VOL. 126 | NO. 35 | Monday, February 21, 2011
Ripples From Stanford Scheme Still Felt in Memphis
By Andy Meek
The court-appointed receiver who’s unwinding the now-defunct operations of Stanford Financial Group – once fueled by money from a giant Ponzi scheme – is preparing to sell off Stanford property in Collierville.
R. Allen Stanford, Stanford Financial Group founder, arrives in custody at the federal courthouse for a hearing Aug. 24 in Houston. (AP Photo: David J. Phillip)
Investors also are suing two Memphis hospitals in an attempt to recover tainted Stanford money donated to the hospitals that was used as part of a widespread effort “to buy legitimacy,” according to a statement from the investor group.
The receiver is looking to sell a unit in The Oaks at Schilling Farms Condominiums in Collierville at a public auction March 8 at the offices of Marx-Bensdorf Realtors, 959 Ridgeway Loop Road. The starting bid is $198,000.
The receiver has entered into a stalking horse contract, which sets the required starting minimum bid.
The group representing Stanford investors is seeking to recover at least $7.3 million Stanford apparently donated to St. Jude Children’s Research Hospital; its fundraising arm, ALSAC; and the Le Bonheur Children’s Hospital Foundation.
The investor group filed a federal lawsuit last week in federal court in Texas. Court documents purport to show almost 40 separate payments made to the defendants spread over 35 months, with multiple payments in some months.
The grant-giving was one part of a larger strategy. Stanford’s founder, a former Texas billionaire with a fondness for cricket, put a premium on the image portrayed by his company and its executives.
Stanford paid top dollar for office spaces and financial advisers and was liberal in its donations to community causes.
“The Stanford Investors Committee has identified hundreds of millions of dollars belonging to Stanford’s depositor/creditors that were fraudulently transferred to third parties who are now subject by law to return those funds to the Stanford receivership for the benefit of Stanford’s victims,” reads a statement the investor group released last week.
“To the extent possible, the Stanford Investors Committee has attempted to resolve these fraudulent transfer claims amicably and without the need for legal action. However, as in other recent high-profile Ponzi scheme cases, like Madoff, not all recipients of fraudulent transfers have responded to this approach, and litigation has become necessary in order for the stolen funds to be returned to the victims.”
A spokeswoman for ALSAC/St. Jude said the hospital shouldn’t be drawn into the legal battle.
“St. Jude received charitable donations and sponsorship fees in good faith directly from Stanford Financial Group,” said Emily Callahan, chief marketing officer, ALSAC/St. Jude, in a prepared statement. “The funds were spent immediately on our mission of saving kids’ lives in the U.S. and around the world and finding cures for catastrophic diseases in children.
“While our hearts go out to those impacted by the Stanford investment issues, it would hurt our charitable mission to have to return the money already spent directly on clinical care and support for children suffering from cancer and other deadly diseases, including bone marrow transplants, chemotherapy treatments, on education and training of doctors and nurses who help kids worldwide, and on groundbreaking research. We remain committed to focusing every minute on our lifesaving mission of finding cures and saving children.”
The hospital entities were far from the only ones that benefited from Stanford’s largesse. Before federal officials shut down Stanford in 2009, the company that once had an office in the East Memphis Crescent Center was a generous benefactor of several causes in Memphis.
The formerly Houston-based company was a corporate sponsor of the National Civil Rights Museum and a contributor to the Greater Memphis Arts Council, the Boys & Girls Clubs of Greater Memphis and the Ave Maria Foundation of Memphis, according to a report from Stanford about its community investments. Stanford’s charitable foundation also was based in Memphis.
In 2005, Stanford Financial Group was the lead investor for an $11 million round of financing for the Memphis medical device manufacturer Luminetx.
Stanford provided financial support to St. Jude as its “corporate charity of choice,” according to the former Stanford in-house magazine.
Tony Thomas, son of St. Jude founder Danny Thomas, said in the magazine Stanford’s chairman “has been a blessing for us and for the children and patients of St. Jude.”
In the summer of 2008, Stanford was given ALSAC’s Michael F. Tamer award, which honors people who have shown a strong commitment to the Memphis hospital, according to St. Jude information.