Thursday, 31 December 2009

Investors Want Aid From Stanford-Linked Congressman

A group of investors in Allen Stanford's alleged Ponzi scheme are demanding a powerful Texas congressman give them the same kind of support he showed Stanford when regulators shut down the alleged scam in February.

The Miami Herald reported Sunday that on February 17, the day the Securities and Exchange Commission charged Stanford with a massive fraud, Republican Congressman Pete Sessions wrote an e-mail to Stanford saying, "I love you and believe in you. If you want my ear/voice—e-mail."

The Herald says the Justice Department has launched a "sweeping" investigation into Stanford's ties to Sessions and other lawmakers from both parties. A Justice Department spokeswoman declined to comment to CNBC about the report, because it is "an ongoing case."

But the Stanford Victims Coalition, which claims to represent some 28,000 investors, is seizing on the report to demand Sessions come to their aid.

"While Congressman Sessions was writing that email to Allen Stanford on that fateful day in February," writes Coalition founder Angela Shaw in a letter to Sessions' office, "panic struck the lives of Stanford investors as they feared the worst—that their retirement plans, their children's' college savings, their life's savings would never be recovered."

Shaw, who lives in Sessions' Dallas Congressional District, notes that Sessions has been supportive of the Stanford investors in the past, including signing a letter from 48 members of Congress to SEC Chairwoman Mary Schapiro earlier this year seeking coverage for the investors under the Securities Investor Protection Act.

Now, armed with Sessions' e-mail to Stanford, Shaw is demanding the Congressman step up his fight for the coverage, which would allow the investors to collect as much as $500,000 in insurance proceeds from the Securities Investor Protection Corporation, which, so far, has refused to cover the Stanford investors.

"I implore Congressman Sessions to do the right thing and help Stanford victims obtain SIPC coverage," Shaw writes, adding, "We need the kind of genuine support he showed Allen Stanford in February."

Sessions, the Chairman of the Republican Congressional Campaign Committee, was among a bipartisan group of lawmakers who came to be known as the "Caribbean Caucus" as a result of their frequent trips to the region--trips funded by a Stanford-backed non-profit organization. He has received $44,375 in campaign contributions from Stanford and members of his staff, according to the Miami Herald.

Sessions' press secretary, Emily Davis, has defended the Congressman, saying in a statement to Politico this week that "Allen Stanford had everyone fooled," and insisting Sessions has worked to ensure that investors get justice.

As for the e-mail, Davis says while it "cannot be authenticated, Congressman Sessions believes that its contents represent language he would use to communicate with a person in crisis to encourage right decisions and prevent further tragedy."

The statement appears to ring hollow with the Victims Coalition. In her letter to Sessions' office, Shaw notes, "his reputation is on the line—along with our financial futures."

Tuesday, 29 December 2009

Judge refuses to release Stanford

Texas investment promoter Robert Allen Stanford tried just before Christmas to persuade a federal judge to release him from prison pending his $7 billion fraud trial in January 2011.

It was the second such attempt by Stanford, 59, who is alleged to have wrecked the retirement dreams of 30,000 investors from Baton Rouge to Brazil and other points around the world.

U.S. District Judge David Hittner needed just a single word to rule on the request: “Denied.”

Stanford’s defense team — Houston attorneys Kent A. Schaffer and George McCall Secrest Jr. — did not return calls Monday.

They argued in their pre-Christmas filing with Hittner that Stanford’s health has deteriorated during the six months that he has been in custody since his June indictment.

The defense attorneys added that a prison beating Stanford suffered in September contributed to his decline.

Schaffer and Secrest also argued the millions of documents involved in Stanford’s criminal case make it impossible for him to meaningfully participate in the planning of his defense while he remains at the federal detention center in Houston.

Another key point in their argument referred to confessed swindler Bernard Madoff of New York, who was allowed to remain free on bond before he pleaded guilty to felony charges that netted him a prison term of 150 years.

Madoff, whose frauds totaled more than $50 billon, and several other recently convicted white-collar criminals did not flee prior to their convictions, Schaffer and Secrest noted.

Stanford appealed Hittner’s initial refusal to permit him release on bond to the 5th U.S. Circuit Court of Appeals in New Orleans.

Circuit judges Edith Brown Clement, Priscilla Owen and Emilio Garza upheld Hittner’s decision in August, ruling that “Stanford’s arguments are without merit.”

The 5th Circuit panel also said in August: “Stanford has the means, the motive and the money to flee.”

In Baton Rouge on Monday, attorney Winston G. Decuir Jr. said Stanford’s new argument concerning the pre-trial release of Madoff and other white-collar criminals might justify another appeal to the 5th Circuit. Decuir is not involved with the Stanford case.

Decuir, who regularly practices in federal courts, said Stanford’s argument for pre-trial release does not carry a high chance of success.

“It wouldn’t surprise me to see federal prosecutors use the Bernie Madoff case the other way,” Decuir said, noting that Madoff received a prison term of 150 years.

“No one expected Bernie Madoff to get that kind of time,” Decuir said.

Younger people convicted of massive white-collar crimes might not run from a 10-year prison term, Decuir said.

Many people might be tempted to run from possible prison terms in excess of a century. And prosecutors probably would use that argument in any debate over Stanford’s requested release, Decuir added.

The 5th Circuit also may not be impressed by Stanford’s argument that he needs release from prison to help his attorneys sift through millions of documents, Decuir said.

“Today, you can put a million pages on a CD-ROM, slap it in a laptop and meet with your client in prison,” Decuir noted.

Stanford has developed heart problems since his arrest and undergone surgery for an aneurysm, his attorneys told Hittner last week.

When Stanford was beaten at a detention center near Conroe, Texas, his attorneys told the judge, he suffered a broken nose and fractures near his right eye that required reconstructive surgery.

The attorneys added that Stanford has lost 40 pounds and sometimes coughs up blood.

Decuir said, however, that reports of deteriorating health often are not “sufficient to persuade a judge to change his or her mind.”

Approximately $1 billion of the Stanford losses occurred in the Baton Rouge, Lafayette and Covington areas, state Rep. Bodi White, R-Central, and Baton Rouge lawyer Phillip W. Preis estimated earlier this year.

Sunday, 27 December 2009

Leroy King extradition hearing set for January

Chief Magistrate Ivan Walters has set January 25 as the date for the start of extradition proceedings against former head of the Antigua and Barbuda's Financial Services Regulatory Commission (FSRC), Leroy King. United States law enforcement authorities have requested King on charges of helping disgraced Texan billionaire, Sir Allen Stanford, cover up an alleged US$7 billion Ponzi scheme.
King, 63, has been charged by the Securities and Exchange Commission (SEC) with taking bribes to ignore wrong doing in relation to the alleged Ponzi scheme. He is facing 10 counts of conspiracy to commit mail fraud, seven counts of conspiracy to commit wire fraud, conspiracy to obstruct the SEC and conspiracy to launder illegal proceeds.
The SEC's complaint alleges that King facilitated the Ponzi scheme by ensuring that the FSRC conducted sham audits and examinations of Stanford International Bank Limited's books and records.

Feds probing Congress Ties to disgraced banker Stanford

Just hours after federal agents charged banker Allen Stanford with fleecing investors of $7 billion, the disgraced financier received a message from one of Congress' most powerful members, Pete Sessions.

"I love you and believe in you,'' said the e-mail sent on Feb. 17. "If you want my ear/voice -- e-mail,'' it said, signed "Pete.''

The message from the chair of the Republican National Congressional Committee represents one of the many ties between members of Congress and the indicted banker that have caught the attention of federal agents.

The Justice Department is investigating millions of dollars Stanford and his staff contributed to lawmakers over the past decade to determine if the banker received special favors from politicians while building his spectacular offshore bank in Antigua.

Agents are examining campaign dollars, as well as lavish Caribbean trips funded by Stanford for politicians and their spouses, feting them with lobster dinners and caviar.

The money Stanford gave Sessions and other lawmakers was stolen from his clients while he carried out what prosecutors now say was one of the nation's largest Ponzi schemes.

Sessions, 54, a longtime House member from Dallas who met with Stanford during two trips to the Caribbean, did not respond to interview requests.

Supporters say the lawmaker, who received $44,375 from Stanford and his staff, was not assigned to any of the committees with oversight over Stanford's bank and brokerages.

His press secretary, Emily Davis, said she was unable to comment on the e-mail sent at 11:31 a.m. on the day Stanford was charged by the U.S. Securities and Exchange Commission. ``I haven't seen it, so I can't verify its authenticity at this time,'' she said.

But the message found on Stanford's computer servers and the contributions he made to Sessions and other lawmakers -- totaling $2.3 million -- are now part of the government's inquiry.

Records show Stanford also doled out $5 million on lobbying since 2001, setting up his own Washington firm last year with expensive furnishings and artwork -- the money plundered from his customers' accounts.


Over the years, he took on battles to protect his banking network while fending off regulators.

In 2001, he pressed successfully to kill a bill that would have exposed the flow of millions into his secretive offshore bank in Antigua.

The next year, he helped block legislation that would have drawn more government scrutiny to his bank.

While he was fighting reforms to financial secrecy and offshore banking laws, Stanford was hobnobbing with dozens of lawmakers.

Stanford hosted New York Congressman John Sweeney's wedding dinner at his five-star restaurant in Antigua in 2004 -- toasting the couple for photographers -- and staged a cocktail fundraiser for now-disgraced Ohio congressman Bob Ney at his bayfront Miami office.

``He legitimized himself by having himself vetted by powerful members of Congress,'' said Steven Riger, a former vice president at Stanford's Miami brokerage. ``It was all about the public's perception.''

Kent Schaffer, Stanford's court-appointed attorney, said his client never asked for special favors. ``Stanford gave contributions to politicians, but there was nothing criminal behind it,'' he said.

The federal investigation comes after months of criticism from victims' groups complaining that elected leaders failed to vet Stanford before accepting money from him the past 10 years. If they had, they would have discovered that the U.S. State Department in 1999 concluded that Stanford helped create a haven for money-laundering in Antigua.

Thursday, 24 December 2009

Stanford won't be released, judge rules

Fallen financier R. Allen Stanford won’t be released from jail before his fraud trial in 2011, a U.S. judge ruled after reviewing a doctor’s report that the accused is close to “a complete nervous breakdown.”

