WORLD> America
|
WORLD> America
|
|
US charges Stanford with 'massive' fraud
(China Daily)
Updated: 2009-02-19 07:54
As Allen Stanford assured clients last week that US investigators were conducting "routine examinations" of his Texas investment advisory firm, a lawyer for his company's Antigua affiliate was backing out. The 58-year-old billionaire, now accused of running a "massive, ongoing fraud," spent his final weeks at the firm struggling to soothe clients while disregarding subpoenas that sought to account for almost $8 billion of their money, according to a lawsuit filed yesterday by the Securities and Exchange Commission. Regulators pounced days after a lawyer at the Antigua bank at the heart of the case "disaffirmed" everything he had told authorities. "The attorney's withdrawal is a massive red flag" that "screams fraud," said Peter Henning, who teaches criminal and securities law at Wayne State University in Detroit. "If the SEC hadn't turned up the heat by that point, it did then." The SEC's civil suit accused Antigua-based Stanford International Bank of touting "improbable, if not impossible" returns while selling certificates of deposits to investors for more than a decade. A federal judge in Dallas agreed to freeze assets and appoint a receiver to account for the roughly $8 billion investors spent on the CDs, according to the SEC. The attorney who stepped down was Thomas Sjoblom at Proskauer Rose LLP in Washington, according to a person familiar with the matter. He declined to comment. Stanford spokesman Brian Bertsch referred questions to the regulator. Madoff's arrest
The SEC had been investigating Houston-based Stanford Group since at least last summer about sales of the CDs. The inquiry intensified after the December arrest of New York money manager Bernard Madoff, who allegedly confessed to masterminding a $50 billion fraud in which early investors were promised steady returns and paid with money from later participants. Stanford Group, selling the CDs through a network of financial advisers, told clients their funds would be placed mainly in easily sellable financial instruments, monitored by more than 20 analysts and audited by regulators on the Caribbean nation of Antigua, the SEC said. Instead, the "vast majority" of the portfolio was managed by Allen Stanford and the Antigua subsidiary's chief financial officer, James Davis, according to the regulator. A "substantial" part of the portfolio was invested in private equity and real estate, it said. Wire transfers stop A day after Madoff's arrest, Pershing LLC, the Jersey City, New Jersey-based clearing firm, told Stanford Group it would no longer process wire transfers to its Antigua affiliate, citing suspicions about its reported investment returns, according to the SEC. In the past several weeks, as investigators sent subpoenas in an attempt to account for investor money, Stanford and Davis failed to appear for testimony or provide any documents, the agency said. Laura Pendergest-Holt, a member of Stanford International's investment committee, couldn't account for the funds, and nor could a former senior investment officer whom the SEC didn't identify, the agency said. She and Davis were also named as defendants in the civil case. Attorneys for Allen Stanford, Davis and Pendergest-Holt couldn't be located for comment. Julie Preuitt, an official in the SEC's Fort Worth office, declined to comment on Stanford's whereabouts. The receiver will focus on trying to locate remaining investor funds, she said. On about Feb 6, Allen Stanford imposed a two-month moratorium on early redemptions of CDs, according to the SEC. Then, on Feb 11, he wrote a letter to clients to address press reports about the US inquiries. "Regulatory officers have conveyed to us these visits are part of their routine examinations," he wrote, according to a copy obtained by Bloomberg. In an e-mail the next day, he told employees he'd "fight with every breath to continue to uphold our good name" in the face of the investigations. On Tuesday morning, the US Marshal's office in Houston sent a 15-person task force to secure files and computers at Stanford's offices in the Galleria shopping district, said Alfredo Perez, a spokesman for the agency. Stanford Group's alleged fraud wasn't limited to the sale of CDs, the SEC claimed. Since 2005, Stanford Group advisers sold more than $1 billion of a proprietary mutual fund "wrap program," named Stanford Allocation Strategy, "by using materially false and misleading historical performance data," according to the SEC complaint. The allegedly false data helped the program grow from less than $10 million in 2004 to more than $1.2 billion, generating fees exceeding $25 million. Since 1993, the bank has reported annual investment gains ranging from 11.5 percent to 16.5 percent, except last year, when it reported a loss of 1.3 percent, according to the SEC. The numbers were at times "strange," hitting exactly 15.71 percent in 1995 and 1996, the agency said. Stanford International Bank says it has 30,000 clients and $7.2 billion in assets under management, according to the SEC. The Stanford Financial companies, including Stanford Group, Stanford International Bank and Stanford Trust, were founded by Allen Stanford, who is their chairman. The Texas native was listed last year by Forbes magazine as the 605th-richest man in the world with an estimated net worth of $2 billion. Allen Stanford is a citizen of the US and of Antigua & Barbuda after being naturalized in that Caribbean country 10 years ago, according to a biography on the company's Web site. He was knighted by the Antiguan government in 2006 and now uses the title "Sir." Stanford Group has 19 offices in the U.S. and more than $43 billion under management or advisement, according to its website. Agencies (China Daily 02/19/2009 page17) |
