Billionaire jailed over $7bn fraud

2009-06-20 12:15

Washington - Brash Texas billionaire R Allen Stanford was indicted and jailed on Friday on charges his international banking empire was really just a Ponzi scheme built on lies, bluster and bribery.

The Justice Department announced charges against Stanford and six others who allegedly helped the tycoon run a $7bn swindle. At a court hearing in Richmond, Virginia, a federal judge agreed with prosecutors that Stanford poses a flight risk and ordered him to remain in custody until a future detention hearing in Houston.

Among those charged were executives of Stanford Financial Group and a former Antiguan bank regulator who prosecutors say should have caught the fraud but instead took bribes to let the scheme continue.

Robert Khuzami, the enforcement director for the Securities and Exchange Commission, said investigators have built "an impressive criminal case from the rubble of this massive fraud”.

If convicted of all charges in the 21-count indictment, Stanford could face as much as 250 years in prison, officials said.

Dick DeGuerin, Stanford's lawyer, said in a written statement that Stanford was "confident that a fair jury will find him not guilty of any criminal wrongdoing."

The indictment unsealed on Friday in Houston charged Stanford and other executives at his firm falsely claimed to have grown $1.2bn in assets in 2001 to roughly $8.5bn by the end of 2008. The operation had roughly 30 000 investors, officials said.

Investigators say that even as Stanford claimed healthy returns for those investors, he was secretly diverting more than $1.6bn in personal loans to himself.

Massive fraud


Court papers charge Stanford and top executives orchestrated the massive fraud by advising clients to buy certificates of deposit from the Antigua-based Stanford International Bank. Stanford and the other executives were charged with wire fraud, mail fraud, and conspiracy to commit securities fraud. Stanford was also charged with conspiring to obstruct an SEC proceeding.

While Stanford is less well-known than the infamous swindler Bernard Madoff, authorities say both men's businesses were based on the same type of scam - faking investment returns while attracting new investors to keep the operation afloat.

"This case is a typical Ponzi scheme, robbing Peter to pay Paul," said Gregory Campbell of the US Postal Inspection Service.

Authorities say they are investigating 100 other possible Ponzi schemes, although none on the scale of the Stanford or Madoff cases.
"We will find you, we will stop you, and we will make you pay for your crime," said Campbell.

Stanford, 59, has been working since February to challenge what his attorney called "the false accusations against him." DeGuerin said that rather than resulting from fraud or a Ponzi scheme, "the present insolvency of the Stanford Companies was caused by the SEC's heavy-handed actions, which have destroyed and continue to destroy much of the value" of the companies and their investors.
Devastating losses
A group of cheated Stanford investors said in a statement that their losses "are devastating, as senior citizens are losing their homes, going without medical care, and becoming a burden on their children and families."

Stanford surrendered to the FBI on Thursday and appeared in federal court in Richmond, Virginia, on Friday afternoon, where authorities convinced Magistrate Judge Hannah Lauck to keep him behind bars for the time being.

Prosecutor Steven Tyrrell said at the hearing that more than $1bn from Stanford's alleged scheme remains unaccounted for, and if anyone has access to it, it's Stanford.

The others indicted in the case were Stanford executives Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt.

A separate indictment unsealed in Florida accused a fourth Stanford worker, Bruce Perraud, of destroying records important to the investigation.

Larger than life

Prosecutors charged Leroy King, the former chief executive officer of Antigua's Financial Services Regulatory Commission, with conspiracy to obstruct an SEC investigation.

In February, King told reporters the commission properly scrutinised Stanford's business.

Prosecutors allege King accepted more than $100 000 in bribes to help Stanford continue his fraud.

At his zenith, Stanford was a larger-than-life figure in Antigua. His enterprises there include a newspaper, two restaurants, a development company and the ornately landscaped Stanford cricket grounds, where he shook up the staid world of professional cricket last year by bankrolling the purse in a $20m winner-take-all match.

Newly filed SEC documents accuse Stanford and his finance chief, James M Davis, of conducting a massive Ponzi scheme" in which early investors were paid returns from money put in by later investors. Davis has been cooperating with federal investigators.

Jeff Tillotson, who represents Pendergest-Holt, chief investment officer of Stanford's parent company, told The Associated Press, "We obviously deny that our client has committed any crime." He has said she was "set up" by Stanford.

- AP

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