Ex-Stanford adviser: Moreno lost $20 million

Written by Leslie Turk
Monday, January 30, 2012

Lafayette businessman Mike Moreno got more than half of his money out of Stanford Group but still had $20 million invested in the company when regulators shut it down in February 2009, according to court testimony last week.

Allen Stanford, 61, is on trial in Houston, accused of masterminding a $7 billion Ponzi scheme centred on the sale of so-called CDs at the Stanford International Bank, based on Antigua. Court testimony in the fraud trial of Allen Stanford revealed Moreno’s substantial losses. Jason Green, a former Baton Rouge-based financial adviser, testified that Moreno tried to pull his money out before the company crashed, but his request was denied. Bloomberg reported
Friday on the on-going trial:

A former Stanford Group Co. executive told a jury that one client of R. Allen Stanford’s securities brokerage lost at least $20 million before the business was closed by U.S. regulators.

Jason Green, who led Stanford Group’s private-client group, offered the figure while being cross-examined by the defense on the fifth day of Stanford’s investor fraud trial in federal court in Houston.

Stanford’s lawyers have said that customers who bought the certificates of deposit issued by Antigua-based Stanford International Bank Ltd. and sold by the brokerage were able to withdraw every penny of their money until the Securities and Exchange Commission sued in February 2009.

Asked by defense attorney Ali Fazel if anybody had not gotten their money back before then, Green replied, “Yes, one person I know of specifically” was denied $20 million. Green later identified the client as Michael [stet] Moreno, who had residences in Lafayette, Louisiana, and in Houston.

As the Insider previously reported, Moreno was among 49 investors Stanford receiver Ralph Janvey listed in July 2009 court filings who either cashed out some of their holdings before Stanford was shut down or moved their money into non-Stanford accounts. Those 49 investors took out a total of $494 million, $47 million of that withdrawn out by Moreno. Green testified that Moreno needed the money to settle tax obligations, according to Bloomberg.

Moreno, [Green] said, entrusted Stanford’s business with almost $50 million before withdrawing some of those funds to address a tax obligation. The $20 million withdrawal request was made shortly before Stanford stopped allowing clients to redeem CDs before their maturity date to stanch the outflow of capital as the global financial crisis deepened.

Receiver Janvey tried unsuccessfully in 2009 to claw back Moreno and other investors’ proceeds. Read more on that here.

In their opening last week, prosecutors said Stanford treated the savings of thousands of investors as his “personal piggy bank” to buy two airlines, build a cricket team and stadium, funnel money to a Swiss bank account and otherwise live a life of luxury on the Caribbean island of Antigua, The New York Times reported.

Stanford faces 14 charges of defrauding nearly 30,000 investors from 113 countries.

Moreno said in mid-October that he has been living temporarily in Dallas, raising $300 million to start a new fracking company.

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Stanford Used Threats, Charm to Influence Antiguan Regulator

By Laurel Brubaker Calkins and Andrew Harris – Jan 31, 2012

An Antiguan judge who is also the island’s top banking regulator told the jury at R. Allen Stanford’s investment fraud trial that he repeatedly tried to influence the agency that oversaw his banking operations there.

Marian Althea Crick said she complained to Antiguan officials shortly after Stanford relocated his bank to the island until the financier was removed as a director of the agency that predated the Financial Services Regulatory Commission, where she is now chairman. She said it was “a clear conflict” to have the owner of a regulated entity participating in the agency that oversees the business.

“It reminded me of a saying we have at home,” Crick, a government witness, testified yesterday in federal court in Houston in the second week of the trial. “It was a classic case of the rat being put in charge of the cheese.”

Stanford, 61, who was indicted in June 2009, is charged with 14 counts including mail fraud, wire fraud and obstruction of a probe by the U.S. Securities and Exchange Commission. He denies the charges.

Crick testified that Antigua’s prime minister told her Stanford wanted her fired after she had a series of public and private disagreements with the financier in the 1990s. She said Stanford even briefly took control of her agency while she was out of the country in 1998, until she got Antigua’s Attorney General to reverse the decision on legal grounds.

Month-Long Trip
In 1999, Stanford paid for office space and placed several of his employees on the official committee tasked with conducting a formal review of Antigua’s international banks, Crick said. In 2001, she said, Stanford urged government officials to send her and an auditor examining Stanford International Bank Ltd. on a month-long trip so that a different auditor could complete the bank’s audit.