Attorneys for Stanford, who faces 21 criminal counts for allegedly swindling investors out of more than $7 billion, asked U.S. District Judge David Hittner in Houston yesterday to reconsider his earlier ruling denying bail out of concern the defendant might flee. They submitted reports from two psychiatrists who’d examined Stanford, 59, and found him suffering from severe depression triggered by his incarceration under conditions that render him unable to help in his defense.

“Having considered the motion along with the exhibits attached thereto, and the applicable law, the court determines the motion should be denied,” Hittner wrote in an order today.

Stanford has been jailed since his arrest June 19 and is in a federal detention center in downtown Houston. Stanford’s lawyers said in a Dec. 21 filing that one of the psychiatrists determined that the financier’s mental and physical health had deteriorated sharply.

“If the present set of circumstances persist, Mr. Stanford’s spiraling downhill course will continue to the point where he will suffer serious physical disorders and, more likely than not, a complete nervous breakdown,” the doctor’s report said, according to the filing.

Stanford and three former top executives at Stanford Financial Group are charged with running a Ponzi scheme that paid above-market rates to early investors by taking money from later investors in certificates of deposit sold by Antigua-based Stanford International Bank. Stanford is accused of skimming about $1.6 billion from depositors to fund a lavish lifestyle that included a fleet of jets, yachts, multiple homes and a private island in the Caribbean.

Stanford faces spending the rest of his life in prison if he’s convicted at a trial set to begin in January 2011. The financier denies all wrongdoing in connection with both the criminal case and the parallel civil fraud lawsuit brought against him and the same associates by the U.S. Securities and Exchange Commission.

Stanford’s lawyer complained that without Internet access and frequent communication with his defense team, the jailed financier cannot adequately review more than 7 million documents in the government database or answer questions from attorneys and accountants hired to defend him.

“The issues we raised were real, as well as legally and factually compelling,” attorney Kent Schaffer said in an e-mail today. “I am surprised that we were shot down so abruptly and without a response from the government or a hearing. I am not sure how Allen will be able to participate in assisting in his own defense and, the truth is, he probably won’t be.”

Wednesday, 23 December 2009

Stanford again seeks bail

A psychiatrist who examined R. Allen Stanford believes he is in danger of suffering “a complete nervous breakdown” if he is not released from prison on bail and allowed to properly prepare for his scheduled criminal trial, according to court documents.

In documents asking that the jailed businessman be released on bail, attorneys argue Stanford's deteriorating mental and physical health, combined with the difficulty of seeing his attorneys while at the downtown Houston Federal Detention Center, make it impossible for him to properly prepare for trial.

The court documents include letters from more than two dozen family and friends who say Stanford would not flee if released. “I can guarantee you that my dad will go nowhere if released on bail,” one of his sons wrote. “He knows that running would get him nowhere, it would only make things worse.”

Stanford has been in federal custody since June 18, shortly after a Houston grand jury indicted him and others accused of cheating investors who bought certificates of deposit from his bank on the Caribbean island of Antigua. He faces 21 counts of conspiracy, fraud, bribery and obstruction of justice.

After his arrest in Virginia Stanford was brought to Houston, where a magistrate court judge ruled on June 25 he could remain free if he posted $500,000 bail and wore a tracking device.

But before the release paperwork was completed the government appealed the order to U.S. District Court Judge David Hittner, who ruled that Stanford is a flight risk and ordered he remain in custody.

Prosecutors have not yet responded to the new request for bail.

In the weeks after his arrest, while held at the Joe Corley Detention Center in Conroe, Stanford was hospitalized repeatedly for heart problems and for treatment following a beating from a fellow inmate. He was transferred to the downtown detention center on Sept. 29.

The physical and mental strains of imprisonment have taken a heavy toll on Stanford, according to court filings: He has lost 40 pounds in the last 90 days, and has been prescribed medications for elevated and irregular heartbeats, ulcers and depression.

Victor Scarano, a Houston psychiatrist and lawyer who examined Stanford in jail, concludes that his “physical and mental state is continuing to deteriorate” and he is suffering “major depression.”

“If the present set of circumstances persist, Mr. Stanford's spiraling downhill course will continue to the point where he will suffer further serious physical disorders and, more likely than not, a complete nervous breakdown,” Scarano says, according to the court documents.

Scarano doubts that anti-depressants would be enough to treat the condition but giving Stanford the freedom “to work with his attorneys in creating a strong and formidable defenses, is the treatment that will do the most to enhance his physical and mental recovery,” according to the filing.

It says the limited visiting hours and security measures at the detention center make it “sheer sophistry” to assume Stanford would be able to review even a fraction of the more than 7 million documents involved in the case to prepare for his trial, now scheduled for January 2011.

Attorneys argue that there are other ways than incarceration for assuring Stanford will not flee, including putting him in home confinement with an armed guard, a measure his lawyers say New York federal courts have used successfully.

Stanford's defense team notes several cases where wealthy, well-traveled individuals accused of massive white collar fraud have been allowed to remain free on bail with few restrictions. They include Bernard Madoff, who later pleaded guilty in a massive Ponzi scheme and is serving prison time, and hedge fund manager Raj Rajaratnam, accused of insider trading, who remains out on bail.

Attorneys included dozens of letters from Stanford's family and friends pleading with Judge Hittner to free Stanford pending trial. The letter writers include his parents, fiancé, and five of his six children.

His son Robert A. Stanford Jr. wrote that his father taught him to “never run away” from a problem.

“My dad won't back down from this case until he finally proves to the world that he is not guilty,” the younger Stanford wrote.

Tuesday, 22 December 2009

SIBL Investors Might Not See Money Any Time Soon

Former Stanford International Bank Limited (SIBL) investors might have to wait in a long line of people who will have first bite of the proceeds of the assets recovery process now underway.

This was the sentiment expressed by Attorney General Justin Simon in an interview with Fox Business, casting doubts that the investors will be repaid when assets are sold in Antigua & Barbuda.

Simon said US receiver of the SIBL Ralph Janvey was only concerned about the assets of the international bank.

“That entity is only the owner of three parcels of land. Most of the lands there are in the name of Stanford Development Company and various other entities which he formed here. In fact, on record here, he has about 23 local companies, not all of them are commercial enterprises,” the attorney general said.

“…A lot of them are simply holding land, but let me make it very abundantly clear that we do not seize lands. The constitution of Antigua & Barbuda provides that the government can compulsory acquire. It also makes provision that compensation must be paid to the former owners of the land and we intend on dealing with it on that basis.”

Despite the billions of dollars that have passed through Stanford’s hands, there are predictions that only a small fraction of that money will ever be recovered.

Whatever the amount, Simon says there will be very large claims coming in from a wide range of people, including the obvious receiver’s fee.

“Mr Stanford has left a substantial amount of debt in Antigua,” Simon said. “There are trade creditors, monies owed to our utility company, APUA in respect of electricity, telephone and that sort of thing.

“There are also the 450 employees who have been severed but severance has not yet been paid to them.”

He also said that the government was very conscious of the financial obligations left behind and it would make every effort to ensure that those various claims are satisfied in addition to the claims of various investors and depositors.

Simon said that according to law, severance payments are first and then government utilities. Creditors and former customers would then be paid in priority decided by the receivers who are recovering money and selling assets.

The value of the land being sold is also in dispute.

US investigators claimed Stanford and his accountants routinely inflated the book value to conceal the true worth of his enterprises.

After Stanford’s arrest in June this year, for his alleged involvement in a US$8 billion Ponzi scheme, investors have been claiming up to US$24 billion in damages from Antigua & Barbuda, but they are still awaiting permission from the court in the US to proceed with the suit.

Former head of the Financial Service Regulatory Commission Leroy King, who is implicated in the scheme, is currently awaiting extradition to the US to face charges.

King is accused of conducting fraudulent audits and examinations of the bank’s books in exchange for financial bribes and gifts.

He was granted bail in the amount of $500,000, with a $100,000 bond to facilitate his release. In addition to surrendering his travel documents to the court and two sureties, he has been placed on house arrest and must be accompanied by one of his sureties once he leaves his home.

Saturday, 19 December 2009

Antigua AG on Regulatory Investigation

Antigua Prepared To Fight Action From Stanford Investors

Finance Minister Harold Lovell

It was one week but there were two different tones from members of the Baldwin Spencer administration concerning a move by legislators in the United States to block Antigua & Barbuda from accessing a loan from the International Monetary Fund (IMF) and to a pending lawsuit from investors burned by R Allen Stanford. Where the minister of finance was defiant, the attorney general seemed contrite .

A group of senators are alleging that the twin-island state shares some culpability in the US $8 million Ponzi scheme Stanford allegedly ran, bilking investors out of their money. They say the US should oppose any new international loans to the country until the government compensates victims. This attempt to exert pressure comes after investors have said they will sue the country.

Speaking on Voice of the People on Thursday, Minister of Finance Harold Lovell declared that the country would fight tooth and nail against the victims’ coalition, which claims that the country owes them up to $24 billion in damages.

“Antigua is a small country so they (are) going pick on us, and (Senior Republican on the Banking Committee Richard Shelby of Alabama) apparently, he has some of his country club constituents who have invested money, so he is now trying to bully-rag us into paying these persons what they say they have lost. But let me tell you, we will fight that tooth and nail; there’s no way we are going to accept that we are liable in any way,” Lovell said.

In what could be classified as the strongest local response on the matter to date, Lovell added, “The persons invested their money in the Untied States. Procedures should have been in place in the United States also to prevent that, and let us look at Madoff … how come the Madoff victims aren’t calling on the US government to compensate them for whatever losses they have incurred?”

The reference was to Bernard Madoff, who is serving a 150-year prison sentence after pleading guilty to running a $65 billion Ponzi scheme.

Stanford’s trial date has been set for January 2011, and as prosecutors prepare for the case, fingers keep pointing back to Antigua, which was the headquarters for Stanford International Bank (SIB).

Among the allegations are that the government benefitted from his largess when he occupied the throne as the single largest investor and that the head of the Financial Services and Regulatory Commission (FSRC), Leroy King, was in collusion with Stanford to bilk investors.

King, who has been charged by the US Securities and Exchange Commission on multiple counts of conspiracy, remains under house arrest here, as the extradition process meanders through adjournments.

