A group of investors who lost millions in the collapse of Stanford Financial Group says it is "shocked" by a request by court-appointed receiver Ralph Janvey for nearly $20 million to cover his expenses.
Janvey, a Dallas attorney, was appointed in February, the same day a federal judge froze Stanford's assets in the face of what the Securities and Exchange Commission calls a "massive" fraud. On Friday, nearly three months to the day after taking control of Stanford's interests, Janvey asked the court to approve $19.9 million in payments to various law firms and subcontractors, even though there is only $69 million in cash on hand.
The payments only cover work done through April 12, and while the request suggests costs may begin to level off now that the initial work is done, Janvey asks for permission to submit monthly bills in the future.
"The tasks and challenges presented by this large receivership are numerous, complex, difficult, and in some respects unprecedented," says a motion filed on Friday.
The Stanford Victims Coalition says it is "basically shocked" by the request, warning that at the current pace, the fees paid to Janvey and his associates could soon outstrip the amount that might be recovered for investors.
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"The defrauded Stanford investors continue to be victimized in this case," the group writes in a statement provided to CNBC.
In particular, the group says it is "astonished" by the fact that according to the court filing, much of the expenses are for providing information to the Securities and Exchange Commission and other authorities including the FBI, the Department of Justice, U.S. Postal Inspectors and the Federal Reserve; as well as the Financial Industry Regulatory Authority—the industry's self-regulatory arm. The group says investors are being asked to pay for the regulators' shoddy work.
"We were not protected by the ... agencies charged with regulating Stanford’s operations and now we seem to be paying for the clean-up job," the group says.
But Janvey's filing insists, "The Receiver is successfully managing the Estate for the benefit of all claimants."
In addition to the $69.3 million in cash Janvey directly controls in one U.S. bank account, more $300 million is in non-U.S. bank accounts that are also claimed by the Antiguan receiver, Vantis PLC, which is attempting to liquidate the company.
While Janvey says Stanford's assets will ultimately be "only a fraction of the several billion dollars that would be needed" to make victims whole, the filing says the recovery will be "much more" than the amount currently in the estate's bank account, and more than the receiver's expenses. But the filing says the recovery "would not even be possible without the expenditure of considerable resources."
The victims' group is unimpressed, noting, "It appears Ralph Janvey has taken his orders to 'acquire and take control over the Estate’s assets' quite literally."