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Tearful Stanford investor tells jury of losing life savings
By Bloomberg - Saturday, February 11th, 2012.
http://www.antiguaobserver.com/?p=71073
HOUSTON – A retired US Air Force medic told jurors at R Allen Stanford’s criminal trial that she lost four- fifths of her savings and her dream of a comfortable retirement on now-worthless certificates of deposit from Stanford’s bank.
“Being in the military, I was just a middle-class, hard- working person who took care of my family and made my ends meet,” a tearful Dianne Hammer testified today in Stanford’s fraud trial in federal court in Houston. “You really don’t get rich serving in the military.”
Hammer’s broker at Stanford Group Company and marketing brochures from Stanford International Bank didn’t say that investors were supposed to have a net worth of $1 million or annual incomes of $250,000 to buy CDs from the Antiguan bank, she said. Prosecutors claim Stanford ran the bank as a Ponzi scheme that defrauded investors of more than $7 billion.
Testifying for prosecutors, Hammer, 54, said she increased her Stanford CD holdings from $50,000 to $260,000 in August 2008, after she discussed deteriorating financial market conditions with her Stanford broker.
“He said since it was an overseas bank, it was safer than banks in the U.S. were at the time,” she said. The adviser also recommended she combine investments with her elderly parents so the family could qualify for a higher interest rate on their joint holdings at SIB, she said.
Stanford, 61, has denied wrongdoing. His lawyers have told jurors that all of Stanford’s customers were wealthy, accredited investors, with sophisticated investment knowledge.
Military Pension
Hammer told jurors that she now lives on a modest military pension. When US securities regulators seized Stanford’s operations on suspicion of fraud in February 2009, Hammer said her SIB statement listed her CD account balance as $280,679.
Her parents’ statement that month indicated a CD balance of $295,604, which she said represented roughly 90 per cent of their savings. Her mother has since died of cancer, and her father was diagnosed with Alzheimer’s disease and lives in an assisted-living facility.
Assistant US Attorney Gregg Costa asked Hammer if she or her parents have gotten any of that money back. She said they haven’t.
“You’ve got to have money to be able to retire,” Hammer testified. “I wanted to be able to travel, buy a house, and help my children as I could, too.”
Costa showed Hammer a photo of a yacht that Stanford spent $13 million renovating and a snapshot of the former financier standing beside a glass case filled with $20 million, the prize money awarded to winners of a cricket tournament Stanford sponsored.
“If you’d known that millions of dollars in CD money was going to rebuild yachts and to cricket prizes like in that glass case, would you have bought the CDs?‘‘ Costa asked. ‘‘Do you wish you had some of the money in this yacht or in this glass case?’’
The judge barred Hammer from answering when Stanford’s lawyer, John Parras, objected to the questions as inappropriate for a jury weighing guilt or innocence.
Stanford’s trial, which may last six weeks, is completing its third week of testimony. (Bloomberg)
http://www.antiguaobserver.com/?p=71073
Stanford Watch
The latest news on R. Allen Stanford and Stanford Financial Group
http://blog.chron.com/stanford/2012/02/stanford-lawyer-seeks-to-undermine-cfo’s-testimony/
« Live-tweeting the Stanford trial – Day 12 | Main | Live-tweeting the Stanford trial – Day 13 »
Stanford lawyer seeks to undermine CFO’s testimony
Defense lawyers strove Tuesday to paint R. Allen Stanford’s chief accuser as a liar and thief who engineered the financial manipulations that brought down Stanford’s multibillion dollar financial network and led to fraud charges against him.
In cross-examining James Davis, Stanford’s former chief financial officer and the government’s star witness, defense lawyer Robert Scardino zeroed in on an $880,000 company loan to Davis in 2009 that Davis testified was authorized by Stanford in a text message.
“You’re claiming this is a loan and not a theft?” Scardino asked, and Davis acknowledged that he signed a promissory note for the loan from Stanford International Bank, but that Stanford didn’t.
Davis’ lawyer produced a cell phone that Davis has said he used for the text exchange in which Stanford authorized the loan, but Davis said all texts from 2009 had been deleted.
The only physical evidence of the texts is a copy made by placing the phone on a copy machine, Davis said.
Scardino also questioned Davis about a meeting in Miami where he presented graphics and other materials to Stanford executives, which Davis testified earlier exaggerated the financial strength of the bank in the Caribbean island nation of Antigua.
Davis agreed that he invented the numbers presented to the executives, saying he did so because Stanford’s withdrawals from the bank and other subsidiaries of Houston-based Stanford Financial Group had depleted the stash of money put in by investors. “It was to cover for the $2 billion he took out of the companies” he said.
Davis agreed under questioning Tuesday by Scardino that he was a “liar and fraudster” when he worked for Stanford, but said he decided to tell the truth after the U.S. Securities and Exchange Commission shut down Stanford’s operations in February 2009.
“I quit lying when I got an attorney,” Davis said.
Stanford, a native of Mexia, and others are accused of operating a $7 billion investor fraud, mostly by offering above-market returns on certificates of deposit issued by the Antiguan bank.
According to previous testimony, Stanford salespeople and their clients were told the CDs were invested conservatively when the money really went to support Stanford’s risky business ventures, cricket tournaments and life of luxury in the Caribbean and Florida.
Davis has pleaded guilty to three felony counts and is cooperating with prosecutors. To be tried later are three former Stanford officers also accused of fraud and an Antiguan regulator accused of taking bribes to conceal the bank’s financial condition.
http://blog.chron.com/stanford/2012/02/stanford-lawyer-seeks-to-undermine-cfo’s-testimony/
Cross-Examination of Stanford CFO James Davis Begins
February 7, 2012
by: Andrew Schneider
http://app1.kuhf.org/articles/1328589544-Cross-Examination-of-Stanford-CFO-James-Davis-Begins.html
James Davis is preparing to take the stand for a fourth day in the Ponzi scheme trial of Houston financier R. Allen Stanford. The former chief financial officer for Stanford Financial Group and Stanford International Bank is now undergoing cross-examination.
listen now:
Defense counsel Robert Scardino made the question of Davis’ credibility as a witness the heart of his opening argument. He wasted no time in pressing the issue when finally given the chance to question Davis.
One of his first questions for the former CFO was, “When you met with prosecutors, did you tell them, ‘I’m a liar?’” Davis answered, “Yes.” Scardino: “Did you tell them you were a crook?” Davis: “A fraudster.” Scardino: “Did you tell them you were a coward?” Davis: “Yes. I told them I was a coward.”
Much of what followed hinged on Scardino’s efforts to tie Davis directly to criminal activity. He focused on the near $1 billion loan Davis took out from Stanford International Bank in December 2008 and January 2009, pointing to the lack of available evidence that Davis had obtained Stanford’s permission for the loan as Davis claimed.
Scardino also raised questions about a string of affairs Davis had. These included one with Laura Pendergest-Holt, whom he met while teaching a bible class with his wife and who later became Stanford’s chief investment officer.
For live Stanford trial blogging and past entries from the courtroom, follow http://live.kuhf.org/ .
http://app1.kuhf.org/articles/1328589544-Cross-Examination-of-Stanford-CFO-James-Davis-Begins.html
Stanford used fake accounting to back bank-witness
2/6/2012
http://newsandinsight.thomsonreuters.com/Legal/News/2012/02_-_February/Stanford_used_fake_accounting_to_back_bank-witness/
HOUSTON, Feb 6 (Reuters) - Allen Stanford used fake accounting to prop up his offshore bank in its waning days, as withdrawal requests from investors poured in, Stanford's former top deputy said on Monday.
Faced with a worrying number of withdrawals in 2008, Stanford came up with a plan to make a $600 million capital infusion into the bank, said James Davis, Stanford's former chief financial officer and the government's top witness.
Stanford is on trial in federal court in Houston, charged with bilking his investors in a $7 billion Ponzi scheme run from his bank in Antigua. Prosecutors allege that Stanford, who has pleaded not guilty, sold fraudulent certificates of deposit and used the proceeds to buy jets, luxury homes and Caribbean real estate.
In the spring of 2008, Stanford's accountants inflated the value of about 1,500 undeveloped acres in Antigua that Stanford had bought for $64 million. The accountants planned to flip the property through a series of transfers to put the real estate back on the bank's books with a value of more then $3.2 billion, Davis told the court.
"No actual cash or assets were going into the bank?" William Stellmach, a federal prosecutor, asked Davis. "No, sir," Davis replied.
The transaction was meant to fill a hole left by Stanford's profligate spending, which became apparent as investors took their money out of the bank, Davis said.
But, by the end of December, 2008, Stanford International Bank had only $88 million in cash, far less than the $1 billion it claimed to hold, according to documents Stellmach showed to jurors. The U.S. Securities and Exchange Commission seized Stanford's businesses and assets in February 2009.
Davis, 63, said stress related to keeping the scheme going eventually took a toll on his health, causing him both physical and mental problems.
"The fraud that I was participating in was killing me," Davis told the jury.
(Reporting By Anna Driver)
Follow us on Twitter: @ReutersLegal
http://newsandinsight.thomsonreuters.com/Legal/News/2012/02_-_February/Stanford_used_fake_accounting_to_back_bank-witness/
Stanford had secret fund for bribes, yacht-witness
2/3/2012
http://newsandinsight.thomsonreuters.com/Securities/News/2012/02_-_February/Stanford_had_secret_fund_for_bribes,_yacht-witness/
HOUSTON, Feb 3 (Reuters) - Texas financier Allen Stanford drew on a secret Swiss bank account for personal expenses like yacht maintenance and to pay bribes, the government's top witness said at Stanford's fraud trial on Friday.
Stanford, 61, is accused of bilking thousands of investors out of their savings by selling fraudulent certificates of deposit through his bank in the Caribbean. Prosecutors say the $7 billion Ponzi scheme is one of the biggest white collar crimes since Bernard Madoff's scam. Stanford has pleaded not guilty to all charges.
"The monies flowed from Stanford International Bank CDs to this slush account at SocGen," former Stanford Chief Financial Officer James Davis told jurors. "It was a slush fund."
Davis, 63, said Societe Generale account number 108731 was known only to himself and to Stanford. Stanford tapped the account regularly for millions of dollars at a time to pay for expenses like maintenance of his fleet of private jets and his 100-foot yacht, the "Sea Eagle."
As Davis testified, Stanford sat, head down, taking notes.
Davis is the only person among those charged in the alleged Ponzi scheme who has pleaded guilty. He is the government's star witness.
Prosecutors accuse Stanford of misleading investors by telling them CD proceeds were invested in safe financial instruments like blue-chip stocks and bonds. Instead, Stanford used funds for illiquid investments like Caribbean real estate and start-up companies starved for capital, prosecutors said.
Asked why Stanford deposited funds from the Swiss account into an account in Antigua, Davis said it was partly to pay bribes to Leroy King, a regulator in Antigua, where Stanford's bank was based.
"He said that, for one purpose, it was to pull cash out to pay bribes to the regulators, Lee King," Davis said.
Davis also testified that profit figures attributed to the bank's operations and reported to investors were made up by Davis and approved by Stanford.
"Did Mr. Stanford know the profit was a fake?" asked federal prosecutor William Stellmach.
"Yes, he did," Davis replied.
Davis testified that the bank "always" reported an annual profit on paper, but never actually made a profit.
When asked why the bank needed to show a profit in annual reports distributed to investors, Davis said: "Mr. Stanford said if there was no profit, you could not sell a CD based on a bank that was losing money."
The profit had be "reasonable," Davis said, based on global financial conditions.
"My instructions were clear from the beginning: We report a profit," Davis said.
Davis also testified about numerous promissory notes totaling hundreds of millions of dollars that Stanford created to show that money he was taking from the bank would be considered loans, rather than income, on the advice of a tax consultant.
Officials at the bank were unaware of the promissory notes, which were not disclosed in annual reports to investors, Davis said.
And Stanford never repaid the notes, Davis testified.
(Reporting by Anna Driver)
Follow us on Twitter: @ReutersLegal
http://newsandinsight.thomsonreuters.com/Securities/News/2012/02_-_February/Stanford_had_secret_fund_for_bribes,_yacht-witness/
Receiver sues former Stanford lawyer, 2 firms
By Purva Patel
Updated 10:01 p.m., Wednesday, February 1, 2012
http://www.chron.com/business/article/Receiver-sues-former-Stanford-lawyer-2-firms-2929150.php
The receiver assigned to recover assets of accused swindler R. Allen Stanford and his companies is suing a lawyer and law firms that helped counsel Stanford during a federal investigation.
The lawsuit, filed last week in a Washington, D.C., federal court, alleges that New York-based firms Proskauer Rose and Chadbourne & Parke, as well as securities lawyer Thomas Sjoblom, conspired with Stanford and others to hide fraud and help Houston-based Stanford Financial Group evade regulatory scrutiny.
Obstruction alleged
The receiver seeks to recover at least $1.8 billion in funds the lawsuit calls "bogus" personal loans to Stanford.
Stanford, a Mexia native, is on trial in federal court in Houston on related criminal charges accusing him of bilking investors of more than $7 billion, mostly through certificates of deposit issued by his Caribbean bank.
Testimony in the ongoing trial continued on Wednesday.
Civil lawsuits by investors and by the receiver lay out similar allegations.
The receiver's lawsuit claims Sjoblom, a former enforcement attorney for the Securities and Exchange Commission, obstructed the SEC's investigation of Stanford by lying to investigators and hiding documents. Sjoblom could not be reached for comment.
Firms criticized
The lawsuit alleges that Proskauer Rose and Chadbourne & Parke LLP, both firms where Sjoblom worked while Stanford was a client, failed to supervise Sjoblom adequately.
Spokesmen for the firms denied the allegations.
"The claims asserted against the firm are completely without merit. We will address them in the appropriate forum," said Proskauer Rose spokesman Josh Epstein.
'Nothing new here'
Andrew Blum, a spokesman for Chadbourne & Parke, said previous lawsuits against the firm relating to Stanford have been dismissed, and the firm expects the same result in the receiver's litigation.
"There is nothing new here," Blum said.
Guy Hohmann, a lawyer for Dallas-based receiver Ralph Janvey, disagreed.
"We wouldn't have taken the case or filed it if we didn't think it was meritorious," Hohmann said.
Proceeds from recovered assets eventually should benefit investors who lost money to Stanford's alleged fraud, he said.
purva.patel@chron.com twitter.com/purvap
http://www.chron.com/business/article/Receiver-sues-former-Stanford-lawyer-2-firms-2929150.php
Stanford's bank loaned him millions, witness says
By Terri Langford
Published 10:01 p.m., Tuesday, January 31, 2012
http://www.chron.com/business/article/Stanford-s-bank-loaned-him-millions-witness-says-2890948.php
R. Allen Stanford received several hundred million dollars in loans from his Caribbean bank as he expanded his real estate holdings, and as investors he wooed in the U.S. and elsewhere deposited billions in the bank, a business associate testified Tuesday.
Stanford International Bank in Antigua, a subsidiary of Houston-based Stanford International Group, is at the heart of the federal indictment charging that Stanford and associates misled clients about how the bank's certificates of deposit were invested.
The government charges that although depositors were assured by Stanford and his associates that the CDs were safe and that the bank did not make loans, $7 billion in investors' money went to Stanford's pet business projects and lavish lifestyle.
On Tuesday, federal prosecutors zeroed in how the Mexia native began branching into real estate ventures, searching for projects for "high net" people, while he was loaning himself money from Stanford International.
Federal prosecutors introduced two promissory notes signed by Stanford, indicating the bank loaned him $168 million in 2002 and $330 million in 2003. Neither loan was listed on the bank's annual statements.
Stanford attorney Robert Scardino noted that no law required disclosure of the loans.
They surfaced during the testimony of Arnold Knoche, an accountant hired in 1987 to head Stanford Development Co.
When it began, Stanford wanted to buy up distressed property in Houston, renovate it and then sell it. The pro-jects would be funded by clients at Stanford's first bank, Guardian International Bank in Montserrat. Clients invested in the first project, but the bank couldn't get enough client funding for the other two, Knoche said.
Stanford told Knoche he would make up the shortfall with personal resources.
During the 1990s, Knoche said, the development company shifted its focus to commercial projects in Antigua. Stanford took out the two loans during construction of major projects there - a restaurant, an airplane hangar, a new bank building and a cricket field.
Knoche also said Stanford's insistence on lavish materials pushed up costs.
terri.langford@chron.com
http://www.chron.com/business/article/Stanford-s-bank-loaned-him-millions-witness-says-2890948.php
Stanford Fraud Case Puts Old Friends at Odds
January 30, 2012
By CLIFFORD KRAUSS
http://www.nytimes.com/2012/01/31/business/in-stanford-fraud-case-longtime-friends-become-courtroom-enemies.html?ref=business
HOUSTON — R. Allen Stanford and James M. Davis were roommates at Baylor University and trusted friends over three decades who together built an international financial empire. But this week they are scheduled to confront each other in federal court as indicted swindlers ready to cross swords.
Mr. Davis, who was the chief financial officer of the Stanford Financial Group before it collapsed three years ago, is now the chief prosecution witness against Mr. Stanford. He will testify that he witnessed and participated in a $7 billion Ponzi scheme set in motion and directed by Mr. Stanford from a bank on the island of Antigua.
“It’s very similar to an organized crime or Mafia case,” said Adam Gershowitz, a professor of criminal law at the University of Houston, “where you have friends who go back years and have worked together for years and one turns on the other to save his own skin.”
Mr. Stanford’s lawyers have already told the jury that Mr. Davis’s story is a lie. They are certain to cross-examine him hard on his contention that all of the illegal things he has already confessed to — cooking the books for an empire that included offshore banking, two airlines, Caribbean real estate and even a cricket team — were all at the instruction of Mr. Stanford. The case could well come down to who the jury decides was really the mastermind of what prosecutors described as an international crime that defrauded nearly 30,000 investors from 113 countries over more than 20 years and corrupted the highest levels of the government of Antigua.
Mr. Stanford and Mr. Davis always made an odd couple. Mr. Stanford was known to have a fiery temper, to berate employees and occasionally to throw glass ashtrays at meetings. He had multiple mistresses and spent lavishly on them, on his cricket team and stadium, and he had a taste for mansions, yachts and private jets.
Mr. Davis was known by employees as soft-spoken and gentlemanly, an executive who was quick to give a congratulatory hug and who opened business meetings with prayers. His passion outside of work was to teach Sunday school at a Baptist church in Baldwyn, Miss.
But together they seemed to have a Midas touch, running up their assets from a mere $14 million in 1987 to $1.7 billion in 2002 and several billion more — on paper at least — before all their operations were shut down three years ago.
“They were bosom buddies,” recalled Ashley Edwards, who was a manager at Mr. Stanford’s two airlines. “They seemed like equals to me. They operated as equals. Jim Davis was a bit more levelheaded, but they got along fine.”
That comity is now history. Mr. Davis has pleaded guilty and is a cooperating witness. Mr. Stanford spent the last two and a half years behind bars, and was brutally beaten by a fellow inmate in a fight over the use of a telephone. A year ago he was found to be unfit to stand trial after psychologists said that his memory had been damaged by the fight and by his addiction to antistress medication.
Mr. Stanford is expected to testify at the trial but it is not certain what he will say because he still contends that he suffers memory loss.
But before he was arrested, Mr. Stanford said in an April 2009 interview, that if any crime had been committed, it must have been Mr. Davis’s responsibility. Mr. Stanford characterized himself as the architect and pitchman of the Stanford enterprises, and Mr. Davis as the executive who took care of the financial detail work.
“If bad things were happening, he never brought them to my attention,” Mr. Stanford said. “He did his job and I stayed out of his hair.”
Robert A. Scardino, a lawyer for Mr. Stanford, said in his introductory argument last week that Mr. Davis “is going to testify and admit that he is a liar and a crook, and yet these prosecutors are going to ask you to believe him.”
The defense followed that line of attack in the trial’s first week, reminding jurors during cross-examinations that Mr. Davis had often worked alone, that he had been the one in charge of finances and that he had made major executive hires.
Under questioning from the defense attorney Ali Fazel, Michelle Chambliess, a former Stanford marketing executive and government witness, acknowledged that Mr. Davis had been a powerful presence in day-to-day operations. The prosecution countered by putting on the stand Jason Green, a former Stanford Financial Group Louisiana branch manager, and asking if he ever had seen Mr. Stanford overrule Mr. Davis. “Very much so,” he said, smiling.
