Stanford charged in $7 billion Ponzi scheme
— -- Texas billionaire Robert Allen Stanford, whose troubled Antigua-based banking empire collapsed earlier this year, was indicted on criminal conspiracy, fraud and other charges Friday in an alleged $7 billion scheme that bilked an estimated 30,000 investors, federal authorities said.
The 21-count indictment also charged Laura Pendergest-Holt, the financier's former chief investment officer; Mark Kuhrt, his banking group controller; Gilberto Lopez, his chief accountant; and Leroy King, a former chief of Antigua's financial regulatory commission who allegedly took bribes in exchange for his positive reports on Stanford's banking operation.
The Securities and Exchange Commission simultaneously amended the civil case the agency filed against Stanford in February by adding additional defendants and details of what the agency called a "massive Ponzi scheme" that operated for at least the last decade.
The criminal indictment accused the defendants of marketing Stanford International Bank certificates of deposit that offered "consistent double-digit returns" at interest rates that "greatly exceeded" those at U.S. banks and featured safety and security.
As part of the alleged marketing pitch, the indictment charged the defendants falsely told investors the Antigua-based bank's value skyrocketed from about $1.2 billion in 2001 to approximately $8.5 billion by December 2008.
The banking operation gave money to some investors to help "perpetuate the false appearance" that Stanford's financial empire "was financially sound," the indictment charged.
In fact, roughly 80% of the bank's investment portfolio consisted of illiquid investments, including more than $1 billion in personal loans to Stanford himself and "grossly overvalued" real and personal property acquired from Stanford-controlled entities, the indictment charged.
Most of the Stanford banking group assets were "misused and misappropriated," in secret transactions that defrauded investors, federal authorities charged. Many of those transactions allegedly benefited Stanford, 59, who was listed on the Forbes 400 list of the richest Americans and was knighted in Antigua, where he staged internationally-promoted cricket matches on a lavish estate.
Houston U.S. Attorney Tim Johnson said Stanford bank clients aren't likely to recover all of the billions they invested. A court-appointed receiver has frozen approximately $300 million in company assets so far, Johnson and other federal investigators said.
Kevin Perkins, assistant director of the FBI's criminal division, said the alleged crimes "strike at the heart of our economy and our quality of life."
"Investors need access to accurate and truthful financial information in order to make decisions about how to invest their hard-earned savings," said Lanny Breuer, assistant attorney general of the Department of Justice's criminal division. "Their savings, and indeed the integrity of our capital markets, are jeopardized when investors are deceived."
Stanford defense attorney Dick DeGuerin argued that the collapse of Stanford's empire stemmed from "heavy handed actions" by the SEC, not from a Ponzi scheme.
"Allen Stanford will continue to fight" the allegations and is "confident that a fair jury will find him not guilty of any wrongdoing," said DeGuerin.
Stanford surrendered to FBI agents Thursday in Fredericksburg, Va. He was taken in shackles to an initial federal court appearance in Richmond Friday, and was ordered to Texas for a detention hearing, the court clerk's office said.
The indictment charged that Pendergest-Holt, Kuhrt and Lopez helped Stanford either operate the scam, or conceal it from investors.
King, the former chief executive officer of Antigua's Financial Services Regulatory Commission, allegedly accepted more than $100,000 in bribes from the Stanford operation for ignoring the actual value of the banking empire's assets, prosecutors alleged.
King, similarly charged with accepting Super Bowl tickets and private jet travel for himself and his wife, also gave Stanford secret information about the SEC's investigation after the agency began seeking information in 2005, federal authorities charged.
"Thus, when King assured the SEC that Stanford was safe and solid, these were not the conclusions of an independent regulator following a thorough inspection," said Robert Khuzami, chief of the SEC's enforcement division. "These were just more Stanford lies, dressed up in the letterhead of a supposedly impartial bank regulator who had in fact been bought and paid for with bribes and corruption."
Attorneys for Stanford's co-defendants either denied the allegations or could not immediately be reached for comment.
James Davis, a Stanford college friend who was chief financial officer of the banking operation, was accused of conspiracy and other criminal charges in a separate court complaint.
He has been cooperating with federal prosecutors in expectation of an eventual guilty plea and under which he would receive a lesser penalty than the 250-year maximum prison term investigators said Stanford would face if convicted.
A separate indictment in Florida accused Bruce Perraud, a security specialist in the banking group's Fort Lauderdale office, of illegally destroying financial records critical to the investigation.