Courts Seek To Recover Stanford's Political Pledges

A court-appointed officer in Dallas has sued national party committees, both Democratic and Republican, to recover campaign contributions from indicted financier R. Allen Stanford. The money at stake totals $1.6 million.

The officer, known as a receiver, says the money belongs to investors who were allegedly defrauded by Stanford. The disgraced financier is accused of using their money in a Ponzi scheme instead of investing it.

"Stanford's investors were simply looking for safe investments and low-risk opportunities," Robert Khuzami, enforcement chief for the Securities and Exchange Commission, said last June, when Stanford was indicted by the Justice Department. "With Stanford, they thought they had found such an opportunity."

The SEC froze Stanford's assets a year ago, well before the Justice Department indicted him. The SEC also asked the federal district court in Dallas to appoint the receiver, who's responsible for recovering other money that Stanford had thrown around in his high-flying lifestyle.

Lack Of Urgency

The receiver's lawsuit against the party committees was filed late Friday in federal court in Dallas.

Kevin Sadler, a lawyer for the receiver, says the defrauded investors are in desperate straits, "and quite frankly, the urgency that we have and the investors have — I'm not seeing that it's shared by those who are in a position to return the money."

Sadler has twice asked the politicos for refunds. A round of letters last March produced $87,800. He says another batch of letters this month was generally ignored, "and so one of the ways to instill a sense of urgency upon someone is to make them come to court and explain why they have not acted to return the money."

The lawsuit targets the party committees because Stanford gave them the biggest checks: $950,500 for the Democratic Senatorial Campaign Committee; and $200,000 for the Democratic Congressional Campaign Committee. All three Republican organizations got Stanford funds: $128,500 to the Republican National Committee; $83,345 to the National Republican Senatorial Committee; and $238,500 to the National Republican Congressional Committee. Stanford apparently didn't favor the Democratic National Committee, according to the receiver's records.

Three of the five party committees in the suit didn't respond to NPR's queries. The National Republican Senatorial Committee declined to comment.

The National Republican Congressional Committee offered a two-part response: It no longer has the Stanford money, a spokesman said, and the committee's leadership has changed.

Commonly Used Arguments

A lawmaker who isn't involved in the suit, Rep. Charlie Rangel (D-NY), got $35,800 from Stanford sources, the receiver says. Rangel's office says that when Stanford's empire fell a year ago, Rangel took his Stanford contributions and gave an equivalent amount to charities. (Rangel's office also says that $24,000 of the total was earmarked by previous agreement to other Democrats, and only passed through the Rangel Victory Committee.)

These are commonly used arguments in dealing with tainted contributions: The money's gone. We gave it to charity. The guys who took it aren't in charge anymore.

Sadler dismisses all of those as any sort of legal analysis.

"It might rise to the level of interesting, but it's not legally relevant," he says.

'A Very Ripe Target'

Jason Gold, head of the bankruptcy practice at the Washington law firm Wiley Rein, says the party committees may run into trouble using the usual arguments.

Although he says he doesn't recall ever seeing a similar case of a receiver suing to recover campaign contributions, he says of the Stanford money: "It's a very ripe target."

Its ripeness comes from the legal principles involved. The suit isn't about campaign finance law; it's about the law on fraudulent transfers. Under that law, a defendant has to show that the transfer of money actually bought something. But buying something with campaign contributions is what gets you indicted in the world of politics.

"Here, it's really going to be very difficult to defend the case, because after all, a contribution is supposed to be a gift," says Gold. "There's not supposed to be a quid pro quo. In fact, if there is a quid pro quo, it could be seen as a bribe or some other inappropriate attempt to influence policy or action."

And that's why, if this case proceeds, the campaign committees could find themselves in a legal box.

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.