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Thursday, October 13, 2011

As Stanford Victims Grumble, Court Approves Receiver's Latest Fee Request

by Julie Triedman

On Tuesday, the Dallas federal district court judge overseeing the receivership of alleged Ponzi schemer R. Allen Stanford's collapsed financial empire of approved the latest $1 million in legal fees requested by receiver Ralph Janvey and the outside law firms advising him.

But while Janvey and his team keep drawing regular paychecks in connection with their recovery efforts on behalf of Stanford investors, as The American Lawyer reports in its October issue, much about the proceedings and Janvey's future role in them remains uncertain.

Federal district court Judge David Godbey is expected to rule soon on a July motion to intervene filed by a group of disgruntled Stanford investors who claim their interests are not being adequately represented by the committee appointed by Janvey to fill that role.

Those moving to intervene accuse the lawyers serving as members of the committee of "double dipping" in the estate because they were paid retainers up front by individual victims and are also eligible under their contracts with the receiver to collect large contingency fees based on what they recover.

Since early this year, Janvey has tapped the committee to take over a number of fraudulent conveyance claims he and his team originally developed, removing the day-to-day expense of litigating those claims. Janvey told the judge in court filings this past summer that he did so as a cost-saving measure.

Janvey's recovery efforts in the case continue to move slowly. To date, of the estimated $7.2 billion lost via Stanford's alleged scheme, the receiver's legal team has recovered just over $146 million. (Another $63 million was sitting in Stanford accounts the day Janvey was appointed.)

Much of the total recovery has already been spent on a combination of legal and professional fees ($50 million) and expenses ($50 million). A majority of the legal fees have gone to one firm, Baker Botts, where Austin-based litigation partner Kevin Sadler is heading up the firm's efforts.

U.S. investors who bought bogus certificates of deposit via the Stanford brokerage entity—a group that includes only a fraction of the 20,000-plus investors harmed by Stanford's alleged worldwide scam—are also waiting impatiently on a forthcoming decision by the Securities Investor Protection Corporation on whether they are entitled to relief for their losses.

SIPC officials said in June that the agency expected to issue its decision in the matter by mid-September. On September 16, however, SIPC Chairman Orlan Johnson announced that the agency's board was delaying a decision pending further review "of the many and complex issues in the Stanford case." Johnson, who is also the co-chair of Saul Ewing's securities transactions and regulations practice group, did not respond to a request for comment.

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