Texas financier Stanford stripped of knighthood

By Calvin Palmer

Texas financier R. Allen Stanford, awaiting trial on fraud charges, has lost the knighthood bestowed on him by Antigua and Barbuda.

The National Honors Committee voted unanimously to revoke Stanford’s title for embarrassing the nation by running an alleged Ponzi scheme out of his Antigua-based offshore bank, chairwoman Jacqui Quinn-Leandro said.

Stanford is in jail pending his trial for allegedly defrauding some 28,000 investors out of $7 billion by selling them what U.S. authorities say were bogus certificates of deposits.

Stanford received his knighthood in 2006 from the governor general — the representative of Queen Elizabeth II in the country — and was widely known as “Sir Allen” in the Caribbean nation.

A group of investors has filed a lawsuit against Antigua and Barbuda alleging that local authorities failed to adequately monitor Stanford International Bank Ltd and profited from the fraud.

The financier provided loans to the government and became the country’s largest private employer, with businesses that included a development company, cricket stadium, newspaper, an airline and two restaurants.

Quinn-Leandro said the six-member honors committee, made up of senators and members of Parliament, voted last month and formally informed Prime Minister Baldwin Spencer of its decision on October 26.

It now remains for Spencer to forward the decision to the governor general for a signature, which is considered a formality.

[Based on a report by the Associated Press.]

Stanford faces detention hearing after indictment on 21 counts of fraud

By Calvin Palmer

A judge in Virginia has ordered a detention hearing for indicted billionaire R. Allen Stanford after agreeing with prosecutors that he poses a flight risk.

Magistrate Hannah Lauck made the ruling despite opposition from Stanford’s lawyer, Christina Sarchio, who said Stanford is not a flight risk and is essentially broke because the government has frozen his assets.

Prosecutors say Stanford’s international banking empire was really just a Ponzi scheme built on lies and bribery to swindle investors out of $7 billion.

Steven Tyrrell of the Justice Department says more than $1 billion from Stanford’s alleged scheme remains unaccounted for.

Stanford will remain in custody until the hearing can be held in Houston where a grand jury indicted him and four others on fraud charges linked to his company, Stanford Financial Group.

Stanford was indicted along with Laura Pendergest-Holt; Houston-based accountant Gilberto Lopez; Houston-based global controller Mark Kuhrt; and Leroy King, a joint American-Antiguan citizen charged with monitoring the Antigua bank.

James M. Davis, the chief financial officer, has been cooperating with officials and was charged in a separate instrument, not an indictment.

Another individual was charged in Miami with document shredding.

The indictment alleges that Stanford and his co-defendants engaged in a scheme to defraud investors who bought roughly $7 billion in certificates of deposit administered by Stanford International Bank Ltd, the bank in Antigua controlled by Stanford.

Federal prosecutors said Stanford and the others misused most of those investor assets — including diverting more than $1.6 billion into undisclosed personal loans to Stanford.

At the same time, said Lanny Breuer, assistant attorney general of the Justice Department’s criminal division, Stanford and his employees were assuring investors their investments were “safe and secure.”

Stanford promised returns that “in the end were simply too good to be true, in light of the bank’s actual investments and assets”.

Stanford, Davis and Pendergest-Holt previously have denied wrongdoing.

Dick DeGuerin, Stanford’s criminal defense attorney, said in a statement: “Since at least February of this year, Allen Stanford has been working with lawyers to meet and challenge the false accusations against him. Those accusations being that the Stanford companies were fraudulent and constituted a Ponzi scheme.

“To the contrary, the present insolvency of the Stanford companies was caused by the SEC’s heavy-handed actions, which have destroyed and continue to destroy much of the value of the Stanford companies and consequently the interests of investors.”

The Houston indictment against Stanford and the others alleges 21 counts of conspiracy, wire fraud, mail fraud and obstruction of justice, and conspiracy to launder money, although Lopez and Kuhrt are not facing obstruction charges.

