Material developments in the notorious Ponzi scheme authored by financier Allen Stanford continue to emerge more than a decade after the collapse of the monumental fraud.
Stanford once headed a Houston-based company featuring his name that managed investments for well-heeled clients globally. The Stanford Financial Group no longer exists, having collapsed in the wake of what one Texas media publication terms Stanford’s “massive $7 billion fraud that victimized thousands of investors.”
Notable consequences continue to flow following Stanford’s 2012 securities fraud conviction and 110-year federal prison term.
What was spotlighted just last week was a federal appellate panel’s rejection of a settlement inked in 2016. That pact was agreed on between companies that had insured Stanford employees and the federally appointed receiver tasked with clawing back ill-gotten gains and providing restitution to victimized investors.
Receiver Ralph Janvey and various insurance providers came to settlement terms after the former agreed to disallow the Stanford employees (who were coinsureds) from bringing any claims against the insurers. In exchange for that protection, the carriers added $65 million to the restitution pile stocked up for fraud victims. Reportedly, that amount now stands at more than half a billion dollars.
A federal district judge approved that pact, but the court was overruled by the above-cited circuit panel last week on grounds that Janvey and the lower-court judge overstepped their authority in crafting settlement terms.
The panel specifically ruled that barring the coinsureds from making financial claims against the carriers deprived them of their legal right to do so. Its unanimous opinion stressed that their inability to make policy claims could not be judicially sanctioned absent “an alternative compensation scheme” available for them to pursue.
Janvey’s recovery work on behalf of the fraud victims continues.