Mr. Green recalled how Mr. Davis had commissioned an expert to do an efficiency study when others thought she was not right for the job. Mr. Stanford berated Mr. Davis, Mr. Green said, mimicking Mr. Stanford’s jaunty Texas drawl: “He’s my best friend, but I still run the company.”
Gregg Costa, the assistant United States attorney leading the prosecution, said in his opening argument of Mr. Davis that Mr. Stanford had found someone he knew he could control: “Mr. Davis has accepted responsibility. He will give you the ultimate insider’s view.”
The prosecution concedes that Mr. Davis is facing up to 30 years of jail and hoping for leniency, but says that he will take the jury through documents and accounting records that will prove that Mr. Stanford was skimming investor money. That money, he will say, was secretly invested in real estate and other high-risk, illiquid assets, as well as personal loans and a secret Swiss bank account.
It is likely Mr. Davis will portray himself as an emotionally needy man who was easily bullied by Mr. Stanford.
Much of what Mr. Davis is expected to say has been laid out in a 2009 plea agreement in which Mr. Davis admitted to various counts of fraud and conspiracy to obstruct a Securities and Exchange Commission investigation.
The fraud began as early as 1988, when Mr. Stanford owned the Guardian International Bank on the Caribbean island of Montserrat, and Mr. Davis served as his controller. Mr. Davis told prosecutors that Mr. Stanford had ordered him to make false entries into the bank’s general ledger to report false revenue and investment portfolio balances. The practice continued after the bank was transferred to Antigua and renamed the Stanford International Bank.
Over the years, as the bank sold high-interest certificates of deposit, Mr. Stanford, Mr. Davis and other executives promoted the investments as safe and secure, as they amassed assets of over $7 billion.
But by 2008, 80 percent of the money went to various risky Stanford investments. Mr. Davis said that for years, at Mr. Stanford’s request, he and others had “created false books and records.” At least $2 billion of personal loans to Mr. Stanford were concealed and disguised, Mr. Davis told prosecutors.
Mr. Stanford has pleaded not guilty to all charges.
Mr. Davis’s plea agreement was nothing if not graphic and detailed. Sometime in 2003, he said, Mr. Stanford and the two top Antiguan bank regulators had taken a “blood oath,” with Mr. Stanford pledging to provide bribes, and the officials promising not to “kill the business.” When Mr. Stanford needed money to pay the bribes, he would instruct Mr. Davis to withdraw funds from a secret numbered Swiss bank account.
When the Antiguan bank was finally running out of money in mid-2008, Mr. Davis said he, Mr. Stanford and other executives artificially inflated the bank’s assets by devising a real estate transaction in which they falsely inflated the value of a $65 million real estate transaction into a $3.2 billion asset.
Mr. Gershowitz, the University of Houston law professor, said Mr. Davis was a compelling witness.
“When you got a guy who says ‘I was in the room and I can tell you exactly what happened,’ it’s a lot easier for a jury to understand and believe than to figure it out from a mountain of paper,” he said. “It’s hard to swallow that Stanford was smart enough to make billions of dollars, but not smart enough to know what the guy down the hall was doing.”
http://www.nytimes.com/2012/01/31/business/in-stanford-fraud-case-longtime-friends-become-courtroom-enemies.html?ref=business
Stanford Tried to Interfere With Antigua Regulator, Witness Says
January 31, 2012, 9:45 AM EST
By Laurel Brubaker Calkins and Andrew Harris
http://www.businessweek.com/news/2012-01-31/stanford-tried-to-interfere-with-antigua-regulator-witness-says.html
Jan. 31 (Bloomberg) -- An Antiguan judge who is also the island’s top banking regulator told the jury at R. Allen Stanford’s investment fraud trial that he repeatedly tried to influence the agency that oversaw his banking operations there.
Marian Althea Crick said she complained to Antiguan officials shortly after Stanford relocated his bank to the island until the financier was removed as a director of the agency that predated the Financial Services Regulatory Commission, where she is now chairman. She said it was “a clear conflict” to have the owner of a regulated entity participating in the agency that oversees the business.
“It reminded me of a saying we have at home,” Crick, a government witness, testified yesterday in federal court in Houston in the second week of the trial. “It was a classic case of the rat being put in charge of the cheese.”
Stanford, 61, who was indicted in June 2009, is charged with 14 counts including mail fraud, wire fraud and obstruction of a probe by the U.S. Securities and Exchange Commission. He denies the charges.
Crick testified that Antigua’s prime minister told her Stanford wanted her fired after she had a series of public and private disagreements with the financier in the 1990s. She said Stanford even briefly took control of her agency while she was out of the country in 1998, until she got Antigua’s Attorney General to reverse the decision on legal grounds.
Month-Long Trip
In 1999, Stanford paid for office space and placed several of his employees on the official committee tasked with conducting a formal review of Antigua’s international banks, Crick said. In 2001, she said, Stanford urged government officials to send her and an auditor examining Stanford International Bank Ltd. on a month-long trip so that a different auditor could complete the bank’s audit.
Stanford tried charm when threats failed, Crick said. Once, Stanford unsuccessfully tried to upgrade her economy flight to first class for a British banking conference. After another disagreement, when she informed Stanford forcefully that she “was not a yes person” and wouldn’t rubber-stamp his requests, she said, “He held my hand, and looked me straight in the eye and said, ‘You remind me so much of myself.’”
When Crick resigned from the regulatory commission in 2002, she was replaced by Leroy King, whom Stanford is accused of bribing with millions of dollars and tickets to the National Football League’s Super Bowl championship games. When King was accused of complicity in hiding Stanford’s alleged fraud in 2009, the agency removed him and put Crick back in charge.
Crick was scheduled to resume her testimony today.
Negative to Positive
Yesterday, the jury also heard from a former research analyst at Stanford Financial Group Co. who said that Laura Pendergest Holt, former chief investment officer of Stanford International Bank Ltd., asked him to change negative investment returns to positive ones that could be shown to Allen Stanford.
Mark Collinsworth testified that Holt made the request in March 2008 after showing him an e-mail she said she received from Stanford. The financier was requesting performance results for part of the bank’s investment portfolio.
“She showed me the e-mail on her iPhone and said, ‘I’m going to forward this to you but I want you to make the numbers positive,’” Collinsworth, a prosecution witness, said during cross-examination. “I thought, surely she wouldn’t ask me to change negative numbers to positive numbers,” he told Ali Fazel, one of Stanford’s attorneys.
Holt, Davis
Collinsworth’s testimony may bolster defense contentions that Stanford grew increasingly reliant upon information provided to him by Holt and Chief Financial Officer James M. Davis, as the organization grew in size and complexity.
Holt was indicted on criminal charges and has pleaded not guilty. Davis pleaded guilty to fraud in 2009 and is cooperating with the U.S.
A lawyer for Holt, Dan Cogdell of Houston, was present for Collinsworth’s testimony yesterday. Citing a gag order imposed by U.S. District Judge David Hittner, who is presiding over the trial, Cogdell declined to comment on what Collinsworth said.
Collinsworth said he refused to make the changes and didn’t know if Stanford was presented the correct investment results at a meeting the next day.
“I was not going to lie to the owner of the company,” he said, adding that he sat silently at the meeting with Stanford and was relieved not to be called upon.
Collinsworth said Holt reassured the bank’s research analysts in a conference call designed to “neutralize” concerns about the safety of the Antigua-based bank’s portfolio after New York investment manager Bernard Madoff was arrested for running a massive Ponzi scheme in December 2008.
‘Very Good Salesman’
Holt told the analysts she had seen the bank’s entire portfolio “and I had nothing to worry about,” Collinsworth said. “Laura was a very good salesman. She could make you feel warm and fuzzy and stuff,” he said.
Collinsworth said he later came to believe that Holt’s claim the portfolio was performing well made little sense because she had said it was invested largely in real estate, private equity and hedge funds. The real estate market at the time was down 50 percent to 60 percent, and private equity valuations were dropping as well, he testified.
“My brain began to kick in a day or so later,” Collinsworth testified. “How can you make money on real estate going down? You can’t short real estate. There was a total disconnect.”
Hired Friends
Stanford never personally asked him to falsify numbers or commit any crimes, Collinsworth said. He said he also believed Stanford wasn’t aware that Holt and Davis had hired friends to fill key bank positions for which they were unqualified.
Davis hired one of his former farm hands as a commodities analyst and his preacher as an analyst for Middle Eastern affairs, Collinsworth said.
Holt invested some of the bank’s funds with a hedge fund run by her husband, a former personal trainer, Collinsworth said. Holt had pressure applied to get another senior bank executive to resign after she ended an affair with him, Collinsworth said.
“Would it be important for the owner of the company to know about these things so he could come in and clean house?” Fazel asked.
“Oh yeah,” Collinsworth replied.
“Is it very clear in your mind that Mr. Stanford relied on Mr. Davis and Ms. Holt to run the numbers side of the business when it came to SIB?” Fazel said.
“Yes,” Collinsworth replied.
Under questioning by Assistant U.S. Attorney Andrew Warren, Collinsworth said he had no idea how often Stanford spoke, met or exchanged e-mail with either Davis or Holt.
Tracking Data
He identified several e-mails the prosecutor showed to the jury as including attachments where Davis sent portfolio tracking data to Stanford from late 2007 to late 2008.
The Stanford bank’s investment holdings didn’t resemble traditional, well-designed portfolios, the witness said.
“When it is finished, it should be like a work of art,” said Collinsworth. Instead, the portfolio suffered from what he called “Noah’s Ark syndrome, where you buy two of everything, with no rhyme or reason, and you end up with a zoo instead of a well-designed portfolio.”
The case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston).
--Editors: Peter Blumberg, Andrew Dunn
To contact the reporters on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com; Andrew Harris in Chicago at aharris16@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
http://www.businessweek.com/news/2012-01-31/stanford-tried-to-interfere-with-antigua-regulator-witness-says.html
How Allen Stanford kept the SEC at bay
1/26/2012
http://newsandinsight.thomsonreuters.com/Legal/News/2012/01_-_January/How_Allen_Stanford_kept_the_SEC_at_bay/
Jan 26 (Reuters) - In 2009, federal investigators finally arrested Houston financier R. Allen Stanford. For twenty years, Stanford allegedly had run a $7 billion Ponzi scheme from his offshore bank on the Caribbean island of Antigua. U.S. authorities had been nosing around Stanford's empire for longer than a decade but hesitated to open a full-blown probe.
As Stanford's trial began this week, one question left unanswered was: How did he keep authorities at bay for so long? A Reuters examination of his case finds that the answer lay in part in the legal advice he obtained from former SEC officials and other ex-regulators and law-enforcement officials.
Among those Stanford sought help from was famed securities lawyer Thomas Sjoblom . Then a partner at the international law firm of Proskauer Rose and chair of its securities practice, Sjoblom also was a former 20-year veteran of the U.S. Securities and Exchange Commission's enforcement division.
What Sjoblom allegedly did next for Stanford has drawn the scrutiny of federal prosecutors. The Justice Department has been investigating Sjoblom for possible obstruction of justice, witness tampering, and conspiracy related to his efforts to persuade the SEC to stand down from its investigation of Stanford, according to people familiar with the probe.
Sjoblom is one of the most senior attorneys ever to be investigated for allegedly crossing the line from legal advocacy on behalf of a client to violating the law. He hasn't been charged, however, and it is possible he never will be.
Stanford went on trial on Monday in federal court in Houston on charges that he defrauded more than 30,000 investors from more than 113 countries, and also obstructed the SEC's investigation of him . Only Bernard Madoff is alleged to have stolen more. Stanford has pleaded not guilty.
Prosecutors are likely, in making the obstruction portion of their case against Stanford, to detail Sjoblom's alleged role in assisting Stanford in that effort. Attorneys began their opening arguments on Tuesday.
IMMUNITY SOUGHT, AND REJECTED
People with first-hand knowledge of the matter say that Sjoblom had offered the Justice Department his testimony against Stanford in exchange for a grant of immunity from prosecution for himself - an offer rejected by the Justice Department. Prosecutors demanded a formal acknowledgment by Sjoblom of his own alleged criminal participation in an attempt by Stanford to derail investigations by the SEC, according to people involved in the discussions.
Sjoblom declined to answer questions when reached by telephone as well as inquiries submitted to him by email.
Ordinarily, attorneys are precluded from being witnesses against former clients because of the attorney-client privilege.
But under a legal doctrine known as the crime-fraud exception, an attorney can tell what he knows if his client has sought advice that would abet the commission of that fraud or some other criminal act - or in rare instances, if the attorney himself aided a crime. The crime or fraud disclosed or discussed must also then occur for the attorney to be able to testify. If Sjoblom had testified against Stanford, he would have been one of the most prominent attorneys to turn against such a client.
THE STANFORD EIGHT
The trials could cast light on the broader mystery of how the alleged Stanford fraud could have gone on so long even though federal regulators were examining the Texas financier for years. The case has put the SEC and other federal agencies in an embarrassing light, creating fresh fodder for critics of the revolving door between government and the private sector.
Stanford, Reuters has found, paid at least eight former senior U.S. and foreign regulators and law-enforcement officials for legal advice or investigative services.
Among the former government figures who worked for Stanford is Spencer C. Barasch, who headed the enforcement division of the SEC's office in Ft. Worth, Texas.
Barasch agreed this month to pay a $50,000 fine for allegedly violating federal ethics laws by representing Stanford after overseeing regulation of Stanford's U.S. brokerage businesses. It is illegal for many former federal regulators, including those at the SEC, to represent private clients if they have "personally and substantially" participated in any matters related to those clients during the course of their government employment.
Examiners at the SEC had suspected as early as 1997 that Stanford was engaged in a Ponzi scheme and felt the SEC should investigate. But year after year, until 2005, their warnings and calls for investigation were ignored by higher-ups.
A FRIEND IN FT. WORTH
In January 2009, the SEC was seeking the sworn testimony of both Stanford and James Davis, the chief financial officer for Stanford International Bank. Davis, Stanford's top deputy, has since pled guilty to securities-fraud and mail-fraud charges and has become a government witness against Stanford and others.
Stanford sought to delay and wear down regulators and investigators, Davis and other witnesses told the government, according to a 2009 plea agreement between Davis and federal prosecutors filed in federal court in Houston.
In 1997, 1998, 2002, 2004, and 2005, according to internal agency records seen by Reuters, examiners for the SEC recommended that the agency investigate Stanford. In three of those instances, Barasch, at the time an SEC official in Ft. Worth, personally overruled the examiners' recommendations, according to those records. Those decisions helped the Ponzi scheme to continue unabated for several additional years, costing investors additional billions of dollars, according to a report by the SEC's Inspector General.
Barasch told the SEC Inspector General that he made those decisions because he was not sure the SEC had the statutory authority or jurisdiction to investigate. He blamed his superiors and a broader culture within the SEC for pressuring the staff not to pursue complex and difficult cases, according to the Inspector General report.
In his final days at the SEC in 2005, Barasch overruled examiners one last time on a request to investigate Stanford, according to the Inspector General report and interviews with SEC officials. The SEC's formal investigation of Stanford began exactly one day after Barasch left the agency.
Barasch referred questions to his lawyer; his attorney didn't respond to requests for comment.
'I HATED BEING ON THE SIDELINES'
Barasch was told at the time by an SEC ethics officer that he was legally precluded from representing Stanford. Barasch went to work for Stanford anyway. In a later investigation of the failure to catch Stanford earlier, the SEC Inspector General asked Barasch why he did so. His reply, according to the Inspector General's report: "Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines."
FBI agents and prosecutors also uncovered evidence that on at least two occasions Barasch sought confidential information regarding the SEC's probe of Stanford during his brief representation of the banker, Justice Department officials said in court records and a press release.
In agreeing to pay the fine, Barasch denied any misconduct, settling the matter "to avoid the expense and uncertainty of protracted litigation," his attorney, Paul Coggins said.
In a related action, the commissioners of the SEC rejected a settlement negotiated between Barasch and SEC staff under which Barasch would have agreed to an order barring him from practicing before the agency for six months. The commissioners rejected the proposed settlement as too lenient, to send a message that its former staff should abide by its rules and federal laws regarding the revolving door.
'REVOLVING DOOR'
"This misconduct highlights the dangers of a 'revolving door' environment between the SEC and the private securities law bar," outgoing SEC Inspector General H. David Kotz said in statement about the Barasch case.
The Justice Department's agreement with Barasch was reported by Reuters earlier this month. The SEC, which has the authority to bar professionals from practicing before the agency, has not announced any disciplinary action.
The SEC is also preparing a separate civil case against another former regulator, Bernerd Young, who worked as a compliance officer for Stanford's bank, said a person familiar with the matter. Before he worked for Stanford, from 1999 to 2003, Young was a district director of the Dallas office of the National Association of Securities Dealers, which was then the brokerage industry's self-regulator. Regulation of the industry has since been taken on by a successor agency, the Financial Industry Regulatory Authority.
Young was notified by the SEC staff last June that they were preparing a civil complaint against him for securities-law and other violations and seeking a lifetime ban on his employment in the securities industry, according to a person who reviewed the SEC's notification to Young. Young hasn't been charged with any wrongdoing.
In November 2007, the Financial Industry Regulatory Authority charged that Stanford had used "misleading, unfair and unbalanced information" and fined him $10,000, but with no admission of guilt. Young was central to decisions by the NASD not to take tougher action against Stanford, according to government officials involved in the matter.
Randle Henderson, an attorney for Young, said Young had "done absolutely nothing wrong" and that he and Young had been cooperating with SEC investigators. If an enforcement action was brought, Henderson said, he and his client would engaged in a "full and complete and aggressive defense" of the allegations.
THE AIRCRAFT HANGAR SESSION
Sjoblom began work for Stanford as early as 2005, as the SEC began a formal investigation. Barasch began representing Stanford in Sept. 2006.
Barasch's successor at the SEC had reversed course and given a green light for the SEC to investigate. Stanford believed that hiring former SEC officials was the best course to thwart the agency, according to emails written by Stanford to subordinates and later cited by the SEC's Inspector General.
Barasch worked on the case until Dec. 2006, dropping out after SEC ethics officers warned him that any further involvement would violate a federal law.
On January 21, 2009, Stanford, his deputy Davis and other senior executives of the Stanford International Bank met Sjoblom in an aircraft hangar in Miami, Florida, to devise a strategy for fending off the SEC, according to the Davis plea agreement entered in Houston federal court.
Stanford, a bulky man with a thick mustache, paced nervously in the aircraft hangar, according to an account one of the attendees gave to federal investigators. In contrast, Sjoblom appeared calm and collected as they discussed their next move, the attendee told federal investigators.
The group allegedly agreed on a strategy: Sjoblom would go to the SEC and tell officials that both Stanford and Davis knew very little about the business they ran. Instead, he would tell them, two other, lower-ranking executives of the Stanford International Bank understood much better how the bank invested customers' money. He would then propose that they testify in place of Stanford and Davis, according to the plea filed in federal court in Houston.
SJOBLOM'S STRATEGY
Sjoblom knew that these assertions were false, and was also by then aware that Stanford had engaged in a massive financial fraud, according to the Davis plea. Still, Sjoblom moved forward with the effort to obstruct the SEC investigation, the Justice Department alleged in the Davis plea.
Early the next morning, on Jan 22, 2009, Sjoblom met in Houston with attorneys for the SEC, according to the Davis plea. There, Sjoblom told the SEC staff that Stanford and Davis did not "micro-manage" clients' portfolios. Taking Sjoblom's word, the SEC agreed to delay the testimony of Stanford and Davis, according to the plea filed in Houston federal court.
The Justice Department has since alleged that Sjoblom's actions constituted an obstruction of their investigation. Based in part on information given them by Davis, federal prosecutors alleged that Sjoblom continued trying to prevent the SEC from learning the truth even after Sjoblom learned about Stanford's massive fraud.
After convincing the SEC to forego Stanford's and Davis's testimony, Sjoblom allegedly helped prepare Laura Pendergest-Holt, Stanford International's chief investment officer, to testify in their absence, according to the Davis plea and an indictment against Pendergest-Holt in federal court in Houston.
