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Further litigation against Willis Group Holdings Ltd. in the $7 billion Ponzi scheme run by Allen Stanford is barred under an order issued by a lower court in connection with the broker’s $120 million settlement, says a federal appeals court, in the latest ruling in litigation whose history includes a U.S. Supreme Court ruling.
Mr. Stanford and his associates sold investors certificates of deposits in Stanford International Bank, according to the U.S. Supreme Court’s 2014 ruling in the case.
The investors expected the bank would use the money to buy “highly lucrative” assets, but instead Mr. Stanford and his associates used the money provided by new investors to “repay old investors, finance an elaborate lifestyle and to finance speculative real estate ventures,” according to the Supreme Court ruling. Mr. Stanford was sentenced to a 110-year prison term.
Defendants in the Supreme Court case included Willis of Colorado Inc. and related Willis companies, and Houston-based Browne, Mellette & Britt Insurance Agency LLC, which does not appear to any longer be in business. The brokers were accused of helping to promote the Ponzi scheme.
The Supreme Court held in its ruling that investors in the scheme could sue defendants in the case.
In subsequent proceedings, Stanford’s receivership released claims against the Willis defendants in exchange for a $120 million settlement that was approved by the U.S. District Court in Dallas in August 2017, according to Monday’s ruling by the 5th U.S. Circuit Court of Appeals in New Orleans, in Antonio Jubis Zacarias, Roberto Barbar v. Stanford International Bank Ltd., et al.
Willis conditioned its agreement on the court issuing a bar order enjoining Stanford-Ponzi scheme related claims against it, according to the ruling.
A three-judge 5th Circuit panel affirmed the bar enjoining further claims against Willis in a divided ruling. “The core difficulty with Plaintiff-Objectors’ challenge to the bar of their carve-out suits is that their theory would frustrate the central purposes of the receivership and confound the SEC mission to achieve maximum recovery for them malefactors for distribution pro rata to all investors,” said the ruling.
The dissenting opinion said, “I share the majority’s appreciation for this settlement’s practical value. But in my view, the district court lacked jurisdiction to grant the bar orders.”
A Willis spokesman and the plaintiff attorney could not immediately be reached for comment.
WASHINGTON (Reuters) — U.S. regulators sought to overturn a 2012 court ruling that prohibited victims of Allen Stanford's $7 billion Ponzi scheme from seeking compensation, in an unprecedented legal battle between the government and an industry-backed fund that protects investors.