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Tuesday, May 21, 2024 | Back issues
Courthouse News Service Courthouse News Service

Stanford’s Civil Tactic Makes SEC Indignant

DALLAS (CN) - R. Allen Stanford must be held civilly liable for his massive Ponzi scheme, the Securities and Exchange Commission argued, scoffing at the implication his criminal trial was unfair.

In a 2009 federal complaint, the agency accused Stanford of running an $8 billion Ponzi scheme through the sale of certificates of deposit. U.S. District Judge Reed O'Connor then entered a temporary restraining order, froze his assets, and appointed a receiver.

Stanford later faced a criminal trial for the scheme, and a jury convicted him in 2012 on 13 of 14 counts of conspiracy, wire fraud and mail fraud. He was sentenced in June to 110 years in federal prison.

With the SEC now seeking partial summary judgment on its civil claims, Stanford moved on March 25 for a time extension to secure sealed exhibits from his criminal trial.

The SEC replied Monday that this extension should be denied.

"First, for all the reasons noted above, these pleadings cannot add any substantive information relevant to the commission's motion for summary judgment because they relate to arguments that have already been rejected in Stanford's criminal case," it said in a six-page response. "In fact, the materials were attachments to a motion for new trial that was denied. The only reason for the Court to examine these pleadings would be to re-examine the fully litigated decisions made in the criminal case. The pleadings cannot give any basis to ignore the well-established precepts of collateral estoppel that demonstrate Stanford's civil liability in this parallel proceeding."

The SEC said Stanford has offered no basis to avoid the "estoppel effect" of his criminal conviction.

"In his response, Stanford admits, as he must, that he has been criminally convicted based on the very conduct that is at issue in this case," the filing states. "And he, in essence, concedes that the elements of collateral estoppel have been met here, including the fact that the same issues were at stake. His only argument is that the criminal trial did not provide him with a full and fair opportunity to litigate the common issues and that, as a result, collateral estoppel does not apply."

It is "beyond dispute" that Stanford had full and fair opportunity to try the criminal case against him, the agency added.

"As he admits, he was represented by competent counsel," the reply states. "His trial lasted over thirty days and over thirty witnesses testified. As even a cursory review of the docket sheet from that proceeding demonstrates, Stanford's criminal trial was fully and fairly litigated, even if Stanford does not like the results."

Stanford had even moved in October 2010 for change of venue based on the same pretrial publicity of which he complains now, the SEC said.

"He had a fair and full opportunity to litigate his motion for continuance," it wrote. "Stanford has pointed to no case suggesting that in circumstances like this collateral estoppel does not apply. Nor could he."

The SEC also sued several Stanford-controlled entities, including Antigua-based Stanford International Bank, Houston-based broker-dealer/investment adviser Stanford Group Co., and investment adviser Stanford Capital Management. The SEC also sued Stanford International Bank CFO James Davis and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group.

At the time of the suit, former SEC enforcement chief Linda Chatman Thomsen had called the conspiracy "a massive fraud based on false promises and fabricated historical return data to prey on investors."

Rose Romero, former regional director of the SEC's Fort Worth division, called it "a fraud of shocking magnitude that has spread its tentacles throughout the world." Romero is currently a partner with Thompson Knight in Dallas.

The SEC says Stanford International Bank sold roughly $8 billion of CDs by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through bank's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for 15 years.

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