Thread: Stanford Financial charged with 'massive' fraud

Stanford Financial charged with 'massive' fraud

Firm being probed for paying high CD yields even as markets have slid

BREAKING NEWS
msnbc.com staff and news service reports
updated 4 minutes ago
Federal regulators on Tuesday charged Texas financier R. Allen Stanford and three of his companies with a "massive" fraud that centered around high-interest-rate certificate of deposits.

In a complaint filed in federal court in Dallas, the Securities and Exchange Commission alleged Stanford orchestrated a fraudulent investment scheme centered on an $8 billion CD program that promised "improbable and unsubstantiated high interest rates."

Stanford's assets, along with those of the three companies, were frozen. Stanford's companies include Antigua-based Stanford International Bank and broker-dealer Stanford Group Co. and investment adviser Stanford Capital Management, which are both based in Houston.


The bank's chief financial officer, James Davis, and Stanford Financial Group's chief investment officer, Laura Pendergest-Holt, were also charged in the complaint.

Alfredo Perez, a spokesman for the U.S. Marshal's Service in Houston, confirmed that agents raided Stanford's office in Houston Tuesday morning, but he did not have any other immediate comment.

A sign hanging at the firm's office in Houston says it is now "under the management of a receiver," according to a Reuters eyewitness.

The SEC alleged Stanford and his businesses misrepresented the safety of the deposits, claiming the bank reinvested client funds in liquid financial instruments to help return profits on investments sharply higher than average rates than similar products.

The SEC is cooperating with the Financial Industry Regulatory Authority, the U.S. brokerage industry's self-policing body, as part of the ongoing investigation.

The SEC's outgoing enforcement chief Linda Chatman Thomsen says Stanford and his family and friends "perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors."

The news may further undermine investor confidence already shaken by allegations that famed money manager Bernard Madoff may have orchestrated a $50 billion Ponzi scheme.

A Stanford spokesman was not immediately available to comment.

The SEC, the FINRA and state regulators in Florida and Texas have been investigating Stanford, which has 30,000 clients in 131 countries.

http://www.msnbc.msn.com/id/29237750/

Allen Stanford's investment companies were exposed to losses from the alleged Ponzi scheme run by financier Bernard Madoff


By Randall Mikkelsen

WASHINGTON (Reuters) - Allen Stanford's investment companies were exposed to losses from the alleged Ponzi scheme run by financier Bernard Madoff, and falsely reassured investors otherwise, federal regulators charged on Tuesday.

The Securities and Exchange Commission outlined the Madoff link in its charges against Stanford that also said the firm sought to remove nearly $200 million from its accounts in recent weeks. The firm also falsely told at least one customer earlier this month that he could not withdraw a multimillion dollar certificate of deposit because the SEC had frozen the account.

The agency charged Stanford, two aides, and three of his companies with financial fraud in an $8 billion CD program. It said his Stanford International Bank (SIB) and other units sold CDs by promising higher returns than CDs offered by traditional banks.

"Recently, as the market absorbed the news of Bernard Madoff's massive Ponzi scheme, SIB has attempted to calm its own investors by claiming the bank has no "direct or indirect" exposure to Madoff's scheme," the SEC said.

"These assurances are false." The agency cited several misrepresentations and said, "Perhaps most alarming is that SIB has exposure to losses from the Madoff fraud scheme, despite the bank's public assurances to the contrary."

It gave no more details, and a Stanford spokesman did not return calls seeking comment.

Other SEC allegations included:

-- SIB reported identical returns of 15.71 pct in 1995 and 1996, which the SEC called "improbable" and suspicious.

-- Ninety percent of SIB's claimed investment portfolio is in a "black box" shielded from any independent oversight, and only Stanford and aide James Davis, also charged, knew details of the bulk of the portfolio.

-- Stanford failed to cooperate with the SEC's probe and continued to mislead investors by falsely saying the SEC had frozen accounts to withdrawal or the company had ordered a moratorium on CD redemptions.

-- A major, unidentified clearing firm stopped processing wires to SIB for purchase of SIB-issued CDs after the clearing firm was unable to obtain information about the company's financial condition.

-- Stanford used also false information to promote a mutual fund wrap program separate from the CDs. The program grew to more than $1.2 billion from less than $10 million in 2004.

There was no sign of imminent federal criminal charges against Stanford.

Citing policy, U.S. Justice Department spokesman Ian McCaleb, said "We cannot confirm or deny the existence of a criminal investigation at this point."

(Editing by Jeffrey Benkoe)

http://www.reuters.com/article/ousiv/id ... 4120090217

Investing is getting really difficult when one Ponzi scheme invests in another Ponzi scheme!

Originally Posted by vortex

Investing is getting really difficult when one Ponzi scheme invests in another Ponzi scheme!

It just keeps getting crazier.........Greed gone wild!

Stanford depositors swarm banks
Wed Feb 18, 2009 10:48am EST


ST. JOHN'S, Antigua (Reuters) - Hundreds of people lined up to withdraw money from banks in Antigua and Caracas affiliated with Texas billionaire Allen Stanford, a day after the tycoon was charged with an $8 billion fraud.

