DALLAS -- The attorney supposed to clean up what the government says was Texas businessman R. Allen Stanford's multibillion-dollar Ponzi scheme is managing to anger just about every party involved in the case.
The Securities and Exchange Commission and other stakeholders in the complicated and far-flung case say Dallas attorney Ralph Janvey, appointed by the court to track down billions of missing dollars, has instead become a rogue receiver who refuses to cooperate with the SEC.
"You know everyone in the courtroom is angry with you," said U.S. Judge David Godbey at a recent court hearing.
Stanford's attorneys say Janvey is "exceeding his authority." And John Little, the court-appointed examiner who represents the interests of jilted investors, said they feel Janvey's actions have been shocking and outrageous.
The latest flash point has been Janvey's demands for more than $27 million in fees for himself and the team of lawyers and consultants he hired to take over Stanford's business empire and track down the missing billions. The giant paycheck would come from the same pot of money he is amassing that is supposed to be divided among Stanford's allegedly defrauded investors.
The SEC has accused Stanford and some of his top company officials of running a $7 billion scheme by promising inflated returns to more than 20,000 investors on certificates of deposit at his bank in Antigua. Instead of investing the money, Stanford, who faces additional criminal charges in Houston, paid off old investors with deposits from new investors, according to the government.
Godbey has not ruled on Janvey's mid-May request for nearly $20 million, covering work through April 12. Nor has he ruled on Janvey's request last week for another $7.6 million to cover work for a seven-week period from mid-April to the end of May.
Janvey wants to pay himself and the more than 100 lawyers and consultants he has hired to work the case. But his requested share of the pie is 34% of the $81.1 million of cash on hand the receiver has under his control in a bank account, according to court records. While investors will be fortunate to get back just pennies on the dollar, the attorneys could walk away with millions.
Janvey is requesting nearly $800,000 in fees and expenses for his law firm. The bill also covers nearly $8.9 million in fees and expenses for the advisory firm FTI Consulting, and about $8.4 million for the law firm Baker Botts.
The SEC is fighting Janvey's bill, telling the judge it would be "inappropriate" to pay him the $1.1 million a week he asked for in a filing last week.
The agency complained that Janvey is employing too many high-priced lawyers, including nine partners at Baker Botts and six financial consultants from FTI Consulting who were charging at least $500 an hour. SEC lawyers also took issue with a bill from FTI charging $280 an hour for photocopying and creating shipping labels and binders.
Peter Henning, a professor at Wayne State University's law school and former SEC attorney, said Janvey is in a difficult spot because "these are not cheap cases."
"But there is a concern that it for firms becomes free billing," Henning said.
Securities experts say the relationship between receivers and the SEC is typically more cooperative than contentious. But the friction in this case led the agency, which recommended Janvey for appointment, to try to get a court order stripping him of some of his authority, a motion which was denied.
SEC lawyers acknowledged that they were unable to recall ever before trying to rein in a receiver.
"It is very unusual for there to be this level of conflict between the receiver and the SEC," said Kelly Crawford, a securities lawyer who four times has been a court-appointed receiver. "The SEC remains a watchdog for investors even after the receiver appointment, and if the SEC believes he is not acting in the best interests of investors by charging exorbitant fees ... they are going to step in."
SEC officials declined to publicly discuss their displeasure with Janvey. Rose Romero, the agency's regional director in Fort Worth, said only that the SEC's job is to "look out for the interests of the investors. As with all cases, we are aggressively carrying out this mission in the Stanford case."
For his part, Janvey replied in court papers that "skilled professional services are inherently costly." He said he and the firms he hired are working at a 20-percent discount.
At a recent court hearing, he said this was the first time in his career that he has been in a dispute with the SEC. He also pointed out that he does work for the SEC, but answers to the court.
Janvey's lawyer did not return a message left by the Associated Press. Through his PR firm, for which the receiver requested $165,000 in fees and expenses, Janvey pointed to court documents in which SEC attorney Kevin Edmundson discussed an inability to work out areas of disagreement, but added that "We still want the receiver. We still support the receiver."
One of the impasses is over whether Janvey is targeting innocent investors by going after their original investments in CDs at Stanford's bank in Antigua, as the SEC believes. Janvey has filed lawsuits for $925 million that he is trying to recover from 650 investors and former financial advisers — a move known as a "clawback." The SEC said many of those investors are innocent victims.
Janvey said he is trying to increase the pot of money and make everyone share equally in the losses.
But securities lawyers and the SEC say such a tactic victimizes investors a second time. Last month, Godbey ruled against Janvey, who has taken the issue of whether he can claw back principal to a federal appeals court. Experts in securities law said Janvey's strategy is unusual and unfair.
"To go after principal is just enlarging the number of victims unnecessarily and unwisely," Crawford said.
In addition to the civil case against Stanford in Dallas, he and four executives of his now defunct Stanford Financial Group are accused of orchestrating the massive Ponzi scheme in a criminal indictment in Houston. Investigators said Stanford secretly diverted more than $1.6 billion in investor funds as personal loans to himself.
Stanford and executives Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt pleaded not guilty to various criminal charges in Houston, including wire and mail fraud, in a 21-count indictment issued June 18. The three Stanford executives are free on bond while Stanford himself remains jailed in the Houston area.
James Davis, ex-chief financial officer for Stanford's business empire, has been cooperating with prosecutors and is free on bond.