19th JDC Judge Don Johnson.
In today’s Sound Off Louisiana feature, founder Robert Burns provides an overview of the Contradictory Hearing on the Stanford victims’ Motion for New Trial which was argued before 19th JDC Judge Don Johnson on Tuesday, October 22, 2024:
10/26/24: Burns provides an overview of the 10/22/24 Contradictory Hearing on Plaintiffs’ Motion for New Trial entailing the victims of Robert Allen Stanford’s Ponzi Scheme.
As stated in the video, attorney Phil Preis uses as his basis for Plaintiffs’ Motion for New Trial LA CCP Art. 1972, for which he asserts a judge has no discretion, and also LA CCP Art. 1973, for which a judge does have discretion.
In the video above, Burns references this October 7, 2024 New York Times article which indicates that the receiver for the Stanford Trust, Ralph Janvey, has been disseminating out payments to victims which have arisen from the $1.6 billion in settlements reached with banks, to include a $1.2 billion settlement by TD Bank.
The article references quotes both from Angela Alexander, to whom Burns apologized in the video above for this inadvertent case of mistaken identity.
As Burns indicates in the video, the actual person who confronted Burns outside of 19th JDC was, in reality, Ms. Jean Anne Mayhall. Burns, in the video above, indicated that it’s his desire to, “give credit where credit is due,” regarding Mayhall’s less-than-flattering characterization of Burns as she made known to him in the immediate aftermath of the jury’s verdict.
Both Alexander and Mayhall are quoted in the above-linked New York Times article, so let’s take a quick look at a few highlights from the article:
It has been 15 years since Thomas Swingle first learned that about $1 million of his family’s savings had gone up in smoke, after the financier Robert Allen Stanford was exposed for having sold billions in fraudulent certificates of deposit to investors around the world.
The memory of those days is still painful.
“It was literally a life-changing event,” Mr. Swingle, 72, said of the $7 billion scheme, which unraveled in early 2009. “It is like someone hit you in the chest with a sledgehammer.”
Now, victims of Mr. Stanford’s company, Stanford Financial, are on the verge of recouping some of their losses, but Mr. Swingle and his wife, Cindy Finch, have to contend with another decision they made: In 2021, they agreed to sell their claim to any future settlement to an investment fund for around $60,000.
When Mr. Swingle and Ms. Finch sold their claim, he said, it appeared Stanford’s defrauded customers were unlikely to get anything back at all. Had the couple held on to the rights, they might be able to claim as much as $350,000.
“It didn’t turn out good for us,” Mr. Swingle said, “but you got to move on.”
Now, the securities lawyer appointed to serve as a receiver in the case, Ralph S. Janvey, is starting to make big payments. He has already paid about $609 million to the firm’s former customers, and he has about $157 million more to dole out in addition to the $1.2 billion. That’s far from the total claims of about $4.9 billion, owed to more than 20,000 customers around the world, but it is more than victims like Mr. Swingle ever thought would be available.
At least $700 million in claims have been sold to hedge funds and other investors in distressed assets, according to Baker Botts, the law firm that Mr. Janvey retained to help recover money for customers.
Jean Anne Mayhall, 72, is also a Stanford victim. She said her mother, who has since died, sold her claim because she was tired of waiting. She said the lawsuits against the banks dragged on for so long that many customers simply gave up.
Ms. Mayhall, who lives in a small town near New Orleans, held on to her $500,000 claim, but she knows of more than a dozen victims who died waiting to get any money back.
Ms. Mayhall said she did not begrudge the hedge funds that bought claims. “They didn’t twist anyone’s arm,” she said.
Angela Shaw Alexander, 52, a victim in the Stanford case who has lobbied over the years for the firm’s customers, said the fees were excessive given how long it had taken for investors to get back their money.
Mr. Janvey said that he felt bad for the victims, but that the fraud was extensive and required years of costly litigation to recoup money for customers.
He said federal authorities believed he would be able to recover at least $2 billion in assets from the bank in Antigua. But he and his team recovered just $63 million in cash and some real estate, planes and private equity investments to sell.
