Stanford accused in a scam ‘of shocking magnitude’

By A. James Memmott

February 18, 2009 at 10:10am

Anyone suffering from Madoff fatigue may have a new money manager to deplore.

The Securities and Exchange Commission yesterday accused R. Allen Stanford and three of his companies with “orchestrating a fraudulent, multi-billion dollar investment scheme.”

The scheme was connected to an $8 billion program in certificates of deposit, the complaint alleged.

A Texas judge has frozen Stanford’s assets to protect investors, according to an SEC statement.

“We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,” said Rose Romero of the SEC’s Fort Worth office in the statement.

The New York Times reported on its website that police officers entered the Stanford Group’s offices in Houston yesterday.

Stanford, a dual citizen of the U.S. and Antigua and Barbuda and the billionaire chairman of Stanford Financial Group, allegedly used false data to lure investors.

The three Stanford Financial Group companies named in the complaint are: Stanford International Bank in St. John’s, Antigua, West Indies, Stanford Capital Management and Stanford Group Company of Houston.

According to the SEC, Stanford International Bank sold $8 billion in certificates of deposit by “promising improbable and unsubstantiated high interest rates.”

The commission’s complaint alleges that bank falsely claimed its investments lost only 1.3 percent in 2008 at a time when the S&P 500 lost 39 percent.

The complaint also points up the improbable coincidence that the bank reported identical earnings of 15.71 percent in 1995 and 1996.

And it alleges that only two people, Allen Stanford and James M. Davis, a director and CFO of Stanford Financial Group, are aware of the details of the bank’s investment portfolio.

Davis, Stanford’s roommate when they attended Baylor University, is also named in the complaint, as is Laura Pendergest-Holt, the chief investment officer of the bank and of Stanford Financial Group.

The complaint states that Stanford and Davis refused to testify in the investigation. Pendergest-Holt did testify.

According to The Wall Street Journal, word of investigations into Stanford International Bank had already sent investors rushing to Antigua to withdraw their money.

Allen Stanford had earlier told company employees that there would be a “temporary moratorium on early redemptions of CDs,” the paper reported.

A native of Texas, Stanford is the chairman and sole shareholder of the Stanford Investment Bank in Antigua.

According to the SEC, the bank claimed 50,000 clients in 2007. It does not loan money. Rather, it sells CDs through the Stanford Group Company.

Stanford became a citizen of Antigua and Barbuda 10 years ago. He was knighted there and is referred to as Sir Allen Stanford on his company’s website.

Stanford Financial Group sponsors a variety of sporting events, most recently a cricket tournament in Antigua with $20 million in prizes, reportedly the most lucrative in the history of the sport.

The Stanford International Bank had told investors in an earlier report that it had no exposure to funds controlled by Bernard L. Madoff, the investment manager who may have run a $50 billion Ponzi scheme.

The Times reported, however, that the Stanford bank did lose $400,000 in an investment in a Madoff feeder fund.

According to federal records, Stanford has made extensive campaign contributions over the years.

Recipients of donations from Stanford, his companies or his employees include Democratic Senators Christopher J. Dodd of Connecticut and Charles Schumer of New York and Republican Senators John McCain of Arizona and John Cornyn of Texas.

Contributions have also gone to several members of the House of Representatives, including Charles Rangel of New York, a Democrat, and Republican Rep. John Boehner of Ohio.

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  • #1.   Pellucid 02.18.2009

    Your headline said he as arrested.

    WHERE, HOW ???

  • #2.   Zyskandar A. Jaimot 02.18.2009

    The ‘SCAMSTER’ STANFORD’s friends in the US CONGRESS…
    The latest ‘SCAMSTER’ on the WORLD FINANCIAL SCENE is
    ALLEN STANFORD bilking people out of $8BILLIONS+[now of parts unknown cuz he has fled the US or made himself unavailable to authorities!] His ‘friends’ included among the top recipients and favorites getting the ‘SCAMSTERS’ illicit monies/favors: Senaturd Bill Nelson (D-Fla.), REPREHENSIBLE Congressman Pete Sessions (R-Texas), Senaturd John McCain (R-Ariz.), Senaturd Chris Dodd (D-Conn.) and Senaturd John Cornyn (R-Texas), one of the members who took a trip to Antigua where he was entertained by Stanford. GREAT ROSTER OF SCUMMY SYCOPHANTS EH THESE US SENATURDS???

  • #3.   John Lloyd Scharf 02.18.2009

    National Ponzi Scheme - Recovery.Gov - ARRA - Stimulus Plan

    The $787 billion American Recovery and Reinvestment Act (ARRA) is an extention of the National Debt by $2580 for every man, woman, and child.

    Of that, President Obama claims $288 billion is “Tax Relief,” or $944 per person. Then, he claims the “Tax Relief” includes $15 billion for infrastructure and science, $61 billion for “protecting the vulnerable,” $25 billion for education and training, and $22 billion for “Energy.”

    So, after all those special tax cut programs are removed, that leaves $165 billion of more general “Tax Relief,” for all of us not in those categories, or $540 per person. So, you are going into debt for investing $2580 for $540 in tax relief.

    A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from profit. Is the ARRA any less of a Ponzi Scheme when the Federal Government does this than when Charles Ponzi or Bernard Madoff does this? Does it matter whether Nicolas Cosmo, Allen Stanford, or Barack Obama does this?

  • #4.   TACOM 02.23.2009

    Not another scam artist operating among the lofty upper levels of Finance? I’m shocked! Shocked I tell you!

    And Muckety needs more accuracy–Madoff ran a 50 Billion dollar scheme, not 50 Million.

    Well, at least Stanford won’t be scampering off to Israel with the money as Bernie Madoff would, if he only could.

  • #5.   CRIS A. DIGAMO 06.29.2009


  • #6.   CRIS A. DIGAMO 06.29.2009 PUBLIC HANGING

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