Bystanders pulled into Stanford financial mess

BOSTON (Reuters) - As financial markets stumbled this week, Trent Rosenthal wanted to trade in stocks. But he made a horrific discovery -- thousands of dollars in his brokerage account were frozen thanks to Stanford Group Company.

On Friday, Rosenthal became the first person to file a lawsuit asking a federal judge to dissolve an order freezing assets that put him and thousands of others into financial limbo this week, court documents show.

Rosenthal, a Houston-based lawyer, is representing himself in the matter.

The suit was filed in the Northern District of Texas Forth Worth Division four days after U.S. officials charged Stanford with having run a "massive, ongoing fraud" and a federal judge in Texas froze the company's assets.

"The market is fluctuating and I would like to be able to be in control of my financial destiny," Rosenthal said in an interview, adding "This is customer property not Stanford Group Company property."

Rosenthal's suit illustrates the wide reach Stanford's purported fraud is having and how it is affecting even investors who never relied on the Texas-company's investment advisers for advice.

Rosenthal said his frozen brokerage account is valued between $50,000 and $100,000 and said it holds two securities that are publicly traded on the New York Stock Exchange. He was exasperated that Sir Allen Stanford, the company's head, is free to move around after having been charged with fraud while his own money is locked up.

"I'm upset because I'm entangled in a fraud even though I had not bought any CDs issued by Stanford or other securities that the Securities and Exchange Commission are probing now," Rosenthal said.

And he is not alone. A sense of urgency is spreading among other clients whose brokerage accounts are also frozen.

One retiree, who asked not to be identified, said he needs the money that is currently frozen to pay for rent and groceries.

"The next big issue will be getting the non-CD, legitimate securities released and we are very nervous about that," said Randy Pulman, a partner at law firm Pulman, Cappuccio and Pullen, who also has clients whose brokerages are frozen.

Securities and cash owned by Rosenthal and other Stanford brokerage customers are held in custody at Pershing LLC, a unit of the Bank of New York Mellon Corp which is one of the world's biggest custodial banks.

"Until further notice Stanford's clients' brokerage accounts held at Pershing have been frozen on request of the receiver and no funds or securities may leave the brokerage accounts without the receiver's approval," Pershing spokesman Michael Geller said.

But some Stanford brokerage account holders, who have called Pershing's New Jersey offices for assistance, say they are frustrated that they were told to contact the receiver where they say no one was available to speak to them in person.

The receiver in the Stanford case told investors on Friday they could contact their brokers to sell stock in their account, but they could not transfer assets to another firm.

Cash and securities in customer accounts with third party, independent clearing brokers remain frozen for the foreseeable future, the receiver said in a news release.

"All of us have been unfairly singled out in this mess," said Rosenthal, who moved his brokerage account to Stanford several years ago.

"I came over when my broker moved from Wachovia to Stanford and they really courted me," Rosenthal said, remembering "They supported a lot of charities and that was certainly important to me." Stanford has donated money to a cancer hospital, art museum as well as libraries and schools, according to their corporate reports.

Now Rosenthal hopes a judge will act quickly on his motion. "The order freezing assets has far reaching consequences and I hope to get an answer soon."

(with additional reporting by Anna Driver and Chris Baltimore in Houston; Editing by Bernard Orr)