“I have been a receiver before, and there is nothing like Stanford,” Mr. Janvey said. “I understand all the frustration. I didn’t think it would take this long.”
Now let’s take a look at some of the highlights from the Memorandum in Opposition to New Trial filed by Defendant OFI:
Not one person testified that OFI failed to perform its regulatory duty, or that OFI did anything wrong. In fact, the evidence unequivocally demonstrated that (1) OFI did not sell, and could not stop the sale of, the SIB CDs; (2) OFI had no control over the investment decisions of individual investors; and (3) OFI went above and beyond its regulatory duties when it became aware, for the first time in June 2008, that a Ponzi scheme may exist.
For the remainder of trial, the jury heard exclusively from OFI witnesses all of whom offered uncontroverted testimony that the OFI was not responsible for Plaintiffs losses. Despite having more than fifteen (15) years to prepare their case, Plaintiffs offered no witnesses (fact or expert) to support their claims either in their case in chief or on rebuttal. In the more than fifteen (15) years that the case was pending, Plaintiffs failed to present a single witness that asserted OFI engaged in reckless conduct and upon the trial of the matter could not locate one person able to so testify.
Importantly, Allen testified that it is outside the scope of the trust examination for an examiner to advise an investor as to the risks or benefits of an investment. As such, it was not Allen’s role to offer Plaintiffs any information regarding their purchase of the SIB CDs.
Conversely, when an account is nondiscretionary, the trust company acts merely as a custodian, (i.e., a safe deposit box) holding the assets that are selected by the investor themselves. They have no authority to purchase assets on the investors’ behalf. OFI does not question, and, more importantly, does not have authority to question, the validity or soundness of the investments made. No witness testified otherwise.
Mr. Seymour explained that this was a concern for the “going concern” viability of the trust company, not a concern that it was engaged in suspicious behavior or that the SIB CDs were fraudulently or improperly valued. No witness testified otherwise.
As Mr. Seymour pointed out, there was no responsibility on the part of OFI to ensure creditworthiness of assets held in nondiscretionary accounts.
Because the matter was the subject of a criminal investigation by the United States Department of Justice and Federal Bureau of Investigation, as well as continuing investigation by the SEC, OFI was asked to hold off on taking any regulatory action that might alert the Stanford conspirators that there was a suspicion the SIB CDs were part of a fraud scheme. In light of this request, and given that the Texas State Securities Board (the direct regulator of the brokers who marketed the SIB CDs) stated it was going to stand down, and given that the Louisiana Attorney General’s office recommended OFI stand down and leave the securities investigation to the federal government, and given that OFI did not have the resources to complete a securities fraud investigation of an offshore bank any quicker than the United States Government (whose investigation was, OFI was informed, very far advanced), OFI agreed not to initiate a separate securities fraud investigation. This action was consistent with OFI’s statutory authorization and consistent with similar deference given the SEC and federal authorities in prior cases, and moreover was consistent with the custom of state regulators dealing with interstate fraud schemes already being addressed by the SEC. No witness testified otherwise.
And, as the testimony demonstrated, the SIB CDs were inherently a risky investment. They were issued by an offshore bank not subject to domestic regulation or requirements, were not insured by the FDIC, and somehow routinely outperformed United States’ returns. Moreover, each investor, before purchasing, had to attest to being “accredited” (i.e., a sophisticated investor who understood the risks with significant asset wealth and/or a very high cash flow). These were exactly the types of investments individuals can make that regulated banks cannot. No witness testified otherwise.
Ms. Van Tassel used particularly strong language to describe the Stanford entities behavior in executing the Ponzi scheme: “cover up,” “inappropriately report,” “fake financial conditions,” and “hide”. This testimony emphasized the point that the Stanford entities and cohorts went to great lengths to cover up their wrongdoing. This included taking extensive measures to hide the fraudulent scheme from regulators, including the SEC and OFI. Thus, even if OFI had the authority to regulate the SIB CDs, discovering the fraud would have been extremely difficult, if not impossible. No witness testified otherwise.
Lastly, the jury heard from Joseph Borg, who has 28 years of experience in the securities industry. Mr. Borg summarized the entire case in just one sentence: OFI was not responsible for Plaintiffs’ losses.
