Attorneys for 86 people affected by convicted Ponzi schemer Robert Allen Stanford’s $7 billion fraud argued Thursday in Baton Rouge for class-action certification of their civil suit against state financial regulators and a Pennsylvania corporation.
The investors allege the regulators and SEI Investments Co. failed to protect them from Stanford’s phony investment scheme.
If granted by state District Judge Mike Caldwell, class-action certification would permit those 86 people to represent all Stanford investors in Louisiana except for any who may choose to opt out of the litigation. In the event of a final decision in the case in favor of investors, certification could greatly increase the size of any total cash award.
Phil Preis and Chuck Gordon, attorneys for the plaintiffs, alleged in the lawsuit that the Louisiana Office of Financial Institutions and SEI Investments ignored evidence of Stanford’s massive fraud, failing an obligation to protect the interests of investors.
Preis and state Sen. Bodi White, R-Central, have estimated that about 1,000 people in the Baton Rouge, Lafayette and Covington areas were collectively bilked out of about $1 billion.
Preis and Gordon brought several witnesses Thursday to testify about the financial devastation caused by Stanford, 62, who is serving a 110-year federal prison sentence.
Terence Beven, a retired 79-year-old Baton Rouge physician, testified that he lost $7.3 million after Stanford financial adviser Ron Clayton falsely told him that certificates of deposit in Stanford International Bank were insured by Lloyds of London.
SEI and OFI attorneys maintained their clients did not fail any obligations owed to Stanford’s investors.
“SEI’s only potential role was as a vendor,” J. Gordon Cooney Jr., an attorney for SEI, told Caldwell. Cooney said SEI only sold software to Stanford Trust Co.
The software was designed to track changing values of stocks and other securities, Cooney said. He added that SEI did not participate in any false statements that Stanford representatives may have made to lure and retain investors.
“We don’t dispute the fact that many of the plaintiffs lost large sums of money,” Cooney said.
He added, however, that there is “no evidence that SEI controlled” any false statements by Stanford employees.
“The Ponzi scheme was not disclosed,” Preis responded. “We say this is an omissions case.”
In the civil suit, Preis and Gordon have argued SEI should have known of Stanford’s schemes because of administrative services the firm provided Stanford.
“SEI stands only for SEI,” Cooney told Caldwell. “It has no connection to Stanford. The ‘S’ does not stand for Stanford.”
In court filings, Preis told Caldwell that OFI officials knew as early as 2007 that Stanford was endangering Louisiana investors’ retirement funds.
OFI attorneys have maintained the office did not fail any responsibilities to investors.
“The role of OFI is to regulate, not to ensure that those who invest in companies subject to OFI regulation will never lose money as a result of criminal actions,” OFI attorney David Latham wrote Caldwell in one filing.
The class-certification hearing is scheduled to resume Friday.
Some of the information Caldwell will use to make his decision on class certification is in deposition testimony from OFI officials who will not appear in the hearing.
That testimony is not being read aloud in the courtroom. Excerpts from the depositions may be used by all parties to support their positions in the dispute.