Federal judge nixes investor suit against SEC for not warning SIPC of $7B fraud by Allen Stanford
Posted Aug 13, 2013 05:24 pm CDT
After initially giving the green light to a lawsuit that said securities regulators for years failed to warn investors of what they believed to be a massive fraud by former billionaire R. Allen Stanford, a federal judge in Florida has dismissed the case.
U.S. District Judge Robert Scola said plaintiffs Carlos Zelaya and George Glantz can’t pursue their suit against the Securities and Exchange Commission because the Federal Tort Claims Act bars claims based on misrepresentation or deceit, Reuters reports.
Their lawyer, Gaytri Kachroo, said an appeal is planned. His clients claim the SEC concluded, after four examinations between 1997 and 2004, that Stanford’s business was a fraud but didn’t warn the Securities Investor Protection Corp. This was not simply deceit or a misrepresentation, Kachroo says, but a failure by the SEC to comply with its legal duty to notify the SIPC, a member-funded group that repays victims of failed brokerages.
Stanford, now 63, was criminally convicted last year by a federal jury in Houston and sentenced to 110 years for fraud. He was accused of costing investors some $7 billion, largely through issuing worthless so-called certificates of deposit through an Antigua bank he controlled.
ABAJournal.com: “Why Didn’t SEC Move Faster in Stanford Case, Law Prof Wonders”
ABAJournal.com: “Federal Judge OKs Suit Against SEC re Alleged 12-Year Delay Alerting SIPC of Allen Stanford Fraud”