Stanford tried charm when threats failed, Crick said. Once, Stanford unsuccessfully tried to upgrade her economy flight to first class for a British banking conference. After another disagreement, when she informed Stanford forcefully that she “was not a yes person” and wouldn’t rubber-stamp his requests, she said, “He held my hand, and looked me straight in the eye and said, ‘You remind me so much of myself.’”

When Crick resigned from the regulatory commission in 2002, she was replaced by Leroy King, whom Stanford is accused of bribing with millions of dollars and tickets to the National Football League’s Super Bowl championship games. When King was accused of complicity in hiding Stanford’s alleged fraud in 2009, the agency removed him and put Crick back in charge.

Crick was scheduled to resume her testimony today.

Stanford swayed regulators

By Terri Langford

An Antiguan banking official told jurors Monday that R. Allen Stanford used his influence to manipulate the island nation’s regulators and insert himself into the regulatory process.

“This would be a classic case of the rat being put in charge of the cheese,” said Marian Althea Crick, who is board chairman of Antigua’s Financial Services Regulatory Commission.

Crick, 59, described a series of run-ins with Stanford and his financial empire, beginning in 1998 when she was hired to be executive director of the commission’s predecessor agency – which once included Stanford as a board member.

Crick said she often raised concerns about his position.

“It’s a conflict of interest, inappropriate,” Crick testified.

Stanford – whose businesses and charities in Antigua gave him such prominence that the nation knighted him – eventually was removed from the commission but still influenced regulators, she said.

In 2001, when the Antiguan regulator announced it was scheduling a review of the bank, Stanford contacted the agency and said he didn’t want a certain auditor included in the review.

Immediately, that auditor and Crick were sent on a hastily arranged fact-finding mission about financial operations in other Caribbean countries, Crick said.

By 2002, Crick anticipated she would be fired and resigned. Her successor, Leroy King, is one of four people charged in a separate indictment from the one against Stanford.

King, accused of taking bribes to keep regulatory heat off Stanford’s operations, is fighting extradition from Antigua. The other three defendants in that indictment were Stanford Group executives.

Crick returned to the Antiguan regulatory agency in 2009 after the U.S. Securities and Exchange Commission sued to force Stanford’s operations into receivership and freeze its assets.

Other testimony Monday, as Stanford’s trial entered its second week, concerned billions of bank assets in a mysterious portfolio known as Tier III.

Mark Collinsworth, an executive in the Memphis, Tenn., office of Stanford’s international financial network, described to jurors a three-tier structure for the bank’s investments.

Prosecutors allege that Stanford customers were led to believe the CDs were invested conservatively, but that the money really went into Stanford’s risky business ventures and jet-setting lifestyle.

Collinsworth said he understood that Tier III contained conservative investments such as bonds and blue chip stocks, but that he had no personal knowledge of the portfolio.

He said Tier III accounted for $5.5 billion of the bank’s investments in 2008, compared with about $1.5 billion for Tiers I and II combined. Tier 1 contained cash and liquid assets, he said, and Tier II contained more aggressive investments.

Collinsworth said under questioning by Stanford lawyer Ali Fazel that Stanford himself had little involvement with the Memphis office, visiting only twice in the 10 years Collinsworth worked there.

Collinsworth testified that his Memphis-based supervisor, Stanford’s chief investment officer, Laura Holt, did not discuss Tier III with subordinates.

According to testimony last week, Holt once said she managed Stanford’s entire portfolio. But as investigators closed in on the operation, she told associates she had no knowledge of certain investments.

Holt is one of the three executives indicted separately from Stanford and set for trial later.

Stanford’s former chief financial officer, James Davis, pleaded guilty to three felony counts and will testify for the prosecution.

Collinsworth said Holt and Davis hired friends and relatives with little financial background for key positions in the office.

They included a close Davis friend with no experience in the Middle East, hired as an analyst on that region, and a Russian analyst, hired by Holt, who had been born there but left as a child and wasn’t familiar with Russia’s most profitable companies.

“If bad things were happening, he never brought them to my attention,” Mr. Stanford said. “He did his job and I stayed out of his hair.”

Robert A. Scardino, a lawyer for Mr. Stanford, said in his introductory argument last week that Mr. Davis “is going to testify and admit that he is a liar and a crook, and yet these prosecutors are going to ask you to believe him.”

The defense followed that line of attack in the trial’s first week, reminding jurors during cross-examinations that Mr. Davis had often worked alone, that he had been the one in charge of finances and that he had made major executive hires.

Under questioning from the defense attorney Ali Fazel, Michelle Chambliess, a former Stanford marketing executive and government witness, acknowledged that Mr. Davis had been a powerful presence in day-to-day operations. The prosecution countered by putting on the stand Jason Green, a former Stanford Financial Group Louisiana branch manager, and asking if he ever had seen Mr. Stanford overrule Mr. Davis. “Very much so,” he said, smiling.

