Troy and Melanie Lillie of Maurice, La. lost their life’s savings in the Stanford Financial Group Ponzi scheme. “We got robbed the day we retired,” Melanie Lillie said in a post-hearing interview at the state Capitol Monday in Jackson.
Her husband worked for Exxon Mobil in Baton Rouge for 29 years before retiring and instantly investing his retirement funds with Stanford. They lost $902,000, she said, while their broker made more than $1 million selling fraudulent certificates of deposit.
The Lillies realized their money was gone when they saw the television coverage of the scam in February. They hope that a trial in November in Louisiana will allow them to recoup some of their losses. Otherwise, Melanie Lillie said, “We’ll have to sell our house.”
Room 113 of the Capitol was filled for the testimonies of four Stanford victims and two former brokers. The hearing was moderated by a panel
comprising Trey Grayson, president of the National Association of Secretaries of State (NASS); Mississippi Secretary of State Delbert Hosemann and Nevada Secretary of State Ross Miller. More than 25 stood when Hosemann asked victims in the audience to identify themselves.
Brookhaven resident Travis Bedsole, 63, testified that he retired at age 60 and invested all of his and his wife’s retirement money with Stanford. In 2008, the Bedsoles took their broker’s advice and moved $385,000 into two CDs, which their broker assured them were all regulated by the federal government. Now all that is gone. Other stocks and bonds are frozen in the receivership.
Bedsole testified he was told he cannot sue his broker.
A resigned Bedsole said he still has plenty of anger about the nightmare that began in February, but had learned to control it.
Hosemann assured Bedsole that the state’s anger had not subsided.
Officials and those who testified implored the state to fight for Securities Investor Protection Corporation (SIPC) funds for victims in the worst circumstances. SIPC, created by Congress in 1970, guarantees up to $500,000 per investor.
The denial of coverage letter from SIPC is weak, said Hosemann, who was optimistic that victims might be able to retrieve some of their frozen funds if “public outrage” was great enough.
Officials also called for more state control over investment regulations, particularly for investments falling under Rule 506 of Regulation D of the Securities Act of 1996.
“(The state) has no pre-issuance oversight. This is the way to stop these things,” said Tom Krebs, former NAASA president and general counsel to the Alabama Securities Commission. “506 is a vehicle for fraud. That’s all it’s been since 1996.”
Hosemann compared the Stanford crash to Hurricane Katrina and hoped the state, which reportedly lost $400 million, would work to recover just as well from this situation. “This is our financial Katrina. Mississippi set the stage on how to recover from such things,” Hosemann said. “Where we go with this is where our legacy will be.”
Hosemann and other members of the NASS plan to fight for more state control of securities regulations in Washington to help prevent crises like the Stanford crash in the future. “This will not stop in the state of Mississippi. We are going to take this to the next level,” he said.
Securities professor Felicia Smith from Mississippi College School of Law, who also testified, was less optimistic: “Fraud is like the air. It’s here.” Smith was skeptical that adding state regulation would help to cure the problem. She recommended more education for investors so they can recognize what is in their best interest.