by Gwen Moritz on Monday, Sep. 27, 2010 12:00 am
An investigation by the SEC's inspector general, David Kotz, found that regulators in the Stanford Group's home state of Texas suspected a Ponzi scheme as early as 1997. And the SEC in Washington, D.C., had evidence by 2007 - by which time Stanford had been operating in Little Rock for several months.
But it wasn't until February 2009 that the SEC lowered the hammer, charging Allen Stanford and a handful of lieutenants with selling $8 billion worth of phony-baloney "certificates of deposit" through a bank Stanford owned in Antigua, the Caribbean island nation that had knighted Stanford in 2006.
In the Senate hearing on Wednesday, according to various national news reports, Kotz complained that the SEC's culture of rewarding the number of successful enforcement actions, rather than the number of investors protected, encouraged regulators to concentrate on easy cases with few victims.
And the Stanford case, as scores of victims could attest if they were willing to speak on the record, is anything but easy.
Stanford clients fell into two categories, those who maintained only brokerage accounts and those who bought Antiguan CDs, reportedly in minimum denominations of $50,000. Brokerage account clients - like Andrew and Susan Meadors of Little Rock, who told their story to Arkansas Business last year - were made whole within a few weeks after the Stanford Group was taken into receivership.
But clients who bought CDs are still waiting, 19 months later, to see whether the receiver appointed by the U.S. District Court in Dallas will find enough Stanford assets to make a dent in their losses - or whether Congress might offer some retroactive relief.
"I've just given it off," a former Stanford client told Arkansas Business last week. "It's gone."
"We would have hoped that these people in Dallas would have gone to trial by now," another victim said.
For more than a year, only a handful of Stanford's Arkansas clients had come forward, including the Meadorses; part-time Little Rock resident Hannah Peck, who briefly filed a federal lawsuit against three brokers in Stanford's Little Rock office; and former Pine Bluff businessman Rick Riley, who told the Arkansas Democrat-Gazette last year that he had borrowed money to buy Antiguan CDs.
Then in July, Christopher J. Collier filed for Chapter 7 bankruptcy, claiming $700,000 in assets and $1.94 million in liabilities. Collier, 51, was one of the four former Merrill Lynch financial advisers who were working for Atlanta-based StillPoint Advisors' Little Rock office when it was sold to Stanford Group in 2006.
Among his creditors, Collier includes 29 former clients, some of them married couples. One of them, the Pfeifer Sutter Family LLC, represented by Benton attorney Luther Sutter, has a lawsuit pending against the Stanford Group and Collier personally in Saline County. The Pfeifer Sutter Family claim is listed as $112,000. Sutter didn't return calls for comment last week.
For the other 28 clients, however, the amount of their claims is listed as "unknown," and each has the following notation: "possible lawsuit connected with Stanford Investments."
Shortly after Collier's bankruptcy petition was filed, his attorney, Frederick S. "Tripp" Wetzel III of Little Rock, said the potential client claims were included because "we're just disclosing what's required by the bankruptcy code."
Wetzel said he wasn't authorized by his client to comment further, and Collier didn't respond to a message left on his cell phone last week. In a Sept. 7 bankruptcy hearing, Collier was asked whether the clients who bought CDs were likely to recoup any money from the receivership.
"If I was going to guess, I'd say no," Collier replied.
The half-dozen Collier clients contacted by Arkansas Business last week showed no appetite for litigation. And although their names are public record, Arkansas Business agreed not to attach names to comments.
"We don't have a lawsuit against him. We don't intend to," one retiree said. "I think one of the reasons his clients haven't pursued suing him is because he doesn't have anything."
That's exactly what another client said: "I don't think it's going to be worth it."
Another former client said he wasn't a party to any lawsuits and wouldn't blame Collier anyway. Yet another former client, a Little Rock business owner, expressed surprise that his name was included in Collier's bankruptcy because "he doesn't owe me any money, and I haven't filed any lawsuit."
The business owner said he had heard from a friend that Stanford was offering above-market rates on CDs, and he approached Collier about the investment opportunity. He said Collier disclosed the fact that the CDs were uninsured. When the CD matured, the business owner cashed it out well before the collapse.
"But [Collier] individually or Stanford never owed me anything," he said.
Unlike Rick Riley - who apparently wasn't a Collier client, although the Democrat-Gazette didn't identify his Stanford adviser by name - none of the Collier clients contacted by Arkansas Business borrowed money to buy CDs. They did, however, think they were "safe" investments - and in his testimony in bankruptcy court, Collier said he sold the instruments as certificates of deposit that were safe.
Luther Sutter, representing the Pfeifer Sutter Family LLC, asked Collier under oath whether he knew that FINRA, the Financial Industry Regulatory Authority, had cautioned Stanford not to sell the CDs in November 2007.
"I had no idea," Collier answered.
Based on the number of clients listed in the bankruptcy and the minimum investment required in the CDs, the losses by Collier's clients total at least $1.5 million - and possibly much more.
But Collier was only one of five financial advisers working for Stanford in Little Rock at the time of the collapse, and he was not the most successful peddler of Antiguan CDs in the group. That title belongs to James R. "Jim" Alguire, who was one of 66 Stanford brokers sued by name by the Securities & Exchange Commission - and, unfortunately for Alguire, the 66 are listed in alphabetical order, putting his name at the top of the list and on the front of every document filed in the case.
The named "relief defendants" in the SEC's case all collected at least $200,000 - and up to $2.6 million - in "fraudulent commissions" from selling the Antiguan CDs. Alguire personally collected $273,669 in commissions between January 2007 and January 2009, according to the lawsuit.
The total value of CDs sold by Alguire isn't known. According to the SEC, Stanford paid a 1 percent commission upon the sale of a CD "and as much as an additional 1% trailing commission during the term of the CDs." At a minimum, then, Alguire sold at least $13 million worth of the CDs during the two-year period covered by the lawsuit, and probably much more.
No other Little Rock adviser is named in the SEC complaint, presumably because the others - Collier, Mike Arthur, Matt McDaniel and Heath Stevens - didn't collect at least $200,000 in CD commissions.
But Collier was making money during that period after the Stanford Group bought the Little Rock office from StillPoint Advisors near the end of 2006. His compensation from Stanford - the only income he had, according to his bankruptcy petition - was $252,575 in 2007 and $392,629 in 2008.
But in 2009, the year in which Stanford collapsed and Collier and the others joined the Little Rock office of Sterne Agee & Leach, his income fell to $113,274. And as of July, his income was listed at just over $4,000 a month. His take-home pay after taxes, Social Security and insurance, is $1,540, leaving him with a monthly shortfall of more than $8,700.
According to his testimony at the bankruptcy hearing, Sterne Agee & Leach paid him a signing bonus - really a forgivable loan - of more than $100,000 when he joined the firm after the collapse of the Stanford Group in February 2009.
That, Collier said, was based on the fact that he was managing assets of about $125 million at Stanford, a figure that included the assets of Heifer International Foundation of Little Rock, the operational foundation that provides financial support for Heifer International. Heifer Foundation's most recent Form 990 filed with the Internal Revenue Service listed total assets of $39.3 million as of Dec. 31, 2008.
Heifer International Foundation is no longer his client, Collier said, and his current book of business is about $15 million in assets under management.
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