U.S. News

Stanford Case Examiner Wants Accounts Freeze Lifted


An examiner appointed by the court to represent investors is recommending the court lift a freeze on nearly four thousand customer accounts from the Stanford Financial Group.

The accounts were frozen along with the rest of Stanford's assets in February, as a court-appointed receiver attempts to sort out the alleged "massive Ponzi scheme."

Allen Stanford and two executives that helped run his financial empire are accused by the U.S. Securities and Exchange Commission of an fraud involving certificates of deposit (CDs) issued by Stanford International Bank in Antigua.

Stanford has said he is innocent. The chief investment officer for Stanford's companies, Laura Pendergest-Holt, has pled not guilty to one count of conspiracy and one count of obstruction.

The receiver, Ralph Janvey, had argued most of the accounts should remain frozen to allow for the possibility that he may seek to "claw back" some of the funds, which include proceeds from allegedly fraudulent certificates of deposit.

But the examiner, John Little, argues the customers are being unfairly targeted.

"The continued freeze is imposing severe hardships upon individuals who have done nothing wrong, against whom no claim is even pending, and as to whom the Receiver might not be able to collect a judgment," Little writes in a report filed with the court on Thursday.

Little notes that the freeze is causing "untenable hardship" to the customers, many of whom had virtually all their assets in the accounts. Little recommends the freeze be lifted, noting that Janvey can always pursue "claw back" claims later.

Janvey and a court-appointed Receiver in Antigua have both said there are not nearly enough assets to make all Stanford investors whole.

The freeze, imposed when the Securities and Exchange Commission sued Stanford February 17, was aimed at preserving what remains of Stanford's assets so they could be fairly distributed to investors.

Little says while the freeze "arguably made sense when it was imposed on February 17, 2009, it does not make sense over three months later." It will be up to U.S. District Judge David Godbey in Dallas to decide whether to lift the freeze.

"The threat of such claims is adding significantly to the hardships already being imposed upon Stanford customers who have lost their CD investments and seen their other assets frozen for over three months," Little said in his report.

Janvey has said in previous court filings that he would consider filing claims to "claw back" proceeds received from the redemption or interest payments from CDs issued by the firm's offshore bank.