Allen Stanford Ponzi Scheme

[scion]

Commentary: Ripped-off Stanford victims wait and hope

Thursday, September 6, 2012 | Updated: Wednesday, September 5, 2012 7:15pm
http://www.chron.com/business/article/Commentary-Ripped-off-Stanford-victims-wait-and-3842287.php

And the wait goes on.

It goes on for Ann Lestarjette, who has returned to work as an office manager for an acupuncturist. She's working again even though she and her husband had planned to retire by now.

“I feel like I can't be weary,” said Lestarjette, 61, whose husband died a year after the Securities and Exchange Commission revealed that Allen Stanford's financial empire was a $7 billion Ponzi scheme.

In an instant, their years of savings and retirement plans evaporated.

Lestarjette's story is sadly representative of thousands of Stanford victims, many of whom have had to abandon retirement after Stanford, who is serving a 110-year prison sentence, stole their life savings.

Last week, the SEC said it will appeal a federal judge's ruling that denied insurance coverage for some victims of Stanford's fraud, including Lestarjette.

For 31/2 years, the wait has gone on as investors awaited the outcome of one glacial legal proceeding after another. Now, they hang their hopes on yet another court battle.

“Everywhere the victims have turned, there has been another obstacle,” said Angela Shaw, head of the Stanford Victims Coalition, which represents U.S. investors.

A federal judge in July struck down the SEC's efforts to force the Securities Investor Protection Corp. to cover losses for Stanford's brokerage clients. SIPC is designed to protect investors who are the victims of broker fraud. It's paid out in the case of Bernie Madoff's Ponzi scheme, for example.

But the insurance fund, which is paid for by the brokerage industry, has insisted it shouldn't have to pay in the Stanford case because Stanford investors bought certificates of deposits issued by Stanford's bank on the Caribbean island of Antigua.

U.S. District Judge Robert Wilkins agreed with that, finding that investors such as Lestarjette weren't brokerage “customers,” even though they were clients.

It's a mind-bending legal distinction that simply means that Stanford's clients were ripped off the wrong way.

Wilkins found that it was Stanford's bank — not the brokerage — that stole from investors, and therefore SIPC coverage doesn't apply. Never mind that Stanford's brokerage, a SIPC member, peddled the CDs like candy — internally, brokers referred to them as “bank crack” — and often touted the SIPC insurance in the sales pitch.

Recently, a federal judge in Dallas contradicted Wilkins' findings. Ruling in a different Stanford-related case, he found the various Stanford entities “were operated as one for purposes of perpetrating a fraud on investors.”

That case also found that Stanford's bank operated nothing like a traditional bank — its only source of funds was the CDs — and that it had been insolvent since 1999.

That may give the SEC some ammo for its appeal, but it remains an uphill battle.

For Lestarjette and other U.S. investors, it also remains their best hope, however slim. Otherwise, they will be left with whatever miniscule amounts can be recovered from Stanford's estate.

As of last week, almost 20,000 claims had been filed for more than $6.3 billion, according to documents filed by the court-appointed receiver in charge of Stanford's estate. Yet with only a few hundred million in assets recovered, investors can expect pennies on the dollar.

Meanwhile, Ann Lestarjette spends another day on the job. She's determined, though, to see the case through.

“What's another couple of months? What's another year?” she asks. After 31/2 years, waiting has come to symbolize hope.

And so, for Lestarjette and thousands of other Stanford victims, the wait goes on.

Loren Steffy is the Houston Chronicle's business columnist. [e-mail]

http://www.chron.com/business/article/Commentary-Ripped-off-Stanford-victims-wait-and-3842287.php