Allen Stanford

Judge Freezes Stanford Assets

Zachary Roth | February 17, 2009, 1:08PM

The Houston Chronicle reports:

U.S. District Judge Reed O'Connor issued an order freezing the defendants' assets and appointed a receiver to marshal them.

And Reuters, in full blog mode, adds:

STANFORD FINANCIAL GROUP SIGN IN HOUSTON SAYS NOW "UNDER THE MANAGEMENT OF A RECEIVER" - REUTERS EYEWITNESS.

PERMALINK | COMMENTS (1) | RECOMMEND RECOMMEND (3)
Topics: Allen Stanford, Securities and Exchange Commission, Stanford Financial

Allen Stanford

Stanford Charged With "Fraud Of Shocking Magnitude"

Zachary Roth | February 17, 2009, 12:32PM

Allen Stanford, the billionaire Texas banker, has been charged with orchestrating a fraudulent, multibillion dollar investment scheme, the SEC announced in a press release this morning.

An SEC spokeswoman called it "a fraud of shocking magnitude that has spread its tentacles throughout the world."

There's also more detail on Stanford's alleged scheme, which seems to have involved selling certificates of deposit worth $8 billion based on fraudulent returns.

From the release:

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.

There's also a possible connection to the Bernard Madoff case. The release continues:

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.

The release does not give details as to the nature of that exposure.

But there are other details reminiscent of Madoff:

Others charged along with Stanford are James Davis, the chief financial officer for Stanford International Bank (the wing of Stanford's financial empire implicated in the alleged fraud) and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group.

According to the release, Pendergest-Holt had no financial services or securities industry experience before joining Stanford. And Davis was Stanford's college roommate.

In the same vein, the agency notes that the investment committee for Stanford International Bank "is comprised of Stanford; Stanford's father who resides in Mexia, Texas; another Mexia resident with business experience in cattle ranching and car sales." That committee is charged with managing the bank's multi-billion dollar portfolio of assets.

And according to the New York Times' examination of the complaint itself, the SEC acted after it subpoenaed Stanford and Davis for testimony and documents that would help account for $8 billion in assets, and received no response.

As for Pendergast-Holt, the chief financial officer, she claimed that only Stanford and Davs had access to the bank's assets.

Separately, Reuters just reported that about 15 people, some wearing jackets identifying them as U.S. marshals, were seen entering Stanford's Houston office this morning.

PERMALINK | COMMENTS (10) | RECOMMEND RECOMMEND (13)
Topics: Allen Stanford, Securities and Exchange Commission, Stanford Financial

Allen Stanford

Report: US Agents Enter Stanford's Houston Office

Zachary Roth | February 17, 2009, 12:01PM

Reuters reports:

Federal agents with the U.S. Marshals Service entered the Houston office of Stanford Financial Group Tuesday, according to a Reuters eyewitness on the scene.

PERMALINK | COMMENTS (0) | RECOMMEND RECOMMEND (1)
Topics: Allen Stanford, Securities and Exchange Commission, Stanford Financial

Allen Stanford

Is Allen Stanford The 21st Century's Jay Gatsby?

Zachary Roth | February 16, 2009, 4:25PM

It looks like Allen Stanford, the billionaire Texan banker whose investment firm is being probed by the Feds, has a positively Gatsbyesque yearning to be accepted into high society.

As we knew, Stanford calls himself "Sir" Allen Stanford, on account of a knighthood he was awarded by the former prime minister of Antigua, where his business is based. But it looks like maybe that wasn't quite good enough for Stanford, since until recently he was claiming, falsely, that the knighthood was presented by the British Royal family.

Check out this report (via Nexis), from last November in the Mail on Sunday of London:

Texan-born billionaire Sir Allen Stanford's corporate website claims that, after he became a citizen of the Commonwealth territory of Antigua, it appointed him a 'Knight Commander of the Most Distinguished Order of the Nation'.

'He was presented [with] this honour by His Royal Highness Prince Edward, Earl of Wessex,' states the website.

However, The Mail on Sunday has learned that the Prince had nothing to do with the honour and that it was not approved by the Queen.

...

A Buckingham Palace spokesman said it was a coincidence that the knighthood ceremony, conducted by an Antiguan political appointee, took place during a celebration of the island's independence, at which Prince Edward was a guest.

'It is incorrect to say that the Earl of Wessex knighted this person while in Antigua,' said the spokesman.

Stanford's personal web site now says only that the Earl of Wessex attended the ceremony at which the "royal knighthood" was bestowed. (Though the "royal" part still seem dubious, since Buckingham Palace has disavowed any role in the proceeding.)