But Lovell, addressing the victims’ claim of culpability, is adamant that any arrangement between government and Stanford were legitimate commercial transactions.

“Even if Allen Stanford is guilty, how does that make Antigua & Barbuda guilty? Is it by association or what? And we say, categorically, that in no way did we have knowledge of whatever he is alleged to have done or were we involved in any way.

“We had a commercial relationship with Mr Stanford. If we got money from Mr Stanford, it was on commercial terms. He had a bank and during the course of the last 15 or so years, monies were borrowed … This administration didn’t borrow any money from Mr Stanford, but the previous administration did borrow (and) they say government is continuous, so, these are liabilities on the books of the Government of Antigua & Barbuda, but we have to pay it back at interest rates that are commercial interest rates,” Lovell said.

But Attorney General Justin Simon, in an interview with FOX Business, was less strident. In fact, he expressed disappointment with allegations of the country’s uncooperativeness and the US and Antigua & Barbuda are close to signing an evidence-sharing agreement that should facilitate the former’s preparations for trial.

“I also note with a certain amount of disappointment the allegations that have been made that Antigua & Barbuda are not cooperating with the authorities, and I’m not sure where they got that information from.

“We have certainly been co-operating. I of myself, have gone off to Miami. I have had meetings with the US prosecutors in terms of exchange of information, and, any day now, I’m expecting an MLAT (Mutual Legal Assistance Treaty) application from the US in respect of the matter, so we have been working very closely,” the AG said.

He referenced co-operation in King’s extradition process to illustrate that Antigua & Barbuda is on board with the US.

The AG also told FOX Business reporter Adam Shapiro that Antigua & Barbuda is cognizant of the victims’ loss.

“They ought to know that we, here in Antigua, are certainly very conscious that a number of investors … have suffered,” he said. “It is our intention to assist as much as possible but we have to do it within the framework of the law.”

Friday, 18 December 2009

Allen Stanford’s Trial Set to Start in January 2011

Allen Stanford’s trial on allegations that he led a $7 billion fraud scheme will begin in January 2011 in Houston federal court, U.S. District Judge David Hittner ruled.

Stanford’s lawyer, Kent Schaffer, had asked Hittner not to begin the trial until the summer of 2011. He said if defense lawyers have to proceed without resources provided by Stanford’s insurance policies, it could take as long as two and a half years to properly prepare for trial.

“The criminal case is going to get underway and it’s going to go on schedule,” Hittner said. “That is a solid date.”

Hittner convened a hearing over a request by Stanford and his co-defendants for a preliminary injunction forcing Lloyd’s of London to advance them defense costs. Lloyd’s lawyer called Stanford and his three co-defendants to testify at today’s hearing to the truth of facts alleged in the indictment, the regulatory case complaint and the receiver’s forensic report into Stanford’s financial services empire.

Each of the defendants declined to take the stand, through his criminal attorney, on the basis of the constitutional right against self incrimination.

Hittner questioned why Lloyd’s would ask the defendants about the alleged criminal acts under oath, since they have already pleaded innocent.

“If they plead the fifth, we get an inference that the answer would be favorable to us,” said Barry Chasnoff, a lawyer for Lloyd’s, referring to the Fifth Amendment to the U.S. Constitution.

Waiting for Ruling

Stanford must wait to learn if Hittner will order Lloyd’s to fund his defense, under directors and officers policies which Chasnoff said are worth about $100 million. Hittner allowed Lloyd’s and the Stanford defendants to present evidence and argument on whether the underwriters may refuse to pay the defense lawyers.

Hittner today deferred ruling on a request by Stanford and three co-defendants for an injunction barring the underwriters from voiding the insurance because a colleague who pleaded guilty said there was criminal activity at Stanford Financial Group Co.

The Stanford defendants, whose assets have been frozen by a court order in a related case, say they can’t afford lawyers without the Lloyd’s proceeds.

Stanford and the other executives in June were indicted by a U.S. grand jury on charges they ran a Ponzi scheme based on the sale of certificates of deposit through Antigua-based Stanford International Bank Ltd.


Stanford deceived investors about the nature of the investments and their oversight, while using money taken from later depositors to repay earlier ones, prosecutors said.

The financier, along with Chief Investment Officer Laura Pendergest-Holt and two other company officials, have denied the allegations.

Stanford appeared today in court in wearing green prison clothing and a salt-and-pepper beard. He was not in leg irons and guards loosened one handcuff during the hearing. Stanford did not speak to but glanced often at family members packed into the first row of the gallery. Spectators included his mother and father, his fiancé, his adult daughter, and a former girlfriend and her two children with Stanford.

Stanford Financial Group Chief Financial Officer James M. Davis in August pleaded guilty to three felony counts. Based on admissions in his plea agreement, attorneys for Lloyd’s last month told Hittner they were no longer obligated to pay for the legal defense of the remaining executives.

Felony Counts

Stanford faces 21 felony counts as well as parallel civil claims by the U.S. Securities and Exchange Commission, which sued him in Dallas and obtained a court order there freezing his assets.

While a criminal defendant who lacks money for a lawyer may have an attorney appointed by the court, there is no such provision for civil lawsuits. The loss of Lloyd’s coverage could leave Stanford without the ability to pay for counsel in the SEC case.

The court, not the insurer, should decide whether one defendant’s guilty plea can invalidate coverage for them all, attorneys for the executives have argued in court filings.

“Underwriters unilaterally have acted as both the judge and jury by concluding that their insureds are guilty and thus not entitled to the contractual protections afforded by the policies -- including the right to have their defense funded by the very policies purchased to provide such protection,” Lee H. Shidlofsky, a lawyer for the executives, said in a Dec. 14 court filing.

Economic Risk

“While plaintiffs’ constitutional rights and ability to defend themselves are in danger, the risk for underwriters is strictly economic,” said the attorney, a partner at Visser Shidlofsky LLP in Austin, Texas.

Lloyd’s countered that it was within its rights to exclude coverage for criminal activities.

“The D&O policy makes clear that underwriters did not intend to insure a criminal enterprise,” Neel Lane, a lawyer for Lloyd’s, said in Dec. 15 filing.

Today Shidlofsky said that if Lloyd’s doesn’t pay the legal fees, “it’s going to fall on the taxpayers. That is a significant chunk of change to saddle taxpayers with.”

Thursday, 17 December 2009

Antigua: Friend, or Foe, to Former Stanford Investors

In the wake of jailed financier Allen Stanford's alleged fraud, questions have emerged as to the role the tiny Caribbean island of Antigua played in the scheme. Former investors allege the government benefited enormously from Stanford's enterprises, and some argue the country owes money and has seized properties that belong to alleged victims of the fraud.

Legislators in the United States are attempting to block the Antiguan government's application for a loan from the International Monetary Fund and allegations of government corruption and cover-ups run rampant among critics of the island nation.

FOX Business Network's Adam Shapiro traveled to Antigua for an exclusive interview with the Honorable Justin Simon, the Antiguan Attorney General and Minister of Legal Affairs, to discuss several issues related to the purported Stanford fraud, including the potential corruption of Antiguan government officials, as well as the hundreds of millions of dollars in Stanford assets that now rests in the hands of the Antiguan government.

It could be a long wait before investors who purchased CDs from Stanford’s failed bank see any of the hundreds of millions of dollars in property and funds currently in the possession of the government of Antigua and Barbuda.

According to Simon, Stanford’s investors fall third in line to recover any of the assets controlled by the island nation, and Simon would not say when or if that money would ever be paid.

Simon revealed that an investigation of the Antiguan Federal Services Regulatory Commission [FSRC] has just been completed and the results of that report could be made public by the end of the year.

“We’re expecting that the [FSRC] board will then fully report to the Prime Minister who will then take the matter to cabinet — so at this stage we are still ignorant of the report of the investigation team,” he told Shapiro.

The investigation focused on the role of former FSRC director Leroy King, who has been charged in the United States with accepting more than $150,000 in bribes from Stanford. The complaint against King alleges he tipped Stanford off to an investigation by the Securities and Exchange Commission in 2005 and 2006, and blocked the FSRC from fulfilling its role as regulator.

Former Stanford CFO James Davis, who has pleaded guilty and is cooperating with U.S. prosecutors, says others within the Antiguan FSRC helped King and Stanford pull off the crime. Simon says additional Antiguan government officials could be charged, stating, “if it comes to criminal prosecutions then so be it.” However, neither King nor Stanford has been charged by the Antiguan prosecutor with a crime.

“I think it would be in our best interest, if the investigative report reveals that there has been wrongdoing, for us to ensure that the charges are in fact initiated and then we can determine where we go to from there,” Simon said.

The just-completed FSRC investigation is the only review of potential criminal acts by Antiguan government officials, despite the current government’s admission that there was a close relationship between Stanford and the former Antiguan Prime Minister Lester Bird.

During Bird’s tenure as Prime Minister, Stanford donated thousands of dollars to Bird’s political party, the ALP (Antigua Labor Party), and lent hundreds of millions of dollars to the Antigua government. In the late 1990’s, at the urging of Stanford and despite protests from former Antiguan FSRC employees, the Bird administration changed its bank regulatory laws, prompting the U.S. Treasury Department to send a letter to the Bird administration, saying Antigua had, “weakened its anti-money laundering laws to the point they are now significantly below international standards making Antigua more vulnerable to money laundering.”

Bird initially agreed to an interview with FOX Business last Sunday, but changed his mind after reporters arrived. Clad in a stained T-shirt and Bermuda shorts inside of his opulent mountaintop luxury home in Antigua’s Blue Water district, Bird said he would not comment on the matter with a TV camera present.

Attorney General Simon admits Stanford and members of Bird’s administration did maintain close ties.

“They had a close relationship,” Simon said. “I’m not sure how financially beneficial it may have been to them individually, but they did have a close relationship.”

Of the $7.2 billion dollars Stanford allegedly swindled from more than 28,000 people worldwide, some of the funds were lent to the Antiguan Government to pay bills and build hospitals, and some were used to purchase land in the Caribbean. Many Stanford International Bank investors now wonder if those assets will be sold and used to pay back former depositors and investors.

Simon argues that the Antiguan government is “very conscious” of its financial obligations.

