The US Securities and Exchange Commission has come out swinging against Sir Allen in its latest court filing, in which the regulator strongly objected to the billionaire’s request that a US court unlock $10m in frozen assets.
Sir Allen wants the assets unfrozen so he can pay his high-powered defense team, which includes Dick DeGuerin, the Houston-based criminal lawyer who brainstormed Sir Allen’s recent showboat of an attempt to turn himself over to the authorities.
DeGuerin told FT Alphaville the rationale behind the move was simple:
I want to demonstrate clearly that he’s not a flight risk, that he intends to stand and fight.
Meanwhile, the SEC’s lawyers were busily compiling a 10-page rebuttal of Sir Allen’s request, which they released on Sunday night.
Here are some of the choicer extracts from the filing (emphasis FT Alphaville’s):
On April 20, 2009, the day after Stanford moved to modify the Preliminary Injunction, Stanford filed a Notice of Appeal. Stanford is appealing to the Fifth Circuit (1) the Order Appointing Receiver; (2) the Order of Preliminary Injunction against him; and (3) any other orders collateral to adjudicate the appeal. Stanford is contemporaneously requesting the district court to modify the Preliminary Injunction to permit him access to $10 million of “his frozen funds” for legal fees and expenses.
Stanford’s Notice of Appeal concerns – without limitation – the entry of the Preliminary Injunction and “any other orders collateral to and necessary to adjudicate [the] appeal.” His motion, however, seeks to modify the very order that he has taken up on appeal. Stanford can’t have it both ways.
Stanford is not entitled to use his ill-gotten gains to pay for his defense
In his motion, Stanford seeks $10 million of “his frozen funds” to pay his lawyers’ fees and expenses. Stanford, however, makes no showing – or argument — that he has sufficient assets to satisfy a disgorgement order in this case, and makes no showing that he has $10 million available to fund his defense. Further, Stanford makes no argument explaining how the release of funds to cover his legal bills would benefit the victims of his scheme. Simply put, Stanford has not: (i) accounted for investor funds that he fraudulently obtained; (ii) accounted for his personal assets or the assets of his companies; or (iii) assisted the Receiver in any way to identify or preserve assets for the benefit of the receivership estate.
The filing concludes:
With the exception of the Madoff matter, Stanford’s fraud is unprecedented in terms of scope and duration. He has victimized thousands of investors who face extreme losses in the billions of dollars. Making matters worse, Stanford has not accounted for his assets, or company assets, or assisted the Receiver is marshaling assets for the benefit of the estate. Under these circumstances, the Court should deny his request for a wholesale release of $10 million of funds from the limited estate for his legal defense.
And in a testament to why one should always read the footnotes, there is this fascinating nugget (emphasis ours):
The Commission is investigating whether Stanford has violated the terms of the asset freeze after it was entered by writing a series of checks to the Bellagio Hotel & Casino in the aggregate amount of $258,480. All of these checks were dated February 19, 2009 (two days after entry of the asset freeze), signed by Stanford, and honored on or about February 24th or 25th.
John Little, the examiner appointed by the court to represent investors’ interests, also proffered a less than sympathetic response to Sir Allen’s request. In a filing on Sunday, Little said:
It will come as no surprise to the Court that the Investors do not look kindly upon Stanford’s request for access to $10m to fund his legal defense. On the merits, the Investors are adamantly opposed to the release of any funds to Stanford, for any purpose.
Sir Allen has repeatedly denied any wrongdoing, and there are no criminal charges against him.