The charges accuse King of taking bribes to ignore alleged misdealings. 

[Based on reports by the Associated Press and Houston Chronicle.]

Stanford executive pleads not guilty to criminal charges

By Calvin Palmer

Laura Pendergest-Holt, the chief investment officer of Stanford Financial Group, pleaded not guilty today in Houston to charges of obstruction of justice and conspiracy to obstruct justice.

Pendergest-Holt, 35, is the first person to be criminally indicted in the federal investigation of R. Allen Stanford’s banking and network of financial services companies.

She was freed on a $300,000 bond. Her trial was set for July 20.

If convicted, Pendergest-Holt could face up to five years in prison on each count.

The Securities and Exchange Commission filed a civil lawsuit on February 17, alleging an $8 billion fraud by Pendergest-Holt, Stanford, finance chief James M. Davis and three Stanford Financial Group companies.

Billionaire Stanford has said he expects to be indicted. Davis is cooperating with the SEC investigation, according to his lawyers.

[Based on a report by the Associated Press.]

Grand jury indicts Stanford executive on criminal charges

By Calvin Palmer

A federal grand jury in Houston today indicted the chief investment officer of Stanford Financial Group, Laura Pendergest-Holt, on charges of conspiracy and obstruction of justice.

Prosecutor Gregg Costa asked U.S. Magistrate Judge Mary Milloy to issue a summons for Pendergest-Holt to appear in about 10 days.

Pendergest-Holt is free on bail on a similar obstruction charge filed in February that accuses her of lying to, or failing to give information to, Securities and Exchange Commission investigators in Dallas.

Her lawyer, Dan Cogdell, said he had not seen the indictment and had no immediate comment. He said that Pendergest-Holt is in Houston to talk to him.

It is the first criminal indictment to come out of the investigation into the Houston-based banking and financial services network headed by R. Allen Stanford.

The Securities and Exchange Commission filed a civil lawsuit on February 17, alleging an $8 billion fraud by Pendergest-Holt, Stanford, Davis and three Stanford Financial Group companies.

[Based on a report by the Houston Chronicle.]

TV program claims Allen Stanford was informer for the DEA

By Calvin Palmer

A BBC program due to air tomorrow night claims Texas financier R. Allen Stanford, who is accused of an $8 billion (£5.6 billion) bank fraud, worked as a U.S. government informer.

An investigation by the current affairs program Panorama suggests Stanford was shielded from an earlier inquiry into his activities because he co-operated with the U.S. Drug Enforcement Administration (DEA) to track money laundered by Latin American drug cartels.

In February, the Securities and Exchange Commission filed civil charges alleging a “massive Ponzi scheme”.

Stanford, 59, denies intentional fraud. He told ABC News in a recent interview: ““I will die and go to hell if it’s a Ponzi scheme. It’s no Ponzi scheme.”

No criminal charges have been filed against him and he denies any wrongdoing.

Panorama claimed some U.S. officials were aware of Sir Allen’s cartel links as long ago as 1990. It reported that Stanford, paid a $3.1 million (£2.05 million) check to the DEA in 1999 after that sum was invested in his bank by another Mexican drug gang, the Juarez cartel of Amada Carillo Fuentes.

According to Panorama, Stanford was initially investigated by the SEC over suspicions he was running a Ponzi scheme in the summer of 2006, but the inquiry was over by the winter of that year.

The BBC claims the decision to close the investigation followed a request by another government agency.

Panorama says it is aware of “strong evidence” that Stanford was a “confidential agent” for the DEA as far back as 1999 and turned over details of money laundering by clients from Colombia, Mexico and Ecuador.

Rodney Gallagher, a British financial investigator, who knew Stanford in the 1980s said it was clear to him that the Texan had “a very close relationship with the DEA” and occasionally hired former agency staff to work for him.

The DEA declined to comment to the BBC on its allegations.

Stanford has insisted that getting involved with the Mexican cartels is “something absolutely foreign to everything in my body”.

