TD bank denies wrongdoing after court convicts U.S. fraudster in $7B Ponzi scheme

Adrian Humphreys Jul 27, 2012
Robert Allen Stanford was convicted in a US$7-billion Ponzi scheme and sentenced to 110 years in prison.
Allen Stanford was the stereotype of a Texas tycoon, oozing the extravagance billions of dollars buys: a fleet of private jets, yachts and helicopters; mansions, castles and a private island; mixing with celebrities and world despots; being knighted and hosting a world sports tournament where he put up the US$20-million purse.
At the height of his outsized life, however, his banking empire collapsed and, last month, a U.S. court exposed his US$7-billion fraud, sentencing the 63-year-old to 110 years in prison.
Now, attention is turning to the role a respected Canadian bank may have played in allowing Stanford to strip 21,000 investors of their savings.
The court-designated liquidators of Stanford’s crumbling assets claim the Toronto-Dominion Bank was the principal foreign banking partner for Stanford as he flowed more than US$9-billion through its accounts in Canada while looting his way to notoriety as a Ponzi schemer second only to Bernie Madoff.
TD, Canada’s second-largest lender, is accused of maintaining a relationship with Stanford International Bank (SIB) even as other financial institutions shunned the Antigua-based bank over concerns over money laundering and shady dealing.
“The vast bulk of the money from the fraud would have flowed through the TD Bank,” said Marcus Wide, managing director of Grant Thornton in the British Virgin Islands, one of the joint liquidators of SIB’s assets.
Bernie Madoff, who was sentenced in 2009 to 150 years in prison for his role in a ponzi scheme that saw investors lose an estimated US$18-billion.
Court actions, on behalf of all of SIB’s investors around the world, are now underway in Ontario and Quebec.
In Quebec, the liquidators are suing TD, claiming negligence and knowing assistance in Stanford’s fraud and seeking damages in an amount not yet determined — a minimum of $20-million but it could be in the billions, plaintiffs say.
“The 21,000 creditors’ core economic loss is US$4.4-billion. There are worldwide assets currently frozen that will ultimately be available to the creditors in the amount of approximately US$570-million. Accordingly, the claim in Canada against TD Bank could, after further investigation, potentially exceed US$3-billion,” said Martin Kenney, a Miami-based lawyer who is co-general counsel to the liquidators of the SIB estate.
In Ontario, in a separate action, they seek about $23-million that was held by TD for SIB when the scheme collapsed. The money is currently held by the court after Ontario’s Attorney General launched forfeiture proceedings.
“But for TD Bank’s conduct described herein, the SIB looting would have been discovered and prevented, the fraudulent transactions at issue would not have been completed and damages would not have been suffered by SIB and its customers,” the Quebec suit claims.
“TD Bank failed to act as a reasonable bank would have acted when confronted with the same suspicious circumstances,” it claims. Former assets of Stanford were also frozen in banks in England and Switzerland.
TD Bank declined to discuss the case with the National Post.
“Given that the matter is before the courts, we cannot comment,” said Wojtek Dabrowski, senior manager of corporate communications.
The bank has not yet filed a statement of defence in the Quebec case, where it is moving to have the case dismissed. In the Ontario case, TD admits it provided correspondent banking and other services to Stanford’s businesses for well over a decade, but denies any wrongdoing.
“Throughout the course of the relationship … TD Bank had no knowledge that Stanford was engaged in fraudulent or illegal activities, it was not wilfully blind to any such activities, and it was not reckless as to whether any such activities were taking place,” TD’s statement of defence says.
TD did not have contact with Stanford’s victims, only with their money, TD’s statement says. The bank did, however, also have contact with Stanford or his officials, an ordinary part of its practice with corresponding bank customers.
“Representatives of TD Bank made occasional visits to Stanford offices and hosted Stanford personnel at TD Bank’s offices in Toronto,” TD says. “In the course of these visits and this monitoring, TD Bank never became aware of any fraudulent or illegal activity on the part of Stanford.”
Correspondent banking involves a bank providing cash management services to other banks, often smaller institutions in foreign countries, and acting as a bank’s agent abroad.
Stanford’s banking is only part of the Canadian connection to the massive swindle.
Other than SIB’s lavish facilities in Antigua, the only other bricks-and- mortar presence for the bank was in Montreal, where it maintained an office with five employees.
From the Quebec office, investments were peddled primarily to Quebec investors. Almost US$46-million is owed by SIB to Canadian investors, 25% of them from Quebec. Another group of victims consists of Calgary-based businesses.
But Stanford’s victims spanned the globe.
SIB offered certificates of deposit (CDs) that promised low risk and generous returns. The offer convinced more than 21,000 people in 113 countries to hand over money.