“We want to make every effort to ensure that those various claims are satisfied in addition to the claims of the various investors and depositors,” Simon said.

He declined to say when that might happen.

The country’s former Minister of Finance and the Economy, Honorable L. Errol Cort, wrote in his 2005 official Budget Statement, “Mr. Stanford confirmed his willingness to write off $50 million of the estimated $230 million debt the Government of Antigua Barbuda owes his organization.”

In return for this write-off, the Antiguan government cleared the way for Stanford to acquire Guiana Island and other property in Antigua.

Stanford investors say the Antiguan government should give them the hundreds of millions of dollars the government owed Stanford. Simon says the money, “is still being paid back and it is being paid back through the Bank of Antigua,” which is a former Stanford owned financial institution.

Simon said the Eastern Caribbean Central Bank took over the Bank of Antigua and that future litigation will have to determine if money paid to the bank should instead be paid to make restitution to Stanford’s depositors and investors, “despite the fact that, or even if Stanford is out, the bank remains as an entity and it’s a debt to the bank so that we have to deal with it on those lines.” Something else that has to be dealt with involves more than 250 acres of prime luxury real estate worth hundreds of millions of dollars that once belonged to Stanford.

Early this year the Antiguan government took control of roughly 250 acres of land that were owned by Stanford and his several development companies.

“Let me also make it abundantly clear that we do not seize land,” said Simon. “The constitution of Antigua and Barbuda provides that the Government can compulsory acquire. It also makes provision that compensation must be paid to the former owners of the land and we intend to deal with it on that basis.”

Simon said no value has been placed on the former Stanford lands, but lawyers representing Stanford’s investors say the properties are worth between $200 million and $800 million. The Antiguan government intends to sell the property at some point, but proceeds from the sale of those lands will first go to the hundreds of Antiguans who once worked for Stanford who lost their jobs when Stanford was arrested.

“Severance payments first off the top, thereafter the utilities since they are government owned,” Simon said.
Victims will be last in line.

That’s not good enough for several alleged Stanford victims who have filed a multi-billion dollar class-action lawsuit against the government of Antigua and Barbuda to recover assets that once belonged to Stanford.

“It’s a rather very fanciful suit,” Simon said. “We are going to be taking it seriously, but I think one of the foundations which would have certainly to be established is that there was this intimate or intricate link between Mr. Stanford’s commercial enterprises and the government of Antigua and Barbuda and from where I sit, I have not seen that.”

Stanford’s depositors and investors wait for justice and restitution almost a year after the alleged Ponzi scheme imploded. Simon said the Antiguan Government is about to finalize a Mutual Legal Assistance Treaty (MLAT) with the U.S., which will allow it to exchange evidence that could be used to prosecute Stanford and others in the U.S. Simon says his government is cooperating with U.S. investigators but the Antiguan Government faces other more immediate problems.

Tax revenue has fallen more than 25%, and without Stanford to supply funding, the Antiguans are attempting to borrow millions of dollars from the IMF and World Bank, a loan several U.S. Senators are attempting to block.

King, the former director of the Antiguan FSRC, remains in Antigua. His extradition hearing to the U.S. was postponed without explanation last Monday when the Chief Magistrate moved his docket to the neighboring island of Barbuda.

Despite all of the accusations against the tiny nation and its government, Simon insists the country understands what is at stake, and argues that blaming the Antiguan government for Stanford’s alleged crimes is akin to blaming President Obama for the SEC’s failure to detect Bernard Madoff’s fraud.

“It is a challenging experience,” Simon said. “But it is one that we’re not going to be running away from and we are going to address so that at the end of the day we can bring some closure and satisfaction to investors, creditors and past employees of the Stanford entities.”

Judge Rules for Lloyd's In Dispute Over Stanford's Insurance

A federal judge in Houston found accused swindler Allen Stanford and his attorneys in contempt of a court order Wednesday over their attempts to collect insurance policy proceeds to pay defense costs.
No sanctions were imposed, according to the judge's order.
U.S. District Judge David Godbey in Dallas, who oversees the civil fraud case, granted the motion filed by insurer Lloyd's of London, which issued Stanford's directors and officers policy.
The defendants and Lloyd's are battling over the payment of defense fees in federal courts in both Dallas and Houston.
Kent Schaffer, Stanford's lawyer, could not immediately be reached for comment.
In November, the insurer said it was denying payment of defense costs after Aug. 27, the day Stanford's former chief financial officer, James Davis, pleaded guilty to fraud.
Lloyd's, which has so far advanced a total of $4.2 million in legal fees to Stanford defendants, declined to provide additional coverage because claims resulting from money laundering are excluded under the policy, according to court records.
U.S. District Judge David Hittner, who presides over the criminal case, is expected to take up the defense fee issue at a hearing Thursday.
Stanford, 59, is accused of leading a Ponzi scheme centered on certificates of deposit issued by his Stanford International Bank Ltd, his offshore bank in Antigua.
The former billionaire has been in jail since his arrest on criminal charges in June. He has denied any wrongdoing.

Thursday, 10 December 2009

ANTIGUA - Bird flaps at US senators over IMF blockade

Opposition Leader Lester Bird has chided a group of United States senators who are moving to block Antigua and Barbuda from getting financial assistance from the International Monetary Fund(IMF), according to a report on
"I don't agree with them; you might think that I might want to jump on the boat, but (they are) out of order, totally out of order," Bird said during his contribution to the budget debate on Monday.
"This is a sovereign country and just because they put money in an international institution that does not give them the right to play domestic politics."
Bird's position is in stark contrast to his Antigua Labour Party's (ALP) stance thus far on the government's decision to approach the IMF.
Gov't criticised
The ALP has consistently criticised the government over its move to the IMF, saying that the Washington-based financial institution would not offer much by way of funds to bail out the country from its current economic troubles.
In September, Bird said that the IMF has in mind a programme in which Antigua and Barbuda would only be in line for a maximum of US$13.5 million loan annually for three years.
"It is a drop in the ocean of needs that the UPP (United Progressive Party) regime has created. It will hardly help to create the jobs we need; it will be inadequate to pay wages and salaries in the public service; it will be insufficient to rebuild the roads that have deteriorated under the UPP," Bird said then.
Last week eight, United States senators, including the senior Republican on the Banking Committee, Richard Shelby, introduced a resolution asking that American representatives at the World Bank and the IMF be instructed to prevent any loans to Antigua and Barbuda.
The senators have asked that until the twin-island state compensates victims of the US$7 billion fraud allegedly committed by Sir Allen Stanford through his Antigua-based bank and until the government cooperates with the United States, it should not get any financial assistance from either institution.
The resolution was laid a week ago, but to date there has been no vote on it.

Receiver sues some Stanford investors for $545 million

The receiver in accused swindler Allen Stanford's civil fraud case is suing about 200 investors for as much as $545 million they collected from certificates of deposit alleged to be at the center of a $7 billion Ponzi scheme.

The investors named in the lawsuit are said to have unfairly cashed out before the U.S. Securities and Exchange Commission filed civil charges and seized Stanford's assets and businesses in February.
"The CD proceeds the Stanford investors received from Stanford International Bank (SIB) were not, in fact, their actual principal or interest earned on the funds they invested," said the lawsuit, filed in federal court in Dallas on Monday.
"Instead, the money used to make those payments came directly from the sale of SIB CDs to other investors," the lawsuit said.
Ralph Janvey, the court-appointed lawyer charged with returning assets to Stanford investors, attempted to settle with the investors before filing the lawsuit.
Some of those investors have returned the amounts they received in excess of their principal investment in the CDs issued by SIB in Antigua, and more settlements are expected, according to the court papers.
Janvey is pursuing the claims under fraudulent transfer law and principles of unjust enrichment after a federal appeals court in New Orleans ruled last month that he could not sue the investors using a different legal claim.
Stanford faces criminal charges that he defrauded thousands of investors around the globe through CD sales. He has pleaded not guilty and is in a Houston jail awaiting trial.

IRS Seeks Names of Stanford Investors Who May Have Hidden Accounts Overseas

U.S. officials are continuing a crackdown on Americans who evade taxes by hiding assets in offshore accounts, this time going after clients of accused Ponzi scammer Allen Stanford.

The Justice Department asked a federal court this week to let investigators seek the identities of individuals who held accounts with Stanford, the same tactic used in the UBS tax case that eventually netted access to names of 4,450 U.S. clients.
"This is another crucial step in our ongoing effort to pursue hidden offshore accounts," said IRS spokesman Frank Keith. The action, he added, "will not only help us pursue those who evade their taxes, but also aggressively identify third parties and others who assist with these illegal actions."

Papers filed in court said the IRS has reason to believe that some of Stanford's investors, now victims as Stanford stands accused of orchestrating a $7 billion fraud, may have been under-reporting income.
The Justice Department said the "IRS has evidence volunteered from a U.S. taxpayer that account statements and Form 1099s from Stanford-controlled entities did not include interest or income generated from SIB accounts or certificates of deposits."
The Justice Department is asking for permission to serve a "John Doe summons" on Ralph Janvey, the court-appointed receiver of the Stanford Group Company who took control of Stanford's books. They want Janvey to disclose the identities of Stanford's account holders so that their income disclosures can be investigated.
Janvey did not immediately return a call from
Angela Shaw, founder of the Stanford Victims Coalition that represents about 6,000 victims of the financier, told Reuters they are "shocked" with the development and don't believe the IRS will find wrongdoing.

Larges Sums of Money Need To Be Accounted For, IRS Said
Stanford is charged with fraud, conspiracy and obstruction in a 21-count indictment. He remains jailed while awaiting trial. If convicted, he faces a maximum sentence of 250 years behind bars. He surrendered to the FBI in Virginia in June and has pled not guilty to the charges.

