Replies to post #1 on Allen Stanford Ponzi Scheme

[scion]

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

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

[scion]

Whistleblower Alleges $8 Billion Fraud At Sir Allen Stanford's Offshore Bank

Joe Weisenthal|Feb. 11, 2009, 4:44 PM|26
Tags: Investing, Fraud, Bernie Madoff, Scams, Scandals, SEC
http://www.businessinsider.com/whistleblower-alleges-8-billion-fraud-at-sir-allen-stanfords-offshore-bank-2009-2

This will be interesting to watch: A whistleblower named Alex Dalmady claims that Stanford International Bank, a large offshore operation run by Texas billionaire Sir Allen Stanford, is an $8 billion fraud, with suspiciously steady year-on-year returns, a la Bernie Madoff. We've embedded the full document below, but here's Felix Salmon's boildown:

As you can see, Stanford manages to report extremely consistent returns every year, and it even managed to make a 6% profit on its portfolio in 2008. Which is extremely impressive, given what happened to just about every asset class last year. And which is even more impressive given that Stanford International Bank is a bank which doesn't make loans.

SIB, it turns out, is a very peculiar fish indeed: it offers extremely high interest rates on its deposits -- on the order of 7.5% for a one-year CD. It then takes that money and, rather than lending it out at a higher rate still, invests it in stocks and hedge funds and commodities and the like.

If that sounds dangerous to you, ask yourself whether you'd be remotely reassured by the "Depositor Security" section of Stanford's website:

SIB has seen consistent profitability and growth every year since the Bank was founded. After first paying its clients a premium return on their deposits and then rewarding employees for their performance, the Bank has reinvested every dollar earned back into retained earnings. This has continuously strengthened SIB's capital base for future growth and is a significant difference between SIB and other international banks.

Basically, this is Allen Stanford -- the bank's sole shareholder -- saying "I'm a billionaire, I'm good for the money".

We'll be following this more, particularly as it's the first test of the lone, internet-based whistleblower in the post-Markopolos era.

http://www.businessinsider.com/whistleblower-alleges-8-billion-fraud-at-sir-allen-stanfords-offshore-bank-2009-2

[scion]

SEC Charges R. Allen Stanford, Stanford International Bank for Multi-Billion Dollar Investment Scheme

FOR IMMEDIATE RELEASE
2009-26

Washington, D.C., Feb. 17, 2009 -- The Securities and Exchange Commission today charged Robert Allen Stanford and three of his companies for orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8 billion CD program.

Additional Materials

Litigation Release No. 20901
http://sec.gov/litigation/litreleases/2009/lr20901.htm
SEC Complaint
http://sec.gov/litigation/complaints/2009/comp20901.pdf

Stanford's companies include Antiguan-based Stanford International Bank (SIB), Houston-based broker-dealer and investment adviser Stanford Group Company (SGC), and investment adviser Stanford Capital Management. The SEC also charged SIB chief financial officer James Davis as well as Laura Pendergest-Holt, chief investment officer of Stanford Financial Group (SFG), in the enforcement action.

Pursuant to the SEC's request for emergency relief for the benefit of defrauded investors, U.S. District Judge Reed O'Connor entered a temporary restraining order, froze the defendants' assets, and appointed a receiver to marshal those assets.

"As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors."

Rose Romero, Regional Director of the SEC's Fort Worth Regional Office, added, "We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world."

The SEC's complaint, filed in federal court in Dallas, alleges that acting through a network of SGC financial advisers, SIB has sold approximately $8 billion of so-called "certificates of deposit" to investors by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through SIB's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years.

According to the SEC's complaint, the defendants have misrepresented to CD purchasers that their deposits are safe, falsely claiming that the bank re-invests client funds primarily in "liquid" financial instruments (the portfolio); monitors the portfolio through a team of 20-plus analysts; and is subject to yearly audits by Antiguan regulators. Recently, as the market absorbed the news of Bernard Madoff's massive Ponzi scheme, SIB attempted to calm its own investors by falsely claiming the bank has no "direct or indirect" exposure to the Madoff scheme.

According to the SEC's complaint, SIB is operated by a close circle of Stanford's family and friends. SIB's investment committee, responsible for the management of the bank's multi-billion dollar portfolio of assets, is comprised of Stanford; Stanford's father who resides in Mexia, Texas; another Mexia resident with business experience in cattle ranching and car sales; Pendergest-Holt, who prior to joining SFG had no financial services or securities industry experience; and Davis, who was Stanford's college roommate.

The SEC's complaint also alleges an additional scheme relating to $1.2 billion in sales by SGC advisers of a proprietary mutual fund wrap program, called Stanford Allocation Strategy (SAS), by using materially false historical performance data. According to the complaint, the false data helped SGC grow the SAS program from less than $10 million in 2004 to more than $1 billion, generating fees for SGC (and ultimately Stanford) of approximately $25 million in 2007 and 2008. The fraudulent SAS performance was used to recruit registered investment advisers with significant books of business, who were then heavily incentivized to reallocate their clients' assets to SIB's CD program.

The SEC's complaint charges violations of the anti-fraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act, and registration provisions of the Investment Company Act. In addition to emergency and interim relief that has been obtained, the SEC seeks a final judgment permanently enjoining the defendants from future violations of the relevant provisions of the federal securities laws and ordering them to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest.

The Commission acknowledges the assistance and cooperation of the Financial Industry Regulatory Authority (FINRA) in connection with this matter.

The SEC's investigation is continuing. The Commission acknowledges the assistance and cooperation of the Financial Industry Regulatory Authority (FINRA) in connection with this matter. FINRA independently developed information through its examination and investigative processes that contributed significantly to the filing of this enforcement action.

# # #

For more information, contact:

Rose Romero, Regional Director
Steve Korotash, Associate Regional Director, Enforcement
SEC's Fort Worth Regional Office
[phone]


http://www.sec.gov/news/press/2009/2009-26.htm

[teapeebubbles]

U.S. agents enter Stanford Financial Houston office

HOUSTON (Reuters) - Federal agents entered the Houston office of Stanford Financial Group on Tuesday, according to a Reuters eyewitness on the scene.

About 15 people, some wearing jackets identifying them as U.S. marshals, entered the lobby of Stanford's office in the Houston Galleria area, the eyewitness said.

Houston-based Stanford Financial Group, which says it oversees more than $50 billion of assets, is being investigated by U.S. regulators, according to a person familiar with the matter.

The New York Times reported that U.S. securities regulators had accused three top Stanford executives, including Robert Allen Stanford, of fraud.