08 Sep The Stanford Saga – Chapter 8: Home Is Where The Corporate Jet Is . . . But Where Is COMI?
Several weeks have passed since Antiguan liquidators Peter Wastell and Nigel Hamilton-Smith and federal receiver Ralph Janvey briefed US District Judge David Godbey on the liquidators’ request for US recognition of their proposed Antiguan liquidation of Stanford International Bank, Ltd. (SIB).
Readers will recall that Messr’s. Wastell and Hamilton-Smith have been at odds with Mr. Janvey, a federal receiver appointed in Dallas’ U.S. District Court for the purpose of administering not only SIB, but all of the assets previously controlled by Sir Allen Stanford (links to prior posts can be found here). Those assets and their creditors span at least three continents – North America, South America, and Europe – and have spawned insolvency proceedings in several countries.
One of the preliminary questions in these proceedings is which of them will receive deference from the others. Of particular interest is which proceeding – and which court-appointed representative – will control the administration of SIB. The Eastern Caribbean Surpeme Court (Antigua and Barbuda) has found, perhaps predictably, that SIB’s liquidation is to be adminsitered in Antigua. It also has found that Mr. Janvey has no standing to appear as a “foreign representative” or otherwise on behalf of SIB or other Stanford entities.
In London, the English High Court of Justice, Chancery Division’s Mr. Justice Lewison reached a similar conclusion in early July. Based on a determination under English law that SIB’s “Center of Main Interests” (COMI) is in Antigua, he designated Messr’s. Wastell and Hamilton-Smith as “foreign representatives” of SIB for purposes of Stanford’s English insolvency proceedings.
In Dallas, meanwhile, Judge Godbey has permitted the Antiguan liquidators to commence a Chapter 15 proceeding under the US Bankruptcy Code and to make application for similar recognition of SIB’s Antiguan liquidation in the US. Messr’s. Wastell and Hamilton-Smith and Mr. Janvey have each briefed the question of whether, under US cross-border insolvency law, that liquidation ought to be recognized here as a “foreign main proceeding” – and, more specifically, whether Antigua or the US is the properly designated COMI for SIB.
In briefs submitted over six weeks ago, the liquidators urged a finding consistent with that of the English and Antiguan courts. They argued essentially that a debtor’s “principal place of business” is essentially the location of its “business operations,” and referred repeatedly to SIB’s undeniably extensive physical and administrative operations in Antigua.
In opposition, Mr. Janvey argued strenuously for a finding that SIB’s COMI is, in fact, the US. He did so relying largely on the contention that, despite SIB’s physical location and operations in Antigua, Sir Allen allegedly “spent little time in Antigua” – and that Sir Allen effectively managed and controlled SIB from the US. Mr. Little, the examiner appointed by Judge Godbey to assist him in overseeing the receivership, generally concurred with Mr. Janvey.
Last week, Mr. Janvey’s contention may have received a set-back.
The United States Fifth Circuit Court of Appeals recently upheld a detention order confining Sir Allen to the US pursuant to a separate federal indictment issued against him – and in so doing, concurred in the lower court’s conclusion that Sir Allen’s ties to the State of Texas were “tenuous at best.” The Fifth Circuit’s 3-judge panel recognized that Stanford “is both an American citizen and a citizen of Antigua and Barbuda, and has resided in that island nation for some fifteen years,” and further noted:
Stanford admitted that he established a new residence in Houston in preparation for his required presence during the pendency of the case against him. Several of his children have recently moved to Houston to be closer to him during the proceedings. While Stanford did grow up in Texas, he has spent the past fifiteen years abroad. His international travels have been so extensive that, in recent years, he has spent little or no time in the United States . . . . [O]ne of Stanford’s former pilots [testified] that Stanford . . . engaged in almost non-stop travel on the fleet of six private jets and one helicopter belonging to [Stanford Financial Group] and its affiliates . . . .
On September 1, Messr’s. Wastell and Hamilton-Smith sought leave to file the Fifth Circuit’s order in support of their prior application for recognition, and over Mr. Janvey’s anticipated objection.
It appears that where Sir Allen’s indictment is concerned, home is where the corporate jet is.
But where SIB’s liquidation is concerned . . . where is COMI?