Zacarias v. Official Stanford Int'l Bank, Ltd.
| Decision Date | 22 July 2019 |
| Docket Number | No. 17-11073 CONSOLIDATED WITH 17-11114, 17-11122, 17-11127, 17-11128, 17-11129,17-11073 CONSOLIDATED WITH 17-11114, 17-11122, 17-11127, 17-11128, 17-11129 |
| Citation | 931 F.3d 382 |
| Parties | Antonio Jubis ZACARIAS; Roberto Barbar, Plaintiffs - Appellants v. STANFORD INTERNATIONAL BANK, LIMITED, Defendant Barry L. Rupert; Carol Rupert; Michael Rishmague; Lionel Alessio; Dan Auli Panos, et al, Movants - Appellants v. Official Stanford Investors’ Committee; Manuel Canabal; Willis, Limited; Willis of Colorado, Incorporated, Interested Parties - Appellees Willis Group Holdings Limited; Willis North America, Incorporated; Amy S. Baranoucky; Bowen Miclette ; Britt, Incorporated; Ralph S. Janvey ; Samuel Troice, Appellees v. Edna Able, Interested Party - Appellant The Official Stanford Investors’ Committee; Samuel Troice, on their own behalf and on behalf of a class of all others similarly situated; Manuel Canabal, on their own behalf and on behalf of a class of all others similarly situated, Plaintiffs - Appellees v. Carlos Tisminesky; Roberto Barbar; Ana Lorena Nuila De Gadala-Maria, Plaintiffs - Appellants v. Willis of Colorado, Incorporated; Willis Limited; Willis Group Holdings Limited; Willis North America, Incorporated; Amy S. Baranoucky; Bowen, Miclette ; Britt, Incorporated, Defendants - Appellees v. Barry L. Rupert; Carol Rupert; Michael Rishmague; Lionel Alessio; Dan Auli Panos, Edna Able; et al, Appellants v. Ralph S. Janvey, in his Capacity as Court-Appointed Receiver for Stanford Receivership Estate, Appellee Edna Able; Robert C. Ahders; Rodrigo Rivera Alcayaga; David Arntsen; Carlie Arntsen; et al, Plaintiffs - Appellants v. Willis of Colorado, Incorporated; WGH Holdings, Ltd.; Willis Ltd., Defendants - Appellees Antonio Jubis Zacarias, Individual; Ana Virginia Gonzalez De Jubis, Individual; Gladis Jubis De Acuna, Individual; Eric Acuna Jubis, Individual; Tulio Capriles, Individual; Jorge Casaus Herrero, Individual; Martha Blanchet, Individual; Luis Zabala, Individual; Emma Lopez, Individual; Elba De La Torre, Individual, Plaintiffs - Appellants v. Willis Limited; Willis of Colorado, Incorporated, Defendants - Appellees Ana Lorena Nuila De Gadala-maria, Individual; Jose Nuila, Individual; Jose Nuila Fuentes, Individual; Gladys Bonilla De Nuila, Individual; Gladys Elena Nuila De Ponce, Individual, et al, Plaintiffs - Appellants v. Willis Limited, a United Kingdom Company; Willis of Colorado, Incorporated, a Colorado Corporation, Defendants - Appellees Carlos Tisminesky, Individual; Rachel Tisminesky, Individual; Felipe Bronstein, Individual; Ethel Tisminesky De Bronstein, Individual; Guy Gerby, Individual; Vicente Juaristi Suarez, Individual; Amparo Mateo Longarela, Individual; Salvador Gavilan, Individual; Larry Frank, Individual; Mercedes Bittan, Individual; Omaira Bermudez, Individual, Plaintiffs - Appellants v. Willis Limited; Willis of Colorado, Incorporated, Defendants - Appellees |
| Court | U.S. Court of Appeals — Fifth Circuit |
Randall Alan Pulman, Leslie Sara Hyman, Esq., Matthew John McGowan, Pulman, Cappuccio, Pullen, Benson & Jones, L.L.P., San Antonio, TX, for Movant-Appellant BARRY L. RUPERT, CAROL RUPERT, MICHAEL RISHMAGUE, LIONEL ALESSIO, DAN AULI PANOS.
Kevin M. Sadler, Baker Botts, L.L.P., Palo Alto, CA, Stephanie Frederique Cagniart, Attorney, Scott Daniel Powers, Baker Botts, L.L.P., Austin, TX, for Appellee RALPH S. JANVEY.
Peter Michael Jung, Clark Hill Strasburger, Dallas, TX, Judith R. Blakeway, Clark Hill Strasburger, San Antonio, TX, Edward C. Snyder, Castillo Snyder, P.C., San Antonio, TX, for Appellee SAMUEL TROICE, MANUEL CANABAL, OFFICIAL STANFORD INVESTORS COMMITTEE.
Christopher John King, Esq., Counsel, Homer Bonner Jacobs, Miami, FL, Curtis Bradley Miner, Esq., Maureen Elizabeth Lefebvre, Esq., Colson Hicks Eidson, Coral Gables, FL, for Plaintiff-Appellant ANTONIO JUBIS ZACARIAS.
Christopher John King, Esq., Counsel, Luis Eduardo Delgado, Homer Bonner Jacobs, Miami, FL, Curtis Bradley Miner, Esq., Maureen Elizabeth Lefebvre, Esq., Colson Hicks Eidson, Coral Gables, FL, for Plaintiff-Appellant ROBERTO BARBAR.