Feds Interview Accused Fraudster's Dad
Authorities say Stanford and his alleged co-conspirators engaged in a scheme to defraud investors who purchased approximately $7 billion of CDs from the Stanford International Bank, an off-shore entity based in Antigua. Stanford and his co-defendants are accused of misusing and misappropriating most of their investment assets.
The Securities and Exchange Commission previously filed a civil complaint against alleging Stanford ran a fraud promising investors impossible returns, much like Bernard Madoff's $65 billion alleged Ponzi scheme.
The IRS and the Justice Department announced in November that over 14,700 Americans have admitted to hiding assets overseas in the UBS case, under an IRS voluntary disclosure program that allows U.S. taxpayers to come clean about secret foreign bank accounts and avoid possible persecution.
The once-secretive Swiss bank sent letters to thousands of its American customers in early October, informing them "your account with UBS appears to be within the scope of the IRS Treaty Request" and that under a new agreement between the U.S. and Switzerland, UBS would provide names and account information to U.S. authorities.
In August, the two countries signed a historic agreement to obtain information from UBS to identify information on up to 4,450 accounts. U.S. officials believe the accounts could hold up to $18 billion, and they applauded the move as a major step in lifting the shroud of Swiss banking secrecy and uncovering potentially billions of dollars stored in accounts there by wealthy U.S. account holders who could be dodging U.S. taxes.

IRS and DOJ Aim to Identify Stanford Clients

The Justice Department has filed papers seeking a federal court order to authorize the IRS to serve a “John Doe summons” on Ralph Janvey, the court-appointed receiver of accused fraudster R. Allen Stanford’s investment companies, in an effort to identify Stanford’s clients.

The John Doe summons requires Janvey to identify U.S. taxpayers who hold foreign accounts at Stanford’s Antigua-based financial companies, including Stanford Group Company, Stanford Trust Company and Stanford International Bank.

On Feb. 16, 2009, the Securities and Exchange Commission accused Stanford of a fraudulent $7 billion investment scheme. As a result, the federal district court in Dallas appointed Janvey to take possession and control of Stanford’s books and records, as well as those of his related entities. On June 19, 2009, a federal grand jury indicted Stanford for mail, wire and securities fraud.


According to the papers filed in court by Justice Department Tax Division attorneys, the IRS does not know the identities nor the financial investment information of U.S. taxpayers with the offshore accounts, and the IRS could not readily acquire it other than through a John Doe summons. The IRS also used John Doe summonses to ferret out the identities of U.S.-based clients of the Swiss bank UBS.

According to the declaration of IRS Revenue Agent Daniel Reeves filed in support of the petition, the IRS has evidence volunteered from a U.S. taxpayer that account statements and Form 1099s from Stanford-controlled entities did not include interest or income generated from Stanford bank accounts or certificates of deposit.

According to the Reeves declaration, evidence available to the IRS suggests that many of the persons in the John Doe class may have been under-reporting income, evading income taxes or otherwise violating U.S. tax laws. The aggregate amount of the resulting taxes that should have been reported and paid to the U.S. Treasury is unknown.

With information from the John Doe summons, the IRS hopes to inspect each taxpayer's income tax return to determine if there are any understatements or misstatements of income.

In addition, the IRS can determine if Stanford’s U.S. taxpayer clients filed "Reports of Foreign Bank and Financial Accounts," also known as FBARs. Any U.S. taxpayer who has a financial interest in or signature or other authority over any foreign financial account (including bank, securities, or other types of financial accounts) must file an FBAR if the aggregate value of the financial accounts exceeds $10,000 at any time during a calendar year.

According to the Reeves declaration, a large number of FBARs may not have been filed by U.S. owners of the offshore Stanford certificates of deposit.

Sunday, 6 December 2009

As feds closed in, Allen Stanford scrambled to keep fraud secret, money flowing

ST. CROIX, U.S. Virgin Islands -- With federal agents mounting a probe into his offshore bank, billionaire Allen Stanford drove up a dirt road, hauling records from his headquarters to the top of a lush, tropical mountain.

As the sun set over the island, the banker stuffed the papers into a steel drum, poured gasoline over the top and sparked a fire -- the flames rising into the sky.

Months before his businesses exploded in February in a $7 billion fraud case, Stanford embarked on a mission to hide his financial records while trying to raise money to keep his banking empire alive.

He would jet off to Libya to try to convince government leaders to invest in his offshore institution.

He would even buy two Caribbean islands -- flipping the properties four times to inflate the value of the land and pump up the bank's assets.

``He was desperate,'' said Jonas Hagg, a longtime Fort Lauderdale executive chef who lived on Stanford's yacht. ``You never knew from day to day what was going to happen. He was flying by the seat of his pants.''

Details of the final days of Stanford's banking network, from court filings and interviews with a dozen staff members, offer the most complete picture so far of how he plundered his customers' accounts, pouring the money into failing stocks and botched real-estate deals.

He destroyed key records, creating gaps that continue to stymie federal agents trying to recover money for 21,500 fleeced investors.

As his financial network was collapsing, the once gregarious banker was turning into an angry employer, drinking heavily and bickering with his top officers, say staff members.

During a fight with the Antiguan government, he smashed bottles and his fists against the mahogany walls of his 112-foot yacht, Sea Eagle.

After spending nearly $20 million on two luxury estates in Miami and St. Croix -- pouring hundreds of thousands into renovations -- Stanford tore both houses to the ground within months of each other, making a one-bedroom apartment his only home.

By the time federal agents shut down his operations in February, the 59-year-old banker was in Washington, D.C., on his private jet with just one suit to wear and a credit card that had already been canceled.

Stanford's efforts to hide what prosecutors are calling one of the nation's largest Ponzi schemes began just as he was losing money from his failed deals.

The initial pressure didn't come from regulators, but from a paternity case in 2007 that evolved into a fight over keeping the banker's finances secret.

Onetime girlfriend Louise Sage would demand that Stanford -- the father of her two children -- reveal his sources of income, saying he was making more than the $5 million he claimed on his taxes.

Though he managed to keep his records concealed, the case marked the beginning of a two-year battle to shield his finances from public view.

For a decade, Stanford had been secretly drawing on his bank reserves -- the money belonging to investors -- to the tune of $1.8 billion, court records show.

Because so many people were buying his prize investments -- certificates of deposit -- there was always enough money to keep his bank going.

But after diverting money into numerous real-estate developments and pet projects, including a five-star restaurant with a $4 million wine cellar, the deals began collapsing in a remarkable string of failures.

It started with his Caribbean Star Airlines, a regional carrier he purchased in 2000 with great fanfare. He boasted that the airline was going to put his offshore bank on the map, but the company was bleeding at least $1 million a year by 2007, employees said.

Then, he spent at least $10 million trying to develop his dream real-estate project, Maiden Island in Antigua -- a retreat for Stanford and other wealthy homebuyers -- but it was scuttled after years of haggling with politicians.

Despite the failures, records show that he didn't stop spending vast sums of money.

He decided to move his headquarters from Houston to St. Croix, dipping into the bank's reserves to come up with money to buy land on the island.

By 2007, he had purchased a dozen properties, including an $8.3 million mansion, complete with four pools and tennis courts. He also unveiled plans to build an eco-friendly business park with a 45,000-square-foot hangar for his world headquarters.

Then, the stock market began a painful descent in December 2007 that would take an enormous toll on his bank's investments. At the same time, the U.S. Securities and Exchange Commission was pressing for details about his bank's dealings.

With pressure mounting, Stanford began drinking heavily and fighting with employees and his 31-year-old girlfriend, Andrea Stoelker, staff members said.

``It was getting to the point where he would take it out on others,'' said Hagg. ``The feeling was you could always expect the worst.''

He began spending more time on the yacht, which he had renovated for $16 million, working the phones and firing off e-mails at all hours, employees say.

Carrie Freyn, a chef and personal assistant, said Stanford was constantly sending out new directives and changing plans. ``He was very erratic,'' she said. ``We had to just be able to roll with it.''

After hiring nine people to tend to his sprawling mountaintop estate, he ordered it torn down in 2008 -- just months after doing the same to his $10.5 million home in Miami-Dade's Gables Estates.

Employees at both estates said they were stunned. ``I kept asking the question, `Why? Why knock the houses down?' '' asked St. Croix housekeeper Hyacinth Walters. ``Nobody knew anything.''

With both estates demolished, Stanford and his girlfriend began dividing their time between the one-bedroom apartment in St. Croix and his yacht.

Though St. Croix was home, Stanford made frequent trips to Antigua, where he was trying to land one major deal he predicted would reap billions.

He proposed one of the most lavish developments in the Caribbean, a luxury enclave with private hangars and beach homes on Antigua's Guiana Island. But the government refused to approve it.

``They were not giving him permits or cooperating with him,'' said his political consultant Ben Barnes, former Texas lieutenant governor. ``Allen lost his temper.''

Staff members recall how he flew into a tirade, pounding his fists into the woodwork on his yacht and throwing bottles into the walls.

On three occasions, the boat staff had to hire the same Coral Springs craftsman to repair the cabin after Stanford's outbursts, totaling $45,000 in costs.

While Stanford was hosting his annual 20/20 Cricket Tournament on the island in October 2008 -- the $20 million in prize money skimmed from client funds -- his bank's investments were continuing to plummet.

In just one week in early October, the stock market plunged by 18 percent in a spiral that would continue through the end of the year.

Stanford's assets were set up in three groups, but records now show that only one held significant value -- and it was in serious trouble. Less than a year earlier, the fund contained $889 million, mostly in securities, and was now about to drop to $316 million.

With the market falling, the bank was hit by a problem it had never confronted: hordes of fearful investors wanting to cash out, and a steep drop in new customers.

For Stanford, this was a bad combination. With no real reserves, the bank was hopelessly dependent on fresh money to pay off old investors.

With his employees fearing for their futures, Stanford flew to Miami in October and addressed brokers at his office on Biscayne Boulevard, assuring them the company was strong.

``We've got a lot of cash,'' said Stanford, boasting of a sweeping plan to invest in local real estate.

``You can go downtown on Brickell, and you can see 10,000 condo units coming on stream in the next few months. . . . I've seen it, I've been there, I've done it. . . . this is going to be a long-term play. We're going to make a huge amount of money off it.''

He also told the group he could cure the nation's economic woes. ``I have an answer to solve all this,'' he said. ``If I was president, you give me one term, we wouldn't be in this mess. We'd be back on the road to prosperity.''

While Stanford was speaking to the brokers, he and his top lieutenants were carrying out a scheme to stem the bank's massive losses -- at least on paper, court records show.

By turning to a practice known as flipping, the group was able to inflate the value of two tiny Caribbean islands 50-fold.

From an investment of $63.5 million in May, Pelican Island and Asian Village were deeded back and forth between several companies under Stanford's control -- increasing their value to $3.2 billion in just six months.

