Receiver’s Authority to Pursue Claims Tested in Stanford Ponzi Scheme Case

While the arrest of Bernie Madoff over 5 years ago for running a multibillion dollar Ponzi scheme which financially destroyed many of the people and institutions for which he promised to invest garnered the largest headlines, in fact, a much bigger swindle was perpetrated by Allen Stanford and his company, Stanford Financial Group (the “Group”) which also amounted to a Ponzi scheme. Over 18,000 investors lost billions of dollars as a result of the massive deceit engineered by Mr. Stanford and his company which systematically issued false certificates of deposit of no actual value.


Now the United States Supreme Court is being asked to consider a case which involves the Stanford Ponzi scheme. A federal court in the matter had appointed a receiver to take over the Group’s property. A primary part of the receiver’s obligations include the recovery of assets to pay off, at least, part of the creditors’ claims. With regard to an issue of whether the receiver must arbitrate certain claims with those employees who benefitted, unwittingly or not, from fraudulent transfers made by Stanford’s company, the question arose whether a receiver can bring only those actions which Stanford Financial had standing to bring or whether it could also represent the interest of creditors of the Group.


In the case of McCandless v. Furlaud, 296 U.S. 140, 159-161, 163, 166-167 (1935), the Supreme Court affirmed the standing of federal receivers to assert claims on behalf of the receivership’s creditors. In the Court’s opinion in McCandless, Justice Benjamin Cardozo pronounced that“The duty of reclaiming assets [fraudulently] diverted… is one that rests on the receiver.” While this case appeared to resolve whether duly-appointed receivers could act to recover claims of the creditors, subsequent cases construed exceptions or limits to that holding. As a result various federal appellate circuits have issued conflicting opinions on the matter causing confusion in this area of jurisprudence.


Now in the case of Janvey v. Alguire, the receiver has appealed a decision by the Fifth Circuit questioning the receiver’s authority to do so. The receiver has filed a Petition for Writ of Certiorari to the Supreme Court asking them to resolve the conflicting case law governing the subject. Generally the Supreme Court is more likely to accept a case where it recognizes the lower courts disagree on some fundamental issues. As the capacity of receivers to recover assets fraudulently transferred by scam artists such as Stanford is at stake, whether the high court will hear the case deserves great notice.


In Albuquerque, Giddens & Gatton Law, P.C. has attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases as well as receiverships and other remedies available to creditors. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, P.C. at (505) 633-6298 to set up an appointment or visit the firm’s website at Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.