by Gwen Moritz on Monday, Mar. 30, 2009 12:00 am
Andrew and Susan Meadors of Little Rock waited more than a month for the return of assets frozen in the collapse of Stanford Financial Group.
The Meadorses are what Andrew calls "Stanford refugees," clients whose financial lives were displaced by the civil case that the Securities & Exchange Commission filed against Stanford on Feb. 17. The day before the complaint was filed, a receiver appointed by a federal judge in Texas froze assets associated with Stanford – including those that were clearly the assets of clients rather than the company. The Meadorses first had to fight for what was rightfully theirs and then find another home for their retirement accounts and trading account.
To streamline the process, they liquidated their trading account when the Dow Jones Industrial Average was near its lowest point in almost a decade. And, in another stroke of luck – bad luck – the wire transfer of their assets was completed just about the time the Dow, the S&P 500 and the Nasdaq Composite Index all gained roughly 7 percent in a single day.
"So we just missed out on that by one day, and now we have to buy back our securities at higher prices," Meadors, a partner in the Meadors Adams & Lee insurance agency, said in a tone that was equal parts frustration and resignation.
It could have been much worse, of course, so Meadors doesn't plan to sue. The Meadorses could have, but didn't, invest in the Stanford Allocation Strategy mutual fund or buy any of the impossibly high-yield certificates of deposit issued by Stanford-owned banks in Antigua. Clients who had those assets have a lot more to worry about than missing a one-day rally on Wall Street.
Stanford in Arkansas
Exactly how many Stanford refugees are in Arkansas and how much Arkansas money was frozen – or lost – is not known. The only other Arkansas clients publicly identified are Hannah Kay Peck (who is officially listed as a resident of Hawaii) and the Peck Family Trust, who sued three advisers in Stanford's Little Rock office – Mike Arthur, Matthew McDaniel and Heath Stevens – on Feb. 24.
(Peck also sued the Stanford Group and Pershing LLC, the third-party custodian for most securities owned by Stanford customers like Peck and the Meadorses, but she later dropped them as defendants. The entire case was stayed on March 10.)
The office at 500 President Clinton Ave. in the River Market district was big enough to support five experienced financial professionals – Arthur, McDaniel, Stevens, Christopher J. Collier and Jim Alguire. Other financial professionals consulted by Arkansas Business gave estimates of the assets under management out of the Little Rock Stanford office of $300 million to $1 billion, although some portion of that amount probably came from out-of-state clients.
Stanford entered Arkansas in late 2006 by buying the local wealth management team of StillPoint Advisors of Atlanta. In turn, StillPoint had hired Collier, Arthur, Alguire and McDaniel away from Merrill Lynch in Little Rock in late 2004.
Meadors said Alguire, who was a friend and still is, began courting him and Susan. Alguire invited the Meadorses to Memphis for the Stanford St. Jude Championship, a PGA golf tournament sponsored by Stanford Financial Group and benefiting St. Jude Children's Research Hospital. (On March 19, the tournament announced a new name, St. Jude Classic, despite the fact that Stanford had reportedly paid most of its $7 million sponsorship before the receiver was named. The tournament will be played June 8-14.)
Stanford made the most of the tournament, Meadors said, taking over the renowned Peabody Hotel and treating clients and prospects to top-flight performers – Al Green in 2007 and Aretha Franklin in 2008.
"The thought certainly crossed my mind: 'Who's paying for this?'" Meadors said.
The company's flamboyant founder, R. Allen Stanford – by then being called "Sir Allen," thanks to a knighthood bestowed by Antigua in 2006 – was conspicuous. The "aura of wealth" surrounding Sir Allen struck Meadors as "kind of cultish."
(In fact, Susan Meadors said, when convicted Ponzi schemer Bernard Madoff was arrested in December, "Andrew looked at me and said, 'What if Sir Allen Stanford is the next one?'")
Still, the Meadorses liked and trusted Alguire, and he fixed them up with individual retirement accounts, self-employed pension funds and a trading account. Meadors insisted that the securities in his trading account be held by a custodian, Pershing LLC. "I'm a certified risk manager, and I don't do into things lightly," he said.
