Sir Allen is having a little trouble acclimating to his surroundings. Stanford's attempts to reminisce about how much fun it was to be a billionaire have been interrupted recently by episodes of profuse sweating due to the Texas heat. The knight's lawyer, Dick DeGuerin, is outraged that a member of royalty is being treated to the indignity of residing in a cell with 8 to 10 peasants without air conditioning (in addition to other insufferable conditions) and is demanding a room upgrade for his client.
"For part of the time last week, they were in total darkness," DeGuerin wrote. "The cell has been without air conditioning for at least a week. There are no windows for light or ventilation and the conditions are intolerable."
It looks like the guy who said,"I'll die and go to hell if it's a Ponzi scheme" is getting a sneak preview of what's to come.
Monday 27 July 2009
Saturday 25 July 2009
Stanford’s Shredded Florida Papers Being Reassembled
Shredded documents seized from R. Allen Stanford’s South Florida offices are being pieced back together by prosecutors probing allegations the Texas financier ran a $7 billion Ponzi scheme.
U.S. Magistrate Judge Barry Seltzer of Fort Lauderdale, Florida, said federal prosecutors told him yesterday that within the next two months they will have “re-assembled the contents of three bags of shredded documents,” according to a report posted today on the court’s Web site.
The shredded evidence will initially be used against Bruce Perraud, a former Stanford Financial Group security specialist who is charged with destroying documents after an investigation began. Perraud’s trial date, set for Aug. 24, will probably change to accommodate his lawyer’s vacation plans, Seltzer said.
Stanford, four of his executives and Antigua’s former top banking regulator are charged with defrauding investors of as much as $7 billion through bogus certificates of deposit sold by Antigua-based Stanford International Bank. The charges mirror U.S. Securities and Exchange Commission civil claims filed against Stanford and three of his companies on Feb. 17.
Perraud, who isn’t accused of participating in the alleged fraud, worked at Stanford’s Fort Lauderdale office, according to an indictment unsealed in June. Prosecutors claim Perraud told a document-shredding company to destroy a 95-gallon bin full of papers on Feb. 25, a week after a Texas judge presiding over the SEC case issued an order forbidding the alteration, removal or destruction of Stanford Financial records.
Edward Shohat, Perraud’s lawyer, said in a July 22 telephone interview that his client intends to fight the charge.
Prosecutors told Seltzer that, in addition to the reassembled shredded documents, they intend to use six seized computer hard drives as evidence against Perraud.
U.S. Magistrate Judge Barry Seltzer of Fort Lauderdale, Florida, said federal prosecutors told him yesterday that within the next two months they will have “re-assembled the contents of three bags of shredded documents,” according to a report posted today on the court’s Web site.
The shredded evidence will initially be used against Bruce Perraud, a former Stanford Financial Group security specialist who is charged with destroying documents after an investigation began. Perraud’s trial date, set for Aug. 24, will probably change to accommodate his lawyer’s vacation plans, Seltzer said.
Stanford, four of his executives and Antigua’s former top banking regulator are charged with defrauding investors of as much as $7 billion through bogus certificates of deposit sold by Antigua-based Stanford International Bank. The charges mirror U.S. Securities and Exchange Commission civil claims filed against Stanford and three of his companies on Feb. 17.
Perraud, who isn’t accused of participating in the alleged fraud, worked at Stanford’s Fort Lauderdale office, according to an indictment unsealed in June. Prosecutors claim Perraud told a document-shredding company to destroy a 95-gallon bin full of papers on Feb. 25, a week after a Texas judge presiding over the SEC case issued an order forbidding the alteration, removal or destruction of Stanford Financial records.
Edward Shohat, Perraud’s lawyer, said in a July 22 telephone interview that his client intends to fight the charge.
Prosecutors told Seltzer that, in addition to the reassembled shredded documents, they intend to use six seized computer hard drives as evidence against Perraud.
Friday 24 July 2009
Stanford investors get fleeced again
It’s bad enough being a victim of a Ponzi scheme. But it’s rubbing salt in the wound when the court-appointed receiver charged with cleaning up the mess makes things worse for investors fleeced in the scam.
Yet that’s just what the receiver appears to be doing in the case of R. Allen Stanford, who has been accused of running a $7 billion Ponzi scheme.
