Wednesday, March 18, 2009

SEC Receiver Opposes Investor Efforts to Intervene in Commission Action Against Stanford Firm

The SEC’s court-appointed receiver opposes an effort by investors to intervene in the SEC’s enforcement action alleging a multi-billion dollar fraudulent scheme by the Stanford investment firm. Allowing investor intervention would be wasteful, said the receiver, because they will soon have available an effective claim certification process. Further, all of the intervening investors have accounts frozen by court order. An effort by the Internal Revenue Service to intervene will be addressed by the receiver in a separate motion. (SEC v. Stanford International Bank, Ltd , et al., ND Texas)

The asset freeze should continue because it is essential to protect assets from being dissipated, said the receiver, and will provide more time to review and analyze accounts associated with persons or proceeds involved in the Stanford fraud. In addition, the receiver said that the investors cannot establish the legal requirements for intervention in the SEC’s case against the firm. Specifically, they cannot demonstrate that the existing parties do not adequately represent them. In addition, their legitimate interests, if any, will not be impaired by the receiver’s work. More broadly, the receiver contended that the investors did not satisfy the procedure required under the Federal Rule of Civil Procedure for intervention.

The receiver detailed to the court the certification process for investors that will be put in place. According to the receiver, the certification process will allow the investors the same relief they seek by intervening, which is an opportunity to demonstrate that their accounts are not associated with the fraud and seek release. Indeed, continued the receiver, the certification process will be far more efficient than allowing thousands of account holders to intervene in the SEC’s enforcement action.

Following the certification process, the investors will have the ability to litigate their claims in court if the receiver denies release. The receiver argued that it would detrimentally slow the certification process if some investors are allowed to bypass the procedure and require the receiver to respond to their requests ahead of those going through the certification process. In this circumstance, intervention is both unnecessary and not legally proper.