With the fabricated profits, Stanford was able to claim he had returned the $1.8 billion he had siphoned from the bank over the years.

Meanwhile, he was moving money out of his clients' accounts just to pay operational costs, payroll and to keep up with people cashing in CDs.

Funds were so short in his main bank in Antigua -- the balance just $872,557 in October -- that bank employee Patricia Maldonado pleaded in an e-mail to CFO Jim Davis: ``When can we get some relief?'' The next day, Davis approved $6 million from an account in a Houston bank to shore up the balance.

By November 2008, as Stanford traveled the country in his private jet meeting with top officers, he demanded that no one -- including his employees -- know his whereabouts.

``We weren't supposed to speak to the airline staff, but that didn't make any sense because we had to make the food,'' said Freyn. ``We all had this underground communication.''

He began drinking before noon and continued late into the night. ``It went from one bottle a night to two and three and four,'' Freyn said.

By the end of the year, his businesses were losing $33.3 million a month in operating costs alone, records show. With dwindling cash, staff members were forced to put expenses on their personal credit cards.

By Jan. 14, 2009, the SEC was now ordering Stanford and two of his top officers, CFO Davis and chief investment officer Laura Pendergest-Holt, to talk to investigators.

That month, Freyn and others recall Stanford driving up the dirt road on Mount Welcome in St. Croix, hauling a box stuffed with documents from his office.

After dumping the papers in a steel drum, Stanford and a handyman doused the top with gas and lit the contents. ``We thought it was crazy,'' Freyn recalled. ``You don't just go up there and light a bonfire without a permit.''

The records, which included Stanford's bank and credit-card statements, were torched at the same time Davis was ordering an employee to destroy bank records in Antigua, federal court records state.

In the days that followed, Stanford scrambled to find new investors to stop the bank's bleeding as his top officers tried to fend off federal agents.

During a crucial meeting in the company hangar at Miami International Airport on Jan. 21, Stanford and others decided to send two officers to meet with federal regulators: Pendergest-Holt, 36, and bank president Juan Rodriguez-Tolentino, 46, according to court records and interviews.

The move allowed Stanford to continue selling CDs while seeking help thousands of miles away from an unlikely ally: the government of Libya.

On Jan. 25, he flew to Tripoli to ask Libyan leaders, who had already invested $138.9 million from national reserves, for more money. But in the end, nothing came.

Days later, Stanford and others met in Miami to prep the two employees for their Feb. 10 showdown with the SEC. During the Miami meeting, Davis admitted that the bank's key asset -- the flipped Caribbean real estate -- was worth a fraction of what investors were told.

Nevertheless, Stanford assured his investors on Feb. 12 in a mass e-mail that rumors of an investigation were false and that recent visits to his offices by federal agents were routine. But within a week, he was flying to Washington, D.C., to plead for help from his lobbyist, Ben Barnes.

In Barnes' office, he huddled with white-collar criminal lawyer James Sharp. ``He was very worried,'' Barnes said.

But there was nothing Stanford could do: After federal agents met with Pendergest-Holt, they concluded that the banker's operation was a massive fraud.

On the morning of Feb. 17, agents shut down his companies, including 36 offices across the United States, and filed one of the nation's largest civil fraud suits against Stanford, Pendergest-Holt, Davis and other top lieutenants.

Cut off from his money, Stanford had nowhere to go: His apartments were seized, his jets grounded and his yacht impounded.

In the days to follow, more than 1,000 employees were laid off and his properties were taken over by the court-appointed receiver.

``We were stunned,'' Freyn said. ``I mean, they came in and shut down the office in St. Croix. They let people take out their belongings and told them to go in and take out your stuff because the feds are going to come in.''

Since then, Stanford, Pendergest-Holt, Davis and three others have been indicted on money-laundering and fraud charges. Davis, 61, has pleaded guilty and awaits sentencing, while Stanford is being held without bond in a federal facility in Texas.

With Stanford awaiting trial next year, federal agents are still trying to trace all of his movements during the final days.

Though agents say they have accounted for much of the money that flowed through his banking network, $1 billion is still missing, they say.

The inner workings of the bank were ``a closely guarded secret known only to Stanford, Davis and a few others,'' wrote an investigative accountant in a report.

The records that exist today ``do not begin to tell the story of what happened to all of the proceeds.''

Wednesday, 2 December 2009

Senators Introduce Stanford Investment Fraud Resolution

Antigua government taken over more than 250 acres of Standford's property

U.S. Senator Richard Shelby (R-AL), ranking Republican on the Committee on Banking, Housing and Urban Affairs, along with Senators Vitter (R-LA), Hutchison (R-TX), Cochran (R-MS), Cornyn (R-TX), Isakson (R-GA), Wicker (R-MS), and Shaheen (D-NH), introduced a resolution expressing the sense of the Senate that the Secretary of the Treasury should direct the United States Executive Directors to the International Monetary Fund and the World Bank to use the voice and vote of the United States to oppose making any loans to the Government of Antigua and Barbuda until that Government cooperates with the United States and compensates the victims of the Stanford Financial Group fraud.
Allen Stanford is known to have had close ties with the Government of Antigua and Barbuda, and is alleged, among other things, to have loaned that government at least $85,000,000, which presumably came from Stanford investor funds. The Government of Antigua and Barbuda is refusing to cooperate with the U.S. receiver in charge of gathering the assets of the Stanford Financial Group and distributing them to victims of the fraud. Despite this lack of cooperation in providing recourse to investors in the Stanford Financial Group, the Government of Antigua and Barbuda is currently seeking loans from the IMF and World Bank, both of which receive significant funding from the United States Government.

“The Ponzi scheme perpetrated by Allen Stanford cheated thousands of people, many of them in the United States, out of their investments,” Shelby said. “It is essential that to the extent possible these victims get their money back. It is absurd that the Government of Antigua and Barbuda is standing in the way of helping victims, while also holding out its hand for funding. This resolution makes clear that the United States will not accept such behavior.”

“It’s unbelievable that a government so intertwined in the allegations against Mr. Stanford has the audacity to ask for money from the IMF and World Bank. Not only was one of Antigua’s regulators allegedly a part of Mr. Stanford’s ponzi scheme, but the Antiguan government has taken over more than 250 acres of Stanford’s property and they have refused to work with the US court appointed receiver. Antigua shouldn’t see a dime of money from the US, IMF or World Bank until the victims of this fraud have first been helped,” said Vitter.

"I urge the U.S. Treasury Secretary to work with the International Monetary Fund to seek cooperation from Antigua and Barbuda in order to compensate the victims of the Stanford Financial Group fraud," Senator Kay Bailey Hutchison said.

“Instead of stonewalling efforts to recover assets linked to the scam perpetrated by Allen Stanford and his firm, the government of Antigua and Barbuda should join U.S. and international organizations in trying to find some measure of justice for victims. Government officials in Antigua and Barbuda must understand that their lack of cooperation is unacceptable,” said U.S. Senator Thad Cochran.

“Allen Stanford’s investment schemes devastated countless Texans. The IMF should not loan money to Antigua unless Antigua agrees to cooperate in reimbursing these innocent investors to the fullest extent possible,” said Senator Cornyn.

“Allen Stanford bilked billions of dollars from innocent Americans through his ponzi scheme, and the laws of Antigua shielded the Stanford Financial Group while it operated,” said Senator Isakson. “As long as the Government of Antigua and Barbuda holds assets of Stanford that are not available to the U.S. receiver, it should not receive any funding from the U.S. or the IMF and World Bank. The injured American families deserve no less.”

“Thousands of people have been victimized by the Stanford Ponzi scheme, including many who lost their life savings,” Wicker said. “The cooperation of the Antigua government is essential to helping the victims of this fraud, but this assistance has been consistently denied. It is completely unacceptable for Antigua to receive any loan from the IMF and the World Bank, both of which receive significant funding from U.S. taxpayers. The American government needs to let it be known that this lack of cooperation is not acceptable. This resolution will send that message.”

Sunday, 29 November 2009

King Says Legal Troubles Taking Toll On His Health

Former head of the Financial Services Regulatory Commission (FSRC) Leroy King said his legal troubles in the Stanford matter are taking a heavy toll on his already failing health, but he’s hanging in there on the strength of his innocence.

The veteran banker, who once held the title of ambassador, spoke with OBSERVER for the first time since his indictment by the US Securities and Exchange Commission in June.

While declining to comment on his connection to the alleged Ponzi scheme run by Texan businessman R Allen Stanford, King spoke with this reporter about the impact the last six months have had on him.

He disclosed that he suffered from cancer of the oesophagus and severe gastro-oesophageal reflux disease, both of which required very exacting and demanding treatment regimens.

The US wants King extradited to answer charges that he failed to exercise the required oversight, choosing to look the other way in exchange for lucrative bribes and favours from Stanford.

While legal processing of the US extradition request is pending, King must report daily to a local police station, and it’s this that he finds physically draining, given his state of health.

Careful to point out that he wasn’t complaining, he said he saw no reason why the authorities could not modify the requirement to once a week, since everyone knows him, and for sure he’s not going anywhere.

In addition to his travel documents having been surrendered, two appointed sureties must be able to vouch for his whereabouts at any given time the authorities may enquire.

King, who maintains his innocence, said the restrictions on his movements, the impact that the daily trips to the police station were having on his health care regimen, and the unfamiliar experience of facing criminal charges, were undeniably stressful.

Prior to the ongoing episode, he said, he’d never been accused of or prosecuted for any crime.

The veteran banker, now in his early 60s, said he’d been strictly advised by his lawyer against speaking to the media about any aspects of the case or the specific legal complaints against him.

But he did express sadness about what he said were media reports and even official statements that effectively put him on trial or made him out to be culpable, since the case is yet to be heard in court.

Despite all this, Leroy King said, he was enabled to cope with the present trying circumstances by a combination of faith in God and the assurance of his own innocence in the Stanford matter.

Thursday, 26 November 2009

Stanford victims ask why Texas didn't act sooner

In the aftermath of the R. Allen Stanford case, some local investors are asking: Where was the State of Texas?

Investors who lost money in the Houston financier's alleged Ponzi scheme now say the state's financial oversight was too lax.

"We have the right to know what the (Texas State Securities Board) knew and when they knew it, details of their past investigations, and why they didn't disclose anything to the citizens of Texas all these years," Austin investor Annalisa Mendez said.

In fact, the state looked into Stanford's dealings years ago.

The Securities Board wrote a memo in the mid-1990s, expressing concern "that the high return rates and commissions for CDs made it difficult for the Stanford bank to make a legitimate profit on the CDs," according to a September Financial Industry Regulatory Authority report on the aftermath of both the Bernard Madoff and Stanford cases.

FINRA is a private corporation that provides regulatory oversight of all securities firms nationwide.

Texas Securities Commissioner Denise Voigt Crawford mentioned the securities board's involvement with the Stanford case in Feb. 20 testimony to the state Senate Committee on Finance, just after the scandal broke.

"We looked at him about 10 years ago, because there was evidence of potential money-laundering," Crawford said in response to a question from state Sen. Steve Ogden, R-Bryan.

The FBI and the Securities and Exchange Commission took the case, "which is what should have happened," she said. "But why it took 10 years for the feds to move on it, I could not answer."

The SEC has been criticized by investors who say the agency didn't do enough, quickly enough, to stop Stanford.

In 2003, some Stanford employees told the SEC they suspected fraud at the company.

In 2005, the SEC's Fort Worth office started an informal investigation into the sale of certificates of deposit by Stanford International Bank, which is based in Antigua.

But it was not until this past February that the SEC sued Stanford, alleging he was running a "massive Ponzi scheme" based on fraudulent CDs.

The SEC's inspector general concluded in a report that the agency had fulfilled its duty to check out accusations against Stanford.

The report found that the agency's inquiry was "hampered by a lack of cooperation" from Stanford and his attorneys, as well as by jurisdictional obstacles and obstruction by regulators in Antigua.

Stanford's attorney, Kent Schaffer, denied that his client had operated a Ponzi scheme, saying that money from the CD program was invested in a "wide range of investments."

What caused the losses were the government's lawsuit and fraud investigation, which prompted a run on the bank, he said.

Allen Stanford Scandal Forces Restructuring In Antigua

The alleged Ponzi scheme perpetrated by American turned Antiguan citizen, R. Allen Stanford, will force a restructuring of the country`s financial system.

Antigua and Barbuda`s Governor General, Dame Louise Lake-Tack, on Monday said the country`s financial laws will be amended to ensure adequate monitoring and strict compliance with anti-money laundering requirements.

Lake-Tack made the comments during her annual speech to Parliament laying out the government`s agenda. `The Financial Services Regulatory Commission will be seeking amendments wherever necessary to the legislative and regulatory frameworks that buttress our off-shore financial regime,` said the GG.

Amendments will be made to the International Business Act, The Money Laundering (Prevention) Act, and The Proceeds of Crime Act.

She also used her speech to accuse Stanford of compromising Antigua`s regulatory integrity.

Stanford is awaiting trial in a Houston jail on charges that he allegedly defrauded some 28,000 investors out of $7 billion by selling them what U.S. authorities say were bogus certificates of deposits from the Antigua-based Stanford bank.

Antigua`s National Honors Committee recently voted unanimously to revoke Stanford`s title for embarrassing the nation.

Baseball stars and others, to get back Stanford funds

Some of alleged swindler Allen Stanford's investors, including baseball star Johnny Damon, will see their funds returned after a U.S. appeals court ruled the receiver in the fraud case may not sue them.

Ralph Janvey, the receiver in the Stanford civil fraud case, had filed a lawsuit to recover "clawback" proceeds from several hundred investors in the firm's offshore bank, which prosecutors say is at the heart of a $7 billion Ponzi scheme.

Stanford, 59, faces civil and criminal charges for leading the alleged scheme related to certificates of deposit (CDs) issued by Stanford International Bank Ltd in Antigua.

Janvey has argued that Stanford clients who redeemed their CDs in the weeks before civil fraud charges were filed, unfairly cashed out and were paid with money stolen from other investors.

But the Fifth Circuit Court of Appeals in New Orleans said in a ruling late on Friday that Janvey had no right to sue the investors and the funds, which have been frozen by a lower court's order since February, should be released.

"We were pleasantly surprised that the receiver has indicated his intent to release the money and not pursue further appeals in this matter," Gene Besen, an attorney who helped recoup $9.5 million for seven current and former Major League Baseball players.

Other baseball players snared by the alleged Stanford fraud who will have their funds released include famed former major league pitcher Greg Maddux and J.D. Drew, an outfielder with the Boston Red Sox.

Stanford Financial Group sponsored numerous leagues and teams in such sports as cricket, golf, tennis, basketball, polo and sailing.

About $275 million in proceeds from certificates of deposit have been frozen in accounts at Bank of New York Mellon Corp's (BK.N) Person LLC, JP Morgan Chase & Co (JPM.N) and SEI Investments Co (SEIC.O), according to court documents.

"The Receiver will continue to carry out his duty to recover assets traceable to the Stanford fraud for the benefit of all investors by pursuing recovery of, where cost justified, improper and/or preferential payments of estate funds," a lawyer for Janvey said in an email.

The U.S. Securities and Exchange Commission, which filed the civil fraud charges, had also opposed Janvey's lawsuit, saying it penalized innocent investors.

"He (Janvey) viewed these funds, which were already frozen, as low-hanging fruit and the Fifth Circuit slapped him back on this money grab," Jacob Frenkel, a former SEC enforcement lawyer and now a partner at Shulman, Rogers, Gandal, Pordy & Ecker.

Saturday, 21 November 2009

Stanford investors to Antigua: Remove liquidator

ST. JOHN'S, Antigua -- A group of investors is urging an Antiguan court to remove a British accounting firm appointed to collect assets of a Caribbean offshore bank at the center of an alleged Ponzi scheme by Texas financier R. Allen Stanford.

Martin Kenney, a lawyer for the group led by Florida businessman Alexander Fundora, said his clients have asked the High Court of Antigua to remove Vantis Business Recovery Services as liquidator because a Canadian court found earlier this year that it had deleted data from computers in the Montreal branch of Stanford International Bank Ltd.

"In order to recover and apportion the bank's assets in the fairest and most efficient way possible for the victims of this apparent grand fraud, it is crucial to have Vantis removed and replaced as soon as possible," Kenney said Friday from the British Virgin Islands.

Vantis was appointed by Antiguan authorities to liquidate the assets of Stanford International Bank. A spokeswoman for the firm did not immediately return a telephone call Saturday.

Kenney said that Vantis wiped out original data on computers in the Stanford bank's branch in Montreal, Quebec, in March, without the authority of the Canadian courts and without notifying the Quebec financial regulator.

The Superior Court in Montreal ruled in September that Vantis deliberately misled the court, destroyed original computer data, and removed financial information. Vantis operated with "questionable motives," Judge Claude Auclair wrote in the Sept. 11 judgment.

The Canadian court subsequently replaced Vantis with Ralph Janvey, a lawyer appointed by U.S. courts to liquidate Stanford assets.

Vantis and Janvey have been fighting for jurisdiction over the assets, frustrating investors who are eager to recover money they invested in what U.S. authorities have alleged as a massive Ponzi scheme.

Stanford, once a benefactor of the Antiguan government, is in a Texas jail awaiting trial on charges including money laundering and fraud.

Prosecutors accuse Stanford of leading a $7 billion Ponzi scheme by promising inflated returns to about 28,000 investors on certificates of deposits. The U.S. Securities and Exchange Commission said he instead used the money from new investors to pay off old ones. They also accuse him of skimming more than $1 billion to fund his lavish lifestyle

Thursday, 19 November 2009

Recovered funds to go to Stanford investors

Hundreds of millions of dollars belonging to residents of Louisiana and other states are leaving court control and headed to their owners, people associated with the Stanford fraud debacle said Wednesday.
What’s being returned at this point, however, is just a fraction of the more than $7.2 billion alleged to have been looted by Texas promoter Robert Allen Stanford and some of his associates.
“This was almost like somebody who had a guillotine hanging over their head,” said Phillip W. Preis, a Baton Rouge attorney for several people retrieving their money. “It was like someone had given them a reprieve from a death penalty.”
Stanford, 59, is under indictment and in federal custody in Houston, accused of orchestrating frauds against nearly 30,000 investors.
Preis estimates that as much as $1 billion of that loss was suffered by approximately 1,000 residents of the Baton Rouge, Lafayette and Covington areas.
Dallas lawyer Ralph S. Janvey, the court-appointed receiver responsible for locating and seizing Stanford assets, froze about $894 million in funds remaining in approximately 600 investor accounts after Stanford’s operations were shut down in February.
Janvey had planned to distribute that money on a pro rata basis to about 4,000 bilked investors in this country and another 25,000 in other nations.
But the Securities and Exchange Commission, which had recommended Janvey’s appointment, argued there is no legal basis to seize funds from innocent investors who did not know their money had been poured into a fraudulent scheme.
And a three-judge panel of the 5th U.S. Circuit Court of Appeals ruled Friday in New Orleans that the SEC’s position was correct.
The 5th Circuit ordered Janvey to return the investor funds.
Janvey could have appealed the decision to the entire 5th Circuit or the U.S. Supreme Court.
But he posted a notice on his Web site Tuesday that “investor accounts previously subject to the freeze order are now available for release.”
The one exception, Janvey notes, covers funds frozen in the accounts of former Stanford brokers and employees. The receiver’s claim on that money continues, he says in his Internet posting.
Retirees and other investors had waited since February to retrieve their remaining money, but Preis said many were more stunned than celebrative this week.

“There was no joy,” Preis said. “Just relief.”

Some investors with Stanford lost everything, while other investors have varying amounts of money that remain in certain Stanford accounts.

Central resident Debbie Dougherty and her husband, Ken, had more than $500,000 at stake in the dispute with Janvey.

Dougherty said she and her husband filed for return of that money on Monday and are hoping that it will arrive this week.

Preis said the process may take slightly longer, between five and seven business days.

For investors who lost all of their savings to Stanford’s companies, the 5th Circuit’s decision was devastating.

Blaine Smith, of Baton Rouge, lost $1.5 million. He said Janvey’s plan, while painful to those who did not lose all of their investments, would have provided some money to all innocent investors.

The 5th Circuit judges “just did the same damn thing that Allen Stanford did,” Smith said. “They took money from us and gave it to others.”