In an unusual turn of events, the receiver, Ralph Janvey, again finds himself doing battle with the Securities and Exchange Commission, which recommended the Dallas attorney’s appointment back in February. A month ago, the SEC opposed a $20 million fee application that Janvey had submitted, saying the receiver’s compensation request was excessive.
Now the SEC is asking the Texas federal court judge who approved Janvey’s appointment to strip the Dallas attorney of the power to bring so-called “clawback” lawsuits against innocent investors. The SEC contends the lawsuits are unnecessarily punitive and not supported by either “logic or law.”
A clawback suit is a favorite remedy of receivers in fraud cases to recapture earlier payouts to investors who may have either had some knowledge of the scam, or received preferential treatment from the Ponzi ringleader.
Janvey, who didn’t return a phone call, already has filed a number of clawback suits against former Stanford brokers, contending that they benefited financially by selling Stanford’s high-yielding certificates of deposit that prosecutors say were bogus.
The SEC says it has no problem with those lawsuits, but it is drawing the line at actions that target investors who simply had the good fortune of cashing in some of their Stanford CDs early.
Worst of all, it’s not even clear the investor suits will bring in enough money to justify the effort. A court-appointed examiner in the Stanford case says it appears that Janvey is willing “to expend $2 in attorneys’ and accountants’ fees chasing a recovery of only $1.”
Cleaning up the Texas-sized mess Stanford created with his offshore bank in tiny Antigua shouldn’t be about generating hefty fees for the receiver and his team.
The SEC should do more than simply seek to limit Janvey’s powers. It’s time to remove him from the case and get a new receiver. (Editing by Martin Langfield)
Yet that’s just what the receiver appears to be doing in the case of R. Allen Stanford, who has been accused of running a $7 billion Ponzi scheme.
In an unusual turn of events, the receiver, Ralph Janvey, again finds himself doing battle with the Securities and Exchange Commission, which recommended the Dallas attorney’s appointment back in February. A month ago, the SEC opposed a $20 million fee application that Janvey had submitted, saying the receiver’s compensation request was excessive.
Now the SEC is asking the Texas federal court judge who approved Janvey’s appointment to strip the Dallas attorney of the power to bring so-called “clawback” lawsuits against innocent investors. The SEC contends the lawsuits are unnecessarily punitive and not supported by either “logic or law.”
A clawback suit is a favorite remedy of receivers in fraud cases to recapture earlier payouts to investors who may have either had some knowledge of the scam, or received preferential treatment from the Ponzi ringleader.
Janvey, who didn’t return a phone call, already has filed a number of clawback suits against former Stanford brokers, contending that they benefited financially by selling Stanford’s high-yielding certificates of deposit that prosecutors say were bogus.
The SEC says it has no problem with those lawsuits, but it is drawing the line at actions that target investors who simply had the good fortune of cashing in some of their Stanford CDs early.
Worst of all, it’s not even clear the investor suits will bring in enough money to justify the effort. A court-appointed examiner in the Stanford case says it appears that Janvey is willing “to expend $2 in attorneys’ and accountants’ fees chasing a recovery of only $1.”
Cleaning up the Texas-sized mess Stanford created with his offshore bank in tiny Antigua shouldn’t be about generating hefty fees for the receiver and his team.
The SEC should do more than simply seek to limit Janvey’s powers. It’s time to remove him from the case and get a new receiver. (Editing by Martin Langfield)
Sunday 19 July 2009
Prosecutors ask for delay in Stanford civil cases
Prosecutors in the Stanford Financial Group criminal cases in Houston today asked that a related civil case in Dallas be delayed, arguing that disclosures in that case could hurt the criminal prosecution.
Justice Department prosecutor Paul Pelletier asked a Dallas judge to stay all discovery proceedings in the Securities and Exchange Commission's civil lawsuit against several Stanford Financial entities, founder R. Allen Stanford, chief financial officer James M. Davis and chief investment officer Laura Pendergest-Holt.
The SEC civil suit and criminal charges both allege a multibillion-dollar fraud operated through a Stanford offshore bank and a Houston brokerage, which are now in court-ordered receivership.
