Even if all of Janvey’s efforts are successful, Stanford’s investors are likely to receive only pennies on the dollar, while Madoff investors have recovered about 75 cents on the dollar in principal — and counting. Sadler said the difference is the result of different treatment of the two frauds by the agencies that normally look out for investors.
“Sadly, unlike in the Madoff case, Stanford investors were not eligible for SIPC coverage for their losses,” Sadler told CNBC in an email. He was referring to the Securities Investor Protection Corporation, which compensates investors for securities and cash that are lost when a brokerage firm fails.
In the case of Madoff, SIPC oversaw the liquidation of the firm, made payments to thousands of investors, and covered the fees of court-appointed trustee Irving Picard. But in the case of Stanford, whose U.S. brokerage arm was a SIPC member, the agency argued that the securities in question — bogus CDs issued by a foreign bank — were not covered under the law. Thus, neither were the victims.
Sadler also noted that the U.S. Department of Justice has recovered some $8 billion for Madoff victims through criminal prosecutions, including a $2 billion settlement with Madoff’s primary bank, JPMorgan Chase. But in the Stanford case, prosecutors only targeted individuals.
Stanford and two of his of his top lieutenants — Mark Kuhrt and Gilberto Lopez — were convicted at trial. Two others, Chief Financial Officer James Davis and Chief Investment Officer Laura Pendergest-Holt, pleaded guilty. A sixth individual, Antiguan banking regulator Leroy King, has thus far successfully fought extradition.
“The clean-up efforts for the Stanford and Madoff frauds are routinely compared, but there is no question that the absence of both SIPC coverage and any multibillion-dollar U.S. DOJ recoveries for Stanford victims accounts for the substantial difference between distributions to the Madoff and Stanford victims,” Sadler said.
But Shaw also blames Janvey, and the professionals he hired, for “spending 50 cents for every dollar they’ve recovered.” And she says the SEC “botched” a lawsuit aimed at forcing SIPC to compensate the victims.
“The list is shockingly exhaustive with failure at every turn,” she said.
Sen. Bill Cassidy, R-Louisiana, introduced legislation last year that would have allowed the SEC to take over the Stanford receivership and distribute funds to investors, but the proposal went nowhere.
For his part, Allen Stanford has not given up trying to clear his name. Acting as his own attorney, he has cranked out a steady stream of court filings from prison, none with any success. In the most recent petition, filed in December, Stanford demands to be allowed to question Special Counsel Robert Mueller, who was FBI director during Stanford’s prosecution, over alleged mishandling of evidence.
The court has yet to rule on his motion.
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