The whole tale is reminiscent of Stanford's claim to be descended from the founder of Stanford University. The school has denied the link.

Indeed, even the awarding of Stanford's title by the Antiguan government appears to have been pretty irregular. The paper explains:

His knighthood was bestowed in 2006 under an Antiguan law that allows its politicians to draw up an annual honours list.

But the decision to honour Stanford has caused an outcry on the island, where his ownership of a £1billion financial and property empire has made him a divisive figure. Critics deride the award as a 'mockery' and have gone to court to challenge the legislation.

Antigua's National Honours Act authorises the granting of titles to distinguished citizens, who are screened by a bipartisan committee.

But Stanford was knighted under a 2000 amendment to the act, which permits the island's most powerful politicians to allow their candidates to bypass the vetting procedure.

Phillip Abbott, a businessman who is descended from the island's first settlers, has contested in the Antiguan High Court that the amendment is invalid. 'The spectacle of Allen Stanford being knighted got up my nose,' he said. 'This amendment permits politicians to nominate anyone for a title without going through the vetting required by law.'

As we said, Gatsbyesque.

New details have also emerged about Stanford's business, and what might have tipped off regulators that something fishy was going on.

Reuters reports:

According to US regulatory filings, Stanford owns more than 10 percent stakes in three companies trading below $2 per share on the Bulletin Board or Pink Sheets: eLandia International Inc, a Coral Gables, Florida technology company.

Forefront Holdings Inc, a Brentwood, Tennessee provider of golf supplies; and Health Systems Solutions Inc, a New York technology and services company. "These were not exactly blue chip companies," said Bob Parrish, an accountant in Longboat Key, Florida, whose clients pulled roughly $500,000 out of Stanford last year.

The high rates for certificates of deposit, long considered safe short-term investments, seem to have caught the attention of U.S. regulators who began probing the company in mid-2008.

The wire service adds that the Texas Attorney General's office, and the Florida Office of Financial Regulations are also probing the company.

PERMALINK | COMMENTS (7) | RECOMMEND RECOMMEND (9)
Topics: Allen Stanford, Justice Department, Securities and Exchange Commission, Stanford Financial

Allen Stanford

Cricketers' Wives And Failed Health Clubs: The Allen Stanford Story

Zachary Roth | February 13, 2009, 6:31PM

We told you earlier today about "Sir" Allen Stanford, the Texas billionaire (he got himself knighted in Antigua) who runs a private investment firm that's being probed by the Feds after consistently issuing deposits that pay interest rates at twice the national average.

Although we linked this morning to today's New York Times report, the news that Stanford was being investigated by the federal government was originally broken by Business Week in this excellent rundown from Wednesday.

The magazine includes a great detail on Stanford's comically desperate effort to claim that he's descended from Leland Stanford, who founded Stanford University. It reports that despite those claims -- here, for instance ....

[S]chool officials say there is no familial link to the financier. In October the university sued Stanford Financial in federal court in San Francisco, claiming it had infringed on the school's trademark by using "confusingly similar imitations" of its logo at sporting events and other activities sponsored by Stanford Financial. Denying any wrongdoing, the firm filed a motion to dismiss the case in early February.

And we told you before about Stanford's impressive record of political contributions to lawmakers of both parties. But he's not just a big-time donor -- Stanford appears to be pretty well-connected, with both major parties.

In 2007, the Inter-American Economic Council (IAEC) gave Stanford its "Excellence in Leadership" Award -- at an event co-chaired by President and Laura Bush.

And according to this 2008 report from a St. Croix newspaper, when Stanford held a party to celebrate the opening of his firm's new "global management complex" on the island, President Bush sent a note, reading: "I send greetings to those gathered in St. Croix, Virgin Islands to celebrate the expansion of Stanford Financial Group." Keeping things bipartisan, Nancy Pelosi sent her own good wishes.

And check out this video, which the Stanford Financial Group made to tout its sponsorship of an event, held at the 2008 Democratic National Convention, for the National Democratic Institute, a non-profit group associated with the Democratic Party that works to spread democracy abroad. Bill Clinton, Madeleine Albright, Howard Dean, and Pelosi all spoke at the event. Clinton personally thanked Stanford Financial.

Here's another funny detail. We told you before about Stanford's love of cricket. But last year, he sponsored a series between England and the West Indies that, according to the BBC, one English cricket official described as "a pantomime" and "obscene." The England players complained about the state of the pitch, the lighting, and the crassness of playing for money while representing their country.

