International Law

Stanford Receiver Busy

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As reported by Tom Fowler, in the Houston Chronicle, the receiver in the Stanford ponzi scheme has been busy.

"A federal judge approved a motion by Stanford Financial Group's court-appointed receiver to set aside a $10 million fund for future expenses.

U.S. District Judge David Godbey approved the shift of the funds currently held in an account with clearing bank Pershing to a Stanford account controlled by the receiver, Dallas attorney Ralph Janvey.

The funds can be used to reimburse expenses of the receiver and the firms working for it. They still have to submit invoices for the judge to approve before withdrawing any of the funds.

"Payments of fees and expenses to me and my team will be submitted to the court for its review and approval, and payments may be made only from assets of the receivership estate," Janvey said in an e-mail interview with the Chronicle last week.

"This is a complicated case and the total expenses will be large, as they would be in any case of this size and nature."

As a clearing firm, Pershing executed securities transactions for Stanford customers and had custody of their brokerage accounts.

Under the terms of the original Stanford-Pershing agreement, the $10? million was set aside for Pershing to draw from if Stanford failed to meet its obligations.

Under the order Pershing retains the right to receive payment if Stanford owes Pershing money."

There really is no serious oversight or review of the law firm and receiver's bills to the estate.

I haven't reviewed the receiver's billing in this case, but in other cases I have looked at, for example the Kirk Wright case, I was concerned that adversarial legal system only works with two engaged opponents.

In the receivership, there is no one effectively reviewing the receiver's fees who stands in an adversarial relationship with the receiver.  This can only lead to wasted fees, going from the creditors of the estate to the receiver and law firms managing the file.

Full post as published by Misleading Advertising Law on March 27, 2009 (boomark / email).