Supreme Court allows class action for Stanford Ponzi scheme victims

[JURIST] The US Supreme Court [official website] ruled [opinion, PDF] 7-2 Wednesday in Chadbourne & Parke LLP v. Troice [SCOTUSblog backgrounder] that the Securities Litigation Uniform Standards Act of 1998 (SLUSA) [text, PDF] does not bar the plaintiffs' state law class action suit. The lawsuit was brought by the victims of the multibillion dollar Ponzi scheme orchestrated by Allen Stanford [BBC profile; JURIST news archive]. In March 2012 the US Court of Appeals for the Fifth Circuit [official website] overturned [JURIST report] a lower court decision that found the lawsuits violated the SLUSA, prompting an appeal to the Supreme Court. Writing for the court, Justice Stephen Breyer affirmed the Fifth Circuit's holding that the SLUSA does not preclude the plaintiffs' state-law class action suits because the certificates of deposit sold by Stanford International Bank does not a "covered security" within the meaning of the Act. Justice Anthony Kennedy filed a dissenting opinion, which was joined by Justice Samuel Alito.

The Supreme Court's ruling is the latest legal development arising out of Stanford's Ponzi scheme. In August a federal judge in Florida dismissed [JURIST report] a lawsuit against the Securities and Exchange Commission (SEC) [official website] over the agency's alleged failure to report Stanford's Ponzi scheme to the Securities Investor Protection Corporation (SIPC) [official website]. In June 2012 Stanford was sentenced [JURIST report] to 110 years in prison for his Ponzi scheme. The trial against Stanford began after a federal judged ruled [JURIST report] in 2011 that he was competent to stand trial, overruling a previous determination [JURIST report] that his anti-anxiety and anti-depression medications rendered him unable to meaningfully contribute to his defense. In February 2011, Stanford accused [JURIST report] several federal agents of depriving him of his constitutional rights through abusive law-enforcement methods.

 

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