Receiver in Stanford case under fire for high rates defends request for $27 million in fees

Receiver in Stanford case defends $27M fee request

DALLAS — The lawyer trying to unravel what the government calls a multibillion-dollar Ponzi scheme run by Texas businessman R. Allen Stanford fired back at critics who said his request for $27 million in fees is excessive.

Court-appointed receiver Ralph Janvey escalated the rhetoric in his unusual public battle over attorney fees with the Securities and Exchange Commission in court papers filed Tuesday evening.

Janvey’s attorneys argue that the fees are necessary because the Stanford case is far-flung and complex, “yet those who oppose payment to the Receiver claim to be shocked that a big clean up produces a big bill.”

Janvey also referred to the SEC criticisms as “shrill objections” and suggested the agency either pays “very limited attention to what the Receiver does on a day to day basis, or they have a limited understanding of what a Receiver must do when faced with a task as daunting as gaining control of the Stanford entities and their assets.”

The SEC has accused Stanford and top company officials of running a $7 billion scheme by promising inflated returns to more than 20,000 investors on certificates of deposit at his bank in Antigua. Instead of investing the money, Stanford, who faces additional criminal charges in Houston, paid off old investors with deposits from new investors, according to the government. Stanford denies the allegations.

Just about every stakeholder in the case has weighed in against Janvey’s $27 million bill, which would cover fees and expenses through the end of May for himself and the lawyers and consultants he hired to take over Stanford’s business empire and track down the missing billions. The SEC, Stanford, officials in Antigua and the court-appointed examiner who represents jilted investors have all filed motions opposing Janvey’s fees.

Judge David C. Godbey has indicated he will rule on the issue Sept. 10 at a hearing in federal court in Dallas.

The SEC’s opposition is considered unusual by securities experts. The agency recommended Janvey’s appointment, and receivers typically enjoy cooperative relationships with the SEC.

The SEC did not immediately respond to messages left Wednesday by The Associated Press.

Janvey, who was tasked with what he called “the wind down of the Stanford fraud empire,” said the job cannot be accomplished on the cheap. He called the work “incredibly challenging” and requiring the use of a “large, highly skilled and experienced team.”

Janvey hired more than 100 lawyers and consultants to work the case. He requested nearly $800,000 in fees and expenses for his law firm. The bill also covers nearly $8.9 million in fees and expenses for the advisory firm FTI Consulting, and about $8.4 million for the law firm Baker Botts. The firms have worked on the case for more than six months without pay.

The fee request represents 34 percent of the $81.1 million of cash on hand the receiver has under his control in a bank account, according to court records. His paycheck would come from that pot of money, which will also be divided among Stanford’s allegedly defrauded investors.

Janvey argued that he actually has gained control of $112 million but had to spend more than $31 million on costs associated with winding down Stanford’s businesses.

In addition to the civil case in Dallas, Stanford and four executives of his now defunct Stanford Financial Group are accused of orchestrating the massive Ponzi scheme in a criminal indictment in Houston. Investigators said Stanford secretly diverted more than $1.6 billion in investor funds as personal loans to himself.

Stanford and executives Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt pleaded not guilty to various criminal charges in Houston, including wire and mail fraud, in a 21-count indictment issued June 18. The three executives are free on bond while Stanford himself remains jailed in the Houston area.

James M. Davis, Stanford’s former chief financial officer, pleaded guilty in Houston federal court Thursday to three counts: conspiracy to commit mail, wire and securities fraud; mail fraud; and conspiracy to obstruct a Securities and Exchange Commission investigation. Davis struck a deal with the Justice Department in exchange for a possible reduced sentence.