Stanford moved an astounding amount of money.
TD Bank had no knowledge that Stanford was engaged in fraudulent or illegal activities, it was not wilfully blind to any such activities — TD statement of defence Investors put about US$10-billion into SIB. To keep the scheme afloat, about US$5.6-billion was paid out in interest or redemption payments before the enterprise came to its inevitable, messy end.
That leaves a hole of US$4.4-billion in capital loss by investors.
Most of Stanford’s victims sent their money to Toronto before it made its way to Stanford or one of his companies, Mr. Wide said.
The sums are high and his banking activity in Toronto was fast and furious, documents show.
A report by Ernst & Young, acting in Canada on behalf of the U.S. court-appointed receiver in the SIB case, says Stanford’s victims who were paying in either U.S. or Canadian dollars were told to wire the money to a Stanford account with TD in Toronto. Those paying in British pounds sent their money to the HSBC in London.
“The volume and velocity of funds flowing through the [Toronto] account was very high,” the report says.
Near the painful end before the scam was halted, from Jan. 1, 2008 to Feb. 17, 2009, SIB’s primary account averaged 50 credits and 100 debits each day, together accounting for a transfer of US$9.5-billion. Despite such amounts, the net balance at the end of each month never exceeded US$50-million, the report says.
Stanford’s victims sent US$1.68-billion to the TD in just the last year of the scam, the report says.
In its 2009 indictment against Stanford in the U.S., government prosecutors listed eight bank accounts at the TD in the name of SIB.
TD’s long relationship and network of ties ought to have alerted its officials to the skulduggery, the liquidators claim. It provided TD a “privileged vantage point” into SIB’s affairs.
“This window provided TD Bank with the knowledge that, among other things, SIB at no time had any legitimate business or economic purpose for requiring or using correspondent bank accounts in Canada,” the Quebec suit claims. “As a result, TD Bank should at no time have commenced or continued its correspondent banking relationship with SIB.”
The fraud should not have come as a shock to TD, the suit claims. It was becoming obvious.
During TD’s relationship with SIB, “Antigua’s banking regulations and anti-money laundering practices were subject to extensive, sustained and public condemnation. At the same time, Stanford undertook various well-publicized manipulations of Antigua’s regulatory regime,” the suit alleges.
And if none of that set off warning bells for TD officials, the victims contend, TD’s own past experience should have given it a nudge.
TD should have been “on particularly high alert” after previous criticism of fraudsters using its foreign banking services.
In January, a US$67-million judgment was issued against TD in Florida in a case pressed by investors who claimed the bank aided a US$1.2-billion Ponzi scheme. Scott Rothstein, a former lawyer, is now serving 50 years in prison for a scheme he ran out of his Fort Lauderdale law firm, selling stakes in fictitious lawsuits.
The court awarded victims US$32-million in out-of-pocket money and US$35-million in punitive damages.
TD has filed a notice of appeal.
In the SIB case, liquidators claim TD maintained its ties to SIB when other institutions were jumping ship.
At least three U.S. banks ended their correspondent banking relationships with SIB when red flags emerged, the suit alleges.
In 2000, a Swiss bank investigating SIB as part of its due diligence concluded SIB had illicitly laundered so much money that “it would be very difficult for [the bank] to defend itself or its reputation should any problems arise in the future,” the suit claims.
In the U.S., the Securities and Exchange Commission launched an investigation in 2005. The National Association of Securities Dealers and U.S. Customs also started investigating SIB and its flamboyant founder.
The arrest and conviction brought an ignoble end for Stanford, who was born in Texas and grew up poor. He emerged from his childhood struggles with a flair for business and gained great wealth through his enterprises on the Caribbean island, where he became a banking oligarch.
With an estimated net worth of US$2-billion, he was considered one of the wealthiest Americans.
He became the largest private-sector employer on Antigua and was knighted for his service. “Sir Allen” was a household name on the island when he bankrolled an international cricket tournament, arriving in the stadium in a gold-coloured helicopter to present the $20-million prize.
In 2008, he bought the 1,500-acre Guiana Island, off Antigua’s coast, for a reported US$22-million. A year later, he was under arrest in the U.S.
He was convicted in March on 13 counts of fraud, conspiracy, money laundering and obstruction of justice after a seven-week trial. Prosecutor Gregg Costa told jurors: “Fraud is just theft wearing a business suit.”
In court in Houston last month, despite being found guilty Stanford remained defiant, countering: “I am not a thief.”
The judge was unequivocal, however. He declared the scam “one of the most egregious frauds ever presented to a trial jury in federal court.”
National Post

