Senators Pressure TD Bank to Pay Victims of Stanford Ponzi Scheme
June 18 2019 - 4:01PM
Dow Jones News
By Andrew Scurria
U.S. senators from Louisiana urged Toronto-Dominion Bank to
compensate victims of R. Allen Stanford's Ponzi scheme over the
bank's "knowing assistance" in his $5 billion fraud.
Republican Sens. John Kennedy and Bill Cassidy accused TD Bank
in a Friday letter of abandoning small investors who lost their
nest eggs when Stanford International Bank Ltd., a TD Bank
customer, was exposed as a fraud and collapsed in 2009.
Despite being named in long-running lawsuits in the U.S. and
Canada, TD Bank and other Stanford financial partners haven't
reached settlements with court-appointed liquidators charged with
digging up money for victims. The senators alleged that TD Bank
"aided and abetted" Stanford's banking outside the U.S. and knocked
the institution for expanding its U.S. footprint in the years since
while holding out on settling litigation and paying
restitution.
A TD Bank spokesman declined to comment. Mr. Stanford's U.S.
clients were largely clustered in Texas and Louisiana, though his
far-flung financial empire also stretched to Latin America, the
Dutch Caribbean and Switzerland.
"We demand that TD Bank stop its obstructionist conduct, engage
in a meaningful effort to put an end to this decade-long debacle
and provide restitution to the Stanford victims without further
delay," the senators said in their letter to TD Bank Chief
Executive Greg Braca. "Regulatory intervention should not be
necessary for Stanford's victims to receive the justice they
deserve."
Stanford investors since 2009 have gotten back a fraction of
what they lost and far less than the recoveries for victims of
Bernard Madoff's Ponzi scheme, which collapsed months before Mr.
Stanford's.
While some of the disparity is because of a lack of brokerage
insurance for Stanford victims, the fraud also stands out for
having generated no meaningful settlement from financial
institutions that allegedly turned a blind eye to criminal
activity.
JPMorgan Chase & Co., which provided Mr. Madoff's primary
bank account for moving stolen funds, paid $2.6 billion in a
settlement with federal authorities and acknowledged responsibility
for failing to stop the fraud.
Billions of dollars in investor funds flowed into TD Bank from
Stanford's depositors over the years but weren't invested to
produce the returns that TD Bank knew were being promised,
according to lawyers for Mr. Stanford's victims and hedge funds
holding claims in the receivership.
A complaint they filed last month also targeted HSBC Bank PLC,
Bank of Houston, Trustmark National Bank, and Société Générale
Private Banking, all of which had ties to Mr. Stanford's financial
empire.
In addition to the lawsuit, those investors have lobbied
lawmakers, met with Securities and Exchange Commission Chairman Jay
Clayton and pressed for the return of frozen overseas assets,
according to people familiar with the matter.
Since Mr. Stanford's arrest and the collapse of Stanford
International Bank in 2009, what remains of his far-flung financial
operation has been wound down by lawyers and consultants in Antigua
and Dallas, where court-appointed liquidators have sold assets,
sued alleged beneficiaries of the fraud and distributed proceeds
across roughly 18,000 victims.
The Dallas receiver, Ralph Janvey, has recovered roughly $573
million through last month, according to court records. After
subtracting professional fees and other expenses, Mr. Janvey has
been authorized to distribute $232 million to victims, or roughly
4.5 cents on the dollar.
That number is expected to rise when the receiver hands out the
proceeds from a $63 million settlement with law firm Proskauer Rose
LLP over past work for Stanford. But an appeals court has also tied
up other settlement money recently that was earmarked for
distribution.
Last month, the U.S. Court of Appeals for the Fifth Circuit
rejected a $65 million settlement involving insurance companies
linked to Stanford, taking issue with deal terms that barred others
from asserting claims against the carriers. On Monday, the panel
also held up a potential $125 million judgment against Colorado
billionaire Gary Magness, a Stanford client who allegedly received
stolen funds before the fraud collapsed, while he pursues a defense
against the judgment.
Mr. Stanford is serving a 110-year prison sentence in central
Florida after his 2012 conviction on 13 felony counts.
Write to Andrew Scurria at Andrew.Scurria@wsj.com
(END) Dow Jones Newswires
June 18, 2019 15:46 ET (19:46 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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