VOL. 124 | NO. 123 | Thursday, June 25, 2009
Stanford Receiver Relentless On Legal Fees
By Andy Meek
PILE OF WOES: An artist’s rendering shows Texas billionaire R. Allen Stanford, second from left, flanked by his attorneys during a hearing in federal court in Richmond, Va., after surrendering to authorities late last week. The receiver in charge of dismantling Stanford’s troubled empire is not giving up on collecting fees for himself and helper firms. -- AP IMAGE/WILLIAM J. HENNESSY JR.
When the court appointee in charge of what’s left of Stanford Financial Group asked a judge’s permission last month to pay invoices of almost $20 million for the work he’s done so far, it wasn’t a popular request.
Stanford’s former chairman, disgraced financier R. Allen Stanford, cried foul. The U.S. Securities and Exchange Commission – one of the federal agencies that dismantled Stanford’s operation – also formally opposed the request of Stanford’s receiver, Dallas attorney Ralph Janvey.
But on the same day the first criminal charges were filed in the Stanford saga, the receiver in charge of winding everything down filed a detailed reply to the objections raised over the fees and expenses he wants to pay. His answer: The amount of work his team has done justifies the eight-figure tab.
Janvey’s reply also includes what may be one of the most memorable quotes associated with the Stanford investigation thus far. In defense of how he’s addressed the tasks before him, Janvey wrote: “Drinking from a fire hose cannot be accomplished with perfect manners.”
Demand for payment
Stanford’s former chairman has blamed the receiver for heavy-handed tactics he says have throttled the last drops of value out of his business empire that once included a Memphis brokerage office. But when Janvey filed his more than 30-page explanation Friday, Stanford no doubt had other things on his mind.
That was the same day long-expected indictments emerged from a federal grand jury in Houston, bringing criminal charges against Stanford and several former subordinates. The charges stem from allegations the Stanford companies facilitated a multi-billion-dollar investment fraud.
Among those charged were Laura Pendergest-Holt, Stanford’s former chief investment officer who once was a fixture in the company’s East Memphis office. Also named but not charged was James Davis, Stanford’s Memphis-based chief financial officer who was identified as an unindicted co-conspirator.
The closing of Stanford’s brokerage office in the local Crescent Center put about 50 people out of work, including Republican state Sen. Paul Stanley of Germantown.
Janvey wants to dip into the Stanford estate to pay out roughly $20 million to 14 firms that helped him mop up the financial debris left by Stanford’s collapse. In his court filing, he dismissed opposition to the fee request by saying much of what he’s had to do involves circumstances beyond his control.
One example is the size of the receiver’s bank account. Money from the estate in that account stood at a little more than $75 million as of June 17, meaning the $20 million fee request represents almost one-third of the estate funds in the receiver’s account.
“Regrettably, investors are never made whole following the collapse of a Ponzi scheme,” Janvey argued in his filing. “But that is the doing of the perpetrators of the scheme. The professionals tasked with helping to halt the scheme, recover assets and otherwise sort out the financial mess should not be penalized.”
Pay now, and not less
Janvey argues the work his team has done so far – including securing assets and records and closing Stanford offices – would have been necessary whether “the estate was found to be flush with cash or hopelessly insolvent.”
Janvey’s filing contends the receiver and his team already have discounted their usual fees by more than 20 percent collectively, amounting to $5 million overall.
The SEC’s opposition to the fee request is unusual, and the receiver notes in his reply it came as something of a surprise. Martin Aussenberg, a former special counsel for the SEC who now works as a private attorney in Memphis, told The Daily News it’s not common for the SEC to oppose a fee request.
The SEC’s objections appear to stem from what little value remains in the Stanford estate.
“The Commission believes it would be appropriate for the court to reduce the requested fees by an additional 20 percent, and to permit the receiver to resubmit an application for a segment of this percentage once the ultimate financial condition of the receivership estate has been better ascertained,” the SEC told the Texas court where the fee request is pending.
Janvey counters that none of the firms that are part of his team were brought on board with the caveat their fees would be cut sharply if recoverable assets were less than what regulators expected.