Stanford, Davis and Pendergest-Holt are charged with conspiracy and fraud in criminal cases and prosecutors argue that the more liberal discovery rules in the civil case could “compromise the rights of the government and public to a fair trial in a criminal action.”
In criminal cases, defendants may ask witnesses to confer before trial but can't force them to do so. In civil cases, defendants can subpoena witnesses to be questioned under oath in depositions before trial. Prosecutors argue that disclosures during civil depositions could harm the government's criminal case.
The filing indicates that the SEC lawyers, the receiver appointed to oversee the Stanford financial empire and the lawyer for Davis, who is cooperating with the government and expected to plead guilty, have all agreed to the civil lawsuit stay.
Lawyers for Stanford and Pendergest-Holt oppose any delay in the civil case.
“This is designed to prevent the defendants in the criminal case from obtaining full and fair discovery, including depositions of important witnesses,” said Dick DeGuerin, Stanford's Houston attorney.
In cases where the government files civil and criminal lawsuits against the same parties, it is common for prosecutors to ask that the civil case be stayed. Judicial economy and fairness given the criminal rules are two common arguments.
Judges often agree to stays the civil cases, as was done in civil matters arising from the collapse of Enron Corp., which also spawned numerous criminal cases.
The difference is that the SEC filed its civil fraud suit against Stanford defendants months before the criminal charges. So the civil case is farther along than they usually are when the government asks that they be delayed while criminal charges go forward.
In another matter in the Stanford criminal case, U.S. District Judge David Hittner in Houston told DeGuerin he could file a fee request under seal.
Hittner also denied Allen Stanford's request to move from a Montgomery County jail facility, where federal prisoners awaiting trial are now usually held, to a downtown Houston federal facility, where federal authorities now mostly keep federal prisoners already sentenced.
Justice Department prosecutor Paul Pelletier asked a Dallas judge to stay all discovery proceedings in the Securities and Exchange Commission's civil lawsuit against several Stanford Financial entities, founder R. Allen Stanford, chief financial officer James M. Davis and chief investment officer Laura Pendergest-Holt.
The SEC civil suit and criminal charges both allege a multibillion-dollar fraud operated through a Stanford offshore bank and a Houston brokerage, which are now in court-ordered receivership.
Stanford, Davis and Pendergest-Holt are charged with conspiracy and fraud in criminal cases and prosecutors argue that the more liberal discovery rules in the civil case could “compromise the rights of the government and public to a fair trial in a criminal action.”
In criminal cases, defendants may ask witnesses to confer before trial but can't force them to do so. In civil cases, defendants can subpoena witnesses to be questioned under oath in depositions before trial. Prosecutors argue that disclosures during civil depositions could harm the government's criminal case.
The filing indicates that the SEC lawyers, the receiver appointed to oversee the Stanford financial empire and the lawyer for Davis, who is cooperating with the government and expected to plead guilty, have all agreed to the civil lawsuit stay.
Lawyers for Stanford and Pendergest-Holt oppose any delay in the civil case.
“This is designed to prevent the defendants in the criminal case from obtaining full and fair discovery, including depositions of important witnesses,” said Dick DeGuerin, Stanford's Houston attorney.
In cases where the government files civil and criminal lawsuits against the same parties, it is common for prosecutors to ask that the civil case be stayed. Judicial economy and fairness given the criminal rules are two common arguments.
Judges often agree to stays the civil cases, as was done in civil matters arising from the collapse of Enron Corp., which also spawned numerous criminal cases.
The difference is that the SEC filed its civil fraud suit against Stanford defendants months before the criminal charges. So the civil case is farther along than they usually are when the government asks that they be delayed while criminal charges go forward.
In another matter in the Stanford criminal case, U.S. District Judge David Hittner in Houston told DeGuerin he could file a fee request under seal.
Hittner also denied Allen Stanford's request to move from a Montgomery County jail facility, where federal prisoners awaiting trial are now usually held, to a downtown Houston federal facility, where federal authorities now mostly keep federal prisoners already sentenced.
Wednesday 15 July 2009
OPEN LETTER TO US PRESIDENT BARACK OBAMA
Dear President Obama,
We are the victims of what has been alleged to be one of the most fraudulent, politically corrupt,and criminal financial operations in history. We are the innocent investors who fell through the cracks of the US financial regulatory structure. We lost our entire life’s savings to a largely unregulated financial broker dealer headquartered in the United States of America – Stanford
Financial Group.
