Victim of a Ponzi Scheme? A Third Party Recovery Lawsuit May Be the Only Way to Recover Your Hard Earned Money (photo of Charles Ponzi courtesy of wikipedia.org)
[Post updated] Within a couple weeks of the breaking news about the collapse of Bernie Madoff’s financial empire, people started questioning the possible involvement of Bernie’s wife, Ruth Madoff. Feds say her posh New York City apartment and elegant lifestyle was all financed through Bernie’s crimes. Ruth cooperated with the feds and the receiver and was never prosecuted. Now will Susan Stinson be so lucky?
Susan is the wife of Robert Stinson, the reported kingpin accused of running a Ponzi scheme that bilked 140 investors of $16 million. The government says Stinson took her family on a $24,000 California vacation.Why is the wife’s rather extravagant vacation newsworthy? Because the trip was taken just weeks after Mr. and Mrs. Stinson assets were ordered frozen.
Was this a last hurrah for husband Robert? Maybe. He was booked at one of the hotels as a guest. Published reports do not make it clear if he actually joined his wife on the trip, however.
The court appointed receiver doesn’t think highly of the trip, he thinks Susan should be held in contempt and even go to jail.
Susan apparently told authorities that she failed to carefully read the order. I pulled the order, which was issued on June 29th. To me, there is nothing ambiguous about it. The judge restrained and enjoined Susan Stinson from wasting or dissipating any assets. Bank accounts, cash; it was all frozen.
Although Susan Stinson is not named in the fraud complaint against her husband, she is considered a “relief defendant.” That means the government has not charged her with the original Ponzi scheme conduct but believes she has enjoyed the proceeds of her husband’s criminal conduct.
After spending $24,000 for a California trip, that is spending monies that may belong to her husband’s alleged victims and spending money after being ordered not to, Susan may find herself vacationing at Club Fed instead of Club Med. And that brings up third party liability. More on that below
There is another touch of irony in this story. The name of Robert Stinson’s constellation of companies was Life’s Good.
Post Updated 2012 and 2014: Robert Stinson’s 16 million Ponzi scheme? He was indicted and convicted of charges related to the Ponzi scheme. In April of 2012 he was sentenced to 33 years in prison.
But what about his victims? As of this update the SEC has only recovered $580,000. That’s less than 4 cents on the dollar. Tragically, some folks lost their entire life savings.
Going after Stinson won’t be fruitful. How much can he make as a convicted felon after being in prison for several decades.
Is there any hope for investors? In this case the answer looks bleak but often there is hope.
Third Party Recovery in Ponzi Schemes
Stinson created a phony investment fund called Life’s Good. Somehow he tricked Morningstar into putting that fund on its list of best performing funds. A receiver appointed by the SEC sued Morningstar and claimed the popular rating agency aided and abetted Stinson in violation of federal securities laws. Unfortunately for investors after a trial the court ruled in favor of Morningstar and said it owed no duty to the investors.
Ponzi Schemes and Third Party Recovery
Determining how much money victims will see is always difficult. Much depends on whether the fraudster’s assets were spent or hidden and how aggressive the receiver is. Unfortunately, in most cases there is no receiver appointed, leaving victims to collect for themselves.
People victimized by fraud should contact a lawyer as soon as possible. Delay allows other creditors to get first in line and allows the fraudster to hide or spend whatever money is remaining. Often we can find a third party who may have aided and abetted the fraudster. Sometimes that is a bank, a family member, audit or accounting firm or a lawyer. Although the third party recovery claim didn’t work in this case, they often do.
Third parties may be liable if they actively assisted the fraudster or owed a legal or fiduciary duty to the investor. Every case is different but often we can find such a third party.
Did a bank turn a blind eye to suspicious deposits? Did a lawyer actively help a Ponzi schemer cover his tracks? Did an audit firm botch an audit knowing the audit would be relied on by investors? Did a spouse spend money knowing it was proceeds from a fraud or scam?
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If you are the victim of a Ponzi scheme, financial fraud or legal malpractice, contact the asset recovery lawyers at Mahany Law Our fraud recovery lawyers have helped people across the U.S. For a no obligation, no fee consultation, contact attorney Brian Mahany today online, by email or by phone at (202) 800-9791. Cases handled throughout the United States.