Allen Stanford Ponzi Scheme

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Laura Pendergest-Holt: the woman who may bring down Stanford empire

From The Times
February 21, 2009
Suzy Jagger
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5776317.ece

US regulators are hoping that Laura Pendergest-Holt, the former chief financial officer within the frozen Stanford investment empire, will lead them to the heart of what appears to be one of the world's biggest scams.

Ms Pendergest-Holt, who has been charged with fraud over her role helping to run the American operations of the financial firm, has been interviewed by the Securities and Exchange Commission (SEC) and has agreed to fly from her home in Mississippi to Houston to assist the official receiver formally to seize assets at the group's US headquarters. Her lawyer was unavailable for comment yesterday, but experts in criminal law believe that regulators have earmarked her as a key individual who will help them to track down assets and unlock the complex web of financial transactions.

One partner at a big New York law firm, who declined to be named, said that Ms Pendergest-Holt's willingness to assist regulators and the receiver was a classic sign that she may be preparing to offer critical information that will nail Allen Stanford, the billionaire cricket impresario, in return for leniency by the US courts. American investigators often use plea-bargaining - the promise of leniency - to extract crucial data from people involved in fraud.

On Tuesday the SEC charged Mr Stanford, his deputy James Davis and Ms Pendergest-Holt with defrauding about 50,000 investors from across the world of $9.2billion (£6.5billion). While the SEC had been investigating Mr Stanford and his business empire since the summer, they charged the three this week because they suspected that the billionaire would try to siphon funds out of the US.

On the same day a judge in Dallas froze all the American assets of Mr Stanford, including his $2.2billion personal fortune. On Thursday evening agents from the Virginia office of the FBI tracked down Mr Stanford, who had been missing since he was charged. The agents did not arrest Mr Stanford, instead handing him the SEC fraud charge papers and demanding that he arrange to hand over his US passport.

While many of the 50,000 victims of Mr Stanford's alleged scam may be frustrated that the flamboyant Texan financier was not taken into custody on Thursday evening, criminal lawyers explained that the FBI would be loath to arrest the billionaire because it would set a legal schedule in motion. Such a schedule would force criminal investigators to charge, indict and construct a trial within a tight time frame. Typically, criminal investigators try to delay a trial for as long as possible to enable them to find sufficient evidence to secure a conviction.

Mr Stanford is charged with fraud as part of civil proceedings brought by the SEC. Any conviction of civil charges can only result in financial penalties, not a prison sentence. However, it is understood that criminal authorities in the US are building a parallel case against Mr Stanford.

In official documents released by the Dallas court this week, it appears that Ms Pendergest-Holt had a key and controversial role within Mr Stanford's US business operations. According to the papers, it was Ms Pendergest-Holt who created pre-rehearsed scripts detailing what the company's financiers should say to investors worried about the safety of their savings.

In one interview conducted by the regulator, it was claimed that Ms Pendergest-Holt trained members of staff to repeat reassurances to anxious investors about the robustness of the company's regulatory oversight.

In the court papers, the SEC claimed: "Investors frequently inquired whether Allen Stanford could ' run off with the [investors'] money' and Pendergest-Holt trained [staff] ' not to divulge too much' about oversight of the bank's portfolio because that information ' wouldn't leave an investor with a lot of confidence'."

In another interview with the SEC, Michael Zarich, the company's senior investment officer, claimed that he had been tutored by Ms Pendergest-Holt about what to say to worried clients and that she had turned Mr Zarich away when he started to inquire about how customer money was invested. Mr Zarich said: "Clients would just push, push, push, saying, ' Give me an actual security. Give me something'."

Mr Stanford and his two associates are charged with fabricating financial performance numbers, lying to customers about how they were investing their money, and lying about the company's losses arising from its investments with Bernard Madoff, the New York-based financier. They are also accused of lying to clients about the level of independent regulatory supervision to which their funds were subjected.

According to the Dallas court papers, Ms Pendergest-Holt hosted a meeting with her team of analysts on December 15 to discuss the bank's recent decision to raise about $250 million in cash by selling some of its investments. The decision raised eyebrows among the analysts.

It emerged yesterday that Mr Stanford and his senior associates threatened employees with dismissal if they asked basic but awkward questions, such as the whereabouts of assets and how investment returns were calculated. According to the court papers, Charles Hazlitt, who had been a star salesman for Mr Stanford, told regulators that he had been told to resign or be dismissed when he asked questions about how client funds were invested. Mr Hazlitt said that he had been perceived as a favoured financier at the firm because he had brought in $10million of business during one financial quarter of 2002. He explained that he had been rewarded with a new BMW car. He added, however, that when he began to ask how the company invested client money, he was given an ultimatum. "I kind of peaked when I won the car and was doing great, but as soon as I started questioning things at the bank, they were setting up to let me go."

As investors counted the cost of their potential losses, panic spread across many countries in Latin America and the Caribbean, which emerged as key regions targeted by the Stanford firm for new business.

The central bank in Antigua seized control of one bank in Mr Stanford's empire yesterday to avert collapse as savers raced to withdraw their deposits. In Peru, the country's lead prosecutor said that he had ordered an investigation into whether the financial empire had been engaged in money-laundering activities. Jorge Luis Caldas said that the Peruvian investigation would also look into whether the company sold high-yielding bonds without a licence.

This week, five governments across Latin America seized control of lenders owned by Mr Stanford to avoid a run on the banks.

http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5776317.ece