The Stanford scandal has devastated the lives of thousands of victims from around the world including 35 states in the US and 60 countries. The victims are people who did everything right and our life’s savings totaling $7.2 billion is now gone. We are retired school teachers, war veterans, small business owners, and honest, hard-working people who took every possible step to ensure the safety of our retirement funds. We did not simply make bad investments. We relied on the information provided by our financial regulators and our licensed financial advisors – all of
which pointed to a healthy and growing American financial institution.
For over two decades, the Stanford Financial Group and its various entities, including Stanford International Bank-Antigua, were able to operate without adequate oversight by numerous government agencies charged with protecting us. Multiple US government agencies had knowledge of Stanford’s alleged fraudulent business practices and corruption within the government of Antigua, yet Stanford investors were never warned. The US State Department, the Department of Justice, the US Treasury, the SEC and FINRA all had considerable evidence to warn investors and to take actions to protect investors dating back to at least 1999.
In the aftermath of the SEC’s February 2009 raid of Stanford’s offices, we have learned that the US sat back and allowed a financial institution to take in billions of dollars in IRAs, ERISA pension plans, college funds and general life’s savings despite well-documented internal evidence that should have warranted enforcement actions on multiple fronts, but instead resulted in the endorsement of Stanford by numerous members of Congress and even at the highest echelons of the US government.
The Stanford victims are collateral damage - caught between the "massive ongoing fraud" alleged by the SEC and the lack of government action on a national and international level that would have saved us from devastation.
President Obama, you have taken extraordinary measures to help put America on a path to financial recovery, yet thousands of financial fraud victims are now becoming burdens on their families and the government because the US government has not been accountable for its actions and inactions. Our request of you is, at a minimum, to ensure the US government discloses what really happened with the Stanford Financial Group and how such an intricate scheme was able to infiltrate the global financial system and ruin the lives of so many innocent victims.
The entire world is watching how the American regulatory and legal systems will handle the debilitating losses of innocent victims of alleged financial fraud like the Stanford case. These victims have been denied the SIPC insurance coverage we legally qualify for and now face a long road to what appears to be an extremely limited recovery. The American financial system cannot afford to convey the message that defrauded investors in the US and abroad will be deprived of the right to have their life’s savings protected. We are the prime example of the need for regulatory reform – and a plan to compensate victims when the system fails.
We ask the US government to explore all options to help Stanford victims recover their losses and to address the legislative need for compensation for those who suffer catastrophic losses when compliance requirements are not appropriately enforced by government regulators. We are not asking for a bailout – we simply want to get back what is rightfully ours.
Sincerely,
www.stanfordvictimscoalition.com
We are the victims of what has been alleged to be one of the most fraudulent, politically corrupt,and criminal financial operations in history. We are the innocent investors who fell through the cracks of the US financial regulatory structure. We lost our entire life’s savings to a largely unregulated financial broker dealer headquartered in the United States of America – Stanford
Financial Group.
The Stanford scandal has devastated the lives of thousands of victims from around the world including 35 states in the US and 60 countries. The victims are people who did everything right and our life’s savings totaling $7.2 billion is now gone. We are retired school teachers, war veterans, small business owners, and honest, hard-working people who took every possible step to ensure the safety of our retirement funds. We did not simply make bad investments. We relied on the information provided by our financial regulators and our licensed financial advisors – all of
which pointed to a healthy and growing American financial institution.
For over two decades, the Stanford Financial Group and its various entities, including Stanford International Bank-Antigua, were able to operate without adequate oversight by numerous government agencies charged with protecting us. Multiple US government agencies had knowledge of Stanford’s alleged fraudulent business practices and corruption within the government of Antigua, yet Stanford investors were never warned. The US State Department, the Department of Justice, the US Treasury, the SEC and FINRA all had considerable evidence to warn investors and to take actions to protect investors dating back to at least 1999.
In the aftermath of the SEC’s February 2009 raid of Stanford’s offices, we have learned that the US sat back and allowed a financial institution to take in billions of dollars in IRAs, ERISA pension plans, college funds and general life’s savings despite well-documented internal evidence that should have warranted enforcement actions on multiple fronts, but instead resulted in the endorsement of Stanford by numerous members of Congress and even at the highest echelons of the US government.
