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5th Circuit Judge to Stanford Receiver: You're Nobody
The American Lawyer
November 04, 2009
Clawback litigation arising out of Ponzi schemes is cutting-edge stuff. And it's unclear just how far courts will let receivers go in pursuing investors. But the 5th U.S. Circuit Court of Appeals gave some clues about its thoughts on Monday when it heard oral arguments in the clawback case initiated by the receiver of Stanford International Bank.
The Stanford receiver, Ralph Janvey, is seeking the principal certain investors withdrew from Stanford shortly before the alleged fraud was discovered and assets at the firm were frozen. According to Reuters, the district court allowed Janvey to seek the interest investors made, but not the principal. At the oral argument before the 5th Circuit, the more fundamental question of standing was also addressed. Senior Judge Will Garwood asked Kevin Sadler of Baker Botts, who represents Janvey, why the Securities and Exchange Commission wasn't bringing the case.
"What gives you statutory authority to sue people the SEC did not?" Garwood asked. "It seems to me that the plaintiff or defendant ought to be the ones ... Frankly, in a sense, you're nobody. You are neither one."
Michael Quilling of Quilling, Selander, Cummiskey & Lownds, who represented the investors at the 5th Circuit, told us that he thought the argument went well for his side. "I hope the court will put a barbed wire fence around what a receiver can do," he told us.
Quilling downplayed the potential role that a decision in the Stanford matter could play in the Madoff clawback cases. Quilling said that the Madoff receiver, Irving Picard of Baker Hostetler, isn't pursuing investors as aggressively as Janvey. For example, Picard has not gone after the principal of investors, said Quilling. "He's just gone after fictitious profits," said Quilling of Picard. "[He also] isn't trying to usurp the SEC."
We left a message with Sadler but didn't hear back immediately.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.
