COALICION VICTIMAS DE STANFORD AMERICA LATINA (COViSAL)
Open Letter
to the Judge David Godbey and Stanford’s Receiver
When
the dust settles, Stanford’s Receivership and its professionals will not even
leave behind tumble weeds for the innocent Stanford victims.
The saga drags on for the victims of
Stanford’s fraud as litigation continues to generate fees for the
receivership’s attorneys and professionals - the only beneficiaries so far,
charging millions of dollars in fees and expenses. One wonders why the
Receivership professionals receive compensation from our stolen money without
showing any meaningful recovery. Is this an ethical outcome?
During these tragic five and half years,
we, Stanford’s victims, have watched with sadness while the possibility of
receiving an economic relief that could mitigate our losses has all but
vanished. Meanwhile, attorneys and their professional comrades are getting all
the money. Mr. Janvey has “recovered” approximately $240.9 million as of
December 31, 2013, and spent $127.5 million in fees and expenses. These figures
do not include the professional fees “held back” - totaling $17 million, plus
$50 million for “winding down” costs.
One gets the impression that the money
available from our stolen savings is simply petty cash for the attorneys and
professionals managing the receivership and the liquidation. They are getting
rich quick, while the victims are unable to pay for their living expenses and
medical bills and many are living in poverty.
Because of its implications, the Stanford
Case is an example of how the United Stated handles issues of ethics and
morality in the financial arena, set on a world stage that has already been
witness to so much political and financial corruption. Therefore, we are
convinced that if this monstrous fraud, which operated with impunity for more
than a decade in and from the United States, is not resolved satisfactorily for
all the victims, the worldwide discredit of the United States in regards to
securities fraud will deepen, further increasing the distrust that currently
exists in its financial sector.
As far as the undeniable responsibility of
the regulatory entities, COVISAL asks, "Why did the regulatory entities of
the United States connive to deny protection to thousands of innocent
depositors, clients of Stanford, violating the mandate from the U.S. Congress
to “protect the investment public”? Why were the “red flags” that appeared in
Stanford’s examinations conducted since 1997 disallowed? Why were the
complaints from clients and former Stanford employees, which year after year
warned of the vertiginous growth of a pyramidal fraud, not investigated?
Furthermore, the Receivership’s
accomplishments in the recollection of assets for the victims’ distribution
fund have been lacking. According to Examiner John Little, “The Receiver and
his professionals have not identified any significant Stanford assets or
accounts that were not identified in the earliest days of the Receivership.”
For this reason, the class actions are the only venue of recovery for the
modest small investors who do not have any money to hire attorneys to defend
them individually.
The signing of a Cross-Border Insolvency
Cooperation Protocol between the U.S. Receiver and the Joint Liquidators, seems
only to benefit their attorneys and professionals. They have divided the pie
and are eating it too. Why do the Courts and responsible government authorities
allow the US Receiver and the Joint Liquidators to continue depleting the
Stanford victims’ patrimony with an agreement that allows the continual enrichment
of attorneys without showing any significant recovery results and reasonable
compensation to the victims of the moneys recovered? In a response to the
Receiver’s motion for approval to release of portion of the holdback, Examiner
John Little states, “What has actually been distributed to Stanford’s investors
– approximately $30 million – is less than half what has already been paid to
the Receiver’s professionals. It is fair to say that Stanford’s investors will
not view this Receivership as any sort of a ‘success’ as long as the Receiver
and his professionals have received more from the Receivership than Stanford’s
investors.”
What honest and transparent legal entity is
providing oversight of the receivership’s affairs? Where are the check and balances?
The U.S. Department of Justice, Asset
Forfeiture and Money Laundering Section expressed its commitment to
participating in the oversight of the claim's process and the Distribution
Plan, in the U.S. and Antigua. They have pledged to have a voice in the
determination of the reasonableness of total asset recovery charges in order to
make sure that the costs of this process are sensible and to preserve the
greatest amount of assets for the victims - specifically, the $330 million of
our savings, confiscated in the UK, Switzerland and Canada. However, we cannot
understand its silence and inaction. The Joint Liquidators have so far received
$100 million that were frozen in the UK, and spent over $60 million in fees and
expenses, while the victims are required to jump through hoops to have any hope
of receiving a penny of a recent announced distribution by the Joint
Liquidators.
In SEC v. Byers, 590 F. Supp. 2d 637, 645,
the court explained, “In considering applications for compensation by receivers
and their attorneys, the courts have long applied a rule of moderation,
recognizing that ‘receivers and their attorneys engaged in the administration
of estates in the courts of the United States … should be awarded only moderate
compensation.’” In other words, the goal is not to make the receivership rich
and even an appearance of a windfall should be avoided. Unfortunately, that
does not seem to be the prevailing sentiment amongst the Receivership in this case.
Not only has the Receivership grossly
overpaid themselves and their attorneys, they now have the audacity to ask for
a portion of the holdback created in 2009 when it was already clear their fees
were becoming exorbitant. The SEC and Examiner determined even then that, “the
professional headcount was excessive, and the expenses incurred by certain
professionals were wholly unsupported.” Case law supports the fact that the
fees of the receivership should be in direct correlation to the availability of
assets. In a similar case, (Specialty Products Co. v. Universal Industrial
Corp., 21 F. Supp. 92, 94) the court commented, “I do not think that I am
required to fix fees in total disregard of the fact that this receivership
produced a very lean harvest, that all interests involved suffered heavily, and
that the whole enterprise was definitely not a success.” It is clear from the
Receivership’s actions that they do not have the investors’ best interest at
heart and are simply viewing this as an opportunity to line their own pockets.
In addition, the statutory interpretation
and large amount of interpretative chaos due to disparate jurisprudence in
similar securities frauds has obscured the truth of the law. It would be lethal
for the Stanford victims to be victimized again. No more impunity for the third
parties that have hurt us!
It is unacceptable that the Courts in the
United States, to the detriment of the Stanford victims, have allowed the
Receivership, who were named to prevent the waste and squandering of the
creditors' patrimony, to continue duplicating costs and efforts among their
professionals and hindering the possibilities of a pro rata distribution of the
victims’ patrimony.
The dust has not yet settled, and the
Receivership’s attorneys and professionals have been very well compensated
during the last five and a half years for the work they have performed.
Unfortunately, they have not shown real accomplishments to deserve additional
payments from the fees that were withheld. They have received more money than
the victims - many of them pocketing millions of dollars - and the victims
barely receiving a penny on the dollar. The Courts in the U.S. should consider
all the facts and deny such a request.
We greatly value justice and the rule of law, and ask the Court’s
commitment to these values to ensure that justice is imparted to all innocent
depositors who feel defrauded yet again.
Jaime R. Escalona
On behalf of COViSAL
Director
Coalición Víctimas de Stanford
América Latina (COViSAL)
Twitter: @COViSAL