The Stanford victims are collateral damage - caught between the "massive ongoing fraud" alleged by the SEC and the lack of government action on a national and international level that would have saved us from devastation.
President Obama, you have taken extraordinary measures to help put America on a path to financial recovery, yet thousands of financial fraud victims are now becoming burdens on their families and the government because the US government has not been accountable for its actions and inactions. Our request of you is, at a minimum, to ensure the US government discloses what really happened with the Stanford Financial Group and how such an intricate scheme was able to infiltrate the global financial system and ruin the lives of so many innocent victims.
The entire world is watching how the American regulatory and legal systems will handle the debilitating losses of innocent victims of alleged financial fraud like the Stanford case. These victims have been denied the SIPC insurance coverage we legally qualify for and now face a long road to what appears to be an extremely limited recovery. The American financial system cannot afford to convey the message that defrauded investors in the US and abroad will be deprived of the right to have their life’s savings protected. We are the prime example of the need for regulatory reform – and a plan to compensate victims when the system fails.
We ask the US government to explore all options to help Stanford victims recover their losses and to address the legislative need for compensation for those who suffer catastrophic losses when compliance requirements are not appropriately enforced by government regulators. We are not asking for a bailout – we simply want to get back what is rightfully ours.
Sincerely,
www.stanfordvictimscoalition.com
Monday 13 July 2009
Class Action Suit filed against Antigua
A major international class action lawsuit was filed today by attorney Peter Morgenstern on behalf of all Stanford International Bank-Antigua victims. The suit is against the Commonwealth of Antigua and Barbuda for claims of $24 Billion under the RICO Act, which entitles plaintiffs to seek treble damages of 3 times the actual losses. Some of our SVC members are named as plaintiffs along with victims from 6 or 7 different countries and will represent all victims in the “class.” The case was filed in the US District Court in Houston. All victims are part of the suit and there is no need to “sign up.”
Here is an excerpt from the suit:
This is an action to recover billions of dollars of losses suffered by innocent and unsuspecting customers from around the world who entrusted their money to
R. Allen Stanford’s Stanford International Bank, Ltd. (“SIBL”), part of the Stanford Financial Group (“SFG”), which has now been exposed as one of the most notorious, fraudulent, corrupt, and criminal enterprises in history.
Antigua is sovereign, but not above the law. It became a full partner in Stanford’s fraud, and reaped enormous financial benefits from the scheme. Stanford
stuffed Antigua’s coffers – and its officials’ pockets – with money stolen from unsuspecting customers throughout the United States, Canada, Central America, South America, and elsewhere. Antigua worked tirelessly to protect and nurture Stanford’s criminal enterprise and, in return, eagerly accepted its share of criminally-procured funds.
Stanford’s massive fraud would not have been possible without the active, knowing, and essential assistance of Antigua. Antigua: (i) provided a safe haven for Stanford to operate; (ii) provided essential assistance in Stanford’s efforts to portray itself to Plaintiffs and other members of the Class as a legitimate provider of financial services; (iii) participated with Stanford in a variety of commercial activities in Antigua that provided a pretext for the transfer of criminal proceeds from Stanford to Antigua; (iv) provided false and fraudulent information to the Securities and Exchange Commission (“SEC”) and other regulators in order to thwart the SEC’s investigations into Stanford; and (v) shared in the criminal proceeds of the conspiracy, all or substantially all of which were stolen from the Plaintiffs and other members of the Class.
Here is an excerpt from the suit:
This is an action to recover billions of dollars of losses suffered by innocent and unsuspecting customers from around the world who entrusted their money to
R. Allen Stanford’s Stanford International Bank, Ltd. (“SIBL”), part of the Stanford Financial Group (“SFG”), which has now been exposed as one of the most notorious, fraudulent, corrupt, and criminal enterprises in history.
Antigua is sovereign, but not above the law. It became a full partner in Stanford’s fraud, and reaped enormous financial benefits from the scheme. Stanford
stuffed Antigua’s coffers – and its officials’ pockets – with money stolen from unsuspecting customers throughout the United States, Canada, Central America, South America, and elsewhere. Antigua worked tirelessly to protect and nurture Stanford’s criminal enterprise and, in return, eagerly accepted its share of criminally-procured funds.