Prosecutors allege that in reality, Stanford and Davis were the only two Stanford executives intimately familiar with the finances of the company. Pendergest-Holt only learned the full extent of the fraud around the same time that Sjoblom did, when the two were preparing her to testify before the SEC, federal prosecutors assert. Pendergest-Holt and Sjoblom learned then that the firm was insolvent and most of its financial claims fictional, prosecutors allege in the Pendergest-Holt indictment and the Davis plea.
On Feb. 5, Stanford admitted to Davis and Sjoblom that his bank's "assets and financial health had been misrepresented to investors, and were overstated," according to Davis's plea agreement with prosecutors.
$4 MILLION MORE?
Instead of dropping Stanford as a client and setting the record straight with the SEC, Sjoblom went back to Davis and Stanford with an offer, Davis told the FBI, according to a person familiar with the case. Sjoblom told the pair that they both faced serious criminal jeopardy and asked each to pay him a retainer of $2 million to represent them personally, for a total of $4 million, this person said. That money would have been in addition to what Stanford's firm had already paid Sjoblom's firm. It is not clear whether the additional money was paid.
On Feb. 10, Pendergest-Holt gave testimony to SEC officials. That morning, Davis admitted in his guilty plea, he phoned Pendergest-Holt and encouraged her to lie to "continue to obstruct the SEC investigation," according to the Davis plea agreement.
During her testimony, Pendergest-Holt said she knew little about the assets the SEC wanted to know about. All during her testimony, Sjoblom sat at her side, as five attorneys from the SEC's enforcement division fired away questions.
A federal grand jury later indicted her on obstruction of justice and conspiracy charges related to her allegedly false testimony. She is currently awaiting trial. Her lawyer declined to comment.
The indictment of Pendergest-Holt also implicated Sjoblom. "Holt, Attorney A and others would make false and misleading statements to the SEC staff attorneys in order to persuade them to delay" Stanford's testimony while Pendergest-Holt would "provide false testimony," the indictment alleged.
Days after Pendergest-Holt's testimony, on Feb. 14, Sjoblom resigned as a lawyer for Stanford and wrote to the SEC: "I disaffirm all prior oral and written representations made by me and my associates to the SEC staff."
Federal prosecutors are looking to Pendergest-Holt to see if she corroborates Davis' testimony regarding Sjoblom, and will then decide whether to charge Sjoblom, according to sources close to the case.
(Reporting By Murray Waas)
Follow us on Twitter: @ReutersLegal
http://newsandinsight.thomsonreuters.com/Legal/News/2012/01_-_January/How_Allen_Stanford_kept_the_SEC_at_bay/
Former Stanford employees describe early suspicions
By Terri Langford
Updated 10:18 a.m., Thursday, January 26, 2012
http://www.chron.com/business/article/Ex-Stanford-employees-testify-of-early-suspicions-2710107.php
Two former employees of R. Allen Stanford's financial services operation told federal jurors Wednesday that they saw problems with it years before investigators began targeting the former billionaire accused of masterminding a $7 billion investment fraud.
The first government witness, Michelle Chambliess, said she went to work in 1987 for Stanford's Guardian International Bank, an offshore institution that offered customers interest rates on certificates of deposit that were 2 percent to 4 percent higher than rates available from U.S. banks.
As a vice president of the bank's sales marketing arm and a fluent Spanish speaker, her job was to help push financial service products in Latin America, Chambliess testified under questioning by Assistant U.S. Attorney William Stellmach.
Chambliess said Stanford told her he located the bank offshore so it could avoid U.S. taxes and requirements involving insurance and minimum cash reserves.
Stanford told her that the lower overhead enabled the bank to offer better returns to investors, she testified, that deposits would be placed in conservative, liquid investments, and that CD investments would not be used fund bank loans.
At first, the operation raised no red flags, Chambliess said.
But in the late 1990s, an annual report showed that the bank - by then named Stanford International and moved to the neighboring Caribbean island of Antigua - had loaned Stanford $14 million.
Subsequent annual reports showed the loan repaid, Chambliess said, but it continued to nag at her.
She learned later that an airline and newspaper in which the bank invested - and the company that insured its deposits - were companies owned by Stanford, she said.
In 2002, Stanford pressured his sales staff to sell more CDs in Central and South America, Chambliess testified.
At a quarterly meeting that year, she was startled by Stanford's response when she told him it was increasingly difficult to convince prospects that their investments were safe.
"Do what you need to do," she said Stanford told her. "I don't care how you do it. Just don't tell me. I don't want to know."
Chambliess said she was "flabbergasted."
"I started floating my résumé," she said.
Soon after, Chambliess said, Stanford fired her over the phone because she wasn't meeting her sales quota.
"I was a month shy of my 15-year anniversary," she said, staring to the defense table at Stanford, who showed no reaction.
Prosecution documents showed that in 1987, Guardian reported $14 million in assets, and that by 2002, Stanford International Bank reported $1.7 billion in assets.
In 2009, the U.S. Securities and Exchange Commission sued to place Stanford's companies - all part of Houston-based Stanford Financial Group - into receivership and prosecutors obtained the criminal indictment against him and four others who will be tried later. They have pleaded not guilty.
The company's chief financial officer, James Davis, was charged separately and pleaded guilty to felony counts of mail fraud, conspiracy to commit fraud and conspiracy to obstruct an investigation. He is scheduled to testify for the prosecution next week.
Chambliess testified that Davis, Stanford's Baylor University roommate, came to work for the bank about a year after she did.
She said that Stanford was a hands-on company leader but conceded under questioning by defense lawyer Ali Fazel that Davis took a growing role in the day to day operations.
The government's second witness, Lionel Leo Mejia, said he left a graphics job at the Houston Chronicle to head an agency Stanford created to make sales brochures and buy advertising.
His responsibilities included preparing the bank's annual report, and he testified that he saw Stanford and Davis making changes to financial figures in the report just before it was sent to the printers.
His relationship with Stanford later soured, and he was fired, Mejia testified.
The Associated Press contributed to this report. Terri.Langford@chron.com
http://www.chron.com/business/article/Ex-Stanford-employees-testify-of-early-suspicions-2710107.php
SEC Asks Federal Judge to Order SIPC Payout Plan for Stanford Investors
By Tom Schoenberg - Jan 24, 2012
http://www.bloomberg.com/news/2012-01-24/sec-asks-federal-judge-to-order-sipc-payout-plan-for-stanford-investors.html
The U.S. Securities and Exchange Commission urged a judge to order the federal Securities Investor Protection Corp. to create a claims process for R. Allen Stanford’s alleged investment fraud victims.
SEC lawyers asked U.S. District Judge Robert Wilkins during a hearing today in Washington to require SIPC, a nonprofit corporation funded by the brokerage industry, to start a liquidation proceeding in federal court in Texas to handle more than $1 billion in possible claims related to the alleged Stanford fraud.
“Ultimately, what we’re seeking here is to provide a forum where claimants can seek judicial review of their claims,” Matthew Martens, the SEC’s chief litigator, told the judge during a three-hour hearing.
At issue is whether more than 7,000 brokerage customers who invested in the alleged $7 billion Ponzi scheme run by Stanford are entitled to have their losses covered by SIPC.
SIPC, a congressionally chartered group that insures customers against losses caused by broker theft, says the Stanford investments don’t fit into the confines of the federal law that governs who’s eligible for the payouts. Investors and their advocates in Congress say SIPC is deliberately taking a narrow view of the law to protect brokers from higher assessments.
‘Proof of Customers’
“There has to be proof of customers to start a liquidation,” Eugene Assaf, a lawyer for SIPC, argued today.
Assaf, of Kirkland & Ellis LLP in Washington, said the SEC was trying to open a liquidation proceeding in Texas without any judicial review of whether the Stanford investors are “customers” under the law. He asked Wilkins to require the SEC to refile its lawsuit, allow the parties to seek discovery and then decide whether the Stanford investors are covered by the Securities Investor Protection Act.
“This is our only opportunity to convince the court whether a liquidation should be ordered or not,” said Assaf, adding that a liquidation proceeding would cause significant expense for SIPC.
Martens told Wilkins that a SIPC-appointed trustee and the U.S. bankruptcy court in Texas would be responsible for reviewing whether individual claimants qualified for payouts.
‘Under Advisement’
Wilkins said he would take the matter “under advisement” and issue a ruling “as soon as I can.”
Stanford allegedly used his brokerage to entice investors to buy high-interest certificates of deposit through his private Stanford International Bank Ltd. in Antigua. Instead, according to prosecutors, much of the money was used to support Stanford’s businesses and lifestyle.
Opening statements in Stanford’s criminal trial began today in Houston.
Stanford, 61, was the ringleader of a $7 billion investment fraud, the U.S. said in a 14-count indictment accusing him of mail fraud and wire fraud, crimes that carry maximum sentences of 20 years in prison. He’s also charged with conspiracy to commit mail fraud and wire fraud and to obstruct an SEC probe.
“I plead not guilty to every count,” Stanford, wearing a light gray plaid suit and a white dress shirt and no necktie, told the jury today.
‘Lie After Lie’
Stanford stole from investors “so that he could live the lifestyle of a billionaire,” Assistant U.S. Attorney Gregg Costa said in his opening statement. “He told them lie after lie after lie.”
In the defense’s opening remarks, Robert Scardino, one of Stanford’s court-appointed lawyers, told the jury: “Mr. Stanford’s financial empire was real and did make a lot of money and did pay every penny of what was owed to depositors for 22 years.”
In June, the SEC ordered SIPC to start a process that could grant as much as $500,000 for each Stanford client -- the same maximum amount it offers in any case. After SIPC balked, the SEC for the first time sued the group in federal court in Washington.
SIPC is responsible for providing coverage for individual investors who lose money or securities held by insolvent or failing member brokerage firms. It has agreed to cover losses sustained by victims of Bernard Madoff’s multibillion-dollar Ponzi scheme and investors who may have lost money in the October collapse of commodities broker MF Global Holdings Ltd. (MFGLQ)
SIPC may be best known for its logo, which dues-paying brokerage firms put on their marketing materials to show customers they’re protected. Unlike the protection that the Federal Deposit Insurance Corp. gives to bank accounts, SIPC doesn’t run a general insurance fund or cover investment losses. Under the Securities Investor Protection Act, it’s supposed to aid investors when their securities or cash are stolen or go missing.
Offshore Banks
SIPC doesn’t guarantee an investment’s value or protect against fraud, the agency said in court papers. It also doesn’t cover investments with offshore banks or non-member firms.
Stephen Harbeck, SIPC’s president, has said that SIPC shouldn’t get involved because investors received actual CDs after the brokerage passed their money to a bank. What happened after that isn’t under SIPC’s purview because the Stanford account holders have possession of their securities, he told a court-appointed receiver in 2009.
The SEC eventually decided that there was no true separation between Stanford’s bank and the brokerage firm. Customers who made investments with the bank were effectively depositing money with the brokerage and should get SIPC coverage, the SEC said.
Martens told Wilkins today that the SEC has full authority over SIPC, which is why the judge should enforce the SEC’s order to begin the liquidation proceeding.
U.S. Senator David Vitter, a Louisiana Republican whose state is home to many Stanford investors, asked SEC Chairman Mary Schapiro in a Capitol hearing last month to sue SIPC.
The case is Securities and Exchange Commission v. Securities Investor Protection Corp., 11-mc-00678, U.S. District Court, District of Columbia (Washington).
To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
http://www.bloomberg.com/news/2012-01-24/sec-asks-federal-judge-to-order-sipc-payout-plan-for-stanford-investors.html
Stanford Told ‘Lie After Lie’ to Investors, U.S. Prosecutor Says
January 25, 2012, 12:23 AM EST
http://www.businessweek.com/news/2012-01-25/stanford-told-lie-after-lie-to-investors-u-s-prosecutor-says.html
Jan. 25 (Bloomberg) -- R. Allen Stanford engaged in a long- term fraud scheme and lied repeatedly to investors to “live the life of a billionaire,” a U.S. prosecutor told jurors as the financier’s criminal trial started in Houston.
Stanford, 61, was the ringleader of a $7 billion investment fraud, the U.S. said in a 14-count indictment accusing him of mail fraud and wire fraud, crimes that carry maximum sentences of 20 years in prison. He’s also charged with conspiracy to commit mail fraud and wire fraud and to obstruct a U.S. Securities and Exchange Commission probe.
“I plead not guilty to every count,” Stanford, wearing a light gray plaid suit and a white dress shirt and no necktie, told the jury yesterday.
Stanford has been in federal custody since being indicted in June 2009. His trial was postponed three times because of changes to his legal defense team, the after-effects of a jailhouse beating and a subsequent prescription-drug addiction.
In Washington yesterday, the SEC urged a judge to order the federal Securities Investor Protection Corp. to create a claims process for Stanford’s alleged victims.
Stanford stole from investors “so that he could live the lifestyle of a billionaire,” Assistant U.S. Attorney Gregg Costa said in his opening statement in the Houston courtroom. “He told them lie after lie after lie.”
The scheme stretched over 20 years of “lying, cheating and bribing,” Costa told the jury of 10 men and five women, including three alternates.
‘Real’ Empire
“Mr. Stanford’s financial empire was real and did make a lot of money and did pay every penny of what was owed to depositors for 22 years,” Robert Scardino, one of Stanford’s court-appointed lawyers, told the jury in his own opening remarks.
Scardino and defense lawyer Ali Fazel have previously said they will use the records of Houston-based Stanford Group Co. and Antigua-baed Stanford International Bank Ltd. to prove their client never intended to defraud anyone.
No investor lost money until the SEC sued Stanford and obtained a court order to take control of his businesses in February 2009, the defense has said.
Costa called the $7 billion in deposits once held by Stanford’s Antigua bank “a real number.”
“How did Mr. Stanford get so many people to give him so much of their savings?” Costa asked. “That’s where the lying comes in.”
Stanford lied to depositors about the liquidity of their investments, about whether his bank ever loaned those proceeds and about who was managing their money, the prosecutor said.
‘Compound Fraud’
“You’re going to see the power of compound fraud,” he said.
The financier lied about committing $700 million of his own money to shore up the bank’s finances in 2008, while he was actually pulling money out, Costa said.
Stanford also “waved his magic wand” to increase the value of an unimproved island property from $63 million to $3 billion during the worst economic downturn since the Great Depression, according to the prosecutor.
The financier is accused of bribing his now-dead auditor and an Antiguan banking regulator who received cash, National Football League Super Bowl championship tickets and use of Stanford’s private jets.
Costa told jurors they would hear from investors who lost their life savings. These witnesses will tell, “how his lying, stealing and bribing have taken that money and the dreams they had with it.”
‘Complete Picture’
Scardino told jurors the U.S. didn’t have full access to Stanford’s business records and wasn’t presenting “a complete picture” of his client’s business. He said Stanford invested more than $100 million to improve the island and obtain licenses that made the property more valuable.
The defense lawyer called his client “a Texas boy” and “a very resourceful businessman” who became a billionaire. He said the jury may hear from his client during the trial, without being more specific.
Stanford’s lawyer told the panel that the certificates of deposit sold by the Stanford bank weren’t securities and that Stanford’s clients had no say over how their money was invested.
The bank’s CDs were sold only in tranches valued at $50,000 or more, to investors with either a net worth of more than $1 million or an annual income of more than $200,000, the defense lawyer said.
Scardino called those CD purchasers “sophisticated investors” whom he said “know what a CD was and what it wasn’t.”
‘Legitimate’ Business
They also received promotional materials from Stanford’s business disclosing that past performance was no guarantee of future success and that an investor could lose the entirety of an investment.
“We’re going to prove this was not a Ponzi scheme at all,” Scardino said. Unlike frauds in which money from later- arriving investors is used to pay off earlier speculators, he said, “this one was legitimate.”
Marc Nurik, a Fort Lauderdale, Florida, attorney who has been following the Stanford proceedings, called the defense decision to hold out the prospect of Stanford’s testimony a risk. Stanford isn’t required to take the witness stand.
“The traditional wisdom is that you don’t set up for failure,” he said.
An opening statement is tantamount to the making of a promise to the jury, he said. Stanford’s failure to take the stand would breach that promise.
Nurik said Stanford might be pressing his lawyers to let him testify.
Jury Selection
Jury selection began Jan. 23 at Houston’s Bob Casey Federal Courthouse with U.S. District Judge David Hittner’s interview of 80 prospective panelists, many of whom said they had read or heard reports about the case and some of whom told the judge they didn’t know if they could be impartial.
The 15 men and women selected yesterday include a retail optician, an environmental engineer, two accountants, a kindergarten teacher, a chef, a land surveyor, a pawn broker and a retired hairdresser.
The trial may last about six weeks, Hittner said.
In Washington, SEC lawyers asked U.S. District Judge Robert Wilkins during a hearing yesterday to require SIPC, a nonprofit corporation funded by the brokerage industry, to start a liquidation proceeding in federal court in Texas to handle more than $1 billion in possible claims related to the alleged Stanford fraud.
Judicial Review
“Ultimately, what we’re seeking here is to provide a forum where claimants can seek judicial review of their claims,” Matthew Martens, the SEC’s chief litigator, told the judge during a three-hour hearing.
At issue is whether more than 7,000 brokerage customers who invested in the alleged Ponzi scheme run by Stanford are entitled to have their losses covered by SIPC.
SIPC, a congressionally chartered group that insures customers against losses caused by broker theft, says the Stanford investments don’t fit into the confines of the federal law that governs who’s eligible for the payouts. Investors and their advocates in Congress say SIPC is deliberately taking a narrow view of the law to protect brokers from higher assessments.
In June, the SEC ordered SIPC to start a process that could grant as much as $500,000 for each Stanford client -- the same maximum amount it offers in any case. After SIPC balked, the SEC for the first time sued the group in federal court in Washington.
Individual Investors
SIPC is responsible for providing coverage for individual investors who lose money or securities held by insolvent or failing member brokerage firms. It has agreed to cover losses sustained by victims of Bernard Madoff’s multibillion-dollar Ponzi scheme and investors who may have lost money in the October collapse of commodities broker MF Global Holdings Ltd.
SIPC doesn’t guarantee an investment’s value or protect against fraud, the agency said in court papers. It also doesn’t cover investments with offshore banks or non-member firms.
Stephen Harbeck, SIPC’s president, has said that SIPC shouldn’t get involved in the Stanford case because investors received actual CDs after the brokerage passed their money to a bank. What happened after that isn’t under SIPC’s purview because the Stanford account holders have possession of their securities, he told a court-appointed receiver in 2009.
The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The civil case against Stanford is Securities and Exchange Commission v. Stanford International Bank Ltd., 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The SIPC case is Securities and Exchange Commission v. Securities Investor Protection Corp., 11-mc-00678, U.S. District Court, District of Columbia (Washington).
--Editors: Peter Blumberg, Michael Hytha
To contact the reporter on this story: Andrew Harris in Houston at aharris16@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
http://www.businessweek.com/news/2012-01-25/stanford-told-lie-after-lie-to-investors-u-s-prosecutor-says.html
Stanford jury selection continues for second day
By Terri Langford and Mike Tolson
Updated 09:53 p.m., Monday, January 23, 2012
http://www.chron.com/business/article/Stanford-jury-selection-continues-for-second-day-2675287.php
Jury selection in the $7 billion fraud trial of R. Allen Stanford will continue Tuesday because nearly half the pool had to be interviewed privately about special circumstances or possible bias.
Court officials had scheduled one day for jury selection in the long-delayed federal trial of Stanford, a Mexia native who inherited his father's insurance company and transformed it into a Houston-based international financial services empire.
He is charged on one count of conspiracy to commit wire fraud and mail fraud; five counts of wire fraud; five counts of mail fraud; one count of conspiracy to obstruct a Securities and Exchange Commission investigation; one count of obstruction of an SEC investigation; and one count of conspiracy to commit money laundering.
The indictment alleges Stanford and others committed fraud through Stanford Group Co., a securities brokerage and investment adviser, and Stanford International Bank in the Caribbean island nation of Antigua, both subsidiaries of Stanford Financial Group.
Worth $2 billion
Stanford, listed by Forbes in 2008 as having a net worth of more than $2 billion, had been scheduled for trial a year ago, but it was delayed so he could be treated for addiction to medications he was prescribed after suffering a head injury in a 2009 jailhouse fight.
