MORGENSTERN & BLUE, LLC ‘UPDATE ON THE STATUS OF MORGENSTERN & BLUE’S STANFORD-RELATED CASES AND RECOVERY EFFORTS AND OTHER CASE DEVELOPMENTS Avaust 4, 2010 Many of you have asked us for an update on the status of the case and our efforts on your behalf to recover assets relating to the Stanford fraud. First, you should know that we are working very hard on your behalf, and I am personally devoting virtually all of my professional time to this effort, as are several of my colleagues. We are dedicated to doing everything in our power to maximize your recoveries, and we are extremely sensitive to the horrible devastation that this fraud has caused to you and your families. Please be assured that we share your goals of obtaining the greatest possible recoveries in the shortest period of time. All major legal cases (particularly those involving multi-billion dollar frauds) generally take many years to be resolved by the courts, and this one is no exception. Indeed, as your attorneys, the Stanford case is particularly difficult for us as well, because of the confluence of many complicating factors, including: (i) the pending criminal case against, Stanford and certain of his colleagues, which has resulted in a partial stay of formal discovery and document gathering and our ability to push forward on the legal claims we have identified as being the most promising; (ii) the international nature of the fraud, and the involvement of individuals and entities from around the world who may not be cooperative and who resist our efforts to sue them in United States courts; (iii) issues relating to the “dual receivership” structure with Vantis and Mr. Janvey fighting for control of assets, and the disputes between the two competing receivers; (iv) the complex nature of the fraud itself; (v) political ramifications and obstacles, including the involvement of governments and agencies in the United States, Antigua, Venezuela and elsewhere; and (vi) the sheer volume of information, documentary and otherwise, that is involved in a massive Ponzi scheme of this type. Notwithstanding these roadblocks and complications, we believe that we are making significant progress in the cases, as detailed below The Investor Committee — As many of you are aware, we asked the Court more than a year ago to transfer the civil case from the receivership structure to a bankruptcy, because we believed that in a bankruptcy case the victims would have much greater substantive legal rights, and access to documents and information that would be helpful in advancing pending and contemplated legal actions against third parties. We were also extremely dissatisfied with the progress of the receivership, and believed that a bankruptcy case would be a more streamlined and effective procedure for maximizing investor recoveries. Our efforts were opposed by the receiver, the court-appointed examiner, the Securities and Exchange Commission, and the Internal Revenue Service for a variety of reasons. Following a courtMORGENSTERN & BLUE, Lc Paiviteceo & ConriDeNTiAt hearing in March, and at the Judge's urging, we reached agreement with the receiver and the other parties to resolve the motion by establishing an official committee to represent the investors, which would be empowered to review all documents, appear on all issues in the case, and have control over much of the litigation against the third parties that we believe to be the most likely potential sources for significant recoveries to investors. We considered this agreement to be a breakthrough and were hopeful for swift approval by the Court. Although, wwe are disappointed by the delay in the court’s consideration of the stipulation, we now expect that the agreement will be approved at a hearing scheduled in Dallas for August 10. We believe that the establishment of the investor committee, while long overdue, will be a major step in the right direction, and we will provide further details following next Tuesday's, conference. The Bank Litigation — Last year, we commenced litigation against Toronto-Dominion Bank, Trustmark National Bank, Bank of Houston, HSBC Bank PLC, and SG Private Banking (Suisse) S.A. (Societe Generale) alleging that those financial institutions assisted Stanford's fraud, and are legally responsible to the investors for damages incurred as a result. The banks have responded by filing motions to dismiss our complaint on a variety of theories, and we are actively litigating these cases. We continue to believe that these claims could be the most promising vehicle for substantial investor recoveries, and will aggressively push forward to prosecute these cases to conclusion. As noted above, we have been somewhat stymied in our efforts by a number of impediments, including the pending criminal case and our inability to access certain necessary documents and potential witnesses that we believe will ultimately prove to be helpful. We remain cautiously optimistic that some or all of these lawsuits will result in significant recoveries to investors. We are also actively investigating