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Stanford victims 1 penny vs. U.S. Receiver $127.2 million in fees and expenses


March 3, 2014

Response from COVISAL to the US Receiver Open Letter dated February 14, 2014

Five years after Stanford’s fraud – Some Stanford victims receive 1 penny, US Receiver $127.2 million in Fees and Expenses

It is ironic that the US Receiver decided to send an Open Letter to all the families affected by the Stanford fraud on Valentine's day. Did he mean to write a message of love and hope after five years?  Unfortunately, the only love and hope we see is not coming from the Receiver. The reality is that injustice continues for the victims of Stanford’s fraud as the administration of the receivership continues to generate fees for themselves, their attorneys, and other professionals - the sole beneficiaries so far, charging millions of dollars in fees and expenses.

Mr. Janvey doesn’t know how the victims feel, because he is not in their shoes. Families are living off of charity from neighbors, people are ill and unable to pay for their medical treatments and medicine, lives are being lost because of an inability to pay for lifesaving operations - dreams shattered, and families destroyed. Mr. Janvey is getting paid a generous $400 per hour from the victims' stolen patrimony, and living a very comfortable life in Dallas. It is obvious that there is not a sense of urgency; his family is not in this predicament. The victims are strangers in a foreign land, far away; a fact that explains their indifference when entering the legal bubble they live in. The victims just become billable hours without the human factor to affect their consciences. Why rush to help families in need and desperation when you are guaranteed a paycheck as long as the process continues? 

So, far Mr. Janvey has “recovered” approximately $240.9 million for the period of February 17, 2009, through December 31, 2013. Of this amount, $63 million was available in cash at the time of his appointment, requiring no effort on his part. Adjusting that total amount, the actual recovery earned by Janvey is approximately $177.9 million. During the same period, he incurred professional fees and other expenses totaling $127.2 million for attorneys, accountants and consultants.  The cost-to-recovery ratio between the Actual Recoveries and the Receivership Expenditures is an incredible 71.5% (i.e. $0.72 was spent to recover $1.00).

Irving Picard, the trustee unwinding Bernard Madoff’s fraud has recovered more than $10 billion for victims. That is 59 percent of the $17 billion in principal lost by thousands of investors in Madoff’s investment advisory business.

One gets the impression that the money available from our stolen savings is simply petty cash for the attorneys and professionals managing the receivership. They are getting rich quick, and the victims are unable to pay for their living expenses and medical bills - many are living in poverty. After almost five years, Mr. Janvey announced the first distribution of $55 million dollars to the victims (which is equivalent to 1 penny on the dollar of restitution), and nearly a year after the announcement only half of the victims have received a check. A check that has been very difficult to cash because checks were issued to nonexistent trusts or multiple account holders. The administrator of the claims and distribution process, Gilardi & Co., has shown its lack of experience and inefficiency dealing with international victims, the majority from Venezuela and other countries in Latin America. It is extremely difficult to communicate with the claim administrators - emails and calls go unanswered. The majority of victims who received the certification forms have already sent them to Gilardi & Co., and yet the Receiver claims they are still waiting for more than 6,000 claimants. This distribution and claims process is slow and unresponsive as the receivership keeps billing the estate for its services.

Who are the real beneficiaries of the settlement agreement between the U.S. Receiver and the Joint Liquidators?

It seems like the pie money was divided for the benefit of the administrators and not the victims - administrators who know how to manipulate the system to make the process slow and cumbersome for the victims, and guarantee an income for themselves. An example of this is the Joint Liquidators recent decision to go after innocent families who withdrew money from the accounts rightfully and in good faith, asking them to return the money. These inconsiderate actions to emotionally and financially harm honest families and prolong the process go unpunished and are allowed by the legal system - a legal system that permitted the crime to occur in the first place, and has not taken any legal actions against those responsible, including the government of Antigua and government officials.

The receiver mentioned the release of $23 million of the victims' savings confiscated in Canada for a possible distribution to the victims. However, if the receivership's attorneys, professional fees and expenses are approximately $25.4 million a year, and they are taking almost a year to distribute any money to the victims, what will be left to distribute in the end?

The receiver also mentioned multiple lawsuits against hundreds of defendants who profited from or assisted in the Stanford fraud that seek to recover $680 million dollars in total. Is this all the money they are seeking to recover? What is the real picture for recovery?
Not only that, what honest and transparent legal entity is providing oversight of the liquidation’s and receivership’s affairs?  Where are the check and balances?

It is unacceptable that the Courts in the United States, to the detriment of Stanford’s victims, have allowed the US Receivership, named to prevent the waste and squandering of the creditors' patrimony, to continue prolonging the recovery of assets for so long – generating endless billable hours and expenses for the professionals managing the receivership.

The asset Forfeiture and Money-Laundering  Section of the US Department of Justice were supposed to participate in the oversight of the claim's process and the Distribution Plan, and to have a voice in the determination of the reasonableness of total asset recovery charges. This was designed to make sure that the costs of this process were reasonable in order to preserve the greatest amount of assets for the victims.

Why then is the Department of Justice silent on the subject of the recent illogical and illegal actions by the Joint Liquidators to collect money from innocent families that lost all of their savings?

We, at COViSAL, consider the Receivership’s class action accomplishments and the recollection of assets for the victims’ distribution fund very frustrating. The class actions are the only Avenue of real recovery for the modest small investors who do not have any money to hire attorneys to defend themselves individually. Why is the report so vague and unclear?
We request that the US Receiver, and the Official Stanford Investors Committee, show us the real picture of all the litigation claims brought to the Court. What is the actual potential amount of recovery of all the domestic litigation listed in their joint report? What law suits are moving forward and, which are not? What about any international litigation and the amounts they are seeking to recover?   
Because of these implications, the Stanford Case has become an example of the lack of ethics and morality exercised by the US government on the world stage, transcending the financial arena to a decidedly political one. For this reason, we are convinced that if this monstrous fraud, which operated with impunity for longer than a decade in and from the United States, is not resolved satisfactorily for all the victims, then the worldwide discredit of the United States in relation to securities' fraud will deepen, increasing the distrust that currently exists in its financial sector.

We exhort the Official Stanford Investors Committee, which represents all Stanford investors’ interests worldwide, to voice our cry and concerns expressed in this open letter to the Court and other authorities responsible for the Stanford Case.

We hope that the tears of the innocent families soften hardened hearts, and the devastated depositors are able to recover their losses without added setbacks - that our due process and other constitutional rights will be respected, and that Stanford’s accomplices, who run free enjoying life, are brought to justice for their involvement.

COVISAL hopes that the authorities responsible for the Stanford Case make their actions coincide with their principles and show the world their commitment to honesty, equality and justice.

We pray to God that the rights of the victims prevail over the judicial manipulations, and that conscience is the instrument to impart justice. May God bless the hearts of the thousands of innocent families - victims of a fraud that still continues!       

/s/ Jaime R. Escalona
Jaime R. Escalona
On behalf of Covisal
Coalición Víctimas de Stanford América Latina (COViSAL)          
Twitter: @COViSAL

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