U.S. District Judge David Hittner ruled last month that Stanford is competent to stand trial, denying a defense request to delay it further.
On Monday, Hittner asked each of the 80 prospective jurors for more details about their answers to a previously mailed questionnaire. In the afternoon, he excused 45 for the day and had 35 remain for individual questioning after they said they had strong opinions about the case or mentioned other problems with being jurors.
"We certainly can't select a jury today," Hittner said, and he told the prospects to return at 10 a.m. Tuesday. After selection of 12 jurors and two alternates, opening arguments could begin late Tuesday or Wednesday morning. The 14 will not know until they begin deliberations which two will be alternates.
Knowledge of finance
The jurors previously answered a questionnaire about their familiarity with international finance, accounting or other specialties at the heart of the case against Stanford. He is accused of defrauding investors, mostly through certificates of deposit issued by the bank in Antigua.
Many in the jury pool work in Houston's key industries, including energy, banking, finance and engineering.
Stanford, in a gray suit, was somber at the defense table, whispering occasionally to his lawyers. Hittner ruled in 2009 that Stanford's international connections made him a flight risk, and he has been held without bail.
terri.langford@chron.commike.tolson@chron.com
http://www.chron.com/business/article/Stanford-jury-selection-continues-for-second-day-2675287.php
Stanford trial set to start Monday
By Purva Patel
Published 05:46 p.m., Wednesday, January 18, 2012
http://www.mysanantonio.com/business/article/Stanford-trial-set-to-start-Monday-2613303.php
Investors who entrusted billions of dollars with R. Allen Stanford's company were getting returns on schedule until securities regulators intervened, his lawyers told a judge Wednesday in a possible preview of his defense against fraud charges.
During a pretrial hearing, U.S. District Judge David Hittner denied another plea from lawyers for the jailed Texas native to delay Stanford's lengthy trial, scheduled to start Monday.
They told Hittner they need more time, among other things, to evaluate possible testimony from expert witnesses on auditing and accounting procedures.
Last month, Hittner ruled Stanford is competent and refused to delay Stanford's trial based on his lawyers' contention that he remains mentally incompetent to assist them in his defense. Earlier last year, the judge agreed that Stanford had become addicted to medications prescribed for him after a jailhouse fight and ordered him into treatment.
Medical personnel at the North Carolina prison hospital where he was treated also have said Stanford now is competent.
Stanford Attorney Robert Scardino told the judge Stanford likely will testify during the trial, but Hittner ruled that the jury would not be allowed to hear about those competency issues.
Scardino noted that the contested brain damage and treatment issues could help explain Stanford's demeanor to the jury, to which Hittner retorted, “You're still pushing that?”
In court Wednesday, Stanford, handcuffed and in a green jumpsuit, occasionally closed his eyes and rested his head against a wall. He pled not guilty from his seat when the judge arraigned him on a superseding indictment that came down while he was in treatment, but also said that he had not had time to review the charges.
Stanford and others are accused of running a $7 billion fraud scheme through Houston-based Stanford Financial Group. At the heart of the 14-count indictment against Stanford are certificates of deposit issued by his Stanford International Bank in the Caribbean island nation of Antigua.
The government contends clients were told the funds in the CDs were invested conservatively, when in fact they were used for speculative ventures and to fund Stanford's lavish lifestyle in the Caribbean and Florida.
But Stanford lawyer Ali Fazel told the judge Wednesday that what Stanford officials “said they did with the money is what they did.”
Fazel said CD investors received payments on schedule until the Securities and Exchange Commission sued Stanford Financial Group in 2009 and a judge ordered it into receivership.
Jury selection begins Monday, with attorneys selecting from a panel of 80 potential jurors. The trial is expected to last six to eight weeks.
purva.patel@chron.com
http://www.mysanantonio.com/business/article/Stanford-trial-set-to-start-Monday-2613303.php
Ex-Official at S.E.C. Settles Case for $50,000
January 13, 2012
By EDWARD WYATT
http://www.nytimes.com/2012/01/14/business/ex-sec-official-settles-conflict-case.html?_r=1&nl=afternoonupdate&emc=aua22
WASHINGTON — A former enforcement official for the Securities and Exchange Commission who was accused of blocking or closing at least three investigations into the activities of the Stanford Financial Group, which the authorities claim was a $7 billion Ponzi scheme, has settled civil charges brought by the Justice Department accusing him of violating conflict-of-interest rules by later representing Stanford before the commission.
John M. Bales, the United States attorney for the Eastern District of Texas, announced Friday that the former official, Spencer C. Barasch, who from 1998 to 2005 served as the enforcement director for the S.E.C.’s Fort Worth regional office, had agreed to a civil settlement that would result in payment of a $50,000 fine.
That is the maximum fine for a violation of federal conflict-of-interest rules, but it is much less than the punishment Mr. Barasch would have faced had the Justice Department pursued a criminal case. The civil settlement ends for now any further criminal investigation of Mr. Barasch. A separate civil case involving Mr. Barasch continues at the S.E.C.
Paul Coggins, a lawyer representing Mr. Barasch, said the case was settled “to avoid the expense and uncertainty of protracted litigation.” Mr. Barasch’s actions after leaving the S.E.C. “were expressly permitted by the postemployment statute,” Mr. Coggins said. “At no time has he compromised his honor or ethics, and we vigorously dispute any suggestion to the contrary.” Government officials said at a Congressional hearing last May that Mr. Barasch was the subject of a criminal investigation into his work for Stanford, which was also the subject of much of a 150-page report by the commission’s inspector general issued in March 2010.
That report found that Mr. Barasch frequently discouraged or halted further investigation into Stanford Financial by S.E.C. staff members, and that he subsequently represented the firm in talks with S.E.C. officials about other or continuing investigations.
The S.E.C. is continuing its own attempts to reach a separate civil settlement with Mr. Barasch, people close to the commission said. Such a settlement could include an extended or permanent bar from work before the commission.
H. David Kotz, the S.E.C. inspector general, said in a statement Friday that the Justice Department settlement “sends a strong message that former federal officials cannot abuse the public trust by attempting to profit personally from matters on which they worked as government servants before joining the private sector.”
Mr. Bales said that the case demonstrated that the S.E.C.’s ethics program worked, because commission lawyers had told Mr. Barasch that he was barred from representing Stanford Financial on agency business. “Today’s settlement demonstrates that we will hold those that shirk their professional responsibilities accountable for their conduct,” he said.
According to the Justice Department’s settlement, Mr. Barasch denied any wrongdoing. He said that he lacked the unilateral authority to close or hamper an investigation, and that he received “directives and pressure from his superiors in Washington” to devote his office’s resources to financial and accounting fraud rather to Ponzi schemes.
Mr. Barasch also denied that he had been told he was permanently barred from representing Stanford Financial. In December 2006, he billed the firm about $6,500 for service and expenses.
R. Allen Stanford, the founder of Stanford Financial, is scheduled to go on trial on Jan. 23 in Houston.
He is charged with 21 federal criminal counts of defrauding investors, who were encouraged to buy certificates of deposit at a Stanford bank in Antigua. Instead of being invested, federal officials say, much of the money went to finance Mr. Stanford’s lavish way of living.
http://www.nytimes.com/2012/01/14/business/ex-sec-official-settles-conflict-case.html?_r=1&nl=afternoonupdate&emc=aua22
Stanford Defense Experts Paid, Told to Prepare for Trial
January 05, 2012, 6:05 PM EST
By Laurel Brubaker Calkins
http://www.businessweek.com/news/2012-01-05/stanford-defense-experts-paid-told-to-prepare-for-trial.html
(Updates with ruling rejecting delay in 14th paragraph.)
Jan. 5 (Bloomberg) -- R. Allen Stanford’s defense experts were ordered by a U.S. appellate court to keep preparing for the former financier’s trial over an alleged $7 billion investment fraud. The court also agreed to pay their back wages.
All of Stanford’s non-attorney experts quit last week after appellate judges controlling the former billionaire’s taxpayer- funded defense budget said they would limit and withhold the experts’ compensation until after conclusion of his trial, set to begin Jan. 23 in a federal court in Houston.
“It would be neither feasible nor economical to obtain a replacement to perform the services Marcum was expected by counsel to provide,” Judge Edith Jones, the chief of the U.S. Court of Appeals in New Orleans, said in a letter yesterday to Marcum LLP, one of the expert contractors that resigned last week from Stanford’s defense team.
The service providers were also “ordered to continue work on the case as previously planned, including the provision of testifying experts, through the end of trial, and, if required by counsel, through the conclusion of the case in the district court,” Jones said in the letter, which was posted to the court’s electronic docket.
Accumyn Consulting and the Worley Group had also resigned last week over non-payment of bills dating back to September, according to court filings. Jones issued similar orders and agreements to pay overdue invoices for those two expert-services contractors to keep them working on Stanford’s defense.
Preparation Time
Ali Fazel, Stanford’s lead criminal-defense attorney, asked U.S. District Judge David Hittner last week to delay Stanford’s trial for three months to allow more preparation time. Fazel argued that Stanford has had too little time since being declared mentally competent to adequately review documents critical to his defense.
Fazel said the defense was hampered by the resignation of all expert-services contractors on Dec. 30, after the appellate court balked at paying their bills. Jones, in her letters yesterday, said billings by Marcum and Accumyn feature “hourly rates significantly in excess of the rates payable under the Criminal Justice Act to even the most experienced attorneys.”
Jones said the court would “consider” future payments for work by Accumyn and Marcum according to a sliding schedule pegged to the beginning and end of Stanford’s criminal trial, as well as any post-trial work the firms provide. Jones didn’t require withholding for work she ordered the Worley Group to provide.
Flight Risk
Stanford, 61, has been in custody as a flight risk since he was indicted in June 2009 on charges of defrauding investors through allegedly bogus certificates of deposit at his Antigua- based Stanford International Bank. He denies any wrongdoing.
Stanford was declared mentally fit for trial on Dec. 22, after completing eight months of rehabilitation at the federal prison hospital in Butner, North Carolina. Hittner found the former financier had sufficiently recovered to understand the proceedings and assist with his defense after suffering head injuries in a September 2009 jailhouse assault and becoming addicted to anxiety drugs prescribed by prison doctors following the attack.
Hittner appointed taxpayer-funded defense attorneys for Stanford in 2010 after he found the former billionaire to be indigent. Stanford, who was ranked the 205th richest person in the U.S. in 2008 by Forbes magazine, is accused by the government of skimming more than $1 billion in investor funds to finance a lavish lifestyle of private jets, yachts and a Caribbean island.
‘Massive Ponzi Scheme’
The U.S. Securities and Exchange Commission seized all of Stanford’s personal and corporate assets in February 2009, when it sued him on claims he ran a “massive Ponzi scheme” built on the Antiguan bank CDs. Stanford also lost access to his corporate directors-and-officers liability insurance last year, after underwriters won the right to refuse coverage on the basis of a guilty plea by Stanford’s former finance chief.
“Stanford, as an indigent defendant, is entitled to a solid, capable, and competent defense, not the deluxe or ‘perfect’ defense that he might have otherwise desired were he still in control of the millions (or even billions) of dollars indicative of his past lifestyle,” Hittner said in a Dec. 28 order.
Request Rejected
In separate orders issued today, Hittner rejected Stanford’s request to again delay the trial, and he chided defense lawyers for failing to follow court rules or heed previous evidentiary rulings in the case.
The judge called their delay motion “a rehash of objections and summation arguments made during the hearing” and already considered and rejected. Hittner said he “again directs, and now admonishes, Stanford’s defense team to prepare for trial.”
The criminal case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv298, U.S. District Court, Northern District of Texas (Dallas).
--Editors: Peter Blumberg, Glenn Holdcraft
To contact the reporter on this story: Peter Blumberg in San Francisco at pblumberg1@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
http://www.businessweek.com/news/2012-01-05/stanford-defense-experts-paid-told-to-prepare-for-trial.html
No trial delay for accused Ponzi schemer Stanford
12/28/2011
http://newsandinsight.thomsonreuters.com/Legal/News/2011/12_-_December/No_trial_delay_for_accused_Ponzi_schemer_Stanford/
Dec 28 (Reuters) - Allen Stanford, accused of running a $7.2 billion Ponzi scheme, on Wednesday lost his bid for a three-month delay in his criminal fraud trial, clearing the way for jury selection to begin on Jan. 23.
U.S. District Judge David Hittner in Houston called the public interest in a speedy trial "particularly acute."
Hittner cited charges that Stanford deceived thousands of investors into buying certificates of deposit from his Antiguan bank, Stanford International Bank Ltd, leading to billions of dollars of losses. He also noted that Stanford has been in detention for 2-1/2 years since his June 2009 arrest.
"This case needs to be tried," Hittner wrote.
Stanford had sought to delay the trial to late April. A lawyer for Stanford did not immediately respond to a request for comment.
Once considered a billionaire, Stanford, 61, had run the Stanford Financial Group, and owned luxury homes in the Caribbean, Houston and Miami.
The defendant now faces a 14-count indictment in one of the largest white-collar fraud cases since Bernard Madoff was arrested in December 2008 for his Ponzi scheme.
Criminal proceedings were delayed while Stanford was treated for an addiction to anti-anxiety medication at the same North Carolina federal correctional complex housing Madoff.
Last week, Hittner ruled that Stanford was competent to stand trial.
Stanford's lawyers had argued that their client still suffers serious depression, as well as memory loss tied to a brain injury suffered in a September 2009 jailhouse attack.
In Wednesday's ruling rejecting a trial delay, Hittner said Stanford has had "an extensive legal defense team," having been represented at various times by 14 different lawyers, and "liberal" access to government evidence against him.
The judge also said a delay could add to already "massive" legal bills. He said Stanford, who claims to be indigent, is entitled to a "solid, capable, and competent defense," not the "deluxe or 'perfect' defense" that he might otherwise want.
Prosecutors had said they would not oppose a four- to six-week trial delay, citing the competency hearing.
A Ponzi scheme is a fraud in which older investors are paid with money from newer investors. Stanford also faces civil fraud charges by the U.S. Securities and Exchange Commission, in a separate case being handled in Dallas.
The case is USA v Stanford, U.S. District Court, Southern District of Texas, no. 4:09-cr-00342.
For USA: Gregg Costa of the U.S. Attorney's Office.
For Stanford: Dick DeGuerin of DeGuerin and Dickson.
(Reporting by Jonathan Stempel)
Follow us on Twitter: @ReutersLegall
http://newsandinsight.thomsonreuters.com/Legal/News/2011/12_-_December/No_trial_delay_for_accused_Ponzi_schemer_Stanford/
Two and a Half Years After His Arrest, Allen Stanford's Trial Set to Commence January 23, 2012
Bruce Carton
December 28, 2011
http://www.complianceweek.com/two-and-a-half-years-after-his-arrest-allen-stanfords-trial-set-to-commence-january-23-2012/article/221054/
In June 2009, Allen Stanford was arrested following his indictment in an alleged $8 billion Ponzi scheme. In the two and a half years since then, a seeming endless string of bizarre events have conspired to prevent a trial in the case. The latest lengthy delays in the case, for example, came after Stanford somehow became addicted to an anti-anxiety drug called Klonopin while in federal custody, finally kicked that habit, but then proclaimed that he had complete amnesia as to events that predated head trauma he sustained in a September 2009 prison fight.
In the past week, however, these last stumbling blocks to a trial have been overcome, and now it appears that jury selection in Stanford's trial will, in fact, commence on January 23, 2012. On December 22, U.S. District Judge David Hittner ruled that Stanford is competent to stand trial, despite his doctors assertions that he has "no independent recollection of personal life events or business dealings that predated the head trauma he sustained in the September 2009." The judge sided with doctors testifying for the prosecution who tested Stanford and found that he "either was not trying or was faking.'"
Following Judge Hittner's ruling, lawyers for Stanford asked the court to push out the trial date until late April 2012 to give them more time to review documents with Stanford. Today, Judge Hittner denied the request, stating that it was important that the case be tried as currently scheduled, beginning January 23. "This trial will decide not just whether Stanford is guilty of the criminal charges, but also whether hundreds of millions of dollars of investor funds currently frozen may be forfeited and returned to his alleged victims,” he wrote.
http://www.complianceweek.com/two-and-a-half-years-after-his-arrest-allen-stanfords-trial-set-to-commence-january-23-2012/article/221054/
Allen Stanford's Bid to Delay January Trial for Investment Fraud Is Denied
Why is he using mental ability as a crutch? He must not have been so mental to steal all those monies. What a joke. Mentally ill. Yeah right.
Allen Stanford Found Mentally Fit for Fraud Trial
By Laurel Brubaker Calkins - Dec 22, 2011
http://www.bloomberg.com/news/2011-12-22/allen-stanford-found-mentally-fit-to-stand-trial-for-alleged-ponzi-scheme.html
R. Allen Stanford is mentally fit to stand trial and will face a jury next month on charges he swindled investors of more than $7 billion, a U.S. judge ruled. The trial is to begin with jury selection on Jan. 23.
Stanford’s defense team argued unsuccessfully that his mental capacity was diminished by head injuries he suffered in a 2009 jailhouse assault and the effects of powerful anxiety medications prescribed in prison after the beating.
“I have found by a preponderance of the evidence that Stanford is competent to stand trial,” U.S. District Judge David Hittner in Houston said today in finding Stanford able to assist in his defense.
Hittner’s ruling followed 2 1/2 days of debate over the extent of brain damage Stanford, 61, suffered from the assault and the extent to which he might be faking memory loss.
“He wants to con his way out of this case the same way he conned investors for more than 20 years,” Assistant U.S. Attorney Gregg Costa told Hittner today. “Don’t let him do it.”
Robert E. Cochrane, the psychologist who was Stanford’s lead evaluator at the federal prison hospital in Butner, North Carolina, testified that the former financier failed every test designed to expose fakers.
Stanford’s claim of complete retrograde amnesia, the loss of the memory of what happened before the event responsible, is “remarkable” because it is so rare, Cochrane said.
First Amnesia Report
Stanford first reported having lost his memory after he arrived at Butner in February, more than a year after the assault, the government said.
“Every doctor on the stand agreed that Mr. Stanford is not suffering from the complete retrograde amnesia he repeatedly claimed he had,” Costa said. Once it is accepted that Stanford is exaggerating his memory loss, “it pulls the rug out from under all the other psychological problems he’s reporting,” the prosecutor said.
Ali Fazel, Stanford’s lead lawyer, argued that all the examining doctors agreed “He’s not right. There’s something wrong with him.”
Fazel said Stanford’s brain trauma and psychological impairments leave him incapable of assisting his lawyers or testifying in his own defense.
“Mr. Stanford isn’t running away from anything,” Fazel said. “He wants to fight.” Fazel said.
Desire to Help
Stanford was assaulted and over-medicated while in government custody and wanted the “opportunity to get better and help his counsel,” Fazel argued.
The defense put on testimony from three psychiatrists or neuropsychologists who all said the former billionaire is incompetent.
“He says it’s like there’s a blackboard with all his life written on it, but there are clouds that obscure it,” Victor Scarano, a forensic psychiatrist who examined Stanford for the defense, testified yesterday. “Every once in a while, a cloud opens up and he can connect with the memory, and then the clouds comes back.”
Scarano testified Stanford can’t recall some of his children, romantic encounters or business details. He retains “partial pieces” of memory, Scarano said.
Ralph Lilly, a neurologist for Stanford’s defense, testified yesterday that the ex-financier’s brain damage and health problems, including depression, heart and liver disease, have put him “at risk for suicide.”
All-Night Observation
Based on news media reports of that testimony, Stanford was placed under psychiatric watch last night at the federal lockup in Houston. He arrived in court this morning complaining heatedly to his attorneys of having been kept awake and under observation in the jail’s “psyche hole” all night.
A prison official told Hittner an overnight mental evaluation was conducted out of “an abundance of caution,” given Stanford’s high profile and his own doctor’s testimony. She said Stanford will be re-evaluated tonight to determine if he can be returned to the general prison population.
Stanford has been held as a flight risk since his June 2009 indictment on charges of defrauding investors through a scheme built on allegedly bogus certificates of deposit at Antigua- based Stanford International Bank Ltd.
Hittner delayed Stanford’s trial, first set for last January, after three doctors testified that the financier was incapable of assisting in his defense because of his drug dependency and potential effects from the head injury.
