Stanford Bank Clients Can't Get Cash,Close Accounts, Receiver Says

Stanford Clients Can’t Get Cash, Close Accounts, Receiver Says
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By Erik Larson

Feb. 21 (Bloomberg) -- Customers of Stanford Financial Group Co.’s brokerage and advisory units were told by a court- appointed receiver overseeing as much as $50 billion in assets that they can’t take out cash or close accounts.

The customers are limited to selling securities through Stanford’s Houston headquarters until the company’s assets are accounted for, according to a statement issued yesterday on a new Web site set up by the receiver, Ralph Janvey.

“For the foreseeable future, customers cannot use their accounts to make payments because transfers out of these accounts are frozen until the receiver is able to verify there are no legal or equitable claims against those accounts,” Janvey said in the statement.

Janvey, a Dallas securities lawyer, was appointed receiver by a judge on Feb. 17, the same day U.S. regulators sued Houston billionaire R. Allen Stanford and three of his companies for allegedly running an $8 billion fraud through Antigua-based Stanford International Bank.

Janvey sent most of Stanford’s employees home and directed recipients of political contributions to return the donations, according to the statement. He also barred Stanford companies from selling certificates of deposit and directed its cash and securities be held by independent, third-party brokers.

In the statement, Janvey said he has hired outside lawyers, broker-dealer experts and experts in forensic accounting and electronic records to help him systematically gain control of Stanford’s assets.

$50 Billion

Janvey is overseeing assets under Stanford management that could be as high as $50 billion, according to the SEC complaint. The alleged fraud is limited to $8 billion of CDs issued by the Antigua-based bank.

Janvey, who is physically securing Stanford’s headquarters and other control centers, said he will eventually file with the court a list of Stanford’s assets, a list of all claims against those assets and a proposal for how to distribute the assets to creditors.

The receiver said he seeks to limit interruptions to day- to-day operations during the process and that “some operations will continue as the receiver identifies and values assets and claims against those assets.”

The Antigua-based bank, with 30,000 clients in 131 countries, was named in the lawsuit with Houston-based broker- dealer Stanford Group Co. and investment adviser Stanford Capital Management. The civil lawsuit also names chief financial officer James M. Davis and chief investment officer Laura Pendergest-Holt.

FBI agents found Stanford Feb. 19 in the Fredericksburg, Virginia, area and served him with an SEC subpoena. No criminal charges have been filed against the 58-year-old billionaire. His whereabouts were unknown after the lawsuit was filed, prompting rumors he may have fled the country.

Janvey didn’t return calls or e-mails seeking comment.

The case is Securities and Exchange Commission v. Stanford International Bank Ltd., 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net.

Last Updated: February 21, 2009 00:01 EST