Attorneys argue distribution of Stanford funds

• By BILL LODGE
• Advocate staff writer
• Published: Nov 3, 2009 - Page: 1A

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The Securities and Exchange Commission should not be blocking the return of assets to thousands of investors who lost billions to a Texas promoter, a Dallas lawyer argued Monday in New Orleans.

“The SEC has abandoned its responsibility,” Kevin M. Sadler, an attorney for a court-appointed receiver for those assets, told a three-judge panel of the 5th U.S. Circuit Court of Appeals.

“The receiver is attempting to make an end run” around established federal case law, responded Michael L. Post, an SEC attorney.

The receiver in the case is Dallas attorney Ralph S. Janvey, who was appointed on the recommendation of the SEC.

The dispute revolves around Janvey’s plan to take $894 million from about 650 investors who recovered some of their money before February. That’s when the SEC shut down the operations of Robert Allen Stanford and alleged that he led a scheme to steal as much as $9 billion from 30,000 investors, ranging from Baton Rouge to Brazil and other points around the globe.

That $894 million is nearly 60 percent of the $1.5 billion that Janvey said last week he hopes to recover for pro rata distribution to all investors.

Some of the people targeted by Janvey once worked for Stanford.

But much of that $894 million would come from approximately 500 investors who Janvey concedes had no knowledge of any frauds alleged to have been planned by Stanford.

And that’s a sore spot.

The SEC maintains that it does not seize the principal of innocent investors or recover interest or dividends from innocent investors who lost more than they gained.

The issue divides two retirees from ExxonMobil in Baton Rouge.

Troy Lillie, 59, has said he moved more than $900,000 in retirement funds out of a Stanford bank, only to see Janvey freeze that money for eventual worldwide distribution.

Lillie, who now lives in Maurice, was in the courtroom Monday, hoping for any sign that the 5th Circuit will reject Janvey’s arguments.