Stanford’s massive fraud would not have been possible without the active, knowing, and essential assistance of Antigua. Antigua: (i) provided a safe haven for Stanford to operate; (ii) provided essential assistance in Stanford’s efforts to portray itself to Plaintiffs and other members of the Class as a legitimate provider of financial services; (iii) participated with Stanford in a variety of commercial activities in Antigua that provided a pretext for the transfer of criminal proceeds from Stanford to Antigua; (iv) provided false and fraudulent information to the Securities and Exchange Commission (“SEC”) and other regulators in order to thwart the SEC’s investigations into Stanford; and (v) shared in the criminal proceeds of the conspiracy, all or substantially all of which were stolen from the Plaintiffs and other members of the Class.
Sunday 12 July 2009
HSBC acted as Correspondant Bank to Stanford
While no Stanford financial company had any presence in the UK, they used the British banking system through HSBC London as their correspondent bank for all deposits in Sterling and Euros.
Most people around the world are aware of HSBC bank. HSBC gave SIB an aura of respectability which simply wasn’t appropriate or warranted.
Having looked at the money laundering regulations introduced throughout the European Economic Area (EEA) in 2007 which were passed into British law as Statutory Instrument 2007 number 2157, there are a couple of points to be noted:
1) The regulations state: A credit institution (“the correspondent”) which has or proposes to have a correspondent banking relationship with a respondent institution (“the respondent”) from a non-EEA state must—(a) gather sufficient information about the respondent to understand fully the nature of its business; (b) determine from publicly-available information the reputation of the respondent and the quality of its supervision. As you may be aware, the British government had revoked the banking license of Alan Stanford’s Guardian International Bank situated on Montserrat which would usually undermine one’s ‘reputation’ in banking. Further SIB was audited by an unknown auditor.
2) The regulations also state: A credit institution must not enter into, or continue, a correspondent banking relationship with a shell bank….A “shell bank” means a credit institution, or an institution engaged in equivalent activities, incorporated in a jurisdiction in which it has no physical presence involving meaningful decision-making and management, and which is not part of a financial conglomerate or third-country financial conglomerate. You might be aware that the US receiver has issued a statement indicating that the mind and management of SIB was solidly placed in the US and not in Antigua. Further SIB was not part of Stanford Financial Group. It was an affiliate.
While there is little doubt that the subtleties of the Stanford situation have only come to light after the US Securities and Exchange Commission’s freeze on all Stanford assets, the Uk governemnt were aware that this "bank" was being monitored and were in fact monitoring SIB them selves. HSBC is an enormous bank with many more resources to hand than individual investors. Further, agreeing to be a correspondent bank for all Euro transactions with a bank outside of the EEA should add an additional responsibility to undertake thorough due diligence given the ability to transfer funds freely within the EU and EEA.
How was it possible for HSBC to have become the correspondent bank for all Sterling and Euro deposits given the exercise of due diligence expected from correspondent banking with offshore entities and the history that Allen Stanford had with the British banking authorities.
The Foreign and Commonwealth Office comments to the recent BBC Panorama programme on Alan Stanford said that the ‘UK government does take financial malpractice very seriously and issues regular advice on countries and jurisdictions where there may be serious deficiencies in regulation. It is for companies and the financial professionals they employ to act on this advice with all due diligence’. Presumably, the last part of this comment would apply to HSBC.
There have been many blunders it seems in the case of discovering what was at the heart of Allen Stanford’s financial empire. We, as UK depositors with the bank, can only hope that all of those involved will participate in helping us recover our investments. One part of this is for HSBC (and the various insurance policies it holds) to step up to its part in the scheme and to assist those who deposited funds through them.
Most people around the world are aware of HSBC bank. HSBC gave SIB an aura of respectability which simply wasn’t appropriate or warranted.
