Diplomat Caught in Stanford Ponzi Scheme Can Get Bankruptcy Relief

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By Daniel Gill

A former U.S. ambassador to Ecuador and State Department official can remain in bankruptcy despite a dismissal motion brought by the receiver for the notorious Stanford Financial Group, the U.S. District Court for the District of Maryland held Jan. 30 ( Janvey v. Romero , 2017 BL 26323, D. Md., No. Civil No. - JFM-16-3355, 1/30/17 ).

Judge J. Frederick Motz‘s opinion upheld the Maryland bankruptcy court decision that Peter Romero’s bankruptcy case should not be dismissed as a bad faith filing, as was alleged by Ralph S. Janvey, Stanford’s receiver.

After what the bankruptcy court called an “exemplary career” as a diplomat in the U.S. Foreign Service, Romero took a job as a consultant with Stanford, a Texas-based international financial services firm that turned out to be running a massive Ponzi scheme.

Immediately after learning of fraud allegations levied against Stanford, Romero resigned his position and severed all ties with the company, the court said.

Janvey got a judgment against Romero in a Texas district court to recover more than $700,000 of consulting fees he received over the years, the court said.

Romero tried to settle, but Janvey was unwilling to do so, apparently hoping to make an example of Romero for other individuals sued by the receiver for allegedly ill-gotten gains, the court said.

Romero then filed a Chapter 7 case. In Chapter 7 bankruptcy, a debtor’s nonexempt assets are liquidated by a trustee, and the proceeds are distributed to creditors. Subject to certain exceptions, the debtor is awarded a discharge, effectively wiping out dischargeable debts, which are those not subject to an exception.

Many of Romero’s assets were exempt in bankruptcy and beyond the reach of the receiver and Romero’s other creditors. Janvey responded by moving to have the bankruptcy case dismissed as bad faith.

The bankruptcy court rejected Janvey’s argument, and the district court agreed. It noted that Romero cooperated with the Chapter 7 trustee in his case to liquidate non-exempt assets (and at least one exempt boat), and that Romero and his seriously disabled wife lived “a comfortable, but not exorbitant lifestyle.”

The court rejected Janvey’s argument that Romero should be forced to pay his exempt assets to Janvey.

“This is not the law,” it said.

Peter Romero was represented by Kevin G. Hroblak, Whiteford Taylor and Preston LLP, Baltimore. Ralph Janvey’s counsel was Laura Skowronski Bouyea, Venable LLP, Baltimore.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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