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Stanford charged with 'massive' fraud

Houston, February 18, 2009

Texas billionaire Allen Stanford and three of his companies were charged with "massive" fraud as federal agents swooped on his US headquarters.

In a civil complaint filed in federal court in Dallas, the US Securities and Exchange Commission accused Stanford, a high-profile cricket promoter, and two executives of fraudulently selling $8 billion in high-yield certificates of deposit in a scheme that stretched from Texas to the Caribbean.

"We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world," said Rose Romero, regional director of the SEC's office in Fort Worth, Texas.

The SEC complaint named Stanford International Bank (SIB), based in Antigua with 30,000 clients in 131 countries and $8.5 billion in assets, and the group's Houston-based broker-dealer and investment adviser units.

In all, the company claims to oversee $50 billion in assets.

The news sent shockwaves across the twin-island Caribbean nation of Antigua and Barbuda, where the prime minister warned it could be "catastrophic".

Stanford's assets have been frozen and a federal judge has appointed a receiver "to take possession and control of defendants' assets for the protection of defendants' victims."    

Early Tuesday, about 15 federal agents, some wearing US marshals jackets, entered the lobby of company headquarters in the Houston Galleria area, a Reuters eyewitness said.

The company remained open for business but was "under the management of a receiver," a sign taped to the door read. Spokesman Brian Bertsch referred press inquiries to the SEC.

Stanford, a 58-year-old Texan running the firm that his grandfather founded, has denied any wrongdoing, but his location remained a mystery. The SEC said he failed to respond to subpoenas seeking testimony and did not produce "a single document."    

James Davis, a Stanford aide, and O Y Goswick, a board member of the Antiguan affiliate, had also been subpoenaed but failed to appear, the SEC said.

Stanford's property holdings and celebrity associations drew comparisons with Wall Street financier Bernard Madoff, who was charged in December in a suspected $50 billion fraud.

Stanford was also expanding his political reach, opening a Washington lobbying office about two years ago after buying the Washington Research Group, a policy study unit of Charles Schwab & Co, in 2005.

Stanford spent $2.8 million on lobbying in 2008, according to records accessed through the Center for Responsive Politics, which tracks campaign contributions. His political action committee and employees donated about $2.4 million to parties and candidates for federal office since 1989.

Stanford has also played an increasing role in sports, including endorsement relationships with golfer Vijay Singh and soccer star Michael Owen, along with involvement in polo and expensive effort to rehabilitate West Indian cricket.

He was a sponsor of a world-class tennis tournament, the 2009 Sony Ericsson Open in Key Biscayne, Florida, in March. The England and West Indies cricket boards suspended sponsorship talks with the Stanford group after the charges.

Stanford shot to prominence in international cricket after his private Twenty20 competition in the Caribbean, and the $20 million (14 million pound) game in November between England and his own team of West Indian players.

England Cricket Board Chairman Giles Clarke said his organization may utilize get-out clauses in its deal with Stanford, and he suggested the proposed quadrangular Twenty20 series in England in May was now unlikely to happen.

The SEC said Stanford's Antigua-based bank sold $8 billion in certificates of deposit "by promising high return rates that exceed those available through true certificates of deposits offered by traditional banks."    



Tags: Fraud | Stanford | billionaire |

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