3 Years On, Ponzi Scheme Still Haunts a Victim

3 Years On, Ponzi Scheme Still Haunts a Victim
By Paul Sullivan
TWO years before Carol Lovil’s life savings disappeared in R. Allen Stanford’s Ponzi scheme, she lost her husband, John, to cancer. While grieving, she asked herfinancial adviser at the Stanford Financial Group in Houston what she should do.

Two things still haunt her, Mrs. Lovil said in an interview this month.

She said she asked if the money she had in certificates of deposit issued by Stanford International Bank was guaranteed. It was, she said he told her.

She said she also asked whether she should pay off the mortgage on the lake home in the Texas hill country that she and her husband bought in 1999. He advised against that, she said.

When she turned on the television news on Feb. 17, 2009, and saw the offices of the Stanford Financial Group being raided, Mrs. Lovil said she did not worry. Her money was insured, she thought.

But as it became clear that the $7 billion firm, which had been based in Antigua, was running a Ponzi scheme, she began calling and sending e-mails to her adviser to find out how to get her money back. At first, she was told everything was fine and not to worry. But within a week the responses stopped.

“I was lied to about the safety of this investment,” she wrote in one e-mail to the company. In another, she wrote, “I haven’t worked in 12 years, and in my small community jobs for someone my age are scarce.”

Everything she had, except for a small checking account, was invested with Stanford.

Three years later Mrs. Lovil, a fit woman of 69, has seen none of the money that was in Stanford’s fraudulent C.D.’s. She said she would be in worse shape had she not listened to her lawyer, Randall A. Pulman of Pulman, Cappuccio, Pullen & Benson in San Antonio, who told her to sell her house and get a job.

“That was the best advice I ever got,” she said. And it helped put her on a path that has led to a life very different from the one she had before.

All Ponzi schemes look obvious in hindsight, and that gnaws at the people who lose money: how could they have missed the warning signs that everyone else points out afterward?

Kenneth S. Springer, a former F.B.I. agent and founder of Corporate Resolutions, which investigates money managers, said there were no easy tips for avoiding fraud artists. “The lesson is you don’t follow the herd,” he said. “You’ve got to do your own due diligence, and you can’t fall in love with the returns.”

He said one thing to look for is litigation, and Stanford had a history of arbitration cases where investors sued claiming fraud.

While Mr. Stanford was convicted in early March on 13 of 14 counts of fraud and is likely to face life in prison, that is little comfort to the nearly 30,000 people he defrauded. In three years, they have received only the money that was invested in legitimate securities and held at other securities firms. For Mrs. Lovil that has been about $100,000.

Whether she will ever see any of the nearly $500,000 she lost in Stanford C.D.’s is unclear. The Securities Investor Protection Corporation, a federally mandated backstop against losses in the securities markets, said in 2009 that it would not cover claims from Stanford C.D.’s because the corporation’s protection applies to assets that vanish from an account, not to those that have simply lost value, as in this case.

Coverage by the Federal Deposit Insurance Corporation does not apply either because Stanford International Bank was based outside the United States. In the last three years, the court-appointed receiver has yet to pay any claims from the property it has seized. In fact, there still is not a claims process in the United States.

Meanwhile, Mr. Stanford’s conviction is meager consolation to Mrs. Lovil. “I lost a lot more than money,” she said at Bella Sera, an Italian restaurant in Marble Falls, about 20 minutes from her home. “I lost trust. I don’t trust anyone now.”

She added, “I blame my broker Mark Tidwell more than I do Allen Stanford.”

D. Mark Tidwell had been the couple’s broker at Merrill Lynch, and in 2004 when he moved to the Stanford Financial Group in Houston, he took the Lovils with him. Fairly quickly he began selling the bulk of the Lovils’ securities — most of it in retirement accounts from Mr. Lovil’s career at Nestlé — and buying Stanford C.D.’s.

These C.D.’s carried interest rates that were usually double the prevailing rates — and paid brokers commissions of up to one percentage point of the interest, Mr. Pulman said.

Mr. Tidwell, who left Stanford two months before the Ponzi scheme became public, now runs Zenith Wealth Management in Houston, with a partner from Stanford. He said he warned Mrs. Lovil to move her money away from the firm, but she did not heed his advice. (He would not address the issue of Mrs. Lovil’s mortgage.) Mrs. Lovil said Mr. Tidwell had called her after he left the company, but never told her that anything was wrong.

“Even if I made a mistake in overconcentrating, she had plenty of opportunity and time to get out,” Mr. Tidwell said when asked why he put nearly three-quarters of the Lovils’ money in one asset, the Stanford C.D.’s He blamed the management of Mrs. Lovil’s account after he left.

“As difficult as it was to lose my husband,” Mrs. Lovil said, “at least you knew what the outcome should be.” Losing her life savings “was more difficult,” she said. “It was more shocking.”

Three years later, she said, she was making progress. In September 2009, she got a job at the Llano County Library, where she is an assistant manager.

“I saw an advertisement on the way home from church and thought maybe I should stop in,” said Mrs. Lovil, who worked as an English teacher in Houston more than a decade earlier. “I was the last applicant to apply. It has been the most wonderful experience.”

But having a job has meant this stage of her life is not what she had expected. “You can’t play golf or go to Bible study during the day,” she said. “However, I live five minutes from work, and I look forward to going to work every day. It’s fulfilling.”

As for her house, she tried to keep it and said she could have done so had she paid off her mortgage. But after going over her finances with her local banker, she realized she could not afford to keep the house nor could she qualify for any mortgage refinancing program. So she put it up for sale.

A few days after she got the library job, , she received an offer on the house that turned out to be a gift in disguise. Her real estate agent called to tell her that a local rancher had bought her house as an investment. The agent had told him her story, and he offered to lease it back to her for as long as she wanted to live there.

“I was frantic at first because I hadn’t been a renter since my early 20s,” she said. But now she has changed her tune. “It’s taken a lot of the stress out of my life,” she said. Her savings are about $800 a month even though her rent is close to her old mortgage payment, because she does not have to cover property taxes.

Mr. Pulman, her lawyer, said he hoped Mr. Stanford’s conviction would help allow plaintiffs’ motions pending in federal court to proceed. But that alone will not be enough for Mrs. Lovil to get her money back. “Stanford’s guilty, but the problem is he doesn’t have any money,” Mr. Pulman said. “It’s the guys around him we need to go after, the ones who had knowledge of this.”

He said that would be difficult as long as the case was in federal court, where the bar to establish liability is higher.

As for Mrs. Lovil, she says she tries not to think about when or even if she will recover her money. “I thought I was financially secure,” she said. “I took trips to Europe. You can’t travel like you dreamed about when you’re working.”