Patrick Osborn

Court Rules That Stanford Investor Suits Can Go Forward

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Cicely C. Mitchell

Investors who lost billions in a massive Ponzi scheme orchestrated by convicted former Texas tycoon R. Allen Stanford made huge legal strides on Monday as a federal appeals court decided to allow their class action lawsuits to proceed against individuals and companies they say aided Stanford. Reports indicate that the 5th U.S. Circuit Court of Appeals overturned a federal judge’s ruling from last year that threw out three class action lawsuits that were attempting to use state laws to recover investor losses resulting from Stanford’s scheme.

U.S. District Judge David Godbey in Dallas had thrown out the investors’ lawsuits, declaring that they were precluded under the Securities Litigation Uniform Standards Act, or SLUSA. However, a three-judge panel of the appeals court disagreed with Godbey, stating that upon their findings, the fraudulent schemes “… are not more than tangentially related to the purchase or sale of covered securities and are therefore not sufficiently connected (to) purchases or sales to trigger SLUSA preclusion.”

Earlier in March, Stanford was convicted in a Houston Texas courtroom of 13 of the 14 fraud-related charges for misusing money, falsifying documents and hiding money all in the name of financial gain. He was also accused of using the money of potential investors to support his lavish lifestyle.

Angela Shaw is the founder of the Stanford Victims Coalition. The coalition, which represents investors, stated had Godbey’s ruling been upheld, each class action lawsuit filed by Stanford investors would have been dismissed. Shaw is apart of a committee appointed by Godbey to represent the interests of the more than 20,000 investors who lost money to Stanford and his fraudulent practices. Monday’s ruling allows investors to pursue lawsuits against third parties they believe aided Stanford’s fraud. Those third parties include banks, lawyers and auditors and other financial institutions. Approximately $115 million has been recovered for former Stanford investors by a court-appointed receiver.

Stanford who is scheduled to be sentenced in June could potentially spend the rest of his life in prison.

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