Allen Stanford Ponzi Scheme

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Stanford International Bank Said to Bar Withdrawals Amid Probe

http://www.bloomberg.com/apps/news?pid=20601087&sid=aeHvNZJLOWf0&refer=home#
By Alison Fitzgerald

Feb. 17 (Bloomberg) -- Stanford International Bank Ltd., the Antigua-based affiliate of billionaire R. Allen Stanford's U.S. investment firm, placed a 60-day moratorium on early redemptions of its certificates of deposit, people familiar with the matter said.

Stanford Group Co. financial advisers have told three clients that they can't redeem CDs sold by the firm prior to their maturity date, according to the customers, who asked that their names not be used. The bank in the past let customers pay a three-month interest penalty to get their money back before the contractual maturity of the certificates, the people said.

"Bank depositors may withdraw funds in accordance with the terms of their accounts," Stanford spokesman Brian Bertsch said.

The bank is within its contractual rights to stop early redemptions, the people said.

Stanford Group has been under investigation by the U.S. Securities and Exchange Commission since at least last summer over sales of certificates of deposit in Stanford International Bank and the consistent, above-average returns those investments pay, according to people familiar with the matter.

Stanford's operations also are being probed by the FBI, the Wall Street Journal reported.

One Austin, Texas-based depositor said he called his advisers Feb. 12 and was told he could not cash out his CDs. He said last summer he tried to double his investment in 5-year CDs, which were yielding 8.5 percent, and was told the bank at that time wasn't accepting new deposits.

No Cashing Out

A customer in Houston, who said he has more than $2 million in Stanford CDs, said a representative told him on Feb. 11 that he'd have to wait until the maturity date to get his money back.

Stanford International Bank has $8.5 billion in assets and 30,000 clients, according to its Web site. It describes the CDs in its disclosure statement as traditional bank deposits. The bank says it doesn't lend proceeds and instead invests in a mix of equities, metals, currencies and derivatives, according to its Web site and CD disclosures.

A one-year, $100,000 CD issued by the bank paid a 4.5 percent annual yield as of Nov. 28, according to a posting on the lender's Web site. A one-year, $10,000 CD purchased at JPMorgan Chase & Co. would earn 1.75 percent, its consumer banking Web site said.

Investment Categories

Stanford's bank discloses broad investment categories in marketing materials and on its web site. In 2006, it reported that 57.4 percent of its portfolio was in equities, 21.9 percent in Treasuries and corporate bonds, 13 percent in metals and 7 percent in alternatives, according to a disclosure statement related to the CD offering. The rest was in cash, mostly dollars.

The SEC subpoenaed two former Stanford financial advisers, Mark Tidwell and Charles Rawl, in July and last month the agency questioned two others, according to people familiar with the matter. The agency has asked former employees about the bank's stated returns on investment, between 10.3 percent and 15.1 percent every year from 1995 until last year, according to documents and annual reports on the bank's Web site. SIB has $8.5 billion in assets and 30,000 clients, according to the site.

Investigators from the Financial Industry Regulatory Authority visited six Stanford Group offices in January, downloaded information from computer hard drives and looked through files, people familiar with the events said. The people declined to be identified because they didn't want to put their current jobs at risk.

Madoff Probe

The U.S. investigation of Stanford's securities firm intensified after the December arrest of Bernard L. Madoff, who allegedly confessed to running a $50 billion Ponzi scheme in which early investors were paid with funds from later participants.

The Stanford Financial companies, including Stanford Group, Stanford International Bank and Stanford Trust, were founded by Allen Stanford, who is the chairman. The Texas native was listed by Forbes Magazine as the 605th-richest man in the world with an estimated net worth of $2 billion.

Stanford is a citizen of the U.S. and of Antigua & Barbuda after being naturalized in that country 10 years ago, according to a biography on the company's Web site. He was knighted by the Antiguan government in 2006 and now uses the title "Sir." Stanford Group Co. has 19 offices in the U.S. and more than $43 billion under management or advisement, according to its Web site.

Cricket Supporter

The banker is a backer of Twenty20 cricket, a shortened form of the sport played over about three hours. Last June, he landed in a helicopter at Lord's Cricket Ground in London to announce an annual Twenty20 series of matches between England's national team and the Stanford Superstars, a team of West Indies players, for a winner-takes-all prize of $20 million. Stanford plucked dollar bills from a crate he brought with him to illustrate the amount of money on offer.

The game, played in November at the Stanford Cricket Ground, near the banker's home in Antigua, was won by the West Indies team. The 11 players collected $1 million each. The rest of the money was distributed between the substitutes and the West Indies Cricket Board, the sport's governing body in the region.

In December, Stanford said he was considering whether to continue funding cricket in the Caribbean, including a separate Twenty20 tournament played between countries and islands in the region.

"With the whole economic downturn, it's just prudent business practice to review all of your sports sponsorships," said Julie Hodge, a spokeswoman for Stanford's Twenty20 tournaments in Miami. Stanford will decide whether to stop his cricket sponsorship "within two weeks," she said.

Stanford Group sponsors other sports events, including the Stanford St. Jude Championship, a PGA tour golf tournament in Memphis, Tennessee, and Stanford Field, a polo championship at the International Polo Club in Palm Beach, Florida.

To contact the reporter on this story: Alison Fitzgerald in Washington at [e-mail]
Last Updated: February 17, 2009 10:52 EST

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