U.S. Accuses Texas Financial Firm of $8 Billion Fraud

HOUSTON-The Securities and Exchange Commission accused Robert Allen Stanford, the chief of the Stanford Financial Group, on Tuesday of conducting “a massive ongoing fraud” in the sale of about $8 billion of high-yielding certificates of deposit held in the firm’s bank in Antigua. Also named in the suit were two other executives and some affiliates of the financial group.In the complaint, filed in Federal District Court in Dallas, the S.E.C. accused Mr. Stanford and two associates-James M. Davis, a director and chief financial officer of Stanford Group and the Antigua-based bank affiliate, and Laura Pendergest-Holt, the chief investment officer of both organizations-with misrepresenting the safety and liquidity of the uninsured C.D.’s.The C.D.’s were sold by Stanford International Bank through the firm’s registered broker-dealer and investment adviser, which are in Houston. Both the bank, which claims $8.5 billion in assets and 30,000 clients in 131 countries, and the brokerage unit, which operates about 30 offices in the United States, were named in the S.E.C. suit. Stanford Financial asserts that it advises about $50 billion in assets.Shortly after 10 a.m. Central time, about 40 police officers and other law enforcement officials simultaneously entered Stanford Group’s two office buildings in Houston. Many of the law enforcement personnel carried large black briefcases. Stanford group’s headquarters are in two offices in Houston, one within a tower of the Houston Galleria shopping mall, and the other across the street.A spokesman for Stanford Group declined to comment.Law enforcement officials hung up two white signs stating that the offices of Stanford Financial Group was temporarily closed. “The company is still in operation but under the management of a receiver,” the signs read.In its complaint, the S.E.C. said it could not account for the $8 billion in assets that were housed in the Antigua bank after issuing subpoenas for bank records and to various witnesses. Most witnesses, including Mr. Stanford, Mr. Davis and the Antigua-based bank’s president, failed to appear to testify and did not provide any documents shedding light on the assets.Ms. Pendergest-Holt said in testimony to the S.E.C. that she could not account for the assets, asserting that Mr. Stanford and Mr. Davis were the only ones with access to the bank’s assets....
Clifford Krauss reported from Houston, and Phillip L. Zweig and Julie Creswell from New York.
By CLIFFORD KRAUSS, PHILLIP L. ZWEIG and JULIE CRESWELL
To read more go to:
http://www.nytimes.com/2009/02/18/business/18stanford.html?_r=1
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