[JURIST] A judge for the US District Court for the Southern District of Florida [official website] on Monday dismissed a lawsuit against the Securities Exchange Commission (SEC) [official website] regarding the agency's failure to report Allen Stanford [JURIST news archive] and his Ponzi scheme. Judge Robert Scola stated that the SEC market regulator was shielded [Reuters report] under an exception to the Federal Tort Claims Act (FTCA) [DOJ backgrounder], which bars claims arising from misrepresentation or deceit. Scola previously ruled [JURIST report] in September of last year that the lawsuit could proceed under the claim that the SEC had identified that Stanford was running a Ponzi scheme on four occasions prior to his indictment in 2009, and that the SEC had a non-discretionary duty to report Stanford to the Securities Investor Protection Corporation (SIPC) [official website]. The suit also alleges that SEC investigators declined to pursue action against Stanford due to the complexity of his Ponzi scheme and instead chose to pursue easier cases, ignoring several warnings. In Monday's dismissal, however, Scola stated that he had no jurisdiction to decide the case due to the FTCA exception against claims arising from misrepresentation or deceit. Plaintiffs' attorney reported that they plan to appeal Monday's decision and stated, "We believe that the judge did not draw the appropriate distinction between a claim based on a misrepresentation and our claim based on a failure to warn in line with the SEC's mandatory duty to notify SIPC."
Allen Stanford was sentenced to 110 years in prison [JURIST report] in June 2012 for his $7 billion Ponzi scheme. Earlier in March the US Court of Appeals for the Fifth Circuit [official website] ruled that the victims of Stanford's Ponzi scheme would be permitted to pursue a class action [JURIST report]. The trial against Stanford began in January after a judge ruled that he was competent to stand trial [JURIST report]. This judgment overruled a previous holding to the contrary [JURIST report]. In February 2011 Stanford accused [JURIST report] several federal agents of depriving his constitutional rights by using abusive law-enforcement methods. Stanford was first indicted [JURIST report] in 2009.