Liquidators Challenge Antigua Sun Building Lease

Source: Caribarena

Antigua St. John’s – R. Allen Stanford might have been sentenced to 110 years in prison for running a Ponzi scheme through his Antigua based Stanford International Bank, but the legal battles surrounding his assets continue to rage on with some closer to home than most would like.

Caribarena spoke with Liquidator Marcus Wide on Monday and according to him, there are at least two properties belonging to Stanford that were either leased or sold by the Stanford Development Company without prior consent from his office, and these matters remain in disputation.

Wide revealed that one of those properties include the freshly re-commissioned Antigua Sun Building for which the liquidators have sought a court injunction to halt its lease until an independent valuation is done to determine whether the cost agreed upon between the SDC and the building’s new occupants are in keeping with current and fair market value.

He said the ethical thing to do in instances like these is to wait until the legal proceedings have concluded before occupying the building since the likelihood exists that the occupants could be asked to vacate the premises should a challenge be successful in the event that the new valuation warrants one.

The liquidators have already filed an objection to the court challenging the building’s tenancy while the legal aspects of the agreement are still being ironed out.

“I don’t believe they can (legally occupy the premises) while court proceedings are ongoing,” Wide said. 

“What SDC allows them to do is one thing. Our freeze order is merely that we have a right to first get a valuation, then to either consent to the transaction or decide whether it is fair or not. That is our right. If SDC allow something to happen while there is still a matter before the court, I feel the court will have to deal with the issue of possession,” Wide said.

That valuation is said to be either completed or nearing completion and the findings of this report could mean another court battle between the liquidators and the SDC.

“If our valuation is that the SDC failed to get fair market value then we would go (back) to the court and say this is an improper transaction – an incompetent transaction – and we wish to decline our approval,” Wide explained.

Should this occur, then the SDC would then have the right to challenge the objection and legal battle would continue back and forth until a settlement is reached in the courts. But during this time the occupancy of the building would be considered depraved, according to Wide.

“The court would have to unravel whether their (SDC and the new tenants) view of the world is right. We have no management authority within SDC so if SDC chooses to put a buyer or tenant in possession, that’s a choice that they can make. But the consequence of them doing that, if it is challenged successfully and the court revokes the transaction, they (the court) would also insist that the tenant moves out. The court will do what it has to do, and if the court revokes the transaction then it (the lease agreement) becomes invalid and the tenant would have no continuing right,” Wide said.

When the liquidator’s valuation is received and properly analyzed, a formal response of either approval or rejection will be made and the relevant proceedings will follow.

“It would not take us long (to respond) if we have the appraisal, which I believe we should by this point

Statement from Grant Thornton on Stoelker having her Power of Attorney Revoked

The revocation of Ms. Stoelker’s authority is part of a cooperative process which we are optimistic will maximize the value of the assets without further expensive litigation. Some time ago we commenced and have been pursuing a claim against Stanford Development Corporation to recover its assets for the benefit of its creditors as well as the creditors and depositors of SIB whose money funded SDC’s assets and operations.


Joint Liquidators Marcus Wide and Hugh Dickson

Andrea Stoelker SDC Power of Attorney Revoked

Grant Thornton are aware of the situation and are working with the Antigua Attorney General on this matter. They have assured me that there is nothing for the Stanford Victims to be alarmed about and they will be issuing a statement when the time is appropriate. 

Grant Thornton are executing a cooperative strategy which has borne fruit saving potentially millions in litigation costs and while giving up nothing to Stanford and his allies. 

It’s so nice to see that at least one of the Receivers (Liquidators) are doing their job and doing it well. Thank you Grant Thornton for all your hard work on behalf of the victims, you have brought new hope to many of us. 

Source: Caribarena

R. Allen Stanford has revoked the power of attorney given to his fiancé Andrea Stoelker to run one of his last standing companies – Stanford Development Company in Antigua and Barbuda.

Attorney General Justin Simon has confirmed the revocation and notes that his office has speedily filed at the Deeds Registry.

Simon said the move now takes Stoelker out the control seat of the company and efforts are underway to obtain the resignation of Barbara Streete as Director of Stanford Development Company.

“The Power of Attorney that Mr. Stanford gave the Andrea Stoelker has been revoked and the revocation has been filed at the Deeds Registry yesterday (Monday),” Simon said. “I am also expecting the resignation letter of Barbara Streete to follow.

” Should the resignation be as forthcoming as the AG expects, Stanford Development Corporation will be left without a managing body, and the government would then explore the possibilities of putting the company into liquidation.

“The issues of severance would be addressed” when liquidation takes place, Simon said, as will the issue of “tracing all monies that have been received by Andrea Stoelker in respect of all properties of the company which either have been sold or leased.”

The Attorney General said that at the next sitting of parliament he would look to bring Stoelker’s management practices of the company under scrutiny.

When Caribarena contacted Andrea Stoelker for a comment on the matter she said simply, “I have no comment.” She opted not to confirm or deny.

Attempts to reach attorney for the Stanford Development Company Hugh Marshall for a comment on the matter were unsuccessful.

In the meantime, a spokesman for Stanford victims has said that the government of Antigua and Barbuda needs to step back and keep themselves out of the picture on this one as their intervention at this point could affect the little ground gained by the liquidators and others over the past years.

“If it is seen by the Americans that the government is in any way putting their fingers in the pie they will jump on it. All the good that is being done by the liquidators will be lost,” the spokesperson said.

The spokesperson added that as soon as Stoelker and others find out that the Antigua Government is making any attempt to assist those affected it could easily be spun into a matter of interference.

“It will be a very bad thing. Whatever they are doing it needs to be done quietly,” the spokesperson advised.


Stanford Update: July 2012

Dear Stanford Clients: We here at KLS continue our efforts every day to maximize your recovery and hold responsible parties liable for the Stanford Ponzi scheme. We remain confident and focused on the efforts we are taking to obtain a real recovery for Stanford victims. This letter will update you on the status of the various actions we are taking.  

The SEC Lawsuit
In our lawsuit against the SEC, we are waiting on a ruling from the judge on the SEC’s motion to dismiss the case. This is the same status as our last update, and we again will let you know as soon as we have a ruling on the motion. In the meantime, the parties have exchanged initial disclosures identifying various individuals likely to have relevant information about the case. We are also preparing discovery requests to serve on the SEC, including document requests and interrogatories, seeking all available information regarding their investigations of the Stanford entities and their failure to take enforcement action to end the Ponzi scheme. We expect the SEC will oppose responding to any discovery prior to the Court’s ruling on the motion to dismiss, and we may have to file a motion requesting that the Court compel their discovery responses. We will continue to keep you updated on the status of this litigation. Please note that we continue to file claims with the SEC to include as many of you who wish to be included in the class supporting and represented by this lawsuit. Please do not hesitate to contact us individually if you have not yet filed an administrative claim with the SEC through KLS and want to be included.  

The Claims Process
Currently, both the Antiguan Liquidator and the Dallas Receiver have initiated a claims process. There is no coordination between the two processes, and we must file claims in both jurisdictions. For our Stanford Further Actions clients, we have been diligently preparing and filing your claims. You will receive a full copy of your finalized claim when it is filed. We have communicated with a number of you on these claims and will continue to reach out to you in order to finalize your claims. If you have any questions about the claims process, please feel free to contact us.


The Dallas Receivership
The Receiver in Dallas continues to cost the Stanford victims millions of dollars in fees and expenses as his team of attorneys and consultants operate the receivership estate. There are very few assets left for the Receiver to liquidate, and he appears to be focusing solely on his various clawback and fraudulent transfer cases. The Receiver should be able to reach settlements in these actions. However, based on his actions to date, we have very little confidence in him and the team of attorneys he has working for him. We believe the Receiver and his attorneys and consultants value recovering their own fees above any recovery for the victims. We have complained about this to the Court and the Receiver on multiple occasions. We are currently conducting a comprehensive review of all actions taken by the Receiver to determine whether the Receiver should be disgorged of the profits he and his staff earned over the past several years while bringing very little net benefit to the estate.  

Other Potential Lawsuits
We believe there may be potential lawsuits to bring against various banks and financial institutions through which Stanford may have laundered funds. These banks may be liable if they assisted the Stanford Ponzi scheme, whether knowingly or not. In the next few weeks, we will schedule a conference call to discuss these potential actions with you. In particular, we are considering pursuing a case against the Toronto-Dominion Bank based on investor requests. We would like to schedule a call with all of those interested in pursuing such a lawsuit later next week and will send around the call in information and date to those interested in supporting such action on our part.  

Negotiations with Funds to Sell Claims
We have spent several months negotiating with certain hedge funds regarding the potential sale of your claims to a fund for a discounted price. However, prices offered by these funds are a fraction of the price (in the single digits when we believe that a plausible price is 1/3 of the claim amounts or close to that amount) we believe the claims are worth, and we do not believe it is in the best interests of our clients to sell their claims at this price. We believe these funds are playing hardball. We would be happy to sell your claims at the price currently offered, but we do not recommend selling your claims at this price. The negotiations are at a standstill at this point.  

SIPC Coverage
As you may have recently heard, in the lawsuit brought by the SEC against SIPC to compel SIPC coverage, the Court ruled that SIPC cannot be compelled to act. We assume the SEC will appeal this ruling, but for the time being, the prospect of SIPC coverage is dim. It is unfortunate that the Stanford Victims Coalition expended so much time and money on pursuing this.  

Stanford Criminal Conviction
The recent criminal conviction of Allen Stanford should help the government’s claim to recover the $300 million in assets frozen overseas. Currently, the United States and Antiguan governments are fighting for recovery of these funds. We are hopeful that, whichever government prevails, these funds available for distribution. If you have any questions or comments, please contact us.

 Best wishes,

 The KLS Stanford Team.