Houston Jail Stanford was sent back to a Houston lockup in November after Butner medical officials certified him competent to stand trial.
Prosecutors say Stanford skimmed more than $1 billion of investor funds to acquire a fleet of jets and yachts, multiple mansions and a private Caribbean island, as well as to give money to women with whom he had children. He has denied wrongdoing.
The case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston).
To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
http://www.bloomberg.com/news/2011-12-22/allen-stanford-found-mentally-fit-to-stand-trial-for-alleged-ponzi-scheme.html
SEC sues insurance fund in Stanford case
By LOREN STEFFY, HOUSTON CHRONICLE
Published 10:31 p.m., Monday, December 12, 2011
http://www.chron.com/business/article/SEC-sues-insurance-fund-in-Stanford-case-2398690.php
The Securities and Exchange Commission, in an unprecedented move, sued a national brokerage insurance fund to force it to cover potential investor losses from R. Allen Stanford's alleged $7.2 billion Ponzi scheme.
The lawsuit, filed in federal court in Washington, would require the Securities Investor Protection Corp., or SIPC, to begin a liquidation proceeding for Stanford's U.S. brokerage, which was based in Houston. The liquidation would let customers file claims under federal investor protection laws.
The court action comes after months of negotiations between the SEC and SIPC failed to produce an agreement. SIPC, which is funded by the brokerage industry, has resisted covering losses in the 2009 collapse of Stanford Financial Group, saying the investments were certificates of deposit with an offshore bank rather than securities.
"It's time to get even tougher in our fight for the victims," said Sen. David Vitter, R-La., who led the fight in Congress on behalf of Stanford investors. "I've been urging SIPC Chairman Johnson to act quickly for months, but the victims still haven't received an up-or-down answer. This move by the SEC is encouraging and should significantly help the process."
Last week, Vitter pressed SEC Chairman Mary Schapiro to sue.
The SEC, which has oversight authority for SIPC, argued that the CDs constituted securities and were sold to investors through Stanford's SIPC-insured brokerage.
In June, the commission ordered SIPC to cover investor losses, much as it has for those who lost money in Bernard Madoff's Ponzi scheme, but SIPC's board didn't respond to the order.
"Because SIPC has declined to take steps to initiate the proceeding for the protection of Stanford customers, the commission filed suit today asking a court to compel it to do so," the SEC said in a statement.
Why it's fighting back
SIPC officials said they intend to fight the suit.
"After careful and exacting analysis, we believe the SEC's theory in this case conflicts with the Securities Investor Protection Act, the law that created SIPC and has guided it for the last 40 years," fund chairman Orlan Johnson said in a prepared statement.
Stanford's membership in SIPC reassured investors like Carl Rabenaldt, who works for a Houston engineering firm. He invested his retirement in the CDs in part because he thought his money was covered by SIPC.
"Then, when there's a claim against it, they're finding reasons not to pay it," he said.
R. Allen Stanford is accused of defrauding thousands of investors by selling them certificates of deposit from his bank in Antigua, assuring them that the investments were safe.
He then allegedly used the money for other purposes, including funding a lavish lifestyle for himself and investing it in highly speculative private businesses.
Stanford has been in custody since 2009. He is scheduled to appear before a federal judge in Houston next week to determine if he is competent to stand trial on criminal fraud charges. The trial could begin next month.
Settlement offered?
SIPC last week offered to cover a portion of the Stanford investors' losses, but the SEC found the offer unacceptable, according to a person familiar with the discussions.
At a closed-door meeting Wednesday, the commission decided to proceed with the suit, the person said, adding that SIPC may still make another settlement offer.
SIPC, created in 1970, is designed to insure investors if a brokerage fails and cash or securities are missing from customer accounts. It isn't designed to cover losses from declines in investments' value.
SIPC officials had argued that the Stanford case is different than Madoff's. Stanford investors sent money to buy CDs directly to Stanford's Antiguan bank and therefore they weren't "customers" of the brokerage under the definition of the law, they said. In addition, they argued that Stanford's CDs, while worthless, did exist, and therefore insurance coverage isn't warranted.
The SEC contends the money investors thought was being used to buy the CDs was diverted for other purposes and the CDs were never actually purchased. Because the CDs were sold through the SIPC-insured brokerage, the insurance pool should cover the losses, it argued.
The coverage would apply to about 7,800 of Stanford's 20,000 investors worldwide.
Purva Patel contributed to this report.
loren.steffy@chron.com
http://www.chron.com/business/article/SEC-sues-insurance-fund-in-Stanford-case-2398690.php
SEC is urged to sue over Stanford victims' claims
12/6/2011
http://newsandinsight.thomsonreuters.com/Securities/News/2011/12_-_December/SEC_is_urged_to_sue_over_Stanford_victims__claims/
WASHINGTON, Dec 6 (Reuters) - A U.S. senator is calling on federal securities regulators to take legal action against a brokerage industry-backed fund for failing to cover claims for the victims of Allen Stanford's alleged Ponzi scheme.
Republican Senator David Vitter, a Senate Banking Committee member, said that the Securities and Exchange Commission needs to compel the Securities Investor Protection Corp to take action because victims have now been waiting since Stanford's arrest in 2009 for a resolution.
"Sue SIPC on behalf of the Stanford victims now," the Louisiana lawmaker said in a statement after discussing his concerns publicly during a congressional hearing.
Stanford, 61, was arrested in 2009 and faces a 14-count criminal indictment over an alleged $7 billion scheme linked to certificates of deposit issued by his Antigua-based bank. The SEC has also filed civil charges against him.
Investigators accused the one-time billionaire of using Ponzi scheme proceeds to fund other ventures and a lavish lifestyle that included several yachts, private jets, and homes around the world. Stanford has denied wrongdoing.
SIPC, which handles claims for investors if their brokerage fails, had previously said in 2009 that it did not believe Stanford victims who bought certificates of deposit through the U.S. brokerage arm of Stanford's company were eligible to receive compensation because the customers, rather than the brokerage, held custody of the CDs.
After two years of mulling it over, however the SEC rejected SIPC's argument in June and issued a statement that called on SIPC to institute a liquidation proceeding. [ID:nN1576195]
In that statement, the SEC said it would be forced to file a court action if SIPC did not comply.
SIPC's board met on Sept. 15 to review the matter, but has still not taken any action and remains in talks with the SEC.
Spokespeople for the SEC and SIPC both declined to comment on Vitter's statement.
(Reporting by Sarah N. Lynch)
Follow us on Twitter: @ReutersLegal
http://newsandinsight.thomsonreuters.com/Securities/News/2011/12_-_December/SEC_is_urged_to_sue_over_Stanford_victims__claims/
Securities industry's stance on Stanford case undermines investor confidence
By LOREN STEFFY, HOUSTON CHRONICLE
Updated 12:44 a.m., Saturday, December 3, 2011
http://www.chron.com/business/steffy/article/Securities-industry-s-stance-on-Stanford-case-2341649.php
R. Allen Stanford's investors didn't lose their money the right way.
That's the securities industry's quixotic stance on whether to grant insurance coverage for U.S. investors who claim they were fleeced by Stanford's brokerage business.
For almost three years, investors caught in the collapse of what regulators say was a $7 billion Ponzi scheme have awaited a decision by the Securities Investor Protection Corp. During that time, the Securities Industry and Financial Markets Association, which represents about 650 brokers nationwide, has been urging SIPC not to pay.
SIPC is an insurance fund backed by member brokerages, and while it isn't designed to cover investment losses, it is supposed to pay if a brokerage collapses from alleged fraud.
Yet the association has steadfastly opposed any payment for Stanford investors. When the Securities and Exchange Commission - after taking more than two years to make a decision - told SIPC this summer to pay up, association general counsel Ira Hammerman wrote to SIPC's board insisting that the SEC was wrong, in part because Stanford's investors shouldn't legally be considered customers.
Stanford brokers urged investors to buy certificates of deposit sold through Stanford's bank in Antigua, but in most cases, investors' money was sent directly to the bank, rather than being held by the brokerage. That, Hammerman argued, means that while investors were brokerage clients, they weren't customers under the narrow definition of the law that created SIPC.
If that sounds bizarre, think how it sounds to the 7,800 of Stanford's 20,000 investors who fall into this category.
The money that investors sent to the bank wasn't used to buy the CDs. Some of it was sent back to the brokerage to help pay compensation and referral fees for the brokers that Stanford was wooing away from other firms in hopes of drawing their clients into the alleged scheme, the SEC found.
At a snail's pace
Despite the SEC's instruction, SIPC dragged its feet. Its board dawdled for three months before even considering the issue, and even then it failed to make a decision. That was in late September.
Although the SEC has the authority to sue SIPC to force it to comply, it hasn't done so yet. Recently, 18 members of Congress - including Rep. John Culberson and Rep. Michael McCaul, both Republicans who represent the Houston area - sent SIPC's chairman a letter threatening congressional hearings if the board doesn't decide by Dec. 15.
That, by the way, is less than a week before Stanford himself is to appear before a federal judge to determine if he's competent to stand trial in January.
Meanwhile, Sen. David Vitter, R-La., has been working with SIPC and the SEC to resolve the coverage issue. His press secretary, Luke Bolar, said Friday that SIPC is expected to make a settlement offer to the SEC this week.
Vitter, however, doesn't know what the offer will entail or how it might affect Stanford investors.
Making a mockery of it
While SIPC was never designed to be a blanket insurance policy against fraud, the handling of coverage in the Stanford case has made a mockery of the entire process. After all, SIPC paid investors for losses in Bernard Madoff's fraud case, and it has rushed in to assume losses in the bankruptcy of the commodities firm MF Global.
As Hammerman himself noted last year, the law's "fundamental purpose is to promote investor confidence in the U.S. capital markets by protecting customers against the loss of cash or securities resulting from the failure of the broker-dealer holding such property."
The industry's legal hair-splitting doesn't instill much confidence in the investing public.
While it is true Stanford's brokerage wasn't actually holding clients' funds or securities when it failed, it appears its brokers used the Antiguan bank like a bagman, a way to keep their fingerprints off their clients' money.
Many have now gone on to work at other SIPC-insured brokerages, which continue to operate under the illusion of investor protection.
How's that for inspiring confidence?
Loren Steffy is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com. His blog is at http://blogs.chron.com/lorensteffy. Follow him on his Facebook fan page and on Twitter at twitter.com/lsteffy.
http://www.chron.com/business/steffy/article/Securities-industry-s-stance-on-Stanford-case-2341649.php
Stanford still not competent to stand trial
By OBSERVER News - Tuesday, November 29th, 2011.
http://www.antiguaobserver.com/?p=67952
ST JOHN’S, Antigua – Despite nine months of court-ordered drug treatment, accused Ponzi schemer Allen Stanford is not yet competent to face charges he ran a $7 billion Ponzi scheme, his attorney told CNBC.
As a result, thousands of Stanford investors remain in limbo, nearly three years after the alleged scheme was exposed.
Stanford, who was released from a prison medical centre earlier this month but remains in federal custody, was scheduled to be arraigned yesterday on revised charges filed in May. But defense attorney Ali Fazel said in an e-mail that Stanford cannot be arraigned “until his competency status changes.”
As a result, yesterday’s arraignment has been postponed.
In January, US District Judge David Hittner ruled Stanford incompetent to stand trial after the 61-year-old financier became addicted to prescription drugs while in federal custody. Doctors testified that Stanford may also have suffered brain damage after being severely beaten by another inmate in 2009.
Hittner ordered Stanford to undergo drug treatment at the Bureau of Prisons medical centre in Butner, NC. With the treatment apparently completed earlier this month, Stanford was moved back to a federal detention in Houston. Because Hittner ruled he is a flight risk, Stanford is being held without bail pending his trial.
When that trial will take place remains uncertain. It is currently scheduled to begin January 20 according to a source close to the case, but questions about Stanford’s competency would appear to make that date increasingly unlikely.
Specifics of Stanford’s condition are difficult to come by in a case that is shrouded in an unusual amount of secrecy.
Earlier this month, a civil attorney for Stanford, Stephen Cochell, said in a court filing that his client “continues to suffer from short-term and long-term memory loss.” That filing – despite being in a different court and a separate case – drew an angry rebuke from Hittner, who barred Cochell from further contact with his client in the civil case until after the criminal case is complete.
Attorneys in the criminal case are barred from discussing Stanford’s condition under a broad gag order imposed by Hittner, who has also sealed much of the court docket since Stanford’s medical problems came to light.
As a result, more than 28,000 investors remain in the dark. A court-appointed receiver attempting to recover assets has said much of that effort depends on the outcome of Stanford’s criminal trial, since the vast majority of the funds are in foreign accounts that are inaccessible without a resolution in the case.
So far, investors have recovered just pennies on the dollar.
http://www.antiguaobserver.com/?p=67952
Victim payout plan sought in Stanford's Ponzi case
11/17/2011
http://newsandinsight.thomsonreuters.com/Legal/News/2011/11_-_November/Victim_payout_plan_sought_in_Stanford_s_Ponzi_case/
Nov 17 (Reuters) - Victims of Allen Stanford's alleged $7.2 billion Ponzi scheme may soon have a chance to submit claims, though it remains unclear how much of their losses they might ultimately recover.
Ralph Janvey, the court-appointed receiver for Stanford's firm, asked a federal judge in Houston for permission to set up a claims process, more than 2-1/2 years after the financier's arrest, a Wednesday court filing shows.
Approval of the request could pave the way for investors to recover at least some of their losses from Stanford's alleged fraud, a sum believed to be $2 billion or more.
Stanford, 61, faces 14 criminal charges and U.S. Securities and Exchange Commission civil charges over allegations he deceived investors who bought fake certificates of deposit from his Antiguan bank, Stanford International Bank Ltd.
His February 2009 arrest came two months after Bernard Madoff's Ponzi scheme was uncovered.
Wednesday's filing is "a major step" toward returning money to victims, Kevin Sadler, a partner at Baker Botts representing Janvey, said in an email.
Though a court-appointed examiner and a committee of Stanford investors expressed disagreements over parts of the process at an Oct. 13 court conference, "the court made clear at the status conference that the process should begin, and the receiver has acted accordingly," he added.
Peter Morgenstern, a lawyer for the investors' committee, on Thursday declined immediate comment. John Little, the examiner, did not immediately respond to requests for comment.
It is unclear how much money will be distributed, when payouts will begin, and how such amounts will be calculated.
"For investor claimants, the amount of the investor's net investment in the Ponzi scheme will be one of the most significant factors" in determining payouts, Janvey said.
The $7.2 billion figure reflects CDs on Stanford's books when the receivership was set up, not actual investor losses.
At the Oct. 13 conference, Sadler said at least $2 billion of investor funds had been lost through a series of backdated fictitious loans. "If one wanted to consider a floor of money that's gone, that certainly would be a candidate," he said.
HUNDREDS OF MILLIONS SOUGHT
According to a court filing, Janvey had $80.1 million of unrestricted cash on hand as of Oct. 31, after accounting for professional fees and costs.
The trustee is seeking another $955.3 million in litigation. This includes $610 million from other Stanford investors and vendors, and $335 million in British, Canadian, Swiss and other accounts.
Liquidators in Antigua have sought control of some of these accounts, court papers show.
Stanford recently moved to a Houston federal detention center from the Butner Federal Correctional Complex in North Carolina, where he was treated for an addiction to an anti-anxiety medication.
His criminal trial is expected to begin in January in the federal court in Houston. Stanford is scheduled to be arraigned under his most recent indictment on Nov. 28. That proceeding had been delayed because of his treatment at Butner.
On Thursday, U.S. District Judge David Hittner, who oversees the criminal case, barred Stephen Cochell, a lawyer for Stanford in the SEC case, from meeting his client at the Houston detention center until the criminal case is finished.
The judge said public comments by Cochell about Stanford's current mental status could impact the criminal trial. Cochell did not immediately respond to a request for comment.
Madoff is serving a 150-year prison term at Butner.
The civil case is SEC v. Stanford International Bank Ltd, U.S. District Court, Northern District of Texas, No. 09-00298. The criminal case is U.S. v. Stanford, U.S. District Court, Southern District of Texas, No. 09-00342.
For the SEC: David Reece and other attorneys of the SEC.
For Stanford: Ruth Schuster of The Brewer Law Group.
(Reporting by Jonathan Stempel)
Follow us on Twitter: @ReutersLegal
http://newsandinsight.thomsonreuters.com/Legal/News/2011/11_-_November/Victim_payout_plan_sought_in_Stanford_s_Ponzi_case/
Stanford May No Longer Be Addicted to Anti-Anxiety Drugs, But Now He Says He Has Amnesia
Bruce Carton
November 11, 2011
http://www.complianceweek.com/stanford-may-no-longer-be-addicted-to-anti-anxiety-drugs-but-now-he-says-he-has-amnesia/article/216589/
Back in January 2011, U.S. District Judge David Hittner postponed Allen Stanford's criminal trial after psychiatrists testified that Stanford was not capable of helping with his defense. A big part of the problem, the psychiatrists said, was that despite being in federal custody, Stanford somehow managed to become addicted to an anti-anxiety drug called Klonopin that had left him "mentally foggy." Judge Hittner ruled that Stanford had to be weaned off of the drug and deemed competent before standing trial.
Ten months later, it appears that Stanford has finally completed his drug rehabilitation treatment. Reuters reported yesterday that Stanford has left the medical center at the Butner Federal Correctional Complex in North Carolina, where he has been undergoing treatment since January. Stanford is now in custody at a transfer facility in Oklahoma City.
CNBC reports that Stanford's trial is currently scheduled for January 2012, but it is unclear if that date will stick. And in case the judge deems Stanford to have sufficiently weaned himself off of the Klonopin, Stanford says he has a new ailment that will further delay the case. According to Ed Snyder, an attorney representing many Stanford investors trying to get their money back, "Allen Stanford says he has amnesia. He can't remember anything about his past and what he did for 20 years there in Antigua."
http://www.complianceweek.com/stanford-may-no-longer-be-addicted-to-anti-anxiety-drugs-but-now-he-says-he-has-amnesia/article/216589/
Allen Stanford Is Taken Out of North Carolina Prison Hospital
Laurel Brubaker Calkins, ©2011 Bloomberg News
Thursday, November 10, 2011
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/10/bloomberg_articlesLUFGGZ0UQVI9.DTL
Nov. 10 (Bloomberg) -- R. Allen Stanford, the indicted Texas financier, was transferred out of a prison hospital where he spent almost nine months being treated for a drug dependency acquired in jail and lingering effects from an inmate beating.
Stanford, 61, has been imprisoned as a flight risk since his June 2009 indictment on charges that he defrauded investors through an alleged Ponzi scheme built on sales of certificates of deposit sold by his Antigua-based Stanford International Bank.
U.S. District Judge David Hittner in Houston ordered Stanford into a prison rehabilitation program for treatment of a dependence on anxiety drugs prescribed to him in prison and for evaluation of effects from a head injury he received in a jailhouse assault in September 2009.
Stanford was treated at the hospital unit at the Federal Detention Center in Butner, North Carolina, since February. He is now in the federal prison transfer facility in Oklahoma City, according to the bureau's website. He is being moved within days to the federal facility in Houston where he was previously locked up, according to a person familiar with the matter who declined to be identified because the judge barred people involved in the case from discussing it publicly.
His trial, which was originally scheduled for January 2011, hasn't yet been rescheduled.
Stanford's criminal-defense attorney, Ali Fazel, declined to comment on his client's current location or mental state, citing Hittner's order against publicly discussing some aspects of the case.
'Back in Houston'
"Once he's back in Houston, the next thing would be either a hearing or some sort of agreement between the parties that he is competent to stand trial," Fazel said in a phone interview yesterday. "The judge has to find him competent" before a trial date can be set, Fazel said.
A lawyer representing Stanford in a related civil suit brought by the U.S. Securities and Exchange Commission had said Stanford should remain in the North Carolina facility through at least the end of January.
"Mr. Stanford still suffers from long-term and short-term memory loss as a result of his medical treatment," Stephen Cochell, the civil attorney, said in a Sept. 27 filing in federal court in Dallas.
Cochell, in a phone interview yesterday, said he wasn't notified of Stanford's transfer from the North Carolina hospital unit or given access to the most recent reports by the prison's doctors.