First, he pointed out that states cannot regulate foreign nations; i.e., Antigua. OFI was thus powerless to regulate or control SIB. He emphasized prior witness testimony that OFI did not have the authority to bar the sale of the CDs either. No witness testified otherwise.
Moreover, because the SIB CDs were issued under federal law, OFI-Securities role as a “gatekeeper” was removed; OFI had no right to review and rule on the registration and sale of these securities. Mr. Borg’s testimony echoed that of Mr. Riviere, stating OFI-Securities still maintained the right to investigate, but it needed to have a suspicion of fraud in order to begin an investigation. Yet, once again, there was no reason to suspect fraud until the June 5, 2008, meeting. No witness testified otherwise.
In the face of OFI’s overwhelming evidence, Plaintiffs could offer no evidence to refute what the jury heard and saw over the course of three weeks. Plaintiffs had fifteen years to gather evidence and find witnesses to speak to OFI’s alleged misconduct. They failed. The only evidence Plaintiffs can point to in support of their motion for new trial is counsel’s unilateral and self serving interpretation of OFI documents, in direct contravention to witness testimony. Somehow, Plaintiffs claim that counsel’s own interpretation, which is unsupported by any evidence or testimony, and which was never presented to the Court in any motion for summary judgment seeking an interpretation as a matter of law, can somehow supersede the actual witness testimony on point. No precept of law, fact, or reason supports such an unprecedented assertion.
Plaintiffs offer nothing more than baseless accusations of “self-serving testimony,” and question the integrity of witnesses who worked at OFI for the majority of their careers.
In short, there is zero evidence to support Plaintiffs’ claims in this case. Plaintiffs’ entire case hinged on counsel testifying, in the form of questions, during examination of OFI’s witnesses. This is not evidence. Counsel’s unsupported interpretation of documents is not evidence. The jury weighed all evidence appropriately and came to the correct conclusion that OFI did not act recklessly.
Plaintiffs’ request for a new trial cites to no new evidence or argument that was not presented at trial. Rather, Plaintiffs’ request is based solely on their own fabricated interpretation of evidence and their own determination of what weight should be awarded to the evidence. Such a request for new trial is without merit, as the jury’s decision is supported both by the record and by the law.
All evidence on this standard of care came from OFI witnesses, who testified uniformly that OFI complied with that standard of care in all respects. In the absence of controverting evidence, the jury accepted this testimony, finding that while OFI had a duty to properly execute its regulatory authority, it did not breach that duty in its regulation of STC or the SIB CDs.
Moreover, Plaintiffs’ post-trial calumny is nothing more than an attempt to make up for their complete inability to impeach and controvert the testimony given by OFI witnesses’ at trial. The very testimony that they now seek to impugn is the very testimony they chose, due to their inability to marshal any contrary evidence, to make their case. The fact that the jury actually listened to what these witnesses said, rather than the amateurish sniping at these witnesses conducted by Plaintiffs’ counsel at trial (and now in post-trial motion practice), is not basis for a new trial. Stated another way, the fact that the jury actually listened to the evidence, and disregarded the factually and legally baseless argument of Plaintiffs’ counsel, merely underscores that the jury did the job the Court instructed it to do.
Finally, as indicated on the video, here are links for prior Stanford features we’ve published:
1. First two days of Stanford OFI trial highlighted with prospective juror indicating his occupation as “illegal drug dealer.” [Note: This feature was also combined with coverage of former LSP Lt. John Stelly’s reverse discrimination lawsuit against LSP].
9. Jury finds Office of Financial Institutions not civilly liable to Stanford victims by vote of 11-1.
10. Stanford victims’ attorney Preis blaming jury for trial’s outcome is downright despicable.
13. Stanford victims’ attorney Preis follows through on filing Motion for New Trial.
In our view, it would be nothing short of an outrageous act for Judge Johnson to grant Preis’ Motion for a New Trial, but we learned a long time ago that anything can happen in a court proceeding; furthermore, in our view, the fact that this matter even made it all the way to a full-blown jury trial in the first place is living proof of that fact.
We’ll update the Stanford matter once any further developments unfold.