Victims of Allen Stanford's alleged $7.2 billion Ponzi scheme may soon have a chance to submit claims, though it remains unclear how much of their losses they might ultimately recover.
Ralph Janvey, the court-appointed receiver for Stanford's firm, asked a federal judge in Houston for permission to set up a claims process, more than 2-1/2 years after the financier's arrest, a Wednesday court filing shows.
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Approval of the request could pave the way for investors to recover at least some of their losses from Stanford's alleged fraud, a sum believed to be $2 billion or more.
Stanford, 61, faces 14 criminal charges and U.S. Securities and Exchange Commission civil charges over allegations he deceived investors who bought fake certificates of deposit from his Antiguan bank, Stanford International Bank Ltd.
His February 2009 arrest came two months after Bernard Madoff's Ponzi scheme was uncovered.
Wednesday's filing is ``a major step'' toward returning money to victims, Kevin Sadler, a partner at Baker Botts representing Janvey, said in an email.
Though a court-appointed examiner and a committee of Stanford investors expressed disagreements over parts of the process at an Oct. 13 court conference, ``the court made clear at the status conference that the process should begin, and the receiver has acted accordingly,'' he added.
Peter Morgenstern, a lawyer for the investors' committee, on Thursday declined immediate comment. John Little, the examiner, did not immediately respond to requests for comment.
It is unclear how much money will be distributed, when payouts will begin, and how such amounts will be calculated.
``For investor claimants, the amount of the investor's net investment in the Ponzi scheme will be one of the most significant factors'' in determining payouts, Janvey said.
The $7.2 billion figure reflects CDs on Stanford's books when the receivership was set up, not actual investor losses.
At the Oct. 13 conference, Sadler said at least $2 billion of investor funds had been lost through a series of backdated fictitious loans. ``If one wanted to consider a floor of money that's gone, that certainly would be a candidate,'' he said.
HUNDREDS OF MILLIONS SOUGHT
According to a court filing, Janvey had $80.1 million of unrestricted cash on hand as of Oct. 31, after accounting for professional fees and costs.
The trustee is seeking another $955.3 million in litigation. This includes $610 million from other Stanford investors and vendors, and $335 million in British, Canadian, Swiss and other accounts.
Liquidators in Antigua have sought control of some of these accounts, court papers show.
Stanford recently moved to a Houston federal detention center from the Butner Federal Correctional Complex in North Carolina, where he was treated for an addiction to an anti-anxiety medication.
His criminal trial is expected to begin in January in the federal court in Houston. Stanford is scheduled to be arraigned under his most recent indictment on Nov. 28. That proceeding had been delayed because of his treatment at Butner.
On Thursday, U.S. District Judge David Hittner, who oversees the criminal case, barred Stephen Cochell, a lawyer for Stanford in the SEC case, from meeting his client at the Houston detention center until the criminal case is finished.
The judge said public comments by Cochell about Stanford's current mental status could impact the criminal trial. Cochell did not immediately respond to a request for comment.
Madoff is serving a 150-year prison term at Butner.
The civil case is SEC v. Stanford International Bank Ltd, U.S. District Court, Northern District of Texas, No. 09-00298. The criminal case is U.S. v. Stanford, U.S. District Court, Southern District of Texas, No. 09-00342.