"I assume his doctors have submitted a supplemental report," Cochell said. "I'll get a chance to talk to him when he comes back."
The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission vs. Stanford International Bank, 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).
--Editors: Peter Blumberg, Michael Hytha
To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
http://sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/10/bloomberg_articlesLUFGGZ0UQVI9.DTL
Stanford Victims Group Writes to Judge
Thursday, 13 October 2011 02:29 caribarena news Antigua News
http://www.caribarena.com/antigua/news/latest/98624-stanford-victims-group-writes-to-judge.html
The Coalición Víctimas de Stanford América Latina (COVISAL), made up of non-American residents affected by the Stanford collapse, have written to US Judge David Godbey pleading for assistance.
In the letter, reprinted below, Jaime R Escalona asks, "Why did the regulatory entities of the United States connive to deny protection to thousands of innocent depositors, clients of Stanford, violating the mandate from the U.S. Congress to “protect the investment public?"
Read his full appeal below.
NO MAS INJUSTICE! … NO MAS IMPUNITY!
An Open letter from COVISAL to the Honorable
Judge David Godbey.
October 12, 2011
Honorable Judge Godbey,
We Non-US citizens, victims of the pyramidal fraud perpetrated by R. Allen Stanford, gathered together to defend our rights in the Coalición Víctimas de Stanford América Latina (“COVISAL”), respectfully address you to beg for justice.
As you are aware, since February 16, 2009, at which time your Court froze our certificates of deposit (“CDs”) issued by Stanford International Bank Limited (“SIBL”), 968 days have passed. This is too much time for the thousands of modest elderly victims in a retirement situation that are immersed in endless agony and desperation because of the loss of their life savings.
During these tragic months that now have become years, we, the Stanford’s victims, have seen with sadness how the possibility of receiving an economic relief that could mitigate our loses has all but vanished; while dozens of victims are dying because they are not able to pay for their medical treatments.
Because of its implications, the Stanford Case is a theme of ethics and morality before the world economies that transcends the financial arena to a political one that has been tainted by the lack of ethics of some politicians. For this reason, we are convinced that if this monstrous fraud that operated with impunity for more than a decade in and from the United States is not resolved satisfactorily for all the victims, with equality, the worldwide discredit of the United States for securities fraud will deepen, increasing the distrust that currently exists in its financial sector even more.
As far as the undeniable responsibility of the regulatory entities, COVISAL asks, "Why did the regulatory entities of the United States connive to deny protection to thousands of innocent depositors, clients of Stanford, violating the mandate from the U.S. Congress to “protect the investment public”? Why were the “red flags” that appeared in the Stanford’s examinations conducted since 1997 disallowed? Why were the complaints from clients and former Stanford’s employees that year after year warned of the vertiginous growth of a pyramidal fraud not investigated?"
As far as the class actions against third parties, we consider the Receivership’s accomplishments in the recollection of assets for the victims’ distribution fund very frustrating. For this reason, the class actions are the only venue of recovery for the modest small investors who do not have any money to hire attorneys to defend them individually. In this sense, we do not understand why there is the intention to negate “their day in court” for the collective of small investors. Is this not a constitutional violation?
As far as the statutory interpretation and the large amount of interpretative chaos because of disparate jurisprudence in similar securities frauds, COVISAL hopes and expects that the empty vessels left by badly written or misleading laws are filled with the truth of the law. It would be lethal for the Stanford victims to be victimized again. No more impunity for the third parties that have hurt us!
As far as the signing of a Cross-Border Insolvency Cooperation Protocol, why did the Courts allow the Joint Liquidators of SIBL in Antigua and the US Receiver to continue with the game of “cat and mouse” that has wasted the Stanford victims’ patrimony in a never-ending carrousel of litigations, as a result of their irrational pursuit to control the assets? Is it ethical that the Liquidators and the Receiver squander the insignificant creditor’s patrimony in useless fights?
In reference to the criminal trial against R. Allen Stanford, we ask, "Is it possible that the delay of the trial has to do with a strategy to cover up guilt and evade responsibilities, more than a problem of drug addiction acquired by the accused while under federal custody? Why continue harming the innocent victims by negating them access to documents and to key witnesses that according to their attorneys, continue to be under the exclusive control of the prosecutors?"
We pray to God that without further delay the rights of the victims will prevail over the judicial manipulations and your conscience will be the instrument to impart justice. We hope that the tears of the innocent families soften hard hearts so that the devastated depositors are able to recover their losses without any more delays.
Judge Godbey, don’t let us down.
Jaime R. Escalona
On behalf of COVISAL
Leader, Coalición Víctimas de Stanford América Latina (COVISAL)
http://scribd.com/doc/52189704
jaenrodes@gmail.com
Texas: (512) 377 9255
Caracas: (58 412) 617 2438
http://www.caribarena.com/antigua/news/latest/98624-stanford-victims-group-writes-to-judge.html
As Stanford Victims Grumble, Court Approves Receiver's Latest Fee Request
October 12, 2011 7:08 PM
Posted by Julie Triedman
http://amlawdaily.typepad.com/amlawdaily/2011/10/judge-grants-stanford-receiver-his-latest-fees-but-storm-clouds-brewing.html
On Tuesday, the Dallas federal district court judge overseeing the receivership of alleged Ponzi schemer R. Allen Stanford's collapsed financial empire of approved the latest $1 million in legal fees requested by receiver Ralph Janvey and the outside law firms advising him.
But while Janvey and his team keep drawing regular paychecks in connection with their recovery efforts on behalf of Stanford investors, as The American Lawyer reports in its October issue, much about the proceedings and Janvey's future role in them remains uncertain.
Federal district court Judge David Godbey is expected to rule soon on a July motion to intervene filed by a group of disgruntled Stanford investors who claim their interests are not being adequately represented by the committee appointed by Janvey to fill that role.
Those moving to intervene accuse the lawyers serving as members of the committee of "double dipping" in the estate because they were paid retainers up front by individual victims and are also eligible under their contracts with the receiver to collect large contingency fees based on what they recover.
Since early this year, Janvey has tapped the committee to take over a number of fraudulent conveyance claims he and his team originally developed, removing the day-to-day expense of litigating those claims. Janvey told the judge in court filings this past summer that he did so as a cost-saving measure.
The case's mounting legal costs remain a headache for Janvey. To date, of the estimated $7.2 billion lost via Stanford's alleged scheme, the receiver's legal team has recovered just over $146 million. (Another $63 million was sitting in Stanford accounts the day Janvey was appointed.)
Much of the total recovery has already been spent on a combination of legal and professional fees ($50 million) and expenses ($50 million). A majority of the legal fees have gone to one firm, Baker Botts, where Austin-based litigation partner Kevin Sadler is heading up the firm's efforts.
U.S. investors who bought bogus certificates of deposit via the Stanford brokerage entity—a group that includes only a fraction of the 20,000-plus investors harmed by Stanford's alleged worldwide scam—are also waiting impatiently on a forthcoming decision by the Securities Investor Protection Corporation on whether they are entitled to relief for their losses.
SIPC officials said in June that the agency expected to issue its decision in the matter by mid-September. On September 16, however, SIPC Chairman Orlan Johnson announced that the agency's board was delaying a decision pending further review "of the many and complex issues in the Stanford case." Johnson, who is also the co-chair of Saul Ewing's securities transactions and regulations practice group, did not respond to a request for comment.
http://amlawdaily.typepad.com/amlawdaily/2011/10/judge-grants-stanford-receiver-his-latest-fees-but-storm-clouds-brewing.html
Stanford Says He Has Lost Memory
SEPTEMBER 15, 2011, 7:33 P.M. ET
By MICHAEL ROTHFELD
http://online.wsj.com/article/SB10001424053111904491704576573140276183256.html
R. Allen Stanford, who has gone through a carousel of defense lawyers, an addiction to medication and a jailhouse beating, is now complaining of another malady, a person familiar with the matter says: amnesia.
The former Texas financier says he cannot remember events prior to his arrest in June 2009, the person said.
U.S. District Judge David Hittner in Texas ordered in January that Mr. Stanford be weaned off anti-anxiety medication and anti-depressants at the recommendation of psychiatrists. The judge declared Mr. Stanford unable then to help defend himself against charges of masterminding a $7 billion Ponzi scheme.
Doctors are expected soon to report back on Mr. Stanford's condition. The judge will decide if the trial can go forward in January. Mr. Stanford's lawyer declined to comment.
Roy Lubit, a forensic psychiatrist in New York not involved in the case, said medication and withdrawal are unlikely to cause memory loss. "If it's being cut back at a reasonable pace, that shouldn't stop them from being competent," he said.
Dr. Lubit and Colin Koransky, a forensic psychiatrist in California, both said a head injury—Mr. Stanford suffered one in the beating—could cause amnesia for recent events but is unlikely to affect older memories.
http://online.wsj.com/article/SB10001424053111904491704576573140276183256.html
Bank Probe in Stanford Case
Prosecutors Are Investigating Whether Societe Generale Ignored Suspicious Transactions
SEPTEMBER 16, 2011
By MICHAEL ROTHFELD
http://online.wsj.com/article/SB10001424053111904491704576572940023060486.html?mod=WSJ_business_whatsNews
The Justice Department is investigating whether French bank Société Générale SA helped facilitate Texas financier R. Allen Stanford's alleged $7 billion Ponzi scheme by ignoring suspicious transactions, people familiar with the matter said.
At issue is a Swiss bank account held by one of Mr. Stanford's companies at SG Private Banking (Suisse) SA, a Société Générale subsidiary, that was allegedly funded with investors' money and used to make payments into Mr. Stanford's personal accounts and for bribes to his Antiguan auditor. Prosecutors in the criminal probe are examining whether Société Générale failed to follow due diligence procedures or to ask questions about irregular banking activity, the people familiar with the matter said.
Mr. Stanford, 61 years old, was accused by federal prosecutors and the Securities and Exchange Commission in 2009 of fabricating high returns to lure investors around the world to buy about $7 billion worth of certificates of deposit from Stanford International Bank Ltd. in Antigua, the island where he was knighted.
"Sir Allen," as he was sometimes known, spent millions to travel by private jet, sponsor cricket matches, and buy real estate in the Caribbean and elsewhere. He has pleaded not guilty to charges of fraud, conspiracy and obstruction in Texas.
In a court filing in Mr. Stanford's criminal case last year, federal prosecutors wrote that he "secretly funneled more than $100 million of investors' money through his numbered Société Générale account in Switzerland to his personal bank accounts for the payment of bribes and lavish personal expenditures."
That the bank is a focus of prosecutors' interest hasn't previously been disclosed.
SG Private Banking (Suisse) "has received requests for documents and other information" related to Mr. Stanford from the Justice Department, a Société Générale spokesman said in a statement. He said the bank is cooperating but will not comment further because it is an ongoing investigation.
If the Justice Department concludes that the bank turned a blind eye to potential criminal activity, that could be a basis for a prosecution under the federal anti-money laundering statute, the Bank Secrecy Act, or other conspiracy or fraud charges, lawyers not involved in the case said. A Justice Department spokeswoman declined to comment. However, defense lawyers say it would be highly unusual to criminally prosecute a bank for facilitating a fraud based on the failures of its employees to uncover it. "At that level, prosecutions are reserved for the bad actor, unless you are prepared to say that the bank has a systemic problem and is corrupt at its core," said Robert W. Ray, a white collar defense lawyer at Pryor Cashman LLP.
People familiar with the matter said the focus for prosecutors is trying Mr. Stanford and any action against the bank is likely to wait until after the proceedings involving Mr. Stanford are finished. His case has been on hold as aA judge is expected to determine in the coming months whether he is competent to stand trial.
The probe shows that after more than two years investigators are still trying to unravel the global fraud allegedly carried out by Mr. Stanford and his associates. Mr. Stanford's companies utilized accounts at several Swiss banks, according to court documents and people familiar with the matter.
The investor money that prosecutors allege was siphoned off by Mr. Stanford for bribes and other purposes through Société Générale related to an SG Private Banking account numbered 108731 in the name of Stanford Financial Group, a parent entity for the many Stanford companies. The Swiss account was allegedly funded with investor money transferred from Stanford International Bank accounts, according to the people familiar with the situation and records filed in court.
Prosecutors have said that 108731 was a "secret account" because it wasn't included in the Stanford corporate accounting system, and because only Mr. Stanford and his chief financial officer, James Davis, had access to it. The account was overseen by Blaise Friedli, an SG Private Banking executive vice president in Lausanne, Switzerland, who Mr. Stanford named to his company's "international advisory board," according to a corporate newsletter filed in court.
A former lawyer for Mr. Stanford, Dick DeGuerin, said at a 2009 hearing that 108731 was "not a secret bank account," and that records would show funds didn't go to Mr. Stanford, "but were used within the Stanford companies." Mr. Davis has pleaded guilty to criminal charges and is cooperating with authorities. Mr. Friedli didn't respond to requests for comment.
Some of the investor money in the 108731 account was used for allegedly illegal transactions, prosecutors have said in filings and in court. Mr. Stanford also used investor funds in the 108731 account as collateral for a $95 million loan Société Générale gave him around 2004, according to people familiar with the situation. Money from the loan was allegedly spent on bribes and transferred into Mr. Stanford's personal accounts, the people familiar with the matter said.
In December 2008, as his alleged scheme began to fall apart amid investor redemptions, Mr. Stanford's company authorized the bank to take the funds that were used as collateral out of the 108731 account to repay the loan, the people said.
Prosecutors are investigating whether Société Générale did proper due diligence on the loan to Mr. Stanford and how it was spent, and why the bank didn't identify or report that investor money was being used for suspicious transactions, the people said.
A lawyer for Mr. Stanford, Ali Fazel, declined to discuss the case or the Société Générale accounts, citing a gag order. "We disagree with the government's theory of the case and we are looking forward to the trial to be able to show that," Mr. Fazel said.
Mr. Davis regularly corresponded with Mr. Friedli, making written requests for wire transfers of millions of dollars to Mr. Stanford's personal accounts, and payments of up to $125,000 to the Antiguan auditor's accounts in London and the British Virgin Islands, court filings show. Prosecutors have said in court filings that the payments to the auditor were bribes.
A phone number for the auditor, CAS Hewlett & Co., has been disconnected. The owner of the company, Charles Hewlett, died in 2009.
Write to Michael Rothfeld at michael.rothfeld@wsj.com
http://online.wsj.com/article/SB10001424053111904491704576572940023060486.html?mod=WSJ_business_whatsNews
Court Filing: Libyans Knew Stanford Was Running Scam When They Withdrew Millions
Published: Thursday, 23 Jun 2011 | 8:36 PM ET
By: Scott Cohn
Senior Correspondent, CNBC
http://www.cnbc.com/id/43518221
Newly unsealed court documents obtained by CNBC allege the Libyan government knew Allen Stanford was running a scam when officials withdrew tens of millions of dollars in Stanford investments in 2008 and early 2009.
The Libyan Investment Authority and the Libyan Foreign Investment Company managed to withdraw nearly $55 million, including $12 million in January, 2009, less than three weeks before Stanford was accused by U.S. authorities of running a $7 billion Ponzi scheme.
The newly unsealed complaint, filed on behalf of the court-appointed receiver who is rounding up assets for investors, says the Libyans deposited all the funds in a Citibank account in the U.S. A federal judge has ordered the funds frozen at least until a hearing in December.
CNBC first reported last week on the claims by receiver Ralph Janvey, but the identity of the bank was not disclosed until now. Citibank [C 39.59 0.18 (+0.46%)] has not been accused of wrongdoing.
Also undisclosed until now was the allegation that the Libyans knew before the general public — or Stanford's 28,000 investors — that the Stanford empire was about to collapse.
Stanford traveled to Tripoli and met with representatives of the Libyan Investment Authority on January 25 and 26, 2009. Two days later, according to the court filing, the Libyans withdrew $12.6 million — the last in a series of withdrawals dating back to November, 2008. On February 16, 2009, the SEC sued Stanford, shutting the business down.
"(I)t is clear the Libyan Defendants had access to Mr. Stanford that was substantially superior to other investors," the filing says, "and the Libyan defendants were aware of the impending demise of the Stanford investment scheme well before the Receivership was imposed on the Stanford parties."
The filing cites a U.S. State Department cable first revealed by WikiLeaks as proof the Libyans knew Stanford was in trouble. The cable, sent on January 28, 2010, notes that the head of the Libyan Investment Authority, Mohamed Layas, initially denied the fund invested with Stanford, saying the Texas financier approached the LIA "in the middle of this crisis" — proof, the filing said, that Stanford was seeking help from the Libyans, and the Libyans knew exactly why he was there.
According to the filing, Janvey's office traced the funds the Libyans withdrew to two Citibank accounts, one with a balance, as of March, of nearly $2.8 million, and the other with a balance of nearly $1.4 billion.
The complaint says all the Libyan withdrawals — $54.8 million — belong to Stanford's 28,000 investors.
Stanford's companies "made the payments to the Libyan defendants with actual intent to hinder, delay or defraud their creditors," the filing says.
While the discovery of the funds is an important step, it is not entirely clear how Janvey will ultimately collect the funds, because of the ongoing Libyan crisis.
For now, the funds are frozen by court order, with a hearing scheduled for December.
Allen Stanford, who faces 14 criminal counts in the alleged Ponzi scheme, has denied wrongdoing. He is currently scheduled to go on trial in January.
http://www.cnbc.com/id/43518221
Judge again delays trial of jailed financier Stanford to allow more time for treatment
By Associated Press, Published: June 22
http://www.washingtonpost.com/national/judge-again-delays-trial-of-jailed-financier-stanford-to-allow-more-time-for-treatment/2011/06/22/AGb9p1fH_story.html
HOUSTON — A judge has again delayed the trial of jailed Texas financier R. Allen Stanford, who was declared incompetent to stand trial earlier this year because of a prescription drug addiction.
Stanford’s trial in Houston was to begin Sept. 12 after being delayed from a Jan. 24 start.
U.S. District Judge David Hittner earlier this week ordered the trial to now begin in January 2012 because doctors treating Stanford say he is still not competent to stand trial.
Stanford has been treated the last four months in a federal prison hospital in Butner, N.C., for an anti-anxiety drug addiction he developed while jailed in Houston.
Stanford is accused of bilking investors out of $7 billion in a massive Ponzi scheme. His attorneys say he ran a legitimate business.
http://www.washingtonpost.com/national/judge-again-delays-trial-of-jailed-financier-stanford-to-allow-more-time-for-treatment/2011/06/22/AGb9p1fH_story.html
Judge Orders Politicians to Return Alleged Ponzi Money
Published: Wednesday, 22 Jun 2011 | 6:34 PM ET
By: Scott Cohn
Senior Correspondent, CNBC
http://www.cnbc.com/id/43501562
A federal judge in Dallas has ordered the Democratic and Republican parties and their congressional campaign committees to return some $1.75 million in contributions they received from accused Ponzi schemer Allen Stanford and his companies.
The political committees had fought against returning the money, but U.S. District Judge David Godbey ruled in a summary judgment that the contributions were part of the alleged fraud by Stanford, and should be returned to investors.
Godbey noted that there was no indication the political committees acted in bad faith. Nonetheless, he ordered them to pay the money back—plus interest.
The largest recipient, according to court filings, is the Democratic Senatorial Campaign Committee at $950,000, followed by the National Republican Congressional Committee at $238,500, the Democratic Senatorial Campaign Committee at $200,000, $128,500 to the Republican National Committee and $83,345 to the National Republican Senatorial Committee.
Stanford, who faces 14 criminal counts in an alleged global Ponzi scheme, was known for his political connections, helped by generous contributions to both parties.
Court-appointed receiver Ralph Janvey sued the committees in 2010 demanding the money be returned, but the committees argued they should not be held responsible because they could not have known about the alleged $7 billion fraud—which Stanford continues to deny.
http://www.cnbc.com/id/43501562
Stanford Court Receiver Seeks $55 Million from Libya, All in US Banks
Published: Friday, 17 Jun 2011 | 2:19 PM ET
By: Scott Cohn
Senior Correspondent, CNBC
http://www.cnbc.com//id/43443212
The court-appointed receiver who is recovering assets for investors in Allen Stanford's alleged Ponzi scheme is demanding that Libya's sovereign wealth funds return millions of dollars they somehow managed to withdraw just before the firm blew up in 2009, CNBC has learned.