As for Stanford himself, it looks like it's more than just the silly-mid-offs and leg-before-wickets that he gets out of the game. Business Week reports that during that ill-fated series:

Stanford sparked a scandal in England after a photographer snapped a shot of him with the wives of several professional British cricket players sitting on his lap. A father of six, who is separated from his wife, Stanford later issued an apology over the incident.

Oh, I say!

It hasn't always been notes from the president and cricketers' wives in his lap, though. Today, Business Week adds some information about one of Stanford's early, considerably less successful ventures: a Waco, Texas, health club called Total Fitness of Temple Inc.

Court documents reveal that in 1983, Allen Stanford was slapped with a default judgment for failing to pay back rent on the lease for the health club. The judge in the case signed an order permitting the landlord, Allied Development Co., to collect some $31,800 in unpaid rent plus interest from the man who reportedly now has $2.2 billion in wealth.

You've come a long way, baby!

PERMALINK | COMMENTS (3) | RECOMMEND RECOMMEND (12)
Topics: Allen Stanford, Financial Crisis, George Bush, Nancy Pelosi, Stanford Financial

Allen Stanford

Meet Texas Billionaire (And Mini-Madoff?) "Sir" Allen Stanford

Zachary Roth | February 13, 2009, 11:49AM

We may have found our favorite mini- (or maybe not so mini-!) Madoff yet...

The FBI, SEC, and IRS are all looking into the business activities of the Stanford Financial Group, a Houston-based private investment group run by the "flamboyant Texas billionaire" Allen Stanford, reports the New York Times.

Like Madoff, Stanford's returns may have been too good to be true. A bank he owns, based in Antigua, has been issuing certificates of deposit that pay interest rates at more than twice the national average, says the paper.

Last summer, two former employees alleged in a lawsuit that the firm misled potential investors by overstating the asset value of individuals; failed to file mandatory forms disclosing its clients' offshore accounts; and removed information from its computers in response to an S.E.C. investigation.

The size of the alleged scam is unclear, but a spokesman for Stanford Financial told the Times that it "holds about $8 billion in deposits at its bank and has about $50 billion in assets in its wealth management affiliate."

The firm has denied the allegations.

But what really piqued our interest here was Allen Stanford himself. Here's some of the color the Times offers on the guy:

[A] decade ago, Mr. Stanford told The Associated Press that he had flown a Roman Catholic priest displaying signs of "stigmata," or bleeding wounds on his wrists and ankles, from the tiny Caribbean island of Antigua to New York City on his jet.

And:

Mr. Stanford, who his firm said was unavailable for comment, ranked 205th last year on the Forbes annual list of the richest people in the United States, with an estimated net worth of $2.2 billion. On Antigua, he is akin to royalty, being knighted by the former prime minister, referring to himself as "Sir Allen Stanford" on the company's Web site.

And maybe most interestingly:

Mr. Stanford has claimed ties to Leland Stanford, the former governor of California who started Stanford University in the 1800s. The university, however, has said there is no genealogical relationship between the two.

Indeed, on that one, Stanford put his money where his mouth is. In 2001, he gave $2.5 million to help rehabilitate the Leland Stanford Mansion State Historic Park in downtown Sacramento. A press release sent out by the office of then-California governor Gray Davis noted: "Stanford traces his family heritage to the family of Leland Stanford."

The Times also notes that Stanford and his firm have "emerged in recent years as major contributors to various lawmakers, appearing to focus particularly on legislators considering bills that would change offshore banking rules."

So we took a quick look at online campaign finance records compiled by the Center for Responsive Politics -- and it's fair to say the paper wasn't exaggerating.

Over the last decade or so, Stanford or the Stanford Financial Group have given $128,500 to the RNC, $238,500 to the NRCC, over $80,000 to the NRSC, and $180,000 to the DCCC. They have also given smaller amounts to current or former members of Congress with leadership positions, or positions with oversight over the banking and financial systems. That lists includes Tom DeLay, Phil Gramm, Chuck Schumer, Richard Shelby, Charlie Rangel, Max Baucus, Bob Torricelli, and Paul Sarbanes.

We're guessing this won't be the last post we do on Allen Stanford.

Late Update: It looks like, despite being from Texas, Stanford is a cricket fan. Check out this story from the cricket website cricinfo.com, reporting that today's match between England and the West Indies in Antigua has been suspended because of a waterlogged pitch. Discussing alternative locations, the site adds:

Another option, as yet unvoiced, would be to shift the match to Sir Allen Stanford's private ground near the airport, the venue of the 20/20 for 20 in November.

He is a knight, after all.

Thanks to reader M.G. for the tip.

PERMALINK | COMMENTS (11) | RECOMMEND RECOMMEND (14)
Topics: Allen Stanford, Stanford Financial