The brash, 58-year-old financier's whereabouts remained unclear on Wednesday, a day after the U.S. Securities and Exchange Commission accused him of operating a fraud centered on the sale of certificates of deposit from his Antiguan affiliate, Stanford International Bank Ltd (SIB).

The scheme has drawn comparisons with the alleged $50 billion fraud by Wall Street veteran Bernard Madoff.

Two police officers stood watch at the Bank of Antigua as at least 600 people stood in a line stretching around a street corner, despite assurances from regional monetary authorities that the bank had sufficient reserves.

"I'm worried and I'd like to get my money out," said Andrea Lamar, 28, who joined the line with a friend on a street popular with tourists in the state capital, St. John's.

Bank of Antigua, with three branches in the tiny twin-island state of Antigua and Barbuda, is part of Stanford's sprawling global business interests but is separate from SIB, the offshore affiliate at the heart of fraud charges lodged by U.S. regulators.

The six-nation Eastern Caribbean Central Bank posted a statement at Bank of Antigua saying many depositors had started to withdraw funds, "causing some anxiety," but that the bank had sufficient reserves.

"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 statement said.

Antigua's prime minister, Baldwin Spencer, said in a televised address to the nation late Tuesday that the charges against Stanford could have "catastrophic" consequences for the nation, but he urged the public not to panic.

A similar scene played out in Caracas, where hundreds of Venezuelans lined up to pull their money out of Stanford's offices. Local officials tried to ease concerns.

"We can say in good faith that Stanford Bank Venezuela is a healthy bank without any type of problem to announce," said Edgar Hernandez Behrens, the head of Venezuela's banking regulator, Sudeban.

A Venezuelan official estimated that people in that country have invested about $2.5 billion in Stanford.

In a civil complaint, the SEC said SIB sold $8 billion in certificates of deposit "by promising high return rates that exceed those available through true certificates of deposits offered by traditional banks."

"We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world," said Rose Romero, regional director of the SEC's office in Fort Worth, Texas.

In all, the Stanford Group to claims to oversee $50 billion in assets.

Stanford depositors swarm banks
Wed Feb 18, 2009 11:36am EST Email | Print | Share| Reprints | Single Page[-] Text [+]

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Last week, a Stanford Group spokesman denied initial reports that regulators were probing its business. Since Tuesday, company officials have been referring requests for comment to the SEC.

There were no signs of imminent criminal charges against Stanford, whose personal fortune was estimated by Forbes Magazine last year at $2.2 billion.

A federal judge on Tuesday appointed a receiver "to take possession and control of defendants' assets for the protection of defendants' victims."

'NOT DOING ANYTHING'

All was quiet on Wednesday outside Stanford's Houston office, a day after a raid by federal agents. A man who answered the phone at Stanford's Boston offices but declined to give his name said, "The office is open but we are not doing anything."

A Colombian affiliate of Stanford halted its activities on that country's stock exchange.

"We had to take a decision to protect investors and, naturally, to guarantee stability in the market," Alvaro Camaro, the bank's local director, told Reuters.

Stanford, who holds dual U.S.-Antiguan citizenship, has donated millions of dollars to U.S. politicians and secured endorsements from sports stars, including golfer Vijay Singh and soccer player Michael Owen.

Public figures on Wednesday scrambled to pull back from any relationship with Stanford, whose assets have been frozen.

British brokerage and investment house Blue Oak Capital said it had canceled a deal to distribute research from Stanford Washington Research Group.

"The whole thing was a complete waste of our time, I don't think we ever got any orders as a result of it," said Blue Oak Chief Operating Officer Jonathan Evans.

Former Swiss President Adolf Ogi said he would resign from the board of Stanford Financial Group. "I don't want to be associated with this sort of news," he said.

A leading figure in British cricket described the England and Wales Cricket Board's association with Stanford as a "fiasco." [ID:nLI150905] Stanford had become famous in the cricket world for a $20 million game in November between England and his own team of West Indian players.

Stanford lived for more than 20 years in the reef-girded island of Antigua, only 9 miles wide and 12 miles long with a population of just 70,000.

He owns the country's largest newspaper, heads a local commercial bank, and is the first American to receive a knighthood from its government. He has homes sprinkled across the region, from Antigua to St. Croix in the U.S. Virgin Islands to Miami.

Some in the line at Bank of Antigua expressed hope that Stanford would evade arrest and keep his Antiguan investments.

"The charges come from America. They shouldn't apply here," said Sylvan Roberts, 43. "He's innocent until proven guilty."

(Reporting by Jason Szep in St. John's; additional reporting by Frank Jack Daniel, Ana Isabel Martinez and Saul Hudson in Caracas, Svea Herbst-Bayliss in Boston, Anna Driver in Houston, Helen Popper and Nelson Bocanegra in Bogota, Martin de Sa'Pinto and Emma Thomasson in Zurich and Mitch Phillips and Joel Dimmock in London; Writing by Scott Malone; editing by John Wallace)

http://www.reuters.com/article/domestic ... dChannel=0