25 May The Stanford Saga – Chapter 3: Antiguans 1, Receiver 0
Last week’s blog post (here) covered early skirmishing between SEC receiver Ralph Janvey and Antiguan liqudators Nigel Hamilton-Smith and Peter Wastell over control of the assets and business entities once operated by Sir Allen Stanford – and which the Securities and Exchange Commission (SEC) alleges furthered an elaborate international Ponzi scheme. Court pleadings describing the Stanford entities, the alleged Ponzi scheme, and the federal receivership instituted at the SEC’s behest are available here.
Readers of last week’s post may recall that the primary bone of contention between Janvey and his Antiguan counterparts was whether or not the Antiguans – Messr’s. Nigel Hamilton-Smith and Wastell – should be permitted to seek American recognition of their liquidation of Stanford International Bank, Ltd. (SIB) while a US receivership of Stanford assets (including SIB, and superintended by Janvey) remains pending in Dallas’s U.S. District Court. The Antiguan liquidators requested that District Court Judge David Godbey permit them to seek recognition. The receiver, supported by the SEC (and joined by the IRS), objected.
Judge Godbey’s response was immediately forthcoming. In a short, 5-page Order issued late last Friday, he authorized the liquidators’ request and modified his prior receivership Order to permit the liquidators to commence a Chapter 15 proceeding and seek recognition of their Antiguan liquidation.
Two things are worth noting about Judge Godbey’s Order. First, the mere authorization to seek recognition is no guarantee recognition will be granted. While recognizing the Congressional intent behind Chapter 15 (i.e., greater international cooperation, greater certainty for trade and investment, fair and efficient administration, etc.), Judge Godbey nevertheless directed the parties to confer regarding a process by which to determine whether the Antiguan liquidation should be recognized. The Court no doubt anticipates what the Examiner has already identified: a looming fight over SIB’s eligibility for Chapter 15 relief. More specifically, the parties will provide evidence on the question of whether SIB is a “foreign bank” with a “branch” or “agency” in the US – and, therefore, ineligible for Chapter 15 recognition under Section 1501(c)(1) (which incorporates Section 109(b) by reference).
Second, where recognition is appropriate, a prior post asked whether Judge Godbey might not use his broad discretion under Chatper 15 to fashion and direct the mutual cooperation that Congress envisioned – but that to date, has apparently slipped from the parties’ view. Judge Godbey’s Order suggests that where SIB’s liquidation can be recognized, he may do so: In a brief acknowledgement his own broad discretion, Judge Godbey’s Order notes that “[a]s a practical matter, the mechanism of Chapter 15 is precisely designed to effect coordination between entities like the Antiguan Liquidators and the Receiver.”
Meanwhile, the Antiguan liquidators and the receiver have until May 29 to confer, jointly prepare, and submit a status report outlining a proposed procedure for moving forward with the request for recognition.
The devil, as they say, is in the details.
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