AFTERMATH CONTINUES: Kentucky Secretary of State Trey Grayson, left, Mississippi Secretary of State Delbert Hosemann and Nevada Secretary of State Ross Miller listen to testimony in Jackson, Miss., last month during a public hearing about the now-defunct Stanford Financial Group. Hosemann hosted the hearing for Stanford victims, brokers and regulators. -- AP PHOTO/THE CLARION-LEDGER, GREG JENSON

Under the most optimistic scenario, as much as 20 cents on the dollar could be returned to victims of the investment fraud that brought down Stanford Financial Group.

That’s among the findings in a status report filed in the Texas court where federal regulators are trying to prove Stanford was a financial house of lies built on an illusion of wealth. The status report was prepared by Dallas attorney Ralph Janvey, the court-appointed receiver whose team is mopping up what’s left of the network of assorted companies under the Stanford nameplate.

His estimate that investors could get back up to 20 percent of every dollar invested is based on recovery efforts to date and doesn’t include future assets his team may acquire. But that’s not exactly a reason for investors to break open the bubbly.

Next to nothing

That estimate means, for example, that someone who invested half a million dollars in a Stanford certificate of deposit – investments prosecutors now say were nothing but an elaborate sham – would get back only $100,000. That may be why some of the receiver’s court filings already allude to the old adage about something being better than nothing.

Meanwhile, Memphians who either lost their jobs or savings because of the Stanford collapse – not to mention investors elsewhere – have reason to start paying closer attention to the receiver’s efforts if they aren’t already. Janvey claims in his status report, which is current as of Oct. 28, that he’s collected and is pursuing cash, assets and other claims totaling more than $1.5 billion.

He’s also begun to talk about an important step that will have a tangible effect on individual investors. Soon, he’ll come up with a plan on how to distribute what he’s recovered.

“A major step that lies ahead in this receivership will be the development and proposal to the court of a distribution plan to compensate those with claims against the Stanford entities,” Janvey wrote in his status report. “That process will involve extensive work to identify, review, and classify claims, and of course claimants will be allowed to object to the quantification and classification of their claims.

“This will be a time-intensive and expensive proposition, and it will not be revenue-generating. Nevertheless, it must be done.”

Cooked goose, books

That will matter as much in Memphis as anywhere. The city was an important hub in the business empire of R. Allen Stanford, the flamboyant Texas financier and company namesake now cooling his heels in a federal detention center in Texas. His company was a big player in the local investment community, spreading its wealth to local organizations such as St. Jude Children’s Research Hospital.

And it employed a contingent of financial advisers. Some 50 people were put out of work when the Memphis branch closed this summer.

Laying off those employees, closing the office and repeating those actions at Stanford branches around the world were among the myriad tasks on the receiver’s to-do list. It’s been eight months since federal agents raided several Stanford offices, began a manhunt for the company chairman and proclaimed the enterprise an $8 billion Ponzi scheme.

Stanford and several executives are facing separate civil and criminal charges. Once the criminal case against Stanford himself wraps up, the company’s former chief financial officer will be sentenced for his role in the scheme.

James Davis, Stanford’s longtime right-hand man, agreed to a plea deal with prosecutors in which he admitted helping facilitate the Stanford investment scheme, which included cooking company books and pumping CDs to investors that promised inflated returns.

Getting their day in court matters to investors, and so does whatever the receiver can scrape together and pay to the people who need it.

Block and tackle

Controversy often follows the efforts of receivers in investment fraud cases. One of the most frequent arguments is they seek to be paid for their efforts out of whatever value remains in the estate they’re trying to preserve.

To date, Janvey’s team is sitting on $71.5 million in cash. That’s what’s left over after collecting $128.8 million and paying expenses.

Much of the recovery work is unfinished. The receiver has about $136 million in claims pending against former Stanford brokers and managing directors.

He’s also mortgaging Stanford’s proverbial family jewels. But he’s trying to sell them in a market ravaged by the worst recession in decades.

“Stanford and affiliates purposefully spent significant sums of money on luxury items – cars, boats, planes, homes – which can now be liquidated at only a fraction of their original cost,” Janvey wrote in his status report. “One of the most egregious examples is the yacht that Stanford bought for $3.9 million, which he then spent over $16 million to ‘upgrade’ and which may now bring less than one-third of that in (an) auction sale.”

Among the other problems Janvey pointed to are objections Stanford raises to every sale, which Janvey says delays the unloading of assets and causes more money to be spent maintaining them.