By: Scott Cohn
Senior Correspondent, CNBC
Newly unsealed court documents obtained by CNBC allege the Libyan government knew Allen Stanford was running a scam when officials withdrew tens of millions of dollars in Stanford investments in 2008 and early 2009.
The Libyan Investment Authority and the Libyan Foreign Investment Company managed to withdraw nearly $55 million, including $12 million in January, 2009, less than three weeks before Stanford was accused by U.S. authorities of running a $7 billion Ponzi scheme.
The newly unsealed complaint, filed on behalf of the court-appointed receiver who is rounding up assets for investors, says the Libyans deposited all the funds in a Citibank account in the U.S. A federal judge has ordered the funds frozen at least until a hearing in December.
CNBC first reported last week on the claims by receiver Ralph Janvey, but the identity of the bank was not disclosed until now. Citibank has not been accused of wrongdoing.
Also undisclosed until now was the allegation that the Libyans knew before the general public — or Stanford’s 28,000 investors — that the Stanford empire was about to collapse.
Stanford traveled to Tripoli and met with representatives of the Libyan Investment Authority on January 25 and 26, 2009. Two days later, according to the court filing, the Libyans withdrew $12.6 million — the last in a series of withdrawals dating back to November, 2008. On February 16, 2009, the SEC sued Stanford, shutting the business down.
“(I)t is clear the Libyan Defendants had access to Mr. Stanford that was substantially superior to other investors,” the filing says, “and the Libyan defendants were aware of the impending demise of the Stanford investment scheme well before the Receivership was imposed on the Stanford parties.”
The filing cites a U.S. State Department cable first revealed by WikiLeaks as proof the Libyans knew Stanford was in trouble. The cable, sent on January 28, 2010, notes that the head of the Libyan Investment Authority, Mohamed Layas, initially denied the fund invested with Stanford, saying the Texas financier approached the LIA “in the middle of this crisis” — proof, the filing said, that Stanford was seeking help from the Libyans, and the Libyans knew exactly why he was there.
According to the filing, Janvey’s office traced the funds the Libyans withdrew to two Citibank accounts, one with a balance, as of March, of nearly $2.8 million, and the other with a balance of nearly $1.4 billion.
The complaint says all the Libyan withdrawals — $54.8 million — belong to Stanford’s 28,000 investors.
Stanford’s companies “made the payments to the Libyan defendants with actual intent to hinder, delay or defraud their creditors,” the filing says.
While the discovery of the funds is an important step, it is not entirely clear how Janvey will ultimately collect the funds, because of the ongoing Libyan crisis.
For now, the funds are frozen by court order, with a hearing scheduled for December.
Allen Stanford, who faces 14 criminal counts in the alleged Ponzi scheme, has denied wrongdoing. He is currently scheduled to go on trial in January.