[Based on a report by The Daily Telegraph.]

Stanford denies Ponzi scheme and intentional fraud

By Calvin Palmer

R. Allen Stanford says he is angry seeing the government “disembowel” the financial empire it took him 25 years to build and denies any involvement in a Ponzi scheme.

On February 17, the Securities and Exchange Commission began taking control of Stanford’s business empire, including the Houston-based brokerage Stanford Financial Group and Antigua-based Stanford International Bank.

The SEC also froze the personal assets of Allen Stanford, Chief Financial Officer James Davis and Chief Investment Officer Laura Pendergest-Holt.

“As God is my witness,” Stanford said today, “there is no Ponzi scheme, there was no intentional fraud.”

Fraud is fraud be it intentional or unintentional. This statement sounds like a kid who has been caught with his hand in the cookie jar. I am no expert on religion but I seem to recall a phrase that goes like “Do not take the Lord’s name in vain”.

He said he did not know a lot about the details of investments in the controversial CDs in the Stanford bank, but he said he trusted those who did.

The devil is always in the details.

“I’m not the chief financial officer, I’m not on the investment committee, I’m not making the investment decisions per se, but all the reports that I got, everything that I saw and that I touched over the years was real,” Stanford said.

“I’m not a banker by nature. I’m more of a developer and a builder and a visionary, an entrepreneur who wants to see something grow. I attracted what I considered to be the top talent in this industry and I gave them a lot of responsibility, and asked them always to perform. And we’ve always done very well.”

Stanford said in hindsight, when Wall Street crashed, his companies should not have allowed so many customers to cash out of their CDs.

Did Wall Street crash? The banking sector certainly crashed in what was generally acknowledged to be a banking crisis. It would appear the top talent he recruited did not quite live up to their billing. Top people surely would not have allowed so many customers to cash out of their CDs. Or was it more a case that they had been found out and there was nothing their “talent” could do about it?

He also believes he was a target because of who he was — a colorful Texan with a bank in the Caribbean —  and has been held to a different standard than big American banks who received taxpayer bailouts.

Of course, he is being held to a different standard. The big American banks did not commit acts of fraud but recklessly over extended themselves on risky, the so-called toxic,  loans.

“I guess somebody is looking for a moose head,” he said, referring to a hunting trophy. “I’m a maverick rich Texan, so I’m a pretty colorful moose head to put on the wall.”

Do not flatter yourself, Stanford. I guess if his companies’ assets were as big as his ego, the SEC would not be investigating.

In its civil suit the SEC claims Stanford and Davis ran an $8 billion Ponzi scheme, luring investors to put money in bank CDs that paid out interest rates well above the market’s average performance.

Pendergest-Holt is accused of “facilitating the fraudulent scheme” by misleading investors into believing she managed and monitored the company’s investments with a team of analysts.

The complaint alleges Stanford and Davis decided on a predetermined return on investment for Stanford International Bank’s portfolio and manipulated financial statements to report investment income the bank did not actually earn.

Stanford and Davis also engineered a bogus $1.6 billion loan to Stanford, the complaint alleges, and put an undetermined amount of the funds into “speculative, unprofitable private businesses controlled by Stanford”.

Neither man has been charged with a crime, but Pendergest-Holt has been accused of lying to investigators. Her attorneys deny it.

[Based on a report by the Houston Chronicle.]

 

 

Stanford executive arrested on criminal charge

By Calvin Palmer

The chief investment officer for Stanford Financial Group was arrested in Houston yesterday on criminal charges of obstructing an investigation by the Securities and Exchange Commission (SEC).

Laura Pendergest-Holt, a resident of Tennessee, was at Stanford offices in Houston to cooperate with the federal investigation when she was arrested, according to her Houston lawyer Dan Cogdell.

Pendergest-Holt was held in the Federal Detention Center downtown on a federal charge out of Dallas alleging she lied in a February 10 interview with the SEC.

