A Georgia attorney contends the Securities and Exchange Commission did not properly represent him and other victims of convicted swindler Robert Allen Stanford in Louisiana and other states in a courtroom dispute over securities industry-funded insurance.
Richard R. Cheatham, of Atlanta, wants a federal judge in Washington, D.C., to suspend the judge’s recent ruling that Cheatham and thousands of other investors who lost billions of dollars are not eligible for securities industry insurance coverage.
Cheatham told U.S. District Judge Robert L. Wilkins in a court filing that the SEC agreed to false stipulations in the commission’s suit against the Securities Investor Protection Corp. The congressionally created and industry-funded insurer refused an SEC order last year to cover as much as $500,000 of each investor’s losses in the United States.
Worldwide, the SEC estimates Stanford investor losses at more than $7 billion. In Louisiana, investors in the Baton Rouge, Lafayette and Covington areas lost about $1 billion, according to estimates by state Sen. Bodi White, R-Central, and Baton Rouge attorney Phil Preis.
Stanford was convicted on fraud charges in Houston and sentenced to a prison term of 110 years after he repeatedly denied defrauding his investors.
In the first decision of its kind, however, Wilkins agreed with SIPC attorneys July 3 that, although investors placed their money with SIPC member Stanford Group Co., insurance coverage was negated when the cash was earmarked for nonmember Stanford International Bank.
Cheatham objected to that conclusion in his filing with Wilkins this week.
What Stanford Group Co., or SGC, did to him, Cheatham told the judge, “was plain, garden variety theft.”
Cheatham added: “SGC unilaterally caused the sale of $300,000 of the securities held in (Cheatham’s) account and ‘deposited’ the proceeds from that sale in SGC’s owner’s personal piggybank.”
The judge should understand, Cheatham wrote, that SEC and SIPC stipulated to false facts regarding his personal experience with Stanford.
Cheatham denied that he opened an account with Stanford International Bank, wrote a check that was deposited into that account, authorized the wiring of money to that account or purchased any of the bank’s certificates of deposit.
Contrary to the SEC’s stipulations with SIPC in the court suit, Cheatham said he never received any certificate for any deposit with the bank and did not authorize anyone else to hold such certificates.
All of those stipulations factored into the judge’s decision, Cheatham said. And all were false in his particular case, he said.
Cheatham said he began receiving statements from Stanford Trust Co., of Baton Rouge, that showed the trust was custodian of $300,000 of his money in the form of Stanford International Bank certificates of deposit. He added that he had never had any dealings with either the bank or Stanford Trust Co.
“I did not authorize the transactions, and I signed no documentation with respect to them,” Cheatham added. “I never received or dealt in any manner with the proceeds from the sale of securities in my IRA that were apparently used to make this alleged ‘deposit’ with” Stanford International Bank.
Cheatham is asking Wilkins to suspend his July 3 ruling so that he can represent himself in the dispute over SIPC insurance coverage.
That request comes at a time when members of Louisiana’s congressional delegation and those of some other states are pressuring the SEC to appeal for reversal of Wilkins’ decision.
U.S. Senators David Vitter, R-La., and Mary Landrieu, D-La., and 12 other senators signed a letter that was delivered Friday to SEC Chairwoman Mary Schapiro.
“We respectfully urge you and the rest of the commission to move quickly to appeal Judge Wilkins’ ruling and pursue the course of action that began when the SEC rightfully declared that many of the Stanford victims are entitled to SIPC coverage,” the senators told Schapiro.
“Whether or not the SEC can compel SIPC to act is a significant legal issue that merits consideration by more than a single district judge,” the senators added.
A similar letter was delivered to Schapiro from 35 members of the House, including U.S. Reps. Bill Cassidy, R-Baton Rouge; Charles W. Boustany Jr., R-Lafayette; Jeff Landry, R-New Iberia; Steve Scalise, R-Jefferson; John Fleming, R-Minden, and Rodney Alexander, R-Quitman.
The SEC has until the first week of September to make a decision on a possible appeal.
SEC spokesman John J. Nester said Friday: “No decision made as yet.”