Having looked at the money laundering regulations introduced throughout the European Economic Area (EEA) in 2007 which were passed into British law as Statutory Instrument 2007 number 2157, there are a couple of points to be noted:
1) The regulations state: A credit institution (“the correspondent”) which has or proposes to have a correspondent banking relationship with a respondent institution (“the respondent”) from a non-EEA state must—(a) gather sufficient information about the respondent to understand fully the nature of its business; (b) determine from publicly-available information the reputation of the respondent and the quality of its supervision. As you may be aware, the British government had revoked the banking license of Alan Stanford’s Guardian International Bank situated on Montserrat which would usually undermine one’s ‘reputation’ in banking. Further SIB was audited by an unknown auditor.
2) The regulations also state: A credit institution must not enter into, or continue, a correspondent banking relationship with a shell bank….A “shell bank” means a credit institution, or an institution engaged in equivalent activities, incorporated in a jurisdiction in which it has no physical presence involving meaningful decision-making and management, and which is not part of a financial conglomerate or third-country financial conglomerate. You might be aware that the US receiver has issued a statement indicating that the mind and management of SIB was solidly placed in the US and not in Antigua. Further SIB was not part of Stanford Financial Group. It was an affiliate.
While there is little doubt that the subtleties of the Stanford situation have only come to light after the US Securities and Exchange Commission’s freeze on all Stanford assets, the Uk governemnt were aware that this "bank" was being monitored and were in fact monitoring SIB them selves. HSBC is an enormous bank with many more resources to hand than individual investors. Further, agreeing to be a correspondent bank for all Euro transactions with a bank outside of the EEA should add an additional responsibility to undertake thorough due diligence given the ability to transfer funds freely within the EU and EEA.
How was it possible for HSBC to have become the correspondent bank for all Sterling and Euro deposits given the exercise of due diligence expected from correspondent banking with offshore entities and the history that Allen Stanford had with the British banking authorities.
The Foreign and Commonwealth Office comments to the recent BBC Panorama programme on Alan Stanford said that the ‘UK government does take financial malpractice very seriously and issues regular advice on countries and jurisdictions where there may be serious deficiencies in regulation. It is for companies and the financial professionals they employ to act on this advice with all due diligence’. Presumably, the last part of this comment would apply to HSBC.
There have been many blunders it seems in the case of discovering what was at the heart of Allen Stanford’s financial empire. We, as UK depositors with the bank, can only hope that all of those involved will participate in helping us recover our investments. One part of this is for HSBC (and the various insurance policies it holds) to step up to its part in the scheme and to assist those who deposited funds through them.
Saturday 11 July 2009
Leroy King arrested in Antigua
The former head of Antigua and Barbuda's Financial Services Regulatory Commission (FSRC) Leroy King has been placed under house arrest.
He appeared in court today after turning himself in to authorities, following the issuance of a provisional arrest warrant late yesterday evening.
Accompanied by lawyer Ralph Francis, who held brief on behalf of attorney John Fuller, King surrendered to police this morning and was formally arrested.
When he made his court appearance before Chief Magistrate Ivan Walters, he was granted EC$500,000 bail (US$191,535) with two sureties. Under the conditions of his bail release, King had to pay EC$100,000 (US$38,307) of the amount in cash and was ordered to surrender all travel documents and to visit the St John's Police Station everyday between 6 am and 6 pm.
Apart from his daily visits to the police station, the only other time King will be allowed to leave his residence in the north of the island would be to seek medical attention. That allowance was made after Francis told the court, in his application for bail, that King had a medical condition that required him to receive frequent treatment.
The restrictions will remain in place until July 30th when the magistrate will review the house arrest order.
American officials made the request for King, who has dual Antiguan and American citizenship, to be detained while they prepare an extradition order for him to face charges in the US. The allegations relate to his role in the US$8 billion fraud allegedly committed by investor Sir Allen Stanford.
King is facing charges of conspiracy to commit wire and mail fraud, conspiracy to launder illegal proceeds, and conspiracy to obstruct the US Securities and Exchange Commission investigations into Sir Allen and the Antigua-based Stanford International Bank (SIB).
It has been alleged that King accepted hundreds of thousands of dollars in bribes and gifts from Sir Allen to turn a blind eye to his illegal activities. He also allegedly conducted sham audits and examination of SIB's books and records.
King was on Tuesday fired as FSRC head and replaced by career banker Everett Christian. His sacking followed closely on the heels of his suspension last Thursday.
Prior to that, he had been sent on leave pending the FSRC Board's investigation into his conduct as it related to SