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Stanford Indicted in $7 Billion Scheme With Antiguan Regulator
By Bill McQuillen, Justin Blum and Laurel Brubaker Calkins
June 20 (Bloomberg) -- Texas financier Allen Stanford was indicted with a former Antiguan regulator on charges they helped direct a $7 billion fraud that U.S. prosecutors said put the “integrity of the markets” at risk.
Also charged yesterday in a 21-count indictment was Gilbert Lopez, the chief accounting officer at Stanford Group, and Laura Pendergest-Holt, Stanford’s chief investment officer, who was previously charged with obstruction. Stanford, 59, faces charges of conspiracy to commit securities, mail and wire fraud.
Stanford was arrested June 18 in Fredericksburg, Virginia, at his girlfriend’s home. He appeared yesterday before a federal magistrate in Richmond, who ordered him sent back to Texas for a hearing on whether he should be held without bail. U.S. Magistrate Judge Hannah Lauck asked Stanford, who appeared in court wearing dark pants, a white, open-collar shirt, no jacket, tie or belt, whether he wanted to return.
“To go to Texas? Yes ma’am,” Stanford responded. Earlier, he repeatedly shook his head as the charges against him were read. He was led away in leg irons by two U.S. marshals.
The scam used Stanford’s bank in Antigua and alleged bribes to officials there to defraud at least 30,000 investors through the sale of certificates of deposit, the Justice Department said. The main indictment, filed in Houston federal court, names Stanford, Pendergest-Holt, 35, and Lopez, 66. Mark Kuhrt, 37, Stanford’s former global controller, and Leroy King, 63, were also charged.
Antiguan Regulator
King is the former administrator and chief executive officer of Antigua’s financial services regulatory commission.
A woman who answered the telephone at the commission declined to comment.
“Stanford’s investors were simply looking for safe investments and low risk,” said Robert Khuzami, director of the U.S. Securities and Exchange Commission’s Division of Enforcement, at a news conference yesterday in Washington. “With Stanford they thought they had found such an opportunity. But what they actually found was a complicated array of phony financial statements, fabricated performance and sham audits.”
A second indictment, filed in federal court in Miami, names Bruce Perraud, 42, who was employed as a “global security specialist” for Stanford in Fort Lauderdale, Florida. A criminal information, filed in Houston, named James Davis, 60, the company’s chief financial officer.
Lopez and Kuhrt appeared yesterday in federal court in Houston and were each released on $100,000 bond. They are to be arraigned June 25.
‘Misused and Misappropriated’
Stanford “misused and misappropriated” assets, including diverting at least $1.6 billion into undisclosed personal loans to himself, said Assistant U.S. Attorney General Lanny Breuer. The scam put the “integrity of the markets” at risk, he said.
Stanford faces as much as 20 years in prison if convicted of the most serious counts. In a statement, his defense lawyer, xxxx DeGuerin, said he will fight the charges.
“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 Stanford Companies and consequently, the interests of investors,” he said in the statement.
Pendergest-Holt “will surrender to a summons in Houston some day next week,” Dan Cogdell, her lawyer, said on June 18.
The 57-page Stanford indictment contains 21 counts, including conspiracy to commit mail, wire and securities fraud, as well as 10 counts of mail fraud and a single count of conspiracy to commit money laundering. Stanford, Pendergest-Holt and King are also charged with conspiracy to obstruct an SEC investigation.
Alleged Fraud
The SEC sued Stanford, Pendergest-Holt and Davis in February, accusing them of running the alleged fraud through Antigua-based Stanford International Bank Ltd.
Yesterday, the SEC said King helped Stanford conduct a Ponzi scheme in exchange for bribes.
King ensured the regulator “looked the other way” and conducted sham audits and examinations of Stanford’s Antiguan bank, the SEC alleged in court papers filed in federal court in Dallas. The agency asked the court to add King and two Stanford accountants to its lawsuit filed earlier this year.
The Stanford Group Co. sold $8 billion of certificates of deposit in Stanford International Bank. The company’s network of financial advisers told clients their money would be placed primarily in easily sold financial instruments monitored by more than 20 analysts and audited by Antiguan regulators, according to the SEC lawsuit.
‘Vast Majority’
Instead, the “vast majority” of the portfolio was managed by Stanford and Davis, who invested much of it in private equity and real estate, according to the regulatory agency.
Davis is cooperating with prosecutors, said his lawyer, David Finn.
“Davis will accept full responsibility for his actions,” Finn said, adding that he is in plea negotiations.
According to the criminal information filed yesterday against Davis, “The defendant and his conspirators would create false books and records containing artificial values” for the Stanford International Bank portfolio.
The bank touted “improbable, if not impossible” returns, the SEC said in its earlier complaint.
Richmond Magistrate
Christina Sarchio, Stanford’s attorney at the hour-long hearing yesterday in Richmond, said her client wasn’t a flight risk and that the government has known his whereabouts for months.
“His assets are frozen, he has no money, no means of fleeing,” Sarchio said. “He’s certainly no danger to the community.” Stanford had planned to make arrangements to voluntarily surrender himself in Houston prior to his detention, his lawyers said.
Steven Tyrrell, the chief of the Justice Department’s fraud section in its criminal division, said he was concerned Stanford would be in a position to obstruct justice if not in jail, as he had already “paid thousands of dollars in bribes.”
Tyrrell said Stanford is a flight risk based on the $1 billion that allegedly remains unaccounted for.
“The defendant is a serious risk of flight,” the prosecutor said.
Cogdell, who is representing Pendergest-Holt and Lopez, said he will step down as Lopez’s lawyer.
“Lopez absolutely maintains his innocence, and he believes the facts will bear that out,” Cogdell said.
At a bail hearing yesterday in Houston, Cogdell told U.S. Magistrate Judge Frances Stacy that Lopez is unemployed.
‘Not Going Anywhere’
Kuhrt responded when Stacy asked for a cosigner on his bond that he had voluntarily moved “back from St. Croix, my family is here, I’m not going anywhere.”
Stacy insisted Kuhrt’s mother co-sign his bond. Kuhrt and Lopez have surrendered their passports and the judge required them to find “verifiable” employment.
Kuhrt told Stacy he had been living on unemployment benefits of $459 per week until one week ago when he took a new job with a waste disposal company.
Stacy said she would appoint court representation for him. Lopez will have a new attorney by next week, Cogdell told the court.
Florida Appearance
Perraud is accused of hiring a commercial document shredding company to destroy a 95-gallon bin full of Stanford business records on Feb. 25, nine days after U.S. District Judge David Godbey in Dallas had issued an order barring Stanford group officers and employees from destroying or removing any books and records, according to court papers.
Perraud made his initial court appearance yesterday before U.S. Magistrate Judge Douglas Frazier in Fort Myers, Florida, said Steve Cole, a spokesman for Tampa-based U.S. Attorney A. Brian Albritton. Perraud was released on a $100,000 bond and will be arraigned in Fort Lauderdale, Cole said.
Pendergest-Holt was arrested by FBI agents on Feb. 26 and was charged with obstructing the SEC’s probe by making misrepresentations to its representatives while under oath.
On May 14 she entered a plea of not guilty before U.S. Magistrate Judge Mary Milloy in Houston. The judge set a trial date of July 20 before U.S. District Judge Vanessa D. Gilmore.
Stanford, a Mexia, Texas, native, was knighted by the government of Antigua and Barbuda in 2006. He has publicly asserted his constitutional right against self-incrimination and refused to testify or provide documents to investigators.
Stanford has said he did nothing wrong.
“I’m not a damn swindler,” he told Bloomberg News in April.
605th Richest Person
Ranked by Forbes Magazine’s last year as the 605th richest person in the world, he had an estimated net worth of at least $2 billion, according to a March 2008 filing in a Florida paternity case brought by a mother of two children.
Godbey, who is presiding over the SEC case, in February froze the assets of the Stanford companies and those belonging to Stanford, Davis and Pendergest-Holt.
Sixteen members of Congress asked on June 18 for the SEC to release all documents in the Stanford probe. In a letter to SEC Chairman Mary Schapiro, they requested internal memos and information the agency received discussing potential wrongdoing by Stanford and his associates.
The lawmakers also called for an audit of all expenses incurred by Dallas lawyer Ralph Janvey in his role as the receiver appointed to recover funds for Stanford’s clients.
The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09cr00342, U.S. District Court for the Southern District of Texas (Houston).
To contact the reporters on this story: Bill McQuillen in U.S. District Court in Richmond, Virginia, at [email protected]; Justin Blum at the U.S. Department of Justice in Washington at [email protected]; Laurel Brubaker Calkins in Houston federal court at [email protected].
Last Updated: June 20, 2009 00:01 EDT
Stanford Indicted in $7 Billion Scheme With Antiguan Regulator
By Bill McQuillen, Justin Blum and Laurel Brubaker Calkins
June 20 (Bloomberg) -- Texas financier Allen Stanford was indicted with a former Antiguan regulator on charges they helped direct a $7 billion fraud that U.S. prosecutors said put the “integrity of the markets” at risk.
Also charged yesterday in a 21-count indictment was Gilbert Lopez, the chief accounting officer at Stanford Group, and Laura Pendergest-Holt, Stanford’s chief investment officer, who was previously charged with obstruction. Stanford, 59, faces charges of conspiracy to commit securities, mail and wire fraud.
Stanford was arrested June 18 in Fredericksburg, Virginia, at his girlfriend’s home. He appeared yesterday before a federal magistrate in Richmond, who ordered him sent back to Texas for a hearing on whether he should be held without bail. U.S. Magistrate Judge Hannah Lauck asked Stanford, who appeared in court wearing dark pants, a white, open-collar shirt, no jacket, tie or belt, whether he wanted to return.
“To go to Texas? Yes ma’am,” Stanford responded. Earlier, he repeatedly shook his head as the charges against him were read. He was led away in leg irons by two U.S. marshals.
The scam used Stanford’s bank in Antigua and alleged bribes to officials there to defraud at least 30,000 investors through the sale of certificates of deposit, the Justice Department said. The main indictment, filed in Houston federal court, names Stanford, Pendergest-Holt, 35, and Lopez, 66. Mark Kuhrt, 37, Stanford’s former global controller, and Leroy King, 63, were also charged.
Antiguan Regulator
King is the former administrator and chief executive officer of Antigua’s financial services regulatory commission.
A woman who answered the telephone at the commission declined to comment.
“Stanford’s investors were simply looking for safe investments and low risk,” said Robert Khuzami, director of the U.S. Securities and Exchange Commission’s Division of Enforcement, at a news conference yesterday in Washington. “With Stanford they thought they had found such an opportunity. But what they actually found was a complicated array of phony financial statements, fabricated performance and sham audits.”
A second indictment, filed in federal court in Miami, names Bruce Perraud, 42, who was employed as a “global security specialist” for Stanford in Fort Lauderdale, Florida. A criminal information, filed in Houston, named James Davis, 60, the company’s chief financial officer.
Lopez and Kuhrt appeared yesterday in federal court in Houston and were each released on $100,000 bond. They are to be arraigned June 25.
‘Misused and Misappropriated’
Stanford “misused and misappropriated” assets, including diverting at least $1.6 billion into undisclosed personal loans to himself, said Assistant U.S. Attorney General Lanny Breuer. The scam put the “integrity of the markets” at risk, he said.
Stanford faces as much as 20 years in prison if convicted of the most serious counts. In a statement, his defense lawyer, xxxx DeGuerin, said he will fight the charges.
“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 Stanford Companies and consequently, the interests of investors,” he said in the statement.
Pendergest-Holt “will surrender to a summons in Houston some day next week,” Dan Cogdell, her lawyer, said on June 18.
The 57-page Stanford indictment contains 21 counts, including conspiracy to commit mail, wire and securities fraud, as well as 10 counts of mail fraud and a single count of conspiracy to commit money laundering. Stanford, Pendergest-Holt and King are also charged with conspiracy to obstruct an SEC investigation.
Alleged Fraud
The SEC sued Stanford, Pendergest-Holt and Davis in February, accusing them of running the alleged fraud through Antigua-based Stanford International Bank Ltd.
Yesterday, the SEC said King helped Stanford conduct a Ponzi scheme in exchange for bribes.
King ensured the regulator “looked the other way” and conducted sham audits and examinations of Stanford’s Antiguan bank, the SEC alleged in court papers filed in federal court in Dallas. The agency asked the court to add King and two Stanford accountants to its lawsuit filed earlier this year.
The Stanford Group Co. sold $8 billion of certificates of deposit in Stanford International Bank. The company’s network of financial advisers told clients their money would be placed primarily in easily sold financial instruments monitored by more than 20 analysts and audited by Antiguan regulators, according to the SEC lawsuit.
‘Vast Majority’
Instead, the “vast majority” of the portfolio was managed by Stanford and Davis, who invested much of it in private equity and real estate, according to the regulatory agency.
Davis is cooperating with prosecutors, said his lawyer, David Finn.
“Davis will accept full responsibility for his actions,” Finn said, adding that he is in plea negotiations.
According to the criminal information filed yesterday against Davis, “The defendant and his conspirators would create false books and records containing artificial values” for the Stanford International Bank portfolio.
The bank touted “improbable, if not impossible” returns, the SEC said in its earlier complaint.
Richmond Magistrate
Christina Sarchio, Stanford’s attorney at the hour-long hearing yesterday in Richmond, said her client wasn’t a flight risk and that the government has known his whereabouts for months.
“His assets are frozen, he has no money, no means of fleeing,” Sarchio said. “He’s certainly no danger to the community.” Stanford had planned to make arrangements to voluntarily surrender himself in Houston prior to his detention, his lawyers said.
Steven Tyrrell, the chief of the Justice Department’s fraud section in its criminal division, said he was concerned Stanford would be in a position to obstruct justice if not in jail, as he had already “paid thousands of dollars in bribes.”
Tyrrell said Stanford is a flight risk based on the $1 billion that allegedly remains unaccounted for.
“The defendant is a serious risk of flight,” the prosecutor said.
Cogdell, who is representing Pendergest-Holt and Lopez, said he will step down as Lopez’s lawyer.
“Lopez absolutely maintains his innocence, and he believes the facts will bear that out,” Cogdell said.
At a bail hearing yesterday in Houston, Cogdell told U.S. Magistrate Judge Frances Stacy that Lopez is unemployed.
‘Not Going Anywhere’
Kuhrt responded when Stacy asked for a cosigner on his bond that he had voluntarily moved “back from St. Croix, my family is here, I’m not going anywhere.”
Stacy insisted Kuhrt’s mother co-sign his bond. Kuhrt and Lopez have surrendered their passports and the judge required them to find “verifiable” employment.
Kuhrt told Stacy he had been living on unemployment benefits of $459 per week until one week ago when he took a new job with a waste disposal company.
Stacy said she would appoint court representation for him. Lopez will have a new attorney by next week, Cogdell told the court.
Florida Appearance
Perraud is accused of hiring a commercial document shredding company to destroy a 95-gallon bin full of Stanford business records on Feb. 25, nine days after U.S. District Judge David Godbey in Dallas had issued an order barring Stanford group officers and employees from destroying or removing any books and records, according to court papers.
Perraud made his initial court appearance yesterday before U.S. Magistrate Judge Douglas Frazier in Fort Myers, Florida, said Steve Cole, a spokesman for Tampa-based U.S. Attorney A. Brian Albritton. Perraud was released on a $100,000 bond and will be arraigned in Fort Lauderdale, Cole said.
Pendergest-Holt was arrested by FBI agents on Feb. 26 and was charged with obstructing the SEC’s probe by making misrepresentations to its representatives while under oath.
On May 14 she entered a plea of not guilty before U.S. Magistrate Judge Mary Milloy in Houston. The judge set a trial date of July 20 before U.S. District Judge Vanessa D. Gilmore.
Stanford, a Mexia, Texas, native, was knighted by the government of Antigua and Barbuda in 2006. He has publicly asserted his constitutional right against self-incrimination and refused to testify or provide documents to investigators.
Stanford has said he did nothing wrong.
“I’m not a damn swindler,” he told Bloomberg News in April.
605th Richest Person
Ranked by Forbes Magazine’s last year as the 605th richest person in the world, he had an estimated net worth of at least $2 billion, according to a March 2008 filing in a Florida paternity case brought by a mother of two children.
Godbey, who is presiding over the SEC case, in February froze the assets of the Stanford companies and those belonging to Stanford, Davis and Pendergest-Holt.
Sixteen members of Congress asked on June 18 for the SEC to release all documents in the Stanford probe. In a letter to SEC Chairman Mary Schapiro, they requested internal memos and information the agency received discussing potential wrongdoing by Stanford and his associates.
The lawmakers also called for an audit of all expenses incurred by Dallas lawyer Ralph Janvey in his role as the receiver appointed to recover funds for Stanford’s clients.
The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09cr00342, U.S. District Court for the Southern District of Texas (Houston).
To contact the reporters on this story: Bill McQuillen in U.S. District Court in Richmond, Virginia, at [email protected]; Justin Blum at the U.S. Department of Justice in Washington at [email protected]; Laurel Brubaker Calkins in Houston federal court at [email protected].
Last Updated: June 20, 2009 00:01 EDT
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