The United States will not seek an order of restitution when Robert Allen Stanford is sentenced on June 14th, stating that to do so would be impractical and instead indicating it seeks to provide Stanford victims with proceeds of forfeited assets. In a June 4th filing with a Houston federal court, the government instead sought permission to compensate victims through the process of remission, claiming that an order of restitution would conflict with the judicial claims process already in place by the receiver chosen by the Securities and Exchange Commission. The jury that convicted Stanford also found that funds in nearly 30 foreign accounts constituted proceeds of Stanford's fraud and were thus subject to forfeiture. Additionally, the US indicated it will seek the imposition of a money judgment against Stanford at his sentencing that could allow further forfeiture of Stanford assets.
Generally, an order of restitution is mandatory in a crime involving fraud under the Mandatory Victim Restitution Act ("MVRA"). However, there exist several exceptions to mandatory restitution under the MVRA, including when "the number of identifiable victims is so large as to make restitution impracticable" or if "determining complex issues of fact related to the cause or amount of the victim's losses would unnecessarily complicate or prolong the sentencing process." In invoking these exceptions, the US points to several factors, including (1) the estimate that over 21,000 investors lost money in Stanford's scheme, (2) complications involved in calculating loss amounts when over $1 billion in fictitious interest was paid to investors and the fact that some investors withdrew portions of their principal while some kept all funds with Stanford, and (3) the likely duplication of efforts already underway by the SEC Receiver. The US indicated that it was cooperating closely with the SEC Receiver, who recently obtained court approval for a claims process to return funds to victims and established a September 1 "bar date" by which prospective victims must notify the SEC Receiver of their alleged loss. Additionally, the DOJ and SEC have agreed to a joint distribution process by which to distribute any assets that are obtained by the DOJ through the forfeiture process.
While unusual in that the criminal defendant is usually the party arguing that an order of restitution would be impractical or unduly complex, the DOJ's proposal makes a lot of sense. For one, the SEC Receiver appointed by the Court has a core mission that includes the directive to "marshal, liquidate, and distribute assets to victims." The distribution process is often the primary duty of a court-appointed receiver, which is often the party that takes control of scheme operations and is intimately familiar with the scheme. Additionally, the addition of the DOJ into the distribution process would likely result in duplicative efforts and, ultimately, reduced payouts to victims. As a government agency already bursting at the seams, the DOJ is ill-equipped to deal with a complicated and extensive restitution process.
Stanford is scheduled to be sentenced June 14, 2012.
A copy of the June 4th filing is here.
For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.
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