And all of the money is on deposit in a U.S. bank.
In a complaint still under seal in U.S. District Court in Dallas, attorney Ralph Janvey demands the return of nearly $55 million in alleged "fraudulent transfers" to the Libyans. The money includes $12 million in funds Libya managed to withdraw just after Allen Stanford made a personal trip to meet with members of the Qaddafi regime in early 2009.
Three weeks later, the Securities and Exchange Commission filed suit against Stanford and his companies, shutting down the alleged scam. A spokesman for Janvey tells CNBC all of the money is in a U.S. bank, but he could not disclose which bank because the order is still under seal.
All of the funds have been frozen by the court, pending a hearing in December.
http://www.cnbc.com//id/43443212
New Stanford International Bank Limited liquidators put in place
By Observer News - Friday, May 27th, 2011.
http://www.antiguaobserver.com/?p=59209
Almost one year after Vantis initiated an appeal against its removal as liquidators of Stanford International Bank Limited (SIBL), its representatives have dropped the matter and there has been a consensual agreement to let Marcus Wide and Hugh Dickson of Grant Thornton take Vantis’ place.
The agreement, which was reached a week ago, was then endorsed by an order in the Eastern Caribbean Supreme Court of Appeal last week and the challenge was accordingly withdrawn.
Alexander Fundora, the creditor who led the fight to remove Vantis, later stated, “Wide’s and Dickson’s appointment represents an important step in the recovery of money for the many victims of the alleged R Allen Stanford multi-billion dollar Ponzi scheme.”
The creditor, who founded the Miami Florida-based home health care company, said he lost close to US $3 million on certificates of deposit when government regulators, both locally and in Dallas, took over operations of Stanford businesses after the civil and criminal proceedings were initiated against him.
He had accused the original joint-liquidators of the failed bank, Vantis, of misconduct and sought their removal and replacement.
In a statement to this newsroom following the agreement between Fundora and the ousted liquidators, the new liquidator Wide said, “With more than $7 billion in alleged losses suffered by approximately 27,000 depositors worldwide, a robust liquidation of the bank is vital…Hugh Dickson and I look forward to serving the creditors of the Stanford estate.”
Together, Wide and Dickson are said to have more than 60 years combined experience in insolvency, and now specialise in offshore entities and complex and contentious cases. Wide in particular has liquidated over 30 failed banks in the Caribbean.
Court filings by United States prosecutors allege that R Allen Stanford, James M Davis, and Laura Pendergest-Holt, through companies they controlled, including SIBL, executed a massive Ponzi scheme for at least one decade. Stanford’s trial is slated to start in September.
(More in today’s Daily OBSERVER)
http://www.antiguaobserver.com/?p=59209
Stanford Investors seek $10.7 billion from former auditor
Thu, May 26 2011
http://www.reuters.com/article/2011/05/27/stamford-idUSL3E7GR05320110527
May 26 (Reuters) - Investors in Texas financier Allen Stanford'S alleged Ponzi companies have sued BDO USA LLP and it's parent for $10.7 billion, claiming the auditors ignored potential red flags and concealed information from its own audit team.
U.S. Prosecutors have accused Stanford of running a $7 billion Ponzi scheme and defrauding investors who bought bogus certificates of deposit issued by his Antigua-based SIBL. Stanford, who has denied any wrongdoing, is scheduled to go on trial in September.
In a complaint filed in the Northern District Of Texas Dallas Division court, the plaintiffs alleged that BDO is liable for sales of unregistered securities and that the auditor made it possible for Stanford Companies to sell the Stanford International Bank Ltd (SIBL) Certificates of Deposit.
"We have yet to be served with the complaint and therefore are unable to comment at this time," BDO USA spokesperson Jerry Walsh told Reuters by email.
"However, the fact that this complaint was not filed until now -- years after the Stanford fraud came to light and after many other investor complaints were filed -- reflects a transparent understanding that the allegations lack merit."
The 55-page complaint says "BDO was generally aware of and willfully blind to the fact that it was involved in improper activity and that it was assisting the sale of unregistered securities from and through Texas."
The case is Philip Wilkinson and Pam Reed vs BDO USA, LLP and BDO International Ltd, United States District Court for the Northern District Of Texas Dallas Division, 3:11-cv-01115-B.
(Reporting by Himank Sharma in Bangalore, editing by Bernard Orr)
http://www.reuters.com/article/2011/05/27/stamford-idUSL3E7GR05320110527
S.E.C. Official Demoted Despite Spotting Stanford
May 13, 2011, 3:16 pm Legal/Regulatory
By BEN PROTESS
Joshua Roberts/Bloomberg News
http://dealbook.nytimes.com/2011/05/13/despite-spotting-stanford-s-e-c-official-was-demoted/?ref=business
In 1997, Julie Preuitt sounded the alarms that the Texas financier R. Allen Stanford was operating a huge Ponzi scheme.
The Securities and Exchange Commission official hammered away at the case for years, until the agency finally brought action against Mr. Stanford in 2009.
But no good deed goes unpunished, Ms. Preuitt testified before Congress on Friday, saying she had been marginalized and demoted at the S.E.C., where she once oversaw examiners in the agency’s Fort Worth office.
The falling-out stems from a 2007 effort by S.E.C. officials in Fort Worth to increase their examinations of financial firms. Ms. Preuitt, who still works in the Fort Worth office, warned that the policy change was superficial and would cause regulators to avoid investigating complicated schemes, like the $7 billion fraud that Mr. Stanford is accused of running.
Ms. Preuitt brought the concerns to her bosses and later complained to officials in the agency’s Washington headquarters. In turn, Ms. Preuitt received a letter of reprimand. The agency later transferred her to a nonsupervisory position, which in essence was a demotion.
Ms. Preuitt told lawmakers on Friday that she remained in that role, even though the S.E.C.’s internal watchdog issued a report last year that said the agency had treated her “improperly.”
The report also recommended that the agency consider disciplining two Fort Worth managers who penalized Ms. Preuitt.
“The commission has failed to discipline anyone, at least not visibly, nor has there been any effort made to restore me to a position with similar duties and responsibilities to the one held before,” Ms. Preuitt said in testimony before the House Financial Services Committee. “I paid a heavy price for complaining.”
The issue was further complicated by internal drama at the Fort Worth office. The S.E.C. official who proposed the new examination policy had earlier edged out Ms. Preuitt for a high-ranking position in the office.
The S.E.C. also argued that Ms. Preuitt had failed to follow orders and issued her complaints in an antagonistic way. The watchdog report did not dispute that claim.
Still, the S.E.C.’s inspector general said some S.E.C. officials mistreated Ms. Preuitt.
“We found that it was improper for Fort Worth management to take action against employees for voicing opposition to a program initiative and for bringing complaints to senior S.E.C. management,” the inspector general, H. David Kotz, said in prepared testimony on Friday.
Ms. Preuitt told lawmakers that she had been “excluded from training and participation in management meetings or decisions.”
She also warned lawmakers that her “situation should not be viewed in isolation.”
“It is part of a cultural problem which continues to impact the commission’s effectiveness,” she said.
The S.E.C. declined to comment.
http://dealbook.nytimes.com/2011/05/13/despite-spotting-stanford-s-e-c-official-was-demoted/?ref=business
Lawmakers rebuff pleas to return funds from alleged Ponzi schemer
By R. Jeffrey Smith, Published: May 16
http://www.washingtonpost.com/politics/lawmakers-rebuff-pleas-to-return-funds-from-alleged-ponzi-schemer/2011/05/09/AFBwgE5G_story.html
While Allen Stanford was flying high, he and his colleagues spent more than $10 million on campaign contributions and lobbying payments to curry favor in Washington. But all that money was diverted from investors in what authorities have called an elaborate Ponzi scheme, second only to Bernard Madoff’s in U.S. history, according to court documents.
Since Stanford’s arrest in 2009, a court-appointed receiver for the Houston-based Stanford Financial Group has been struggling to reclaim investor funds paid out to in-house and contract lobbyists, financial advisers and others whose services may have helped enable the scheme.
The receiver, Dallas lawyer Ralph S. Janvey, has been able to recover only about 5 percent of the political contributions he has targeted. Four of the principal national Republican and Democratic fundraising committees took in $1.6 million in Stanford donations, but they are vigorously fighting demands that they return it.
At least 50 members of the House and Senate have either ignored restitution demands or donated some of Stanford’s campaign contributions to charity instead, according to the receiver and a survey by The Washington Post. Included are House Majority Leader Eric Cantor (R-Va.); Senate Rules Committee Chairman Charles E. Schumer (D-N.Y.); Sen. Bill Nelson (D-Fla.), who chairs a Finance Committee subcommittee; and Sen. John Cornyn (R-Tex.), a member of the Judiciary Committee.
After questioning by The Post, a few of the lawmakers say they are having second thoughts. “We’re prepared to send the money back if they’re prepared to send us a release,” a spokesman for Cantor’s fundraising committee said.
“A check will be cut shortly,” Nelson’s spokesman said, explaining that the senator earlier donated matching funds to charity in keeping with his practice for “individuals who run afoul of the law.”
Kevin M. Sadler, an Austin-based lawyer who speaks for Janvey, said no one in Washington has argued that Stanford, who is in federal custody while awaiting trial, is innocent. Instead, they have challenged the receiver’s legal standing or argued that he waited too long to litigate. “Such indifference to the victims of a massive fraud scheme is difficult to understand,” Sadler said.
Thus far, Janvey has filed 45 lawsuits as part of his global scramble to recover a fraction of the more than $7 billion that prosecutors allege Stanford stole from investors in 114 countries. His authority has been upheld twice in federal civil court, where an appellate panel affirmed last December that there was considerable evidence that “the Stanford enterprise operated as a Ponzi scheme.” It cited in particular the August 2009 guilty plea of Stanford aide James Davis, who said the firm had routinely reported false returns and used new income to pay client debts.
Noting this confession, Janvey forged a legal strategy that includes pursuing payments to lobbyists and advisers, arguing that the money represented fraudulent transfers and therefore is eligible for seizure.
Many of those sued have contested this theory, with the political party committees leading the pack; they have complained in legal documents about being asked to use new donations to pay back funds they spent long ago.
While the civil cases play out, Stanford still awaits a criminal trial. He pleaded not guilty to fraud charges, and his court-appointed lawyer Ali Fazel predicted “a vigorous and hotly contested trial.” He declined to comment further because of a gag order.
Many fooled
If the government’s assertions are true, Stanford fooled many in Washington, or at least got them to look the other way, by cloaking himself as a wealthy businessman with estates in Florida, Texas and the Caribbean and a fleet of corporate jets that he loaned to lawmakers.
His business efforts secured high-level endorsements, with President Bush praising Stanford’s company in a 2008 letter for “helping more Americans build a solid foundation for the future.” Multiple investors said they relied on Bush’s endorsement in deciding to buy worthless certificates of deposit, according to a Securities and Exchange Commission report last year.
Stanford courted prominent figures to give his business extra gravitas. Former World Bank president Paul Wolfowitz collected $15,000 in 2008 for speaking to a Stanford board meeting in Washington, company records show. “It seemed like a perfectly normal board,” Wolfowitz said.
Former congressman Michael Oxley (R-Ohio) — then vice chairman of the Nasdaq Stock Market and a member of Stanford’s advisory board — was among the attendees. Oxley, now a lobbyist for the Financial Industry Regulatory Authority, has not returned the $3,000 he collected from Stanford in 2004 while chairing the Financial Services Committee.
Oxley spokeswoman Peggy Peterson said Oxley was unaware of a request the receiver says he made in February 2010.
Federal campaign law generally does not oblige politicians to vet contributors, according to campaign finance lawyers. But troublesome signs were evident for those who looked carefully. Stanford had, for example, previously bankrupted a Texas health club chain, a matter of public record.
His Antigua-based Stanford International Bank, which would eventually attract billions of dollars in deposits, caught the eyes of SEC examiners as early as 1997. Relying primarily on public information, they concluded that year — and then again in 2002, 2004 and 2006 — that Stanford was probably running a Ponzi scheme, according to a report last year by the SEC’s inspector general.
One of Stanford’s top bank officers was his former college roommate, with no previous banking experience. Its auditor was an unknown company in Antigua, prompting an investor’s warning to the SEC in 2002 that another Enron scandal was in the making.
In the same year, the Democratic Congressional Campaign Committee accepted $125,000 from Stanford’s firm, the Democratic Senatorial Campaign Committee accepted $750,000 and the National Republican Congressional Committee accepted $175,000. Stanford has previously said he was trying at the time to influence legislation against money laundering that he feared would boost his company’s expenses; the legislation did not pass.
An early warning
In December 2003, a North Carolina lawyer who was born in Antigua wrote to all 13 House members from the state, warning that Stanford appeared to be bribing Antiguan officials and engaging in illegal transactions, according to the letter.
One recipient was Rep. Sue Myrick (R.), then a top NRCC official. Two other recipients forwarded the letter to the Justice Department, which promised “appropriate investigative steps.” Myrick did not respond to phone calls and e-mails seeking comment.
The letter did not stop the NRCC from accepting $5,000 from Stanford in 2004, and $32,000 more in 2005 and 2008.
SEC examiners concluded again in 2004 that Stanford’s advertised rates of return were so improbably high that the bank appeared to be a “very large Ponzi scheme.”
The same year, Stanford hosted Cornyn on what the senator told the Senate secretary was a “fact-finding mission” to the company’s Antigua headquarters. The Texas Republican has repeatedly declined to comment on the trip, which he reported cost Stanford’s company $5,362. People do not say that “somehow an elected representative is responsible for the actions of every donor,” Cornyn told a newspaper in 2009.
In 2003 and 2007, Stanford-related groups gave Cornyn $4,000 in campaign funds; in 2004, they gave $25,000 more to the Republican National Committee. Cornyn also helped host a 2009 black-tie ball funded partly by Stanford’s firm.
Cornyn’s office said he donated the funds to a charity after the scandal erupted; asked why they were not sent to the receiver, spokesman Kevin McLaughlin said, “We have no further comment.” A victims group says that 1,300 Texans who invested in Stanford’s firms lost $582 million. Cornyn now chairs the National Republican Senatorial Committee, which is fighting a receiver lawsuit demanding the return of $83,345.
Cornyn flew on one of Stanford’s jets once, his office states, while then-House Majority Leader Tom DeLay flew about a dozen times, according to an aide. In 2004, DeLay (R-Tex.) and four other congressmen wrote to a top Venezuelan banking official attesting to Stanford’s honesty; the government there subsequently allowed Stanford to open more than a dozen branches that attracted more than $1.5 billion. His Venezuelan bank’s collapse led to a government takeover and huge losses by accountholders.
DeLay attorney Brian Wice said that “if the government can prove to a jury .?.?. that the allegations about the scope of Mr. Stanford’s Ponzi scheme are true, then Mr. DeLay wasn’t the only individual whom Mr. Stanford was able to deceive.”
The SEC did not act firmly against Stanford until 2009, after the Madoff scandal broke, a lapse that the inspector general blamed largely on decision-making at the SEC’s Fort Worth office, including obstruction by an official there who later sought to represent Stanford.
But some public officials figured out earlier that Stanford should be avoided. In 2006, for example, the U.S. ambassador to Barbados sent a cable to the State Department in which she noted that Stanford’s “companies are rumored to engage in bribery, money laundering, and political manipulation,” and noted that she avoided being caught in photos with him during a chance encounter, according to a copy disclosed by WikiLeaks.
Janvey and his colleagues have been merciless in pursuing misspent funds: They have frozen dozens of bank accounts, sued hundreds of investors who took early profits and asked three sports teams to return more than $2.8 million.
Their services have not come cheap — they have collected legal fees of $47.9 million for thousands of hours of legal work through the end of last year. Sadler said that the fees were discounted and noted that the judge who appointed the lawyers has been holding back 20 percent of the amount billed for review later.
Tight grip on funds
Janvey’s battle to “claw back” funds from Washington includes a claim against the Center for Strategic and International Studies, which got $52,000 from Stanford, and its longtime senior adviser Luis E. Giusti, a former Venezuealan oil executive who was on Stanford’s advisory board and received checks totaling $2.6 million at his CSIS office, according to the receiver.
CSIS spokesman H. Andrew Schwartz declined to say whether the money will be returned. He said CSIS “acted ethically” and had no knowledge of the Stanford firm’s illegal activities or of Giusti’s dealings with “Stanford entities.”
Giusti attorney Kerry Petersen said he spent eight years speaking to investor groups at Stanford’s request in return for a yearly “honorarium” and does not plan to return the funds.
Janvey has also sued prominent Democratic lobbyist Ben Barnes — 2004 presidential candidate John F. Kerry’s chief fundraiser — demanding the return of more than $5 million in fees. Lawyers and aides for Barnes, a former Texas lieutenant governor, have responded that he provided “valuable services to Stanford,” for monthly charges that reached $265,000, and that Barnes has no legal obligation to return the funds.
Regarding Stanford’s hefty donations to the four principal Democratic and Republican congressional campaign committees, Sadler said “we asked for it back nicely, and they ignored us. We asked them again, and they ignored us. So we sued them. .?.?. They want to push the day of reckoning past the 2012 election cycle.”
Spokesmen for the committees all declined to state how much they have spent fighting the lawsuits. The Democratic Senatorial Campaign Committee and the Democratic Congressional Campaign Committee each said they disagree with Janvey’s “characterization” of events.
The Federal Election Commission recently agreed to let the committees finance their continuing fight against Janvey from special pools of donor funds ostensibly meant to finance election recounts. Melanie Sloan, director of Citizens for Responsibility and Ethics in Washington, said “this seems to be a rare case” where politicians are resisting the return of tainted funds, perhaps because Stanford and his history are still not well known.
“Members,” she said, “would rather keep the money, but only if they think their constituents won’t care.”
Staff researcher Lucy Shackelford contributed to this report.
http://www.washingtonpost.com/politics/lawmakers-rebuff-pleas-to-return-funds-from-alleged-ponzi-schemer/2011/05/09/AFBwgE5G_story.html
Former S.E.C. Official Said to Be Subject of Criminal Inquiry
By EDWARD WYATT
Published: May 13, 2011
http://www.nytimes.com/2011/05/14/business/14sec.html?_r=1
WASHINGTON — A former Securities and Exchange Commission enforcement official who has been accused of repeatedly blocking efforts to investigate R. Allen Stanford, the Houston financier charged with running a $7 billion Ponzi scheme, is the subject of a federal criminal inquiry for having done legal work for Mr. Stanford after leaving the S.E.C., government officials said Friday.
The former official, Spencer C. Barasch, is now a private-sector lawyer in Texas. He has represented clients dealing with the agency, including a defendant charged last month with financial fraud by the S.E.C. in federal court in Dallas.
Those disclosures came Friday at a Congressional hearing into the S.E.C.’s failures to stop the Stanford Ponzi scheme.
Mr. Barasch led the enforcement bureau in the S.E.C.’s Fort Worth office and played “a significant role” in numerous decisions by the office not to investigate Mr. Stanford despite repeated accusations of fraudulent behavior, according to a report the S.E.C.’s inspector general released last year.
After leaving the agency, Mr. Barasch did legal work for Mr. Stanford despite being told multiple times by the S.E.C.’s ethics office that it was improper, S.E.C. officials said at the hearing. Mr. Stanford was eventually charged with fraud and is scheduled for trial later this year. He has denied the charges.
Mr. Barasch’s law firm said he had not acted unethically or violated any laws.
Members of the House Financial Services Committee’s oversight and investigations subcommittee expressed shock that Mr. Barasch, who the inspector general said had blocked efforts to pursue Mr. Stanford at least six times over seven years, continued to practice securities law before the commission.
The S.E.C. can, after an administrative proceeding, bar lawyers from practicing before the commission should it find sufficient wrongdoing. The commission declined on Friday to say whether such a proceeding was under way.
“This is not even defensible,” Representative Randy Neugebauer, Republican of Texas and head of the House subcommittee, said at the conclusion of the hearing.
“It is extremely disturbing that we had a culture in agencies that demand high levels of disclosure and integrity, that within that very agency there wasn’t a similar amount of integrity,” Mr. Neugebauer said. “It’s inexcusable.”
