SEC charges Stanford, three companies in $9.2B fraud
The SEC has charged billionaire financier Robert Allen Stanford and three of his companies with committing a $9.2 billion fraud.
The Securities and Exchange Commission today charged billionaire financier Robert Allen Stanford and three of his companies with committing a $9.2 billion fraud.
Mr. Stanford and the three companies he owns — Stanford International Bank Ltd. of St John’s, Antigua; Stanford Group Co., the Houston-based broker-dealer and investment adviser, and Stanford Capital Management, the Houston-based investment adviser, were all named in the SEC’s complaint.
Laura Pendergest-Holt, chief investment officer of the parent Stanford Financial Group, and James Davis, the bank’s chief financial officer, were also charged.
In the scheme, the bank allegedly sold about $8 billion of certificates of deposit, claiming that the firm’s investment strategy helped it earn double-digit returns on its investments, making it capable of offering high yields to CD purchasers.
The bank also claimed that its “diversified portfolio of investments” lost 1.3% last year —when the Standard and Poor’s 500 stock index fell by 39%. It also allegedly told its CD purchasers that their money was safe because the bank reinvests client funds in “liquid’ financial instruments and monitors the portfolio through a team of more than 20 analysts, and that it was subject to audits by regulators in the nation of Antigua and Barbuda, according to the SEC’s complaint.
Instead, the money was in illiquid investments, including real estate and private equity, and only Mr. Stanford and Mr. Davis monitored the portfolio, the SEC alleged. Additionally, the Financial Services Regulatory Commission, the island nation’s regulator in question, does not audit the portfolio or verify the assets the bank claims in its financial statements.
The bank also has exposure to Bernard Madoff’s alleged fraud scheme, despite assurances to its clients that it had none, according to the SEC.
But that’s not all. Since 2005, Houston-based Stanford Group Co.’s advisers also sold $1.2 billion in a proprietary mutual fund wrap program called Stanford Allocation Strategy by using false historical performance data, according to the SEC
The SEC slapped Mr. Stanford, his companies, Ms. Pendergest-Holt and Mr. Davis with a temporary restraining order, and is seeking a permanent injunction for all of the defendants, an immediate asset freeze and a disgorgement of the allegedly ill-gotten gains.
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