TD Toronto Dominion Bank

By Andrew Scurria 

U.S. senators from Louisiana urged Toronto-Dominion Bank to compensate victims of R. Allen Stanford's Ponzi scheme over the bank's "knowing assistance" in his $5 billion fraud.

Republican Sens. John Kennedy and Bill Cassidy accused TD Bank in a Friday letter of abandoning small investors who lost their nest eggs when Stanford International Bank Ltd., a TD Bank customer, was exposed as a fraud and collapsed in 2009.

Despite being named in long-running lawsuits in the U.S. and Canada, TD Bank and other Stanford financial partners haven't reached settlements with court-appointed liquidators charged with digging up money for victims. The senators alleged that TD Bank "aided and abetted" Stanford's banking outside the U.S. and knocked the institution for expanding its U.S. footprint in the years since while holding out on settling litigation and paying restitution.

A TD Bank spokesman declined to comment. Mr. Stanford's U.S. clients were largely clustered in Texas and Louisiana, though his far-flung financial empire also stretched to Latin America, the Dutch Caribbean and Switzerland.

"We demand that TD Bank stop its obstructionist conduct, engage in a meaningful effort to put an end to this decade-long debacle and provide restitution to the Stanford victims without further delay," the senators said in their letter to TD Bank Chief Executive Greg Braca. "Regulatory intervention should not be necessary for Stanford's victims to receive the justice they deserve."

Stanford investors since 2009 have gotten back a fraction of what they lost and far less than the recoveries for victims of Bernard Madoff's Ponzi scheme, which collapsed months before Mr. Stanford's.

While some of the disparity is because of a lack of brokerage insurance for Stanford victims, the fraud also stands out for having generated no meaningful settlement from financial institutions that allegedly turned a blind eye to criminal activity.

JPMorgan Chase & Co., which provided Mr. Madoff's primary bank account for moving stolen funds, paid $2.6 billion in a settlement with federal authorities and acknowledged responsibility for failing to stop the fraud.

Billions of dollars in investor funds flowed into TD Bank from Stanford's depositors over the years but weren't invested to produce the returns that TD Bank knew were being promised, according to lawyers for Mr. Stanford's victims and hedge funds holding claims in the receivership.

A complaint they filed last month also targeted HSBC Bank PLC, Bank of Houston, Trustmark National Bank, and Société Générale Private Banking, all of which had ties to Mr. Stanford's financial empire.

In addition to the lawsuit, those investors have lobbied lawmakers, met with Securities and Exchange Commission Chairman Jay Clayton and pressed for the return of frozen overseas assets, according to people familiar with the matter.

Since Mr. Stanford's arrest and the collapse of Stanford International Bank in 2009, what remains of his far-flung financial operation has been wound down by lawyers and consultants in Antigua and Dallas, where court-appointed liquidators have sold assets, sued alleged beneficiaries of the fraud and distributed proceeds across roughly 18,000 victims.

The Dallas receiver, Ralph Janvey, has recovered roughly $573 million through last month, according to court records. After subtracting professional fees and other expenses, Mr. Janvey has been authorized to distribute $232 million to victims, or roughly 4.5 cents on the dollar.

That number is expected to rise when the receiver hands out the proceeds from a $63 million settlement with law firm Proskauer Rose LLP over past work for Stanford. But an appeals court has also tied up other settlement money recently that was earmarked for distribution.

Last month, the U.S. Court of Appeals for the Fifth Circuit rejected a $65 million settlement involving insurance companies linked to Stanford, taking issue with deal terms that barred others from asserting claims against the carriers. On Monday, the panel also held up a potential $125 million judgment against Colorado billionaire Gary Magness, a Stanford client who allegedly received stolen funds before the fraud collapsed, while he pursues a defense against the judgment.

Mr. Stanford is serving a 110-year prison sentence in central Florida after his 2012 conviction on 13 felony counts.

Write to Andrew Scurria at Andrew.Scurria@wsj.com

(END) Dow Jones Newswires

June 18, 2019 15:46 ET (19:46 GMT)

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