According to the complaint, the SEC was questioning Pendergest-Holt in its investigation into allegations that Stanford Financial and related companies, including the Stanford International Bank, had defrauded investors and account holders of an estimated $8 billion in deposits.

Pendergest-Holt was named in the SEC’s civil complaint filed earlier this month. That civil lawsuit also named chairman R. Allen Stanford and chief financial officer James M. Davis.

The criminal complaint alleges she “made several affirmative misrepresentations to the SEC in order to obstruct its investigation”.

Pendergest-Holt is scheduled to appear before U.S. Magistrate Judge Mary Milloy today.

It is the first criminal charge arising from a wide federal investigation into Stanford’s operations.

“She unequivocally committed no crime. Before today, she cooperated with authorities and even flew here to cooperate,” Cogdell said. “We were shocked at the way she was arrested. The whole deal — flying her here was a deception to arrest her here and make a big splash.”

Cogdell said he expects it to be a “nasty, drawn out fight”.

[Based on a report by the Houston Chronicle.]

FBI finds Stanford in Virginia

By Calvin Palmer

R. Allen Stanford, the Texan billionaire at the center of an alleged $8 billion investment fraud, was today found by the FBI in Virginia.

FBI agents served papers from the US Securities and Exchange Commission on Stanford in Fredericksburg, it was confirmed.

FBI spokesman Richard Kolko said they had acted at the request of the SEC and that Stanford had not been arrested.

The complaint was served on Stanford by agents from the FBI’s office in Richmond, Virginia, Kolko said.

“The agents served Mr. Stanford with court orders related to the SEC civil filing against the Stanford Financial Group,” Kolko said.

Stanford, 58, and three of his companies were charged with fraud in a civil complaint filed in federal court in Dallas, Texas.

Stanford and two other executives were accused of fraudulently selling $8 billion in high-yield certificates of deposit in a scheme that stretched around the world.

While Stanford faces civil proceedings, it is understood that the FBI is also building a separate, parallel criminal case against him.

The scam is the second major fraud to hit America in three months after Bernard Madoff confessed that his $50 billion investment firm was “just one big lie”.

The FBI is convinced that the two huge frauds are just the tip of the iceberg. John Pistole, the Deputy Director of the FBI, told politicians on Capitol Hill last week that the agency was investigating 530 corporate fraud cases, including 38 directly related to the current economic crisis.

[Based on reports by The Times and Reuters.]

Venezuela seizes Stanford bank to stem massive withdrawals

By Calvin Palmer

Venezuela seized a local bank owned by R. Allen Stanford today to stem massive online deposit withdrawals as the impact of the $8 billion fraud case against the Texan billionaire spread through Latin America.

The Venezuelan government said it would quickly sell the bank — Stanford Bank Venezuela, one of the country’s smallest commercial banks — and that it had already been approached by potential buyers.

In recent days, depositors at the bank had worried over the fraud case targeting a sister company, Stanford International Bank, even though the companies’ assets are separate.

Depositors withdrew cash using Internet banking services. The bank takes deposits and makes loans only in Venezuelan currency.

“Most depositors of Stanford Bank Venezuela are from the highest income classes,” Finance Minister Ali Rodriguez said. “They move their funds on the Internet, and this allowed for a massive withdrawal that pushed the bank into a precarious state.”

“The authorities were forced to take the decision to intervene and there will be an immediate sale,” he added.

Industry officials have said the fall of a bank, whose deposits represent only 0.2 percent of Venezuela’s banking system, is unlikely to cause much disturbance in the rest of the sector.

Two days after the US Securities and Exchange Commission (SEC) accused Stanford, 58, of perpetrating “a fraud of shocking magnitude,” SEC officials were still in the dark about his whereabouts — as were close members of his family.

In an interview with the Houston Chronicle, Stanford’s 81-year-old father James said he understood that authorities were searching for his son, but insisted he had no idea where his son could be.

“I’d spoken to him a week or so ago — he’d called — about problems with the business climate in general, but nothing of this magnitude,” he said. “I cannot imagine, I cannot believe, I will not believe what is being alleged actually happened.”

