BR Stanford investors lose appeal against regulator

Regulator accused of misconduct

Five Baton Rouge residents, a family company and a family trust cannot recover from the federal government $3.5 million stolen by Houston promoter Robert Allen Stanford, an appellate panel ruled Tuesday.

Stanford, 64, is serving a 110-year federal prison term for his 2012 conviction on charges that he masterminded the theft of as much as $7 billion from approximately 25,000 investors in more than 100 countries.

About $1 billion of those losses were suffered by about 1,000 investors in the Baton Rouge, Lafayette and Covington areas, according to estimates by state Sen. Bodi White, R-Central, Baton Rouge attorney Phillip Preis and the Louisiana Attorney General’s Office.

In Baton Rouge in July 2012, Reuel Anderson, Gary Greene, Timothy Ricketts, Kim Guillot, Kahne Guillot, Anderson Family Co. LLC and June Anderson Testamentary Q Trust sued the Securities and Exchange Commission over their loss of $3.5 million to Stanford.

Those plaintiffs argued they would not have invested with Stanford “but for the negligence and deliberate misconduct by Spencer Barasch, a former SEC regional enforcement director, and the negligent supervision of Barasch by his SEC supervisors.”

The Baton Rouge plaintiffs noted a 2010 report by the SEC’s Office of Inspector General concluded, “The SEC’s Fort Worth office … had been aware since 1997 … that Stanford likely was operating a Ponzi scheme.”

A Ponzi scheme is a fake investment program. Criminal promoters skim most of the money provided by people who believe they are investors.

As long as fresh victims pour money into the scam, criminals continue to pose as legitimate business men and women and grow their wealth and power.

Between 1997 and 2005, the SEC’s examination group looked at Stanford’s operations four times and concluded his investment program could not have been legitimate, according to the SEC’s OIG report.

The Baton Rouge plaintiffs added the SEC’s OIG report said Barasch ended one probe in 1998 by falsely stating he had referred the Stanford case to the National Association of Securities Dealers for investigation.

In 2002, Barasch allegedly ended another SEC query by falsely stating new allegations of Stanford’s wrongdoing had been referred to the Texas State Securities Board for investigation.

U.S. District Judge Shelly Dick ruled last year in Baton Rouge that the plaintiffs failed to prove Barasch was required by federal law or policy to refer allegations against Stanford to the NASD and Texas securities boards.

On Tuesday at the 5th U.S. Circuit Court of Appeals in New Orleans, a three-judge panel affirmed Dick’s decision.

Circuit Judges Edgar C. Prado, of San Antonio, and Thomas M. Reavley and Edith H. Jones, both of Houston, concluded the plaintiffs “have not identified any mandatory obligations violated by SEC employees in the performance of their discretionary duties.”