Mexican Exposure to Stanford Financial Fraud Estimated at $1.4 Billion; Mexican Investors File Lawsuits Against Stanford in Dallas, Houston

Author: John Dorsey

Mexican investors are estimated to have held approximately US$1.4 billion of certificates of deposit and other supposed investments in the alleged US$8 billion fraud at Stanford Financial Group Co., according to David Cibrian, a partner at Strasburger & Price, LLP (”Strasburger“) who is representing numerous Mexican investors in their claims against Stanford Financial Group and its affiliates, including Antigua-based Stanford International Bank (collectively, “Stanford“).

On February 17, 2009, the U.S. Securities and Exchange Commission (the “SEC“) filed a lawsuit against Stanford in the U.S. District Court for the Northern District of Texas (the “Dallas Court“) accusing Stanford of running a multibillion-dollar fraud. The Dallas Court has frozen Stanford’s worldwide assets and appointed Ralph Janvey (”Janvey“) as a receiver to act on behalf of investors in recovering assets from Stanford. Certain Stanford investors filed separate lawsuits against Stanford in the U.S. District Court for the Southern District of Texas (the ”Houston Court“).

On March 16, 2009, Janvey and the SEC filed a motion with the Dallas Court opposing the requests of investors to join the SEC’s action against Stanford in the Dallas Court. They also asked the Dallas Court to reject the request of Stanford investors for appointment of an examiner to oversee Janvey’s work and to bar Stanford creditors from filing liens against its assets until Janvey had filed a plan to accomodate all claims against Stanford’s estate. The Dallas Court has not yet ruled on the motion.

Cibrian said that Strasburger would work to support the efforts of Janvey as he pursues claims against Stanford in the Dallas Court, which the judge has ordered be the exclusive forum for claims against Stanford. He said that investors who filed lawsuits against Stanford in the Houston Court or other courts will probably need to transfer or remove them to the Dallas Court before they can proceed, although Janvey is now trying to prohibit interventions in the SEC action due to the enormous distraction it would create.

Cibrian, who was one of the lead attorneys among those who pursued claims of Mexican and other investors in a similar investment fraud action by the SEC against InverWorld, Inc. and its affiliates said that “although the investment amounts inthe Stanford case are larger than in Inverworld, the legal concepts will be equally complex. The Stanford matter will take a long time to resolve and the receiver needs to be aided, not distracted, by law firms advising their clients.”

Bloomberg has reported that Janvey has obtained approval from the Dallas Court to release US$4.6 billion from about 28,000 frozen brokerage accounts to Stanford customers and that about 62 percent of Stanford brokerage customers seeking to join the SEC’s case had been given access to their money. The report also said that Janvey was working on a plan that would allow Stanford customers whose accounts are frozen to submit online applications to request their money. However, if a customer’s account contained fraudulent proceeds, the account would not be unfrozen and the customers would have the option of participating in non-binding mediation or appealing their claims directly to the judge.