Democrats’ and Republicans’ political committees should not be allowed to keep $1.6 million in donations from R. Allen Stanford and his companies.

In its Oct. 23 decision in Janvey v. Democratic Senatorial Campaign Committee Inc., et al., the 5th U.S. Circuit Court of Appeals affirmed a district court judgment that had granted summary judgment in favor of Ralph S. Janvey, the court-appointed receiver tasked with recovering Stanford assets.

The 5th Circuit opinion noted that Stanford ran one of the largest Ponzi schemes in U.S. history through his companies and the Securities & Exchange Commission sued the Stanford defendants in 2008.

According to the 5th Circuit decision, Janvey filed suit under the Texas Uniform Fraudulent Transfer Act (TUFTA) to recover about $1.6 million in political donations Stanford and his companies made between 2000 and 2008 to the Democratic Senatorial Campaign Committee ($950,500); the Democratic Congressional Campaign Committee ($200,000); the Republican National Committee ($128,500); the National Republican Senatorial Committee ($83,345); and the National Republican Congressional Committee ($238,500).

After the trial court ruled for Janvey, the committees appealed, arguing that the receiver may not stand in the shoes of Stanford defendants’ creditors as to the TUFTA claims; the receiver’s action was untimely under TUFTA; and federal campaign finance law pre-empts the receiver’s TUFTA claims.

In an opinion written by Judge James L. Dennis and joined by Judge E. Grady Jolly and Senior Judge Fortunato P. Benavides, the 5th Circuit rejected those arguments. Specifically, the appeals court noted that the committees’ last “argument would lead to absurd results: under their interpretation, they would be allowed to keep funds that were, for example, stolen by force or fraud so long as the contributions did not run afoul” of federal campaign finance law.

Marc Erik Elias, a partner in the Washington, D.C., office of Perkins Coie who represents the Democratic Senatorial Campaign Committee and the Democratic Congressional Campaign Committee, did not return a telephone call seeking comment.

Mark Shank, a partner in Dallas’ Gruber Hurst Johansen Hail & Shank who represents the National Republican Senatorial Committee, the National Republican Congressional Committee and the Republican National Committee, declines comment.

Janvey, a partner in Dallas’ Krage Janvey, did not return a call.

Janvey’s lawyer, Kevin M. Sadler, a partner in the Austin office of Baker Botts, says that Janvey has litigation pending before U.S. District Judge David Godbey of Dallas alleging fraudulent transfer against hundreds of defendants in an effort to collect money they received from the Stanford companies. The Oct. 23 decision from the 5th Circuit is “the first one that’s gone to final judgment, and it’s also the first one that’s been affirmed since final judgment. It’s significant in that regard,” Sadler says. “The vast majority of our cases are still pending, and we’re still in litigation, and we’re nowhere near final judgment.”

Sadler hopes the 5th Circuit’s decision sends a clear message to defendants that they must return the money they received from the Stanford companies. “I think one of the things that ought to be clear from this decision is the long list of public officials, who still to this day have not returned their contributions,” Sadler says. “The receiver would hope they would look at that and return those monies.”