A judge this month ordered disgraced financier R. Allen Stanford to disgorge more than $6.7 billion of his ill-gotten gains.
The order, reported by Andrew Harris of Bloomberg News, requires Stanford to pay a $5.9 billion penalty along with $861 million in interest, which may help clear the way for Stanford victims to begin receiving payments.
Those victims, many of whom thought they were investing in low-risk, high-reward certificates of deposit, have so far received little in the way of compensation for their losses. A $55 million payout requested by the court-appointed receiver in the case, Ralph Janvey, would pay a penny for each dollar of the $893 million in receiver-approved claims sought by 17,000 claimants bilked by Stanford.
That payout may be closer to happening in the wake of U.S. District Judge David Godbey's ruling, but that's probably little comfort to victims who are unlikely to ever be made whole. According to court documents, Stanford's "bank" held less than $500 million worth of securities at the end of 2008.
The horrendous losses of Stanford's victims offer a cautionary tale for investors who would seek high yields from foreign CDs that are not backed by the Federal Deposit Insurance Corp. No one likes the puny CD rates being offered by most legitimate banks these days, but it sure beats the alternative of losing the vast majority of your funds and waiting for the rest to work its way through the legal system over a period of years.
What do you think? Will Stanford victims ever be fully compensated? Have you ever invested in a non-FDIC-insured foreign CD?
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