scheme.
When Antigua came under increased scrutiny from foreign regulators, Stanford formed a task force to rewrite the country’s banking laws. The task force succeeded in weakening regulations, and in effectively eliminating the Stanford bank’s Antiguan competitors, making Stanford the country’s de facto offshore banking regulator.
“The smashing success of the Stanford task force and its misleading regulatory ‘reforms’ were rooted in its exclusive nine-person membership,” the complaint stated. “Every firm represented on the Task Force provided crucial services to Stanford Financial Group, and every individual member of the Task Force was personally appointed by Stanford himself. … BDO USA’s partners and associates comprised nearly half of the Stanford Task Force’s members, more than any other firm represented on the Task Force.”
The key aim of the task force was to amend Antigua’s Money Laundering Act to ensure that “fraud” and “false accounting” were not included as violations, investors said.
BDO USA allegedly had some of the most important responsibilities for this, reviewing and advising on Antigua’s banking laws, and making recommendations to Antigua’s regulatory authorities, including procedures for supervising and examining international banks.
The settlement comes three days after New Orleans-based law firm Adams & Reese and Baton Rouge-based Breazeale Sachse & Wilson, among others, agreed to pay Stanford’s court-appointed receiver $5 million to settle claims they referred clients to the scheme and gave fake opinions to Antiguan banking authorities.

From Courthouse News.