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Fifth Circuit rules Receiver not required to arbitrate $215 million fraudulent transfer claim against former Stanford financial advisers

DALLAS, March 16, 2017 – Baker Botts a leading international law firm today announced that on March 16, 2017, the Fifth Circuit Court of Appeals issued its mandate in Janvey v. Alguire, Case No. 14-10857, bringing to a close a long-running dispute between the Stanford Receiver and more than 300 former Stanford financial advisers who were trying to compel the Receiver to assert his claims against them in arbitration.

The financial advisers had asserted that the Receiver was bound by Allen Stanford’s agreements with them to arbitrate any disputes arising out of their employment with Stanford.  In a per curiam opinion, a panel of the Fifth Circuit unanimously held that the Receiver was not bound to those arbitration agreements because he was bringing his claims on behalf of Stanford International Bank alone, a receivership entity that never had any arbitration agreement with the former Stanford brokers. 

“The Receiver’s lawsuit seeks to recover more than $215 million in fraudulent transfers made to the former Stanford brokers, all of whom profited from the sale of fraudulent Stanford International Bank CDs,” said Kevin Sadler, a partner with Baker Botts and the lead lawyer representing the Receiver. 

In a concurring opinion, Judge Higginbotham colorfully summarized the Receiver’s lawsuit thusly:

“The present case concerns the proper division of illegally procured booty from victims of a criminal enterprise—over $200 million, payable but frozen in accounts of sales persons of the enterprise, some having earned in excess of $2 million for their role in the scheme. In short, we have in judicial control over $200 million in booty, undisputed to be proceeds from the criminal scheme.”

Several years and thousands of miles were logged between Dallas and New Orleans in the dispute over the arbitration issue leading up to the Fifth Circuit’s recent ruling:  

  • In 2010, the District Court entered an injunction, freezing more than $25 million in assets nominally owned by the financial advisers, which assets were subject to Stanford control at the time the Receivership was instituted in 2009.  That injunction was affirmed by the Fifth Circuit in 2010 over the objection of the former Stanford financial advisers, who argued, among other things, that the Receiver was required to arbitrate his claims.  
  • In its original 2010 opinion, the Fifth Circuit concluded that the Receiver was not required to arbitrate his claims with the financial advisers because the Receiver stood in the shoes of Stanford’s creditors in the assertion of his fraudulent transfer claims, rather than in the shoes of the Stanford entities.  The Fifth Circuit later withdrew the part of its opinion concerning arbitration, concluding that the District Court should have addressed the arbitration issue in the first instance.  
  • The case then returned to the District Court, which, in 2011, decided the arbitration issue in favor of the Receiver based on the reasoning in the original 2010 Fifth Circuit opinion.  The case then returned to the Fifth Circuit. 
  • In 2013, the Fifth Circuit reversed its original reasoning on the standing issue and remanded the case to the District Court to determine whether the Receiver was required to arbitrate his claims in light of the Fifth Circuit’s conclusion that the Receiver was required to stand in the shoes of the Stanford entities. 
  • In 2014, the District Court concluded that the Receiver was not required to arbitrate even acting as a representative of the Stanford entities.  The District Court rejected the Receiver’s argument that he could stand in the shoes of Stanford International Bank alone, rather than in the shoes of the Stanford entities that signed the arbitration agreements with the former Stanford financial advisers.  But the District Court concluded that the arbitration agreements were unenforceable.  The case then returned to the Fifth Circuit.
  • In its latest opinion on the arbitration issue, the Fifth Circuit concluded that the Receiver was properly acting on behalf of Stanford International Bank alone, and that Stanford International Bank had not consented to arbitrate with the former Stanford financial advisers. 

Following issuance of the mandate, the case now returns to the District Court where the financial advisers, to avoid a judgment in favor of the Receiver, will be required to prove both that they provided reasonably equivalent value to Stanford International Bank in exchange for the fraudulent transfers they received and that they took those transfers in good faith.  They will have to do so in in view of the following observation from the Fifth Circuit in its 2017 opinion: 

“The defendants argue that the inflated commissions paid to them under the contracts benefited the Bank because they induced more creditors to invest in the Bank, but this argument conflates Stanford with his victim corporations. Expanding the number of defrauded investors in the Bank merely expanded the Bank’s ultimate liabilities and increased the injury to the Bank; it did not benefit the Bank as a corporate entity distinct from the fraudster, Stanford.”

The Baker Botts Team included Kevin Sadler, Scott Powers, Stephanie Cagniart, Sherwin Faridifar, Maddy Dwertman, and Ellen Reeder, all of the Austin office.  David Arlington, Brendan Day, Evan Young, Lynne Dodge, and numerous former Baker Botts lawyers and paralegals have provided invaluable assistance over the years in the litigation of the Receiver’s case against the former Stanford financial advisers.  


Baker Botts is an international law firm of approximately 650 lawyers practicing throughout a network of offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology, and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit


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