Mr. Green recalled how Mr. Davis had commissioned an expert to do an efficiency study when others thought she was not right for the job. Mr. Stanford berated Mr. Davis, Mr. Green said, mimicking Mr. Stanford’s jaunty Texas drawl: “He’s my best friend, but I still run the company.”

Gregg Costa, the assistant United States attorney leading the prosecution, said in his opening argument of Mr. Davis that Mr. Stanford had found someone he knew he could control: “Mr. Davis has accepted responsibility. He will give you the ultimate insider’s view.”

The prosecution concedes that Mr. Davis is facing up to 30 years of jail and hoping for leniency, but says that he will take the jury through documents and accounting records that will prove that Mr. Stanford was skimming investor money. That money, he will say, was secretly invested in real estate and other high-risk, illiquid assets, as well as personal loans and a secret Swiss bank account.

It is likely Mr. Davis will portray himself as an emotionally needy man who was easily bullied by Mr. Stanford.

Much of what Mr. Davis is expected to say has been laid out in a 2009 plea agreement in which Mr. Davis admitted to various counts of fraud and conspiracy to obstruct a Security and Exchange Commission investigation.

The fraud began as early as 1988, when Mr. Stanford owned the Guardian International Bank on the Caribbean island of Montserrat, and Mr. Davis served as his controller. Mr. Davis told prosecutors that Mr. Stanford had ordered him to make false entries into the bank’s general ledger to report false revenue and investment portfolio balances. The practice continued after the bank was transferred to Antigua and renamed the Stanford International Bank.

Over the years, as the bank sold high-interest certificates of deposit, Mr. Stanford, Mr. Davis and other executives promoted the investments as safe and secure, as they amassed assets of over $7 billion.

But by 2008, 80 percent of the money went to various risky Stanford investments. Mr. Davis said that for years, at Mr. Stanford’s request, he and others had “created false books and records.” At least $2 billion of personal loans to Mr. Stanford were concealed and disguised, Mr. Davis told prosecutors.

Mr. Stanford has pleaded not guilty to all charges.

Mr. Davis’s plea agreement was nothing if not graphic and detailed. Sometime in 2003, he said, Mr. Stanford and the two top Antiguan bank regulators had taken a “blood oath,” with Mr. Stanford pledging to provide bribes, and the officials promising not to “kill the business.” When Mr. Stanford needed money to pay the bribes, he would instruct Mr. Davis to withdraw funds from a secret numbered Swiss bank account.

When the Antiguan bank was finally running out of money in mid-2008, Mr. Davis said he, Mr. Stanford and other executives artificially inflated the bank’s assets by devising a real estate transaction in which they falsely inflated the value of a $65 million real estate transaction into a $3.2 billion asset.

Mr. Gershowitz, the University of Houston law professor, said Mr. Davis was a compelling witness.

“When you got a guy who says ‘I was in the room and I can tell you exactly what happened,’ it’s a lot easier for a jury to understand and believe than to figure it out from a mountain of paper,” he said. “It’s hard to swallow that Stanford was smart enough to make billions of dollars, but not smart enough to know what the guy down the hall was doing.”

Stanford Deputy Sought to Falsify Returns, Witness Says

By Laurel Calkins

Jan. 30 (Bloomberg) –- Laura Pendergest Holt, former chief investment officer of Stanford International Bank Ltd., asked a company research analyst to change negative investment returns to positive ones that could be given to bank owner R. Allen Stanford, the analyst said.

Mark Collinsworth, who then worked for Stanford Financial Group Co., testified today in Houston federal court that Holt made the request in March 2008 after showing him an e-mail she said she received from Stanford. The financier was requesting performance results for part of the bank’s investment portfolio.

“She showed me the e-mail on her iPhone and said, ‘I’m going to forward this to you but I want you to make the numbers positive,’” Collinsworth, a government witness, said during cross-examination in the second week of Stanford’s $7 billion criminal fraud trial.

“I thought, surely she wouldn’t ask me to change negative numbers to positive numbers,” he said. Collinsworth said he refused to make the changes and didn’t know if Stanford was presented the correct investment results at a meeting the next day. “I was not going to lie to the owner of the company,” Collinsworth said of why he sat silently at the meeting with Stanford and was relieved not to be called upon.

Stanford, 61, who was indicted in June 2009, is charged with 14 counts including mail fraud, wire fraud and obstruction of an SEC probe. He denies the charges.

The case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston).