Allen Stanford Accused Of Massive Ongoing Fraud

Allen Stanford Accused of ‘Massive, Ongoing’ Fraud (Update1)
Email | Print | A A A

By Alison Fitzgerald and David Scheer


Feb. 17 (Bloomberg) -- U.S. regulators accused R. Allen Stanford of running a “massive, ongoing fraud” while selling about $8 billion in certificates of deposit through Antigua- based Stanford International Bank Ltd.

The bank made “improbable and unsubstantiated” claims about its ability to generate “safe” returns of more than 10 percent, and it misled investors about exposure to Bernard Madoff’s alleged Ponzi scheme, the Securities and Exchange Commission said today in a complaint against Stanford, firms he controls and two colleagues. The agency asked the Dallas federal court to freeze assets and appoint a receiver to return money to investors.

The SEC has been investigating Stanford’s Houston-based investment firm, Stanford Group, since at least last summer over sales of certificates by the Antigua-based affiliate. The inquiry intensified after the December arrest of New York money manager Madoff, who allegedly confessed to masterminding a $50 billion fraud in which early investors were promised steady returns and paid with money from later participants.

“We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,” Rose Romero, director of the SEC’s Fort Worth office, said today in a statement. Stanford spokesman Brian Bertsch did not immediately return a call seeking comment.

The SEC has asked former employees about the bank’s stated returns on investment, between 10.3 and 15.1 percent every year from 1995 until last year, according to documents and annual reports on the bank’s Web site. SIB says it has $7.2 billion in assets and 30,000 clients, according to the SEC.

‘Routine Examinations’

Investigators from the Financial Industry Regulatory Authority visited six Stanford Group offices in January, downloaded information from computer hard drives and looked through files, people familiar with the events said. The people declined to be identified because they didn’t want to put their current jobs at risk.

“Regulatory officers have conveyed to us these visits are part of their routine examinations,” Allen Stanford said in a Feb. 11 letter to clients and an e-mail message to the company’s employees obtained by Bloomberg.

Stanford said in a Feb. 12 e-mail to his employees that he’d “fight with every breath to continue to uphold our good name” in the face of the investigations.

To contact the reporter on this story: Alison Fitzgerald in Washington at Afitzgerald2@bloomberg.net; David Scheer in New York at dscheer@bloomberg.net.

Last Updated: February 17, 2009 12:05 EST
Advertisement: You've worked, you've saved, now PROTECT your nest egg.!