Jonathan D. Polkes, Weil, Gotshal & Manges, L.L.P., New York, NY, for Interested Party-Appellee WILLIS OF COLORADO, INCORPORATED, WILLIS, LIMITED, WILLIS GROUP HOLDINGS LIMITED, WILLIS NORTH AMERICA, INCORPORATED.
Jessica Lynn Crutcher, Mayer Brown, L.L.P., Houston, TX, Mark D. Manela, Esq., Manela Law Firm, Houston, TX, for Appellee AMY S. BARANOUCKY.
Bradley Wayne Foster, Esq., Counsel, Hunton Andrews Kurth, L.L.P., Dallas, TX, for BOWEN, MICLETTE & BRITT, INCORPORATED.
William Shawn Staples, Stanley Law, P.C., Houston, TX, for Interested Party-Appellant EDNA ABLE.
Before HIGGINBOTHAM, GRAVES, and WILLETT, Circuit Judges.
The Securities and Exchange Commission filed a complaint in the Northern District of Texas against Robert Allen Stanford, the Stanford International Bank, and other Stanford entities, alleging "a massive, ongoing fraud." Invoking the court’s long-held statutory authority, the Commission requested that the district court take custody of the troubled Stanford entities and delegate control to an appointed officer of the court. The court did so, appointing Ralph Janvey as receiver to "collect" and "marshal" assets owed to the Stanford entities, and to distribute these funds to their defrauded investors to honor commitments to the extent the receiver’s efforts recouped monies from the Ponzi-scheme players.
The receiver has pursued persons and entities allegedly complicit in Stanford’s Ponzi scheme. Through settlements with these third parties, the receiver retrieved investment losses, which it then distributed pro rata to investors through a court-supervised claims process. Four years into this ongoing process, the receiver sued two of Stanford’s insurance brokers as participants in the fraudulent scheme. As with the receiver’s other suits, monies it recovered from this suit would be distributed by the receiver pro rata to investor claimants. After years of litigation, the insurance brokers, negotiating for complete peace, agreed to settle conditioned on bar orders enjoining related Ponzi-scheme suits filed against the brokers. The district court entered the bar orders and approved the settlements. Certain objectors bring this appeal challenging the district court’s jurisdiction and discretion to enter the bar orders. We affirm.
The story is well known. Under the operation of Robert Allen Stanford, the Antigua-based Stanford International Bank issued certificates of deposit, (SIB CDs) and marketed them throughout the United States and Latin America.1 Stanford’s financial advisors promoted SIB CDs by blurring the line between the Antiguan bank and Stanford’s United States-based financial advisors, creating the impression that SIB CDs were better protected than similar investments backed by the Federal Deposit Insurance Corporation. Stanford trained its brokers to assure potential investors that the Bank’s investments were highly liquid and achieved consistent double-digit annual returns, all under the protection of extensive insurance coverage.
Here, the receiver alleges that, to support their marketing activities, the Stanford entities purchased insurance policies through their insurance brokers, Bowen, Miclette & Britt, Inc. (BMB) from the 1990s and Willis from 2004. As the receiver describes their role, the Stanford entities then touted insurance policies covering the Bank in its marketing materials. Promotional materials presented the Bank’s unique insurance coverage, describing a gauntlet of audits and risk analyses the Bank passed to satisfy its insurers, perpetuating the impression that Bank deposits were fully insured. They were distributed widely and were routinely distributed to Stanford’s client base. BMB and later Willis also provided letters of coverage to Stanford financial advisors, often originally drafted by Stanford personnel. These letters described the Stanford International Bank’s management as "first class business people," and described how the brokers "placed" Lloyd’s of London insurance policies for the Bank. Letters and promotional materials did not disclose the policies’ true coverage.
Stanford’s marketing efforts succeeded. Insurance played a central role in the Bank’s overall attractiveness to investors. Not only prospective investors who directly viewed the brokers’ letters, but also the Bank’s client base more generally, were drawn to the combination of relatively high rates of return and purportedly comprehensive insurance coverage. Over two decades, the Bank issued more than $7 billion in SIB CDs to investors.
Maturing CDs were redeemed with new investors’ principal payments.2 Deposits were meanwhile commingled and allocated to illiquid investments, primarily in Antiguan real estate—a portfolio monitored not by a team of professional analysts, but by only two individuals, Robert Allen Stanford and James Davis, the Bank’s chief financial officer. BMB and Willis performed insurance assessments on all aspects of Stanford’s businesses, such that they enjoyed full understanding of operations. In the process, the brokers learned that SIB CDs financed an illiquid real-estate fund, and that the quality and risk of the underlying investments had not been disclosed to investors. Moreover, the brokers procured policies that provided no meaningful coverage of deposits in the Bank. When the Ponzi scheme collapsed, $7 billion in deposits were protected by $50 million in insurance coverage. Presenting as a legitimate enterprise, it was nothing but a single, massive fraudulent scheme.
The Stanford Ponzi scheme collapsed in the wake of the 2008 financial crisis, when the stream of new depositors ran dry.3 Among the defrauded investors, 18,000 SIB CD holders lost around $5 billion. On February 17, 2009, the SEC filed its complaint against Robert Allen Stanford, the Bank, and other Stanford entities, alleging, inter alia, violations of the Securities Act of 1933, the Securities Exchange Act of 1934 and Rule 10b-5,...
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