A titanic transatlantic battle over the British remnants of the banking empire once headed by the disgraced Texan financier Allen Stanford is being fought out in the UK criminal and supreme courts.
The US Department of Justice is looking to seize $110m of Antigua-based Stanford International Bank assets in London, which have been identified by administrator Grant Thornton. The DoJ believes that the proceeds are the result of Mr Stanford's alleged $7bn Ponzi scheme, for which he is currently standing trial in Texas (see box), and so should be repatriated to a US-appointed administrator under criminal forfeiture rules.
Grant Thornton, which was appointed by Antiguan authorities, believes that it should have the right to take control of the assets and then pass them back to creditors, more than 20,000 of whom are victims of alleged fraud, as it sees fit. At present, the $110m is frozen, even though those assets are among the very few that have been identified and recovered around the world.
US receiver Ralph Janvey and Grant Thornton are, in effect, competing over which country should be considered the legal centre for the liquidation and, therefore, who has rights over the assets. Grant Thornton appears to have gained the upper hand following a series of recent rulings in British courts, though the DoJ is still fighting its corner.
The assets were frozen after the Serious Fraud Office, which acts for the DoJ in the UK as part of a reciprocal agreement, successfully argued in 2009 that they should not be touched by the Grant Thornton. The US gained a similar restraint order for around $140m of assets held in Switzerland. However, last August, Mrs Justice Gloster, sitting in the Central Criminal Court in London, ruled that Grant Thornton should be granted a $20m line of credit from the assets to help fund its costs.
On 16 January, Justice Gloster set out her reasons for making that order. She said: "It appeared to me that a funding order providing for a credit line of $20m provided an appropriate and proportionate balance between the reasonable needs of the joint liquidators [Grant Thornton's Marcus Wide and Hugh Dickson] to have access to the funds, in order to maximise recoveries in the liquidation, on the one hand, and the interests of the DoJ on the other to have the restrained assets preserved."
At the end of January, Grant Thornton's legal firm, Lawrence Graham, asked the Supreme Court for permission to fight the freezing order. This was granted, but with the backlog of cases at the Supreme Court the case is unlikely to be heard until 2013.
Crucially, the court did not rule out Grant Thornton being able to have the appeal heard by Justice Gloster in the junior criminal court. It is understood that the administrator and its lawyers have now asked whether she will hear an application to set aside the restraint order, which, if successful, would give Grant Thornton control of the $110m.
A SFO spokesman said: "We continue to act on behalf of the Department of Justice, through what is known as mutual legal assistance, in attempting to repatriate money for the worldwide victims of the Stanford collapse."
Even if this is resolved, billions of dollars are still to be identified and recovered. Some argue that they were lost to funding Mr Stanford's notoriously lavish lifestyle: he is best known in the UK for backing an outlandish $20m, winner-takes-all cricket match in 2008, which England lost to a Caribbean team called the Stanford Superstars.
In court: Stanford's former college pal testifies
James Davis, Mr Stanford's former finance chief, spent Thursday and Friday in a Houston court as the chief prosecution witness against his old boss.
For Mr Stanford, this is an emotional betrayal: the two had been friends for nearly four decades, meeting while in college. Mr Davis described Mr Stanford's managerial style as "charismatic, dictatorial", testifying that the tycoon had been the "chief faker" among those who allegedly cooked the books.
Mr Davis said that he had also "lied about the truthfulness of the statements of Stanford International Bank Limited". He has pleaded guilty to charges of fraud, conspiracy and obstruction as part of a deal with prosecutors that will see him receive a reduced sentence.Reuse content