- Texas man arrested for powder-letter hoax
- Islamic State opens ‘marriage bureau’ for single jihadists
- Drone almost blocks California firefighting planes
- Tornado rips off roofs, downs trees near Boston
- GOP: Environmental rules keeping agents from accessing border
- John Kerry: Millions displaced by religious fighting in 2013
- Federal appeals court rules against Virginia’s gay marriage ban
- White House says Russia ‘losing’ war in Ukraine
- Hamas turns to North Korea for weapons deal, Iran for money
- Syrian casualties surge as jihadis consolidate
Ballplayers to keep Stanford scheme funds
Question of the Day
Seven current and former major league baseball players, along with hundreds of other investors, can keep the millions of dollars they put into R. Allen Stanford’s purported $7 billion Ponzi scheme, a federal appeals court has ruled.
The decision by the 5th U.S. Circuit Court of Appeals undercuts a central strategy of the lawyer appointed to take control of Mr. Stanford’s assets, and one lawyer says it may set a precedent for how money can be recovered in future scams.
The court’s ruling came in response to receiver Ralph Janvey’s efforts to seize the money hundreds of people made investing with Mr. Stanford and distribute thecash among the thousands of victims of the alleged scam. Mr. Janvey sought the initial investments that the innocent investors made with Mr. Stanford, as well as the interest they received.
In the cases of the baseball players, that meant Mr. Janvey sought $9.5 million, of which $9.2 million was the money initially put up by the players on the assumption that Mr. Stanford ran legitimate businesses.
The effort by Mr. Janvey — which several lawyers have called “unprecedented” because it sought both principal and profit — made national headlines after being reported in June by The Washington Times.
Last Friday, the appeals court ruled that Mr. Stanford’s investment business may have been phony, but the written agreements between him and his investors related to the accounts were real. That means the investors legitimately owned the money in their accounts, both the initial principal and the interest earned, and it can’t legally be taken from them.
The appeals court lifted a lower court order freezing the investors’ money.
“I think the 5th Circuit has set some clear boundaries for equity receivers going forward that could avoid costly litigation over novel legal issues,” said lawyer Gene Besen, who represents all seven baseball players involved in the case.
The legal rationale given by Mr. Janvey was that since the last round of people in a Ponzi scheme are left holding the bag for all the losses, the fairest thing to do would be to put all the money involved from everybody into a single pool and then divide that amount out according to how much people put in.
The players involved are likely future Hall of Fame pitcher Greg Maddux; retired New York Yankees slugger Bernie Williams; Yankees outfielder Johnny Damon; Boston Red Sox outfielder J.D. Drew; Tampa Bay Rays first baseman Carlos Pena; Jay Bell, a shortstop who played for several teams before retiring in 2003; and Andruw Jones, a free-agent outfielder who played for the Texas Rangers in 2009.
Jacob S. Frenkel, a former federal prosecutor and enforcement lawyer for the Securities and Exchange Commission, said the decision could set precedent because there is relatively little case law related to the role of receivers in frauds like those that prosecutors say occurred in the Stanford case.
“There isn’t much case law or common-sense analysis necessary to apply to reach this decision,” he said. “For investors in fear of the mighty ‘clawback,’ this is good law.”
In praising the court’s decision, Mr. Frenkel was harshly critical of Mr. Janvey, who did not return phone or e-mail messages seeking comment.
“It’s widely recognized that the receiver in the Stanford case was out of control,” he said. “If there were a movie titled ‘Receivers Out of Control,’ Ralph Janvey would get the starring role.”
William Prickett, a lawyer who specializes in securities and financial litigation and represents victims of convicted scammer Bernard Madoff’s Ponzi scheme, agreed with Mr. Frenkel that the appeals court decision was not a surprise.
About the Author
Ben Conery is a member of the investigative team covering the Supreme Court and legal affairs. Prior to coming to The Washington Times in 2008, Mr. Conery covered criminal justice and legal affairs for daily newspapers in Connecticut and Massachusetts. He was a 2006 recipient of the New England Newspaper Association’s Publick Occurrences Award for a series of articles about ...
TWT Video Picks
By Scott Pinsker
- D.C. seeks to stay judge's order allowing gun owners to carry in public
- Illegal immigrants demand representation in White House meetings
- Hillary Clinton: Forget Obama, George W. Bush made her 'proud to be an American'
- Babson College, BYU win top spots in Money magazine's college rankings
- Iraqi Christians rally at White House: 'Obama, Obama, where are you?'
- White House defends Kerry failure to broker Middle East cease-fire
- Romney would win popular vote in rematch against Obama: CNN poll
- D.C. seeks stay in order striking down ban on handguns in public
- Tennessee Gov. Haslam slams White House for secret dump of illegals in his state
- Computer glitch caused odd Saturday release of D.C. guns ruling
Obama's biggest White House 'fails'
Celebrities turned politicians
Athletes turned actors
20 gadgets that changed the world
Fighting in Iraq