Smith said he now will lend support to efforts by Louisiana’s congressional delegation to have the SEC order the broker-funded Securities Investor Protection Corp. to provide up to $500,000 for each defrauded Stanford investor. SIPC already has provided $534 million for victims of convicted New York investment promoter Bernard L. Madoff.

As for his fellow Stanford investors who now recover some or all of their money from Janvey, Smith said he bears no grudges.

“I’m glad for them,” Smith said. “At the same time, it just kills us.”

Receiver targets former Stanford employees to recover money for investors

More than 300 former employees of R. Allen Stanford — including some who worked in Austin — benefited substantially from their relationship with the financier, according to the court-appointed receiver in charge of recovering money for investors who were victims of Stanford's alleged $7 billion Ponzi scheme.

Now the receiver is seeking the return of bonuses those employees made selling certificates of deposits for Stanford.

The former employees, including financial advisers and managing directors, had "big commissions and other compensation relating to the sale of CDs" as incentives, receiver Ralph Janvey said in a filing this month in U.S. District Court in Dallas.

"When Stanford paid CD proceeds to former Stanford employees, he did no more than take money out of investors' pockets and put it into the hands of the former Stanford employees," according to the filing. "For the more than 20,000 investors who have thus far received little or nothing from their investment in Stanford CDs, money recovered from wherever it resides today is likely the only money they will ever receive in restitution."

The money, Janvey said, was in the form of loans, quarterly bonuses and other compensation paid to brokers. He estimated that they totaled more than $217 million.

Stanford has denied any wrongdoing and is in jail in Houston, charged by the U.S. Department of Justice with multiple counts of fraud.

Some former Stanford employees who worked in his firm's Austin office are named in Janvey's new filing.

According to Janvey's court claim, they include Patrick Cruickshank, who made $2.9 million in bonuses and other compensation for selling the CDs; Ray Deragon, who made $1.15 million; Nigel Bowman, who made $922,000; Shawn Morgan, who made $425,000; and Carol McCann, who made more than $441,000.

Bradley Foster, a Dallas attorney representing Cruickshank and Bowman, didn't return a call for comment. Michael Stanley, a Houston attorney who is representing Deragon, McCann and Morgan, said that none of his clients has been charged with a crime and that they had no inclination of any wrongdoing at Stanford's company.

"My view is, they are innocent employees," Stanley said. "If there was a fraud going on, they didn't know anything about it."

Janvey is being "very aggressive" in his attempt to seize bonus money from former Stanford employees, Stanley said.

"There's no difference in saying the utility company should pay back the light bills or the landlord should pay back the rent, because in some way it can be traced to investors' funds," Stanley said. "We don't think that's a legitimate legal claim."

But Angela Shaw, a Dallas resident and Stanford investor who lost $2 million, called that comparison "laughable." Financial advisers have a fiduciary duty to check things like the underlying investment portfolio, said Shaw, who founded the nonprofit advocacy group Stanford Victims Coalition.

"They're basically saying, 'We were salespeople; we didn't have any other responsibility to you,' " she said. " 'We were just selling what we were told to sell.' If my doctor was held to the same standard, a lot of us would be dead right now."

Shaw said her family lost $4.5 million.

"They are professionals in their field for a reason, and that's what we trusted as their clients," she said.

In previous court filings, Janvey said he expected to recover $1.5 billion to return to investors.

But that was before he lost a court ruling last week in his effort to get money back from some of those investors. Janvey had argued that investors who had redeemed their CDs in the weeks before authorities moved against Stanford essentially had been paid with money stolen from other investors.

But the 5th U.S. Circuit Court of Appeals in New Orleans ruled that Janvey had no right to sue those and said the money, which has been frozen by a lower court's order since February, should be released. The ruling included some $275 million in proceeds.

A receivership spokesperson declined to give an updated estimate Wednesday on how much Janvey expects to return to investors.

Stanford victim aid requested

The Louisiana congressional delegation and 40 other federal lawmakers are asking the Securities and Exchange Commission to require securities brokers and dealers to cover some of the enormous investor losses in the Robert Allen Stanford fraud case.

U.S. Rep. Bill Cassidy, R-Baton Rouge, said Tuesday the proposal is directed at the Securities Investor Protection Corp., a nonprofit established by Congress in 1970.

SIPC’s funding is provided by member brokers and dealers — and if the SEC acts on the congressional proposal, those brokers and dealers would face increased assessments.

The SEC did not immediately respond Tuesday.

The commission has absolute authority to order SIPC to provide up to $500,000 for each of the more than 4,000 Stanford investors in this country who did not work for Stanford companies, Cassidy said.

SIPC, however, has maintained the Stanford investors were not covered by the corporation.

Stanford, 59, is in federal custody in Houston, where he is under indictment for masterminding frauds that claimed more than $7.2 billion from retirees and other investors in Louisiana and other states and countries.

As much as $1 billion of that loss was suffered by investors in the Baton Rouge, Lafayette and Covington areas, according to estimates by Baton Rouge lawyer Phillip W. Preis and state Rep. Bodi White, R-Central.

“These families worked hard, saved their money, and did their homework,” Cassidy said in a written statement Tuesday. “Many were presented with evidence that their investments were covered by SIPC, and SIPC is the logical place to turn for appropriate restitution.”

Blaine Smith, a Baton Rouge resident who lost $1.5 million to the alleged Stanford frauds, said SIPC officials have denied claims by Stanford investors because most losses were deposits earmarked for an offshore bank.

But Smith said investor bank statements provide evidence that Stanford and his employees never forwarded the money to his bank on the Caribbean island of Antigua.

Instead, Smith said, investors’ money was deposited at banks in Houston, Memphis and elsewhere in the United States.

“Our money never left the country,” Smith said.

While the SIPC has denied coverage for Stanford investors, it has provided $534 million for victims of the frauds perpetrated by Bernard L. Madoff, a confessed New York criminal serving a 150-year prison term. Madoff’s frauds involved more than $50 billion.

SIPC says on its Web site that coverage provided for Madoff’s victims thus far is $14 million more than all other cases covered since the corporation’s founding in 1970.

Cassidy said in an interview Tuesday that SIPC officials justified the disparity between its treatment of Madoff and Stanford investors by reasoning that all of Madoff’s investments were fictitious.

Cassidy added, however, that the value of Stanford’s assets was equally fictitious. Cassidy said some Caribbean properties purchased for less than $70 million were inflated on Stanford ledgers by more than $2 billion.

The Baton Rouge-based lawmaker also said the SEC erred by entering a confidential consent agreement with Stanford long before his operations were shut down by the commission in February.

That agreement, Cassidy said, required Stanford to remove references to “SIPC member” from brochures provided to potential investors.

Investors would have been better protected from fraud, Cassidy said, if the SEC had issued a public announcement that Stanford had been falsely claiming his firms were SIPC members.

“Investor confidence has been shattered in the wake of numerous financial frauds over the past few years, most notably the Stanford and Madoff … schemes,” Cassidy and 48 other lawmakers said in a letter sent Tuesday to Mary L. Schapiro, who chairs the SEC.

“Accordingly, we ask for your reconsideration of SIPC coverage,” the legislators wrote Schapiro.

The letter was signed by all nine members of the Louisiana delegation, as well as nine other senators and 31 additional House members.

The group is made up of 30 Republicans and 19 Democrats from 18 state

Stanford lawyers and Lloyd's of London butt heads in court

R. Allen Stanford sat in court glumly for three hours Tuesday while a dozen lawyers debated whether insurance should pay for his criminal attorneys and whether those lawyers will have to report to a civil receiver when they find something new in the case.

Lloyd's of London lawyers announced in court that under a Stanford company policy, they've paid out $4.2 million to some criminal defense lawyers for work done before the August guilty plea of the Stanford company's chief financial officer, James Davis.

The Lloyd's lawyers said they won't pay further for the criminal defense of Stanford or those accused with him because Davis said they conspired with him. They said that the insurance contract said Lloyd's could stop payment if it determined money laundering was committed. Though Davis didn't plead guilty to money laundering, Lloyd's contends the terms of the policy were violated.

Dan Cogdell, lawyer for the former Stanford chief investment officer, Laura Holt, disputed that position.

“It's a bad faith denial of coverage,” he said.

Stanford, Holt and others are accused of cheating investors who bought certificates of deposit issued by Stanford International Bank, on the Caribbean island of Antigua, and sold through companies affiliated with Houston-based Stanford Financial Group.

Stanford, a native Texan who founded Stanford Financial Group and is the only one of the defendants in the case who is behind bars while awaiting trial, faces 21 counts of conspiracy, fraud, bribery and obstruction of justice.

Lawyers for Stanford and other defendants asked U.S. District Judge David Hittner to order Lloyd's to pay on its policy, possibly unprecedented in a criminal case.

“We're in uncharted water,” Hittner said, asking lawyers on both sides to submit briefs on the issue.

Hittner observed that the insurance lawyers' position would mean taxpayers have to pay for legal representation of Stanford and his codefendants.

Frozen assets
The payment of the criminal defense lawyers has been an ongoing issue. When the Securities and Exchange Commission filed a civil fraud suit last February in Dallas, it froze all the company assets and the personal assets of Allen Stanford and Holt.

Holt filed a separate lawsuit against Lloyd's in Houston federal court Tuesday, saying it was denying her coverage in bad faith. It's unclear whether Hittner will hear that case.

Also discussed Tuesday, but left undecided, is whether a receiver appointed by the Dallas court in the SEC case should be allowed to force criminal defense lawyers to hand over information they obtain while conducting their defense investigations.

Constitutional rights
Kent Schaffer, Stanford's lawyer, argued that the receiver's demands could violate defendants' constitutional rights and interfere with attorney-client privilege.

On that and the insurance issue, prosecutor Gregg Costa asked the judge to consider moving the case along as quickly as possible, especially since Stanford is imprisoned.

Stanford, who has had two surgeries since he went to jail in late June and has dropped more than 35 pounds, was unshaven and gaunt.

Concern on health
He leaned his head down so much at the beginning of the hearing that Hittner asked his lawyers to check on him and admonished that if Stanford is not well enough to attend court, he should stay in the detention center downtown.

Stanford perked up during a break, engaging in animated conversation with two U.S. marshals.