The U.S. Securities and Exchange Commission charged Robert Stanford, 3 of his companies for alleged fraud
* Says alleged fraud involved multi-billion dollar investment scheme centering on an $8 billion CD program.
* Says companies accused of fraud include Antigua-based Stanford International Bank; Houston-based Stanford Group Co; investment adviser Stanford Capital Management.
* Says also charged are Stanford International Bank CFO James Davis, Stanford Financial Group chief investment officer Laura Pendergest-Holt.
* Says U.S. district judge in Dallas grants SEC request to freeze defendants’ assets, appoints receiver.
* Says accuses Stanford of misrepresenting to CD purchasers that their deposits were safe and falsely claiming client funds were reinvested primarily in liquid financial instruments.
* Says its investigation of alleged Stanford fraud is continuing.
Descifrado reports online today that the amount of Venezuelan deposits at risk totals close to $2.3 billion, with the average individual deposit ranging from $80,000 to $300,000.
From a financial contact in Caracas:
*SIB had large offices in Maracay and Valencia which captured deposits via fraudulent CD’s from mainly middle class Venezuelans. There are Bolibourgeoisie among the bilked Venezuelan depositors, but several thousands of basically middle class people probably have lost most or all of their savings deposited at SIB.
*Stanford Bank Caracas was set up mainly to present a grand facade for a crude Ponzi scam. Reputable Venezuelan financial managers warned government financial authorities repeatedly over the past several years that Stanford Bank Caracas was clearly crooked, but the government never took any action. Caracas Gringo wonders if Stanford Bank avoided “detection” by the Chavez government by paying “consulting fees” to some Venezuelan financial regulators, or perhaps a minister or two or three in the regime?
*Less than a week ago, Stanford Bank was telling VenEconomy publisher Robert Bottome that Alex Dalmady’s analysis was “plagued with inconsistencies.” Oh yeah? The SEC clearly agrees with Mr. Dalmady, but the SEC also has to clarify why it took no action whatsoever against SIB for many months until AFTER Mr. Dalmady’s analysis broke wide open in the global financial news media when Mr. Bottome gave bloggers like The Devil’s Excrement and Caracas Gringo permission to re-publish the analysis which appeared first in the January 2009 issue of VenEconomy Monthly.
*Caracas Gringo hasn’t spoken today with Mr. Dalmady, but is informed very reliably that he is now receiving threats by e-mail…perhaps from within the retinue of Sir Allan Stanford (present whereabouts unclear)?
*The top managers of Stanford Bank’s offices in Caracas, Maracay and Valencia also appear to have taken the day off from work today.
And here is the SEC’s press release on the matter.
SEC Charges R. Allen Stanford, Stanford International Bank for Multi-Billion Dollar Investment Scheme
Washington, D.C., Feb. 17, 2009 — The Securities and Exchange Commission today charged Robert Allen Stanford and three of his companies for orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8 billion CD program.
Stanford’s companies include Antiguan-based Stanford International Bank (SIB), Houston-based broker-dealer and investment adviser Stanford Group Company (SGC), and investment adviser Stanford Capital Management.
The SEC also charged SIB chief financial officer James Davis as well as Laura Pendergest-Holt, chief investment officer of Stanford Financial Group (SFG), in the enforcement action.
Pursuant to the SEC’s request for emergency relief for the benefit of defrauded investors, U.S. District Judge Reed O’Connor entered a temporary restraining order, froze the defendants’ assets, and appointed a receiver to marshal those assets.
“As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors.”
Rose Romero, Regional Director of the SEC’s Fort Worth Regional Office, added, “We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world.”
The SEC’s complaint, filed in federal court in Dallas, alleges that acting through a network of SGC financial advisers, SIB has sold approximately $8 billion of so-called “certificates of deposit” to investors by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through SIB’s unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years.
According to the SEC’s complaint, the defendants have misrepresented to CD purchasers that their deposits are safe, falsely claiming that the bank re-invests client funds primarily in “liquid” financial instruments (the portfolio); monitors the portfolio through a team of 20-plus analysts; and is subject to yearly audits by Antiguan regulators. Recently, as the market absorbed the news of Bernard Madoff’s massive Ponzi scheme, SIB attempted to calm its own investors by falsely claiming the bank has no “direct or indirect” exposure to the Madoff scheme.
According to the SEC’s complaint, SIB is operated by a close circle of Stanford’s family and friends. SIB’s investment committee, responsible for the management of the bank’s multi-billion dollar portfolio of assets, is comprised of Stanford; Stanford’s father who resides in Mexia, Texas; another Mexia resident with business experience in cattle ranching and car sales; Pendergest-Holt, who prior to joining SFG had no financial services or securities industry experience; and Davis, who was Stanford’s college roommate.
The SEC’s complaint also alleges an additional scheme relating to $1.2 billion in sales by SGC advisers of a proprietary mutual fund wrap program, called Stanford Allocation Strategy (SAS), by using materially false historical performance data. According to the complaint, the false data helped SGC grow the SAS program from less than $10 million in 2004 to more than $1 billion, generating fees for SGC (and ultimately Stanford) of approximately $25 million in 2007 and 2008. The fraudulent SAS performance was used to recruit registered investment advisers with significant books of business, who were then heavily incentivized to reallocate their clients’ assets to SIB’s CD program.
The SEC’s complaint charges violations of the anti-fraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act, and registration provisions of the Investment Company Act. In addition to emergency and interim relief that has been obtained, the SEC seeks a final judgment permanently enjoining the defendants from future violations of the relevant provisions of the federal securities laws and ordering them to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest.
The Commission acknowledges the assistance and cooperation of the Financial Industry Regulatory Authority (FINRA) in connection with this matter.
The SEC’s investigation is continuing. The Commission acknowledges the assistance and cooperation of the Financial Industry Regulatory Authority (FINRA) in connection with this matter. FINRA independently developed information through its examination and investigative processes that contributed significantly to the filing of this enforcement action.
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For more information, contact:
Rose Romero, Regional Director
Steve Korotash, Associate Regional Director, Enforcement
SEC’s Fort Worth Regional Office