Texas financier Allen Stanford was indicted with a former Antiguan regulator and five others on charges they directed 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.
The alleged 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.
King is the former administrator and chief executive officer of Antigua’s financial services regulatory commission.
“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.”
‘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, Stanford’s defense lawyer, Dick DeGuerin, said he will fight the charges.
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.
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.