H. David Kotz, the S.E.C. inspector general, and Robert Khuzami, the director of the division of enforcement, told the House panel on Friday that Mr. Barasch had become the subject of a criminal investigation by the Federal Bureau of Investigation and the Justice Department after Mr. Kotz’s report was issued in March 2010.
The S.E.C. also referred Mr. Barasch to the ethics boards of the bar associations in Texas and Washington, Mr. Khuzami said at the hearing.
Mr. Barasch did not respond to a request for comment. Robert V. Jewell, the managing partner of Andrews Kurth, the Texas law firm where Mr. Barasch is the leader of the corporate governance and securities enforcement team, said in a statement that he believed that Mr. Barasch “did not violate conflicts of interest.”
“Spencer Barasch served the S.E.C. with honor, integrity and distinction,” the statement said. “We disagree with the characterization of Mr. Barasch’s involvement put forth by the inspector general in his report last year in regard to the Stanford Financial Group matter. We believe he acted properly during his contacts with the Stanford Financial Group and the Securities and Exchange Commission.”
He continued: “We continue to stand by Spencer Barasch; he is and will remain a valued member of the Andrews Kurth team, where he provides our clients with the highest possible quality of advice and counsel.”
Asked by Mr. Neugebauer at the hearing whether he thought Mr. Barasch had engaged in unethical behavior, Mr. Khuzami, the enforcement chief, said yes. “Clearly the rules prohibited him from representing Mr. Stanford,” Mr. Khuzami said. “So my personal conclusion would be certainly the evidence appears to be the case.”
Rule 102(e) of the S.E.C.’s rules of practice says that the commission can bar a lawyer who is found “to be lacking in character or integrity or to have engaged in unethical or improper professional conduct.”
But such a finding requires a formal hearing, and the S.E.C. has not initiated a hearing on Mr. Barasch, said John Nester, an S.E.C. spokesman. Mr. Nester declined to comment on whether “any enforcement investigation, including one that might result in an administrative enforcement proceeding against an attorney, is ongoing.”
The Congressional hearing once again brought to light problems that the S.E.C., like many government agencies, faces with the “revolving door” of people who go back and forth between government and the private sector.
On Friday, the Project on Government Oversight, a watchdog group, released a study showing that between 2006 and 2010, 219 former S.E.C. employees filed 789 post-employment statements indicating their intent to represent an outside client before the S.E.C.
“The revolving door to high-paying jobs representing Wall Street can undermine the integrity of the S.E.C.,” said Michael Smallberg, the investigator for the oversight watchdog group who created the database. “It’s not a stretch for the public to wonder whether the promise of future employment affects how S.E.C. regulators treat certain firms.”
The study, which used documents obtained from the S.E.C. under the Freedom of Information Act, also found that some former employees had filed the statements within days of leaving the commission. One employee’s filing came within two days of leaving; another former employee filed at least 20 statements.
Mr. Nester said the S.E.C. had “a rigorous program to help departing employees meet not just the letter, but also the spirit of the law” on conflicts of interest after they leave the agency.
The Government Accountability Office is conducting a review of post-employment rules, he said, which the S.E.C. is assisting.
A version of this article appeared in print on May 14, 2011, on page B1 of the New York edition with the headline: Former S.E.C. Official Said to Be Subject of Criminal Inquiry.
http://www.nytimes.com/2011/05/14/business/14sec.html?_r=1
House Republicans to dissect SEC's Stanford failure
By Sarah N. Lynch
WASHINGTON | Fri May 13, 2011 8:22am EDT
http://www.reuters.com/article/2011/05/13/us-allenstanford-sec-idUSTRE74C0M520110513
(Reuters) - Securities regulators will argue they have mended their ways at a congressional hearing Friday into the decade-long failure to investigate Texas financier Allen Stanford's alleged Ponzi scheme.
Republicans are expected to demand answers as to why it took the Securities and Exchange Commission so long to probe Stanford despite repeated attempts by SEC examiners to bring the matter to the enforcement division's attention.
The hearing before the House Financial Services oversight subcommittee could fuel Republican calls to take an ax to the SEC's 2012 budget request.
The SEC says it needs a 16 percent budget increase to boost enforcement efforts and to carry out its new responsibilities under the Dodd-Frank law.
The SEC filed civil charges against Stanford in February 2009. He was then arrested in June 2009 and criminally charged with fraud in connection with a $7 billion scheme linked to certificates of deposit issued by his Antigua-based banking company.
Stanford, who has denied any wrongdoing, is scheduled to go on trial in September.
His arrest came the same month as the sentencing of epic swindler Bernard Madoff, whose Ponzi scheme went undetected for years by the SEC despite tips and the suspicions of some agency staffers.
A Ponzi scheme is one in which money from new investors is used to pay out early investors.
Witnesses at Friday's hearing will include SEC Enforcement Director Robert Khuzami, examinations and inspections director Carlo di Florio, and an SEC employee who repeatedly warned about Stanford and was punished after she complained about watered-down examinations.
Also due to appear is SEC Inspector General David Kotz, who issued a report in 2010 faulting the SEC's enforcement staff for repeatedly failing to investigate Stanford.
He laid out numerous recommendations to improve SEC enforcement and examinations, all of which Kotz will tell lawmakers on Friday "have been implemented and closed to our satisfaction," according to prepared testimony posted on the House panel's website.
Khuzami and di Florio will express deep regret that the SEC failed to act more quickly. "More remains to be done, but...we have made great strides to put in place the people and structures to prevent another occurrence of Stanford-type problems."
Republicans are expected to ask why no one has been disciplined at the SEC over the Stanford matter, and why the victims of the alleged scheme are still fighting to get the Securities Investor Protection Corp to cover their claims.
Khuzami and di Florio's prepared testimony says the SEC is close to finalizing a recommendation to SIPC on whether the victims' claims should be covered.
(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn)
http://www.reuters.com/article/2011/05/13/us-allenstanford-sec-idUSTRE74C0M520110513
Stalled Out Stanford Criminal Trial Leaves Numerous Related Matters On Hold, Too
Bruce Carton
May 06 2011
http://www.complianceweek.com/stalled-out-stanford-criminal-trial-leaves-numerous-related-matters-on-hold-too/article/202308/
Back in January, I noted that after Allen Stanford inexplicably managed to become addicted to anti-anxiety medication while in federal custody, the judge overseeing his criminal case postponed his criminal trial indefinitely. U.S. Judge David Hittner ruled that Stanford must be weaned off of the drug and deemed competent before standing trial.
Four months later there appears to be no movement toward a trial in the Stanford case, and CNBC reports that Stanford will not attend an arraignment on a new indictment in his case scheduled for May 19. His current defense attorney, Ali Fazel, says that Stanford is incapable of entering a please [sic] as a matter of law because "he has been found incompetent. We are on standby."
In fact, "standby" seems to be the appropriate word to describe almost every one of the legal proceedings related to Stanford, as numerous cases are now derailed pending a resolution of the criminal prosecution against Stanford. These include:
- The criminal cases against Stanford's co-defendants Laura Pendergest-Holt (former chief investment officer) and Mark Kuhrt and Gilbert Lopez (former accounting executives). All of these co-defendants have pleaded not guilty but have not faced a trial because the judge has reportedly chosen to delay their cases until after Stanford's trial. All of the defendants are now free on bond.
- The court-appointed receiver's effort to recover assets for Stanford's alleged victims. CNBC reports that because most of the missing funds are believed to be in overseas accounts, U.S. authorities need a guilty verdict and a forfeiture order in the Stanford criminal trial to go after these funds.
- SEC civil lawsuit against Stanford. This case is also on hold pending the outcome of the stalled out criminal trial.
In short, all of these matters remain on hold pending the resolution of the Allen Stanford criminal case that shows absolutely no signs of moving forward any time in the foreseeable future.
http://www.complianceweek.com/stalled-out-stanford-criminal-trial-leaves-numerous-related-matters-on-hold-too/article/202308/
UPDATE 3-US narrows case vs accused Ponzi schemer Stanford
Thu, May 5 2011
* Drops five mail fraud counts, two wire fraud counts
* Jailed financier still faces 14 criminal counts
* Stanford has undergone anxiety treatment (Adds calls to other defendants' lawyers, comment from law professor)
By Jonathan Stempel
http://www.reuters.com/article/2011/05/05/stanford-indictment-idUSN056191220110505
NEW YORK, May 5 (Reuters) - Federal prosecutors have narrowed their criminal case against Allen Stanford, the Texas financier accused of running a $7 billion Ponzi scheme.
The government filed an amended, 14-count indictment in U.S. District Court in Houston on Wednesday that drops five mail fraud counts and two wire fraud counts. It also dropped part of a conspiracy count.
Stanford, 61, could still face as much as 20 years in prison if convicted on any of the 10 fraud counts in the revised indictment. No trial date has been set.
Prosecutors have accused Stanford of defrauding investors who bought bogus certificates of deposit issued by his Antigua-based Stanford International Bank Ltd.
They have said that the one-time billionaire used proceeds in part to fund other ventures and a lavish lifestyle that included several yachts and private jets, and homes around the world.
Stanford, who has denied wrongdoing, has been in federal custody since June 2009.
It was unclear why the case was narrowed and the other defendants were dropped. U.S. Department of Justice spokeswoman Laura Sweeney declined to comment, citing a court-imposed gag order.
"We are studying it," said Ali Fazel, a lawyer at Scardino & Fazel in Houston who is representing Stanford. "It appears they have tried to narrow the indictment to focus on him." He declined further comment, citing the gag order.
Four co-defendants in the original June 2009 indictment were also dropped from the new indictment. They are scheduled to go on trial after Stanford. Lawyers for these defendants did not immediately return calls for comment or declined to comment.
CLEANER CASE
Stanford now faces five counts of mail fraud and five counts of wire fraud.
He is also charged with obstructing a U.S. Securities and Exchange Commission probe, and conspiring to obstruct the SEC, commit money laundering, and commit mail fraud and wire fraud. The last charge originally covered securities fraud as well.
"It may create a cleaner, less complex case so that a jury can focus on Stanford and not get sidetracked," said Michael Weinstein, who chairs the white-collar practice at the law firm Cole, Schotz, Meisel, Forman & Leonard PA in Hackensack, New Jersey.
"It is also possible that the original case the government brought did not pan out as expected," said Weinstein, who is not involved in the Stanford case.
Mark Godsey, a law professor at the University of Cincinnati, said, "There is a decent chance some of the other defendants will testify against Stanford."
The SEC had filed a related civil lawsuit against Stanford in Dallas federal court in February 2009.
In January, U.S. District Judge David Hittner ruled Stanford incompetent to stand trial.
Stanford has since February been at a hospital in the Butner Federal Correctional Complex in North Carolina to treat an addiction to an anti-anxiety medication he developed while in jail. Butner also houses convicted swindler Bernard Madoff.
The Houston court set May 19 for Stanford's arraignment on the new indictment. Fazel said that date would be changed because "someone who is incompetent cannot be arraigned."
The case is U.S. v. Stanford, U.S. District Court, Southern District of Texas, No. 09-00342. (Additional reporting by Anna Driver in Houston; editing by Andre Grenon)
http://www.reuters.com/article/2011/05/05/stanford-indictment-idUSN056191220110505
Allen Stanford Investors' Suit Against SEC Should Be Dismissed, U.S. Says
By Laurel Brubaker Calkins - Apr 8, 2011
http://www.bloomberg.com/news/2011-04-08/allen-stanford-investors-suit-against-sec-should-be-dismissed-u-s-says.html
The U.S. asked a federal judge to throw out claims that the Securities and Exchange Commission should be held accountable for failing to stop an alleged Ponzi scheme by R. Allen Stanford earlier than it did.
SEC officials have legal protection for policy decisions, such as whether to take enforcement action when they suspect wrongdoing, the government said in papers filed yesterday in Dallas federal court.
“Plaintiffs are challenging a policy choice -- something they may not do by way of a tort suit for damages,’’ the government said in the filing. “Congress did not intend to provide for judicial review of the quality of investigative efforts.’’
Eight investors in the indicted financier’s Antigua-based Stanford International Bank sued regulators last month for their losses, which amounted to about $18.7 million. They said “negligence and misconduct” by officials in the SEC’s Fort Worth, Texas, office let Stanford’s activities continue unchecked for years after alarms were raised by agency investigators.
The SEC seized Stanford’s businesses in February 2009 on suspicion he was paying above-market rates to early buyers of certificates of deposit by taking funds from later depositors. Stanford, who denies all wrongdoing, was indicted in June 2009 on charges he defrauded investors of more than $7 billion.
The investor case is Robert Juan Dartez LLC v. U.S., 3:11- cv-0602, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv298, U.S. District Court, Northern District of Texas (Dallas).
To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com
To contact the editor responsible for this story: Michael Hytha in San Francisco at mhytha@bloomberg.net.
http://www.bloomberg.com/news/2011-04-08/allen-stanford-investors-suit-against-sec-should-be-dismissed-u-s-says.html
Investors sue government, former SEC official over Stanford losses
03/25/2011 01:53:16 PM EDT -- Dallas Morning News (TX)
http://www.dallasnews.com/business/headlines/20110325-investors-sue-government-former-sec-official-over-stanford-losses.ece
March 25--Nine Louisiana investors who lost nearly $19 million combined to Allen Stanford have sued the government for negligence, arguing the Securities and Exchange Commission failed to stop the Texas financier's alleged fraud.
The suit targets former Fort Worth SEC enforcement director Spencer Barasch, who was accused in an SEC audit of failing several times to act on evidence that Stanford, currently imprisoned and awaiting criminal trial, was running a multibillion-dollar Ponzi scheme.
The suit, which was filed in Dallas federal court Thursday, piggybacks on the SEC's own internal investigation that cited numerous times that Barasch could have brought action against Stanford based on preliminary investigations into the certificate-of-deposit business.
Barasch declined to bring action against Houston-based Stanford several times and ignored evidence of mounting fraud, the SEC's Office of Inspector General concluded last year.
Barasch told colleagues he had referred Stanford-related letters and inquiries to other agencies, when the report concluded that he had not.
He also allegedly told a colleague at a dinner in New Orleans that Stanford wasn't worth investigating based simply on a conversation he had with Stanford's own attorney, according to the report.
The SEC's audit staff had received letters of complaint about Stanford's practices and was suspicious of Stanford's fast-growing deposits as early as 1997. The SEC finally sued Stanford in 2009 and the Department of Justice brought criminal charges against him last year.
The alleged fraud is estimated to have cost investors as much as $8 billion.
Barasch left the SEC in 2005, and managed to do some work for Stanford before the SEC stopped it. Barasch sought three times to represent Stanford but was denied each time by regulators; the SEC filed a complaint against Barasch with the State Bar of Texas.
"Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines," Barasch wrote in an email regarding his interest in representing Stanford.
A spokeswoman for Andrews Kurth LLP, where Barasch is a partner, declined Friday to comment on the suit. A message to the SEC's public affairs office wasn't immediately returned Friday.
Under the Federal Tort Claims Act that the suit is brought under, people can sue individual government employees to show damage from their negligence.
The Fort Worth regional office has seen its share of criticism. Staffers told the inspector general that Barasch and office head Harold Degenhardt avoided tough enforcement cases in order to pump up success rates for the office. Barasch cited the difficulty of pursuing a case against Stanford as one of the reasons action wasn't brought, the report said.
Rose Romero, who succeeded Degenhardt in running the office of about 100 lawyers and staffers, said this month that she would leave for private practice. No successor has been named.
One of the Fort Worth office's prominent SEC trial lawyers, Phillip Offill, is serving an 8-year federal prison sentence for his role in pump-and-dump stock schemes. Offill and Barasch were acquaintances and worked together in Oklahoma.
http://www.dallasnews.com/business/headlines/20110325-investors-sue-government-former-sec-official-over-stanford-losses.ece
Back in My Day, the SEC was the Plaintiff!
Bruce Carton
March 24 2011
http://www.complianceweek.com/back-in-my-day-the-sec-was-the-plaintiff/article/199101/
As I joked on Twitter last week upon hearing that former Goldman Sachs board member Rajat Gupta sued the SEC on March 18 for bringing its case against him as an administrative proceeding rather than in federal court, "Back in my day, the SEC was the plaintiff!"
Gupta's case is just the latest in a string of unusual cases that have been filed against the SEC in the last couple of years. After the SEC admitted to, and an Inspector General report flagged, numerous failings in the agency's investigation of the Madoff case, several cases and even a class action were filed against the SEC by Madoff victims. None of these cases are likely to hold up in court according to experts in this area, and at least one has been dismissed already.
In mid-February 2011, high-profile alleged Ponzi schemer Allen Stanford tried to turn the tables a bit by filing a lawsuit against the SEC and federal prosecutors. Stanford alleging that government agents "undertook illegal tactics" and "engaged in unfair, abusive law enforcement methods and tactics," leaving him with just the clothes on his back and no way to properly defend himself. Add in the last week's Gupta case and you've got yourself a full-blown "sue the SEC" trend!
There is at least one recent bright spot for the SEC: Earlier this week, Stanford dropped his lawsuit against the SEC and prosecutors. According to Reuters, U.S. District Judge Ewing Werlein granted Stanford's request to dismiss the lawsuit. Stanford's lawyers told the court that Stanford's claims will be preserved because the criminal case remains open.
http://www.complianceweek.com/back-in-my-day-the-sec-was-the-plaintiff/article/199101/
Stanford drops $7.2 bln suit vs. DoJ, SEC lawyers
1:48pm EDT
http://www.reuters.com/article/2011/03/24/stanford-lawsuit-idUSN2413966720110324
* Lawsuit accused government lawyers of abusive methods
* Jailed financier has undergone anxiety treatment
By Jonathan Stempel
NEW YORK, March 24 (Reuters) - Allen Stanford, the Texas financier accused of running a massive Ponzi scheme, has dropped his $7.2 billion lawsuit accusing government lawyers of engaging in abuse in pursuing their cases against him.
Stanford had claimed that lawyers and other employees at the Department of Justice, Securities and Exchange Commission and FBI violated his constitutional rights by using "unfair, abusive law enforcement methods and tactics" that left him broke and unable to properly defend himself.
The defendant is a one-time billionaire who filed his Feb. 16 lawsuit in Houston federal court. He turned 61 on Thursday.
U.S. District Judge Ewing Werlein this week granted a request by Stephen Cochell, one of Stanford's lawyers, to dismiss the lawsuit.
Stanford's claims "will be preserved" because the criminal case remains open, Cochell said in a court filing.
Prosecutors have accused Stanford of running a $7 billion fraud centered on the sale of bogus certificates of deposit issued by his Antigua-based Stanford International Bank.
Stanford has pleaded not guilty to the 21-count indictment, which was announced in June 2009. The SEC filed a related civil lawsuit four months earlier in Dallas federal court.
Stanford sued the lead government lawyers in both cases against him. The Justice Department and the SEC were not sued.
Alisa Finelli, a Justice Department spokeswoman, declined to comment. SEC spokesman Kevin Callahan had no immediate comment.
Stanford was moved last month to a hospital at the Butner Federal Correctional Complex in North Carolina to undergo treatment for an addiction to medication to treat anxiety. The Butner complex also houses the swindler Bernard Madoff.
The case is Stanford v. Korotosh et al, U.S. District Court, Southern District of Texas, No. 11-00582. (Reporting by Jonathan Stempel in New York, editing by Dave Zimmerman)
http://www.reuters.com/article/2011/03/24/stanford-lawsuit-idUSN2413966720110324
Court's ruling keeps Stanford in jail
Associated Press
March 14, 2011, 2:48PM
http://www.chron.com/disp/story.mpl/business/7471664.html
A federal appeals court is refusing to allow Texas financier R. Allen Stanford to post bond and be released from jail while he awaits trial on what prosecutors say was a huge Ponzi scheme.
The New Orleans-based 5th U.S. Circuit Court of Appeals said today it doesn't have jurisdiction in the matter.
Stanford's lawyers argued to the court two weeks ago he should be freed to help with his defense. They also contend his right to a speedy trial after his 2009 indictment has been violated. U.S. District Judge David Hittner in Houston has ruled that Stanford is a flight risk and denied release.
Federal prosecutors argued delays in his January trial were proper. Stanford also has requested delays. He is being treated for several medical problems affecting his competency.
http://www.chron.com/disp/story.mpl/business/7471664.html
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