A federal judge has approved a request to establish a claims process for victims of R. Allen Stanford's $7 billion Ponzi scheme, paving the way for victims to recoup some of their losses since Stanford's scheme was uncovered in February 2009. The court-appointed receiver, Ralph Janvey, had initially filed papers seeking to establish a claims process in late 2011. At that time, Janvey indicated that the Receivership currently had approximately $114.5 million in cash on hand, which would represent a fractional return to investors. While the establishment of a claims process is a significant step towards returning money to investors, it could still be months or even years before a first distribution could be sent out.
With the ruling of United States District Judge David Godbey, victims must submit a completed Proof of Claim form by September 1, 2012. The Receivership established a website, www.stanfordfinancialclaims.com, which contains instructions pertaining to the process and provides a downloadable Proof of Claim form here. Victims who have already filed a claim in connection with the Antiguan liquidation proceeding must still file a Proof of Claim to preserve their right to any return of funds recovered by the U.S. Receivership.
A review of the Proof of Claim form suggests that the Receivership's financial records relating to the scheme may be incomplete or lacking. For example, investors are asked to detail each deposit they made with Stanford, along with any withdrawal they made before the scheme was uncovered. This information is required to calculate an investor's "net investment amount" that is in turn used to determine an investor's allowed claim. In other schemes where this information is available to the Receiver, investors have often been given the Receiver's determination of their "net investment amount" in the initial proof of claim form and then asked whether the investor is in agreement with that calculation. If so, additional information is usually unneeded. However, if an investor disagrees with the Receiver's calculation, documentation supporting the investor's figure is then requested.
While the Receiver may simply be seeking verification of already-calculated figures, this could also suggest that records of investor contributions/withdrawals may be incomplete or lacking. Moreover, investors are required to submit documentation supporting their claim calculation, or provide an explanation for its absence. Inevitably, some investors may not have kept meticulous records of their investment activity, which could complicate the process to calculate the claim amount.
Investors expecting to see a distribution check soon could be disappointed. The time between the close of the claims process and the issuance of distribution checks could be lengthy, especially considering that Janvey and his team will be combing through large amounts of supporting documentation. Additionally, many investors will be asked to address discrepancies or omissions in their initial proof of claim form, which can take time. Once all claims are received, the Receiver must then make determinations whether to allow or deny each claim. Following this, the Receiver must obtain court approval of his determinations, and an objection period is typical to allow investors with a denied claim an opportunity to contest that determination. Finally, the Receiver will seek court approval to make a first distribution. In short, a distribution in 2012 seems unlikely.
The website established for investors to file a claim is here. Investors may file their Proof of Claim electronically on the website, or submit their completed Proof of Claim form by mail, fax, or email.
The Proof of Claim Form is available here.