Tuesday, March 3, 2009

Stanford Group Clients Learn Grim News

Charlotte investors looking for a glimmer of hope regarding their chances of getting their money back from Stanford Financial Group's Southpark office heard more troubling news on Monday.

According to the lawyer appointed to oversee the assets of the downtrodden financial empire, the company’s financial health is far worse than originally thought.

In a statement issued delivered to a U.S. District Court judge in Dallas in a packed courtroom, attorney Ralph Janvey said the “liquidity situation and overall financial condition of the Stanford entities can only be described as dire.”

He said Stanford has amassed “tens of millions of dollars” in unpaid bills, with only a limited amount of available cash on hand, and that a “significant” percentage of Stanford customers invested in products or schemes that the U.S. Securities and Exchange Commission allege to be fraudulent.

“Evidence is also mounting that the assets of the company will be only a fraction of the amount needed to satisfy the anticipated claims against the firm,” said Janvey, in his first public statement.

The SEC has accused company chairman Robert Allen Stanford, as well as Jim Davis, the company’s chief financial officer, and Chief Investment Officer Laura Pendergest-Holt of running the Ponzi scheme and misappropriating as much as $1.6 billion of investors’ funds.

The number of brokerage accounts affected by these products could “number in the thousands,” Janvey said, while the company had spread its assets across 175 entities in multiple countries, making tracking the funds more difficult. He estimates the Stanford Group has a total of about 35,000 brokerage accounts.

On Monday, a U.S. District judge extended the order freezing Stanford assets placed under the receiver’s watch to March 12. Meanwhile, numerous investors who cannot access their funds have filed court motions seeking relief.

Despite the hardship being felt by investors, Janvey said Monday that the only way to ensure a fair distribution to defrauded investors is to temporarily prohibit withdrawals.

Said Janvey, “It is critical to my work on behalf of every defrauded investor to ensure that all available assets of the firm remain within the court’s control.”

Meanwhile Stanford employees are without pay, and have found their health insurance benefits frozen as well. Additionally many Stanford employees were also customers, maintaining, retirement, savings and checking account with the Stanford empire.

Brokers and administrative staff are still locked out of their Charlotte office unable to even retrieve personal items.

Administrative employees will certainly fair better, while brokers those with NASD licenses have watched from the sidelines as their careers vanish overnight.

Unable to buy or sell stocks on behalf of their clients, most have tired to assist their clients as best they can. But many clients are staying clear of their brokers and some are understandably angry.

One Charlotte client posted a comment at Cedar Posts (that the blog administrator removed late last night) at Cedar Posts "My broker is XXX XXXXXXXX and he is a guilty as the rest of them, if he was looking out for my best interest he would have known the whole place was a fraud."

With the market slumping to unimaginable levels the bad news just keeps coming for the Stanford Group's Charlotte Brokers.

Eddie Rollins
Timothy L. Bambauer
Jeff Dudas
Leila Evans
Roger Fuller
Susan Johnson
Brent Martin
David J. Morgan
Jon Nee
J. Whitfield Wilks
Stephen Wilson
Ken Boylan
Bryan Cannon
David Gay
Deems May
Laura Richards
Audrey Truman
Charles "Hunter" Widener

Charlotte's Business Journal expands on the above brokers plight in a February 25, 2009 article "Stanford's SouthPark Office Shut Down" was includes the following comment posted by Jim Koeniger:

"Anybody with only a modicum of financial advisory experience should have known the Stanford operation was suspicious. The supposed financial experts who joined Stanford should have known better. Stanford offered above average compensation and a shelter from the bad-news brokerages of big name banks and that apparently made brokers suspend rational thought".


Anonymous said...

Your report needs some clarification. Not all Stanford customers are at risk of losing all of their money. Most customers have brokerage accounts which are in a custodial relationship with Pershing LLC and JPMorgan. The funds are intact and invested in bonds, bond funds, money market accounts, and other instruments not issued by Stanford Group or Stanford International Bank. These accounts are frozen by the court order, not gone. CD's in SIB are at the core of this scandal.

Too many of the stories I read are like this one and focus on the sensational, rather than the big picture.

I was in the courtroom in Dallas yesterday morning.

Todd C.
Dallas, TX

Cedar Posts and Life Floating By said...

Todd C.

Is correct, in that not all of Stanford customers are at risk of losing all of their investments.

But for the time being they are locked out of thier account.

Any money invested in the "Stanford Bank" Cd's is no doubt gone.

Custodial accounts should be protected by SIPC up to $500,000.00 per customer, but this would not cover those who pulled out of the market at their brokers direction and jumped to Cd's as the market declined.

Though it could be months before any customers can access their accounts.

Brokers who worked for Stanford Group have found that seeking employment may just be a lost cause as no one will talk to them.

As far as the "Big Picture" well, it is not very pretty.

Cedar Posts and Life Floating By said...

SIPC it is not the same as FDIC.

When a brokerage firm fails owing customers cash and securities that are missing from customer accounts, SIPC usually asks a federal court to appoint a trustee to liquidate the firm and protect its customers. With smaller brokerage firm failures, SIPC sometimes deals directly with customers.

SIPC aids most customers of failed brokerage firms when assets are missing from customer accounts.

The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC. Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well investment contracts (such as limited partnerships) and CD's that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

Customers of a failed brokerage firm get back all securities (such as stocks and bonds) that already are registered in their name or are in the process of being registered.

After this first step, the firm’s remaining customer assets are then divided on a pro rata basis with funds shared in proportion to the size of claims.

If sufficient funds are not available in the firm’s customer accounts to satisfy claims within these limits, the reserve funds of SIPC are used to supplement the distribution, up to a ceiling of $500,000 per customer, including a maximum of $100,000 for cash claims.

Additional funds may be available to satisfy the remainder of customer claims after the cost of liquidating the brokerage firm is taken into account.

You can read more about how SIPC protects customers at:

Anonymous said...

I'm going to miss ole Snitch

Anonymous said...

Living in Memphis, I find this all pretty funny. I work for a mega corporation at a mid level manager level. And you know when things are screwed up. Especially as intertwined as the financial industry is, burying your head in the sand, doesn't make you a victim. It makes you an idiot. SG, lead by crooks, and managed by yes men. Brokers rolling around the country in a private plane. When at other banks only the top brass gets that privilege. James Davis and his driver. Small town kid doing good. It is all a joke. Common criminals. the lot of them. But I'd do Laura.

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