Stanford to Spend Weekend in Jail

By Laurel Brubaker Calkins and Andrew M. Harris

June 27 (Bloomberg) -- R. Allen Stanford, accused of swindling investors in a $7 billion fraud, will be held in jail through the weekend until a June 29 hearing on whether an order granting him bail should be reversed.

The request to delay the Texas financier’s release on bail was filed yesterday with U.S. District Judge David Hittner, who outranks U.S. Magistrate Judge Frances Stacy and to whom the Stanford criminal case is ultimately assigned. Stacy, at a June 25 hearing, set the bail at $500,000 and required Stanford to post a $100,000 cash deposit.

Hittner ordered the government to file a formal motion to revoke Stanford’s bail by 9 a.m. on June 29, and set oral arguments on the motion for 10:30 a.m. the same day.

“Allen Stanford has demonstrated his desire to stand and fight, and not run,” Dick DeGuerin, Stanford’s lawyer, said in a phone interview after yesterday’s ruling. “I haven’t talked to him, but of course he’s disappointed” he will remain in jail through the weekend, DeGuerin said.

Stanford pleaded not guilty on June 25 to accusations he swindled at least 30,000 investors in a scheme involving the sale of certificates of deposit through his Antiguan bank.

He faces 21 counts of conspiracy, fraud, obstruction and money laundering. Prosecutors accuse him and five other people of working to mislead investors about the nature and oversight of the certificates, which were sold through the financier’s Antigua-based Stanford International Bank Ltd.

SEC Lawsuit

A federal grand jury indicted Stanford on June 18 on charges mirroring allegations made by the U.S. Securities and Exchange Commission in a lawsuit filed in February against him, two colleagues and three of his businesses. Stanford was arrested that evening in Fredericksburg, Virginia, where he was staying while meeting with lawyers about the civil complaint.

Stanford has denied any wrongdoing in the civil lawsuit. “I’m not a damn swindler,” he told Bloomberg News in an interview on April 20.

When Stacy approved Stanford’s bail after a six-hour bond hearing, prosecutors asked for a delay to give them time to appeal.

“The stay is appropriate because there is a strong likelihood that the extraordinary flight risk indicators in this case will lead this court to order Stanford’s detention or, at a minimum, set a substantially higher bond,” prosecutors said in their request yesterday.

‘Government Over-Exaggerates’

“The government over-exaggerates any risk of flight,” DeGuerin said in a response opposing the government’s motion to put on hold the bail order. “Allen Stanford through his own conduct has affirmatively demonstrated his intention to appear for trial.”

DeGuerin said Stanford’s friends and family had gathered the $100,000 cash deposit required to bail the financier out of jail. Stacy ordered that the deposit be contributed by friends and family and not drawn from Stanford’s funds.

“I think he’ll be very motivated not to flee if he raises the money from friends and relatives,” Stacy told lawyers when setting Stanford’s bail.

Court records show the deposit was received yesterday.

Ian McCaleb, a Justice Department spokesman, declined to comment on Hittner’s decision.

The criminal case is U.S. v. Stanford, H-09-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is SEC v. Stanford International Bank, 3:09-cv-00298-N, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporters on this story: Andrew M. Harris in Chicago federal court at aharris16@bloomberg.net; Laurel Brubaker Calkins in Houston federal court at laurel@calkins.us.com.

GM to take on future product liability claims

General Motors Corp. has agreed to take on responsibility for future product liability claims, removing what could have been a sizable roadblock on the automaker's path to a quick sale of its assets and emergence from Chapter 11 bankruptcy as a new company.

As part of its government-backed restructuring plan, GM wants to sell the bulk of its assets to a new company and leave behind unprofitable assets and other liabilities such as product-related lawsuits. A hearing on the proposed sale is scheduled for Tuesday.

But in a concession to consumer groups and state officials who had threatened to block the sale because of product liability concerns, the new company will now assume responsibility for future claims involving vehicles made by the old company, according to documents filed in federal bankruptcy court in New York on Friday.

Under the automaker's previous plan, "New GM" would not have assumed any liability for future claims related to GM vehicles made before the sale and creation of the new company. That meant that consumers who wanted to file a lawsuit related to a defective GM vehicle would have had to seek compensation from "Old GM," a collection of mostly unprofitable assets left over after the sale, where there likely would be nothing left to pay their claims.

But under the new plan, "New GM" will not assume liability for already pending claims against the automaker and those people will still be forced to seek compensation from "Old GM."

"The fact that 'New GM' will protect consumers injured by defective 'Old GM' cars is a positive development for public safety," The Ad Hoc Committee of Consumer Victims of Chrysler and GM said in a statement released Saturday.

But the group said more needs to be done, noting that GM's concession doesn't help people that have already been hurt by its vehicles. It also said consumers hurt by fellow automaker Chrysler LLC still have little recourse.

As part of its plan to sell most of itself to a group led by Italy's Fiat Group SpA and emerge from Chapter 11, Auburn Hills, Mich.-based Chrysler also asked the judge overseeing its case for permission to leave behind its past and future product liability claims.

Consumer groups, as well as several individuals with pending claims against Chrysler, objected and some even took their arguments to the Supreme Court before the sale was ultimately approved and the automaker emerged from court oversight shortly thereafter.

GM, which filed for Chapter 11 on June 1, has said it wants to spend no more than 60 to 90 days under bankruptcy protection and that a key part of meeting that goal will be a quick sale of the company's assets.

Under the deal brokered with President Barack Obama's administration, the U.S. government will get a 60 percent ownership stake in the new GM. The Canadian government will get 12.5 percent, with the United Auto Workers union taking a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

But even with the resolution of the product liability issues, GM still faces numerous objections to the sale, including ones filed by a group of its unsecured bondholders, a handful of states and cities and individual retirees and shareholders.

Madoff's Wife Cedes Asset Claim

Ruth Madoff, the wife of one of the most reviled swindlers in history, has agreed to give up her potential claim to more than $80 million worth of assets, keeping just $2.5 million in cash in an agreement reached with federal prosecutors.

The settlement with the U.S. attorney's office in Manhattan was approved late Friday by U.S. District Court Judge Denny Chin, who is scheduled to sentence her husband, Bernard Madoff, on Monday in a final courtroom stand that will seal his legacy as one of the world's most successful thieves.

Mrs. Madoff won't attend her husband's sentencing in federal court ...