“I cannot believe that my son would run,” he added.

Reports also emerged yesterday that the Federal Bureau of Investigation is investigating whether Stanford was involved in laundering drug money for Mexico’s powerful Gulf cartel.

ABC News, citing unnamed federal officials, said Mexican police detained one of Stanford’s private planes and found checks inside believed to be linked to the ultra-violent cartel.

Stanford and his company Stanford Financial Group invested heavily in politics, spending about $2.4 million in campaign contributions to lawmakers and political committees since 1989, according the Washington-based watchdog group Center for Responsive Politics.

Stanford donated $4,600 to the Obama campaign. The value of Stanford’s campaign contribution has been donated to Chicago Coalition for the Homeless.

The $28,150 that McCain collected since 2000 placed him third among recipients of donation from Stanford and his firm. Sen.McCain (R-Ariz.) also promised yesterday to return the funds or donate them to charity.

The other top recipients of donations include Sen. Bill Nelson (D-Fla.)($45,900) and Republican Rep. Pete Sessions of Texas ($41,375). Nelson received $45,900 and promised yesterday to give his donations to charity. Sessions received $41,375

The center also noted that Stanford Financial Group contributed the most during the 2002 election cycle, when federal lawmakers were debating a bill aimed at curbing financial fraud by better connecting information gathered by state and federal regulators. It passed the House but not the Senate.

[Based on reports by Reuters, AFP, Orlando Sentinel and Chicago Tribune.]

Stanford’s whereabouts unknown as depositors start a run on his banks

By Calvin Palmer

U.S. regulators do not know the whereabouts of Texan billionaire R. Allen Stanford.

Yesterday, the Securities and Exchange Commission filed charges against him alleging a “massive and ongoing” $8 billion investment fraud.

“We don’t know where he is, quite frankly,” said Rose Romero, director of the SEC’s Fort Worth office, which filed the charges against Stanford and his companies.

A lot of people would like to know his whereabouts and not just financial regulators.

Hundreds of depositors of the Bank of Antigua lined up to withdraw their funds.  The bank is owned by Stanford but is not part of the alleged fraud.

At one branch in the capital of Antigua, St John’s, about 600 people lined up outside.  A similar-sized crowd was seen at another branch near the airport.

The scene was repeated in Panama where bank regulators stepped in to take control of the Stanford Bank Panama – also not involved in the fraud allegations – after customers began a run on the bank.

Lengthy lines also formed outside the Stanford Bank Venezuela in Caracas, which issued a statement in an attempt to calm clients, saying that it had asked a bank regulator to join its board and stressing that its assets were not linked to the Stanford International Bank in Antigua that is at the heart of the fraud inquiry.

Venezuela’s superintendent of banks, Edgar Hernandez, said Venezuelans hold about $2.5 billion in Stanford Bank on the island of Antigua, which is being investigated by U.S. authorities on fraud allegations.

Many Venezuelans made investments in dollars in the bank in Antigua. But he said those investments are outside the purview of Venezuelan law.

Hernandez also sought to reassure investors today about Stanford Bank in Venezuela, saying an inspection in the fourth quarter of 2008 found no problems and that the bank appears “healthy”.

The Eastern Caribbean Central Bank pleaded with Bank of Antigua customers to remain calm, saying in a statement that although many depositors had started to withdraw funds, “causing some anxiety”, the bank had sufficient reserves.

“However, if individuals persist in rushing to the bank in a panic, they will precipitate the very situation that we are all trying to avoid,” the central bank warned.

Antigua’s Prime Minister Baldwin Spencer said yesterday that the charges against Sir Allen could have “catastrophic” consequences for the nation, but he also urged people not to panic.

The Stanford group is the largest private employer in Antigua and Barbuda, covering financial, media and sporting franchises.

[Based on reports by Bloomberg.com, The Times, BBC News and the Houston Chronicle.]