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Tuesday, June 18, 2024 | Back issues
Courthouse News Service Courthouse News Service

Stanford Victims to Get Bipartisan Ponzi Funds

DALLAS (CN) - Several Republican and Democratic political committees must return more than $1.6 million contributed by convicted Ponzi schemer R. Allen Stanford, the 5th Circuit ruled.

Click here to read Courthouse News' Securities Law Review.

Stanford, 62, was sentenced in August to 110 years in federal prison. He was convicted in Houston of 13 of 14 counts of conspiracy, wire fraud and mail fraud for running a $7 billion Ponzi scheme by selling phony certificates of deposit.

From 2000 to 2008, entities he controlled gave the money to two Democratic committees - the Democratic Senatorial Campaign Committee and the Democratic Congressional Campaign Committee - and three Republican committees - the Republican National Committee, the National Republican Senatorial Committee and the National Republican Congressional Committee.

Ralph Janvey, the court-appointed receiver for the Stanford entities, filed sued the committees over the money in 2010, and a Dallas federal judge later granted summary judgment in his favor. Janvey is a partner with Krage Janvey of Dallas.

A three-judge appellate panel based in New Orleans affirmed the judgment Tuesday.

"Because we conclude that the receiver may stand in the shoes of the creditors of the Stanford defendants, the receiver's [Texas Uniform Fraudulent Transfer Act] claims were brought 'within one year after the transfer[s] ... w[ere] or reasonably could have been discovered by the claimant,' and they are not preempted, we reject the committees' arguments," Judge James Dennis wrote for the court.

The panel agreed that Janvey can bring claims on behalf of the Stanford entity creditors.

In Jones v. Wells Fargo Bank, the 5th Circuit ruled that "[a] receiver is 'the representative and protector of the interests of all persons, including creditors, shareholders and others, in the property of the receivership" under Texas law, according to the ruling.

"Not only is Jones controlling, but its reasoning finds support in the decisions of several other circuits," Dennis wrote.

The panel also rejected claims that Janvey took too long to file suit, and that the claims were not filed within one year of the transfers. The committees argued that the latest Janvey could have reasonably discovered the payments was February 2009 and that their existence was not "inherently indiscoverable" because they are public record and were discussed in the media.

But Dennis said this "argument misses the mark."

"Even if the existence of the donations was discoverable, their fraudulent nature was not. Moreover, when the Receiver was first appointed on February 16, 2009, he had a number of duties to attend to, which involved the many Stanford offices, systems, and employees," the decision states.

It is not reasonable to expect Janvey to have immediately discover the fraudulent transfers given the extent of the Stanford entities and the extent of the fraud, according to the ruling.

The committees failed to submit any summary judgment evidence indicating Janvey actually discovered the transfers earlier than February 20, 2009, anyway.

The Federal Election Campaign Act furthermore does not expressly pre-empt Janvey's TUFTA claims, the court found.

"TUFTA is a general state law that happens to apply to federal political committees in the instant case," Dennis wrote. "In cases like this one, we have rejected express preemption arguments and construed" federal law narrowly.

He adds: "Nor does TUFTA implicate the 'core concerns' of FECA. As the Receiver correctly explains, he does not seek a refund of the contributions. Rather, the TUFTA claims are brought on behalf of the creditors of the Stanford Defendants and assert that the contributions should not have been made in the first place."

Since his appointment, Janvey has filed approximately 45 fraudulent transfer, fraud and disgorgement suits to recover investor money.

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 Golf Channel, the PGA Tour, the ATP tennis tour, and several Stanford entity investors, members and officers.

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