Nearly three years after the Securities and Exchange Commission filed an emergency enforcement action accusing R. Allen Stanford of masterminding the second-largest Ponzi scheme in history, the Receiver appointed to recover assets for victims has proposed a distribution plan that envisions an initial payout of approximately 1% of victims' approved losses. Ralph Janvey, the court-appointed receiver, filed his Motion for Approval of Interim Distribution Plan (the "Motion") last week, seeking court approval for an initial $55 million payment to victims on a pro rata basis. Based on total claims received thus far of of $5.13 billion, the proposed payout would amount to an initial distribution of approximately 1% of each investor's loss.
In November 2011, Janvey began the process of returning money to victims by seeking court approval of a proposed claims process. While the motion did not elaborate on victims' expected return, a status report filed by Janvey indicated that the Receivership had over $100 million on hand and estimated future asset recoveries could exceed $1 billion. The court approved the proposed claims process in May 2012, and established September 1, 2012 as the deadline by which victims had to submit proof of claim forms detailing their losses.
Janvey and his team received a total of 30,289 claims. Of that amount, nearly one-third were determined to be duplicative, and nearly 400 were submitted past the deadline and thus not eligible for consideration. Of the remaining 20,673 claims, 18,400 came from investors in Stanford's CD's, while the other 2,273 claims represented non-investor claims. Approximately 17,000 investor claims have been approved for a total aggregate claim amount of $4.237 billion, while nearly 1,000 claims remain unresolved due to outstanding requests by Janvey for further documentation or information. In total, investor losses were estimated at $5,131,224,932.65.
Under the proposed plan, the first distribution would go out within 90 days after court approval. Only CD investors would be eligible to receive a distribution, with other claimants such as secured and general creditors precluded from participating. However, before any payments would be sent out, the Receiver is proposing that victims first complete and return a certification as to whether they have applied for or received any compensation for their losses from any sources other than the Receivership. If so, the Receiver intends to reduce payments to those investors to the extent those recoveries exceed any proposed distribution(s). As those certifications are returned, the Receiver proposes to make rolling distributions.
Since its inception, the Stanford receivership has been tasked with the difficult job of sorting through Stanford's international fraud, which included disagreements with foreign regulators concerning jurisdiction over tainted assets, disputes with various creditor groups, and even an investigation by the SEC over Janvey's fees. Janvey also filed over $200 million in clawback lawsuits seeking false profits from those investors fortunate enough to benefit from their investment.
A copy of the Motion is here.