Political Groups Must Give Back Contributions Made By Convicted Ponzi Schemer

by Wall Street Fraud on December 3, 2012

Securities fraud attorneySeveral Republican and Democratic national political committees have been ordered to return $1.6 million in contributions made by convicted Ponzi schemer R. Allen Stanford. The money will be turned over to the court-appointed receiver tasked with collecting and liquidating assets to repay investors.

The political committees resisted efforts by the receiver, Ralph Janvey, to recover the contributions under the under the Texas Uniform Fraudulent Transfer Act. Janvey filed suit alleging that the committees should have to disgorge the above funds because the contributions were fraudulent transfers, given “with actual intent to hinder, delay, or defraud” creditors of Stanford and his companies.

Ultimately, the Fifth Circuit Court of Appeals agreed, upholding a decision by U.S. Circuit Judge James Dennis. He rejected the committees’ argument that the Texas Uniform Fraudulent Transfer Act was trumped by federal campaign finance laws.

In his opinion, “The committees’ argument would lead to absurd results,” he ruled. “Under their interpretation, they would be allowed to keep funds that were, for example, stolen by force or fraud so long as the contributions did not run afoul” of campaign finance rules.

He further concluded that it did not matter that the money had already been used.  “Nor does the fact that the original funds have been spent preclude the receiver from asserting his claim,” Dennis said.

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