He was offered CDs in Stanford International Bank in Antigua, where Stanford also controlled the Bank of Antigua, but he didn't jump at something that sounded "too good to be true." Meadors said he thought $100,000 was the minimum investment required for the CDs, which reportedly were paying 8 percent and higher.
The Peck Family Trust apparently bought three CDs; the lawsuit Hannah Kay Peck filed in U.S. District Court in Little Rock included no dollar signs but listed three CD account numbers as well as an IRA account number.
In the complaint, Peck said her Stanford adviser, Mike Arthur, "promised Ms. Peck that the CDs would have a significantly higher rate of return than rates available through CDs offered by traditional banks and would be properly insured to safeguard Ms. Peck's assets." She claimed she also relied on statements made by Matt McDaniel and Heath Stevens.
Alguire, Arthur and Stevens didn't return calls seeking comment; McDaniel declined to comment.
Like a Novel
The Peck complaint said Peck discovered that her deposits were "completely depleted" on Tuesday, Feb. 17, the day the SEC sued Allen Stanford and the Stanford Group. But Andrew Meadors had started to sweat the previous Saturday, Valentine's Day.
He picked up that morning's Wall Street Journal and saw a headline at the top of page B1: "Stanford Financial Gets More Scrutiny." (The previous day, the Journal had reported Stanford Financial Group's confirmation that it was the subject of an investigation by the SEC, the Financial Industry Regulatory Authority and the Florida Office of Financial Regulation, but that story had been buried on page C6.)
Meadors called Jim Alguire, who was at Disney World with his family. Alguire, Meadors said, told him that Stanford was just getting some bad PR. But by the following Tuesday, it was clearly much more than that.
"Our friend Jim's life has changed dramatically, and this thing is like a bad John Grisham novel," Meadors said, and then corrected himself. "Or a good John Grisham novel, if you like action, money, deception, the Caribbean."
The collapse of the stock market last fall, which exposed Madoff's fraud, had caught up with the Stanford Financial Group. Meadors quoted billionaire investor Warren Buffett: "'When the tide is out, you see who has been swimming about naked.' Sir Allen Stanford needs some swim trunks."
For a month, the Meadorses attempted to get their assets back out of Stanford – something Andrew thought should have taken no more than a day or two while the receiver, Dallas attorney Ralph S. Janvey, determined that client assets held by Pershing didn't belong to Stanford.
The receiver, however, said in a March 2 court filing that the Stanford group of businesses was "extraordinarily complex" and included at least 175 different entities and more than 100 offices. On March 4, 21 Stanford clients filed a civil suit in federal court in Houston accusing the SEC and Janvey of wrongfully seizing their property.
The first accounts – those valued at less than $250,000 – were approved for release the next day, with most of the larger accounts approved on March 12. The Meadorses' accounts were in the first group, yet it took more than two weeks for the electronic transfer to be completed.
"Our money was kidnapped," Andrew Meadors said. "Life is stressful enough in 2009, and this is just unnecessary."
Matt Jones at Legacy Capital Group in Little Rock set up a transfer account for the Meadorses before Jim Alguire and his colleagues from Stanford landed at Sterne Agee & Leach in Little Rock. Andrew Meadors defends the Stanford advisers in Little Rock and says he'll eventually move his accounts back to Alguire.
"I believe that [Alguire] is innocent as far as having any idea of what they were doing down at Stanford International Bank," Meadors said. As evidence, he said, Alguire invested "a lot" of his own money in the Antiguan CDs.
The other Stanford advisers in Little Rock were "good guys," Meadors said. "And they are really mad. This is not L.A. or San Francisco," where financial advisers could move around freely without running into their clients or their clients' relatives. "This is Little Rock."
In March 1999, Meadors recalled, he and his friends called a "happy hour" to celebrate making $25,000 in the high-flying stock market in a single day.
"What a difference a decade makes," he said last week. "Now we're celebrating getting our own money back."
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