possible claims against other banks and financial institutions. The Dual Receiverships ~ As you all know, the courts in Dallas, Texas and Antigua each appointed a separate receiver to collect and distribute Stanford's assets to creditors and investors. The two receivers have been locked in litigation around the world, at great cost and expense to you, {o determine which receiver should control the proceedings and the limited assets available for distribution. We believe this to be tremendously wasteful and unproductive, We have been communicating regularly with both receivers, and believe strongly that the two receiverships need to be consolidated and coordinated to avoid the enormous costs of these duplicative efforts by the receivers and their professionals, Several weeks ago, the receivers jointly sought court approval in Dallas for a “resolution” of their disputes, which would have had the effect merely of perpetuating the dual receivership structure, We do not believe that this structure or the proposed resolution is in the best interests of investors, and we filed a formal objection with the Court. Thereafter, a court in Antigua determined to oust Nigel Hamilton-Smith and Peter Wastell from their positions as liquidators, and their firm, Vantis, itself entered into administration proceedings. Hamilton ‘Smith and Wastell remain the Antiguan liquidators pending further court proceedings and appeals, but they have resigned from Vantis. At this time, it is impossible to determine how this issue will be resolved by the courts We will keep you advised of any new developments, and will continue to take appropriate steps to advance your interests,MORGENSTERN & BLUE, Lc Paiviteceo & ConriDeNTiAt The Criminal Case ~ The judge presiding over the criminal cases against Allen Stanford and certain of his colleagues has agreed to “bifurcate” the cases of Stanford and the other defendants, meaning that Stanford will be tried first, and separate from the other defendants. His trial is scheduled to begin in January, and the Judge has made it clear that this trial will not be adjourned. We expect that the criminal trial will be quite interesting and informative, and believe that much of the information that is revealed at that trial will help us in pursuit of our various cases on your behalf. Political Efforts and SIPC Coverage ~ As many of you know, I have been working closely with Angela Shaw and the Stanford Vietims Coalition on political efforts aimed at helping all Stanford investors. We have together made more than a dozen trips to Washington, D.C. to meet with officials of the SEC, State Department, Department of Justice, members of Congress, Senators and other officials on a variety of issues relating to the Stanford cases, including: (i) SIPC coverage; (ii) the SEC Inspector General’s investigation and report; (iii) tax issues; (iv) issues relating to the role of the Antiguan and Venezuelan governments, and other concerns. It appears that the Senate Foreign Relations Committee will hold a hearing in the early fall to investigate and consider the international aspects of the case, and to consider the resolution we drafted calling for the termination of aid to Antigua until it honors its obligations to Stanford victims, We believe that the hearing could be very effective in increasing the pressure on the Antiguan government. On the SIPC front, during a visit to Washington, D.C. last week, we met with Congressman John Culberson from Texas, and with the general counsel and other representatives of the SEC, At Congressman Culberson’s request, a House of Representatives subcommittee voted last Thursday in favor of providing coverage to Stanford victims under the complex SIPA statute, While this change was conceptually agreed to by the subcommittee ‘members, full passage of the bill will require many additional steps, including approval by the full appropriations committee, a separate Senate committee, and then by the entire House and the Senate and the President. The specific language of the amended statute, who will be covered, and the scope of the coverage, will undoubtedly be issues that will require considerable additional discussion and effort. While the events of last week were certainly promising, this was only a step forward on the SIPA coverage issue. We will keep you advised of all further developments. Other Claims and Actions — We are continuing to investigate and analyze the viability of additional potential legal claims and causes of action to recover funds for your benefit. We do believe that there are promising leads and we will continue our hard work on your behalf. Please feel free to contact us with any questions or comments at any time. As you can imagine, our top priority is to devote our time and resources to prosecuting these claims to recover your lost investments. We recognize, however, that you need (and are entitled) to be advised of the progress of our efforts, and we will do our best to balance these responsibilities as we move forward. Peter D. Morgenstern MORGENSTERN & BLUE, tic