U.S. News

Stanford Receiver Sues 400 Investors to Recover Funds

Scott Cohn

The court-appointed receiver in the Stanford Financial case—whose job is to locate funds to return to investors—is suing some 400 of them in a controversial "clawback" case.


Dallas attorney Ralph Janvey, who was appointed Receiver in February at the request of the Securities and Exchange Commission, filed the claim late Tuesday against the investors, all of whom have had their accounts frozen since February.

Janvey is hoping to recover close to $1 billion—not just the "returns" the investors thought they had earned in the alleged Ponzi scheme, but also their initial investments in the Stanford certificates of deposit—CD's that authorities charge are bogus.

Janvey argues all of the funds are "fraudulent CD proceeds" that should be distributed equally to all Stanford victims.

The investors comprised a small group of clients who had their funds in Stanford and Stanford-related accounts at the time a federal judge froze all Stanford assets in February.

Thousands of other investors either got their money out before the freeze or managed to get the court to release their accounts.

The lawsuit adds insult to injury for the investors, many of whom had put their life's savings into Stanford CDs.

Melanie & Troy Lillie

Among those affected is Troy Lillie, 59, of Maurice, Louisiana, whom CNBC profiled in May in the original documentary "Secrets of the Knight: Sir Allen Stanford and the Missing Billions."

Lillie, a retired refinery supervisor for ExxonMobil, had invested all of his retirement funds—$954,000—in Stanford CDs on the recommendation of his Stanford advisor.

The advisor, Michael Word, told Lillie in December to redeem the CDs because of the deepening financial crisis. Lillie complied, but could not get his money out before the account was frozen.

Now, Janvey is trying to seize Lillie's account and hundreds like it.

Lillie, who had worked at ExxonMobil for 29 years and is in failing health, has had to take a job as a clerk on a Shell oil platform in the Gulf of Mexico. He works two weeks at a time on the platform, leaving his wife, who also has health problems, home alone.

Reached by phone on the platform, Lillie told CNBC if the clawback claim is succesful, he may be forced to sell his house in addition to losing his life's savings.

"I totally disagree with it," Lillie said of Janvey's suit.  "It's going to destroy a lot of lives, and you're talking to one of 'em."

Attorneys for the alleged victims have said they will fight the clawback claims.

In his court filing, Janvey does not allege that Lillie and the others engaged in wrongdoing.

Rather, he says, "the partial losses of this small percentage of claimants cannot be minimized further at the expense of thousands of other claimants." Janvey wants all the funds to be concentrated in a central pool to distribute "equitably" to victims.

The move puts Janvey directly at odds with the SEC, which had him installed as Receiver in the first place.

Last week, the SEC filed an emergency motion attempting to block today's suit, arguing that it targeted "innocent investors," and the clawback claims are "not supported by case law and are contrary to Commission practice." But in a written statement, Janvey says his goal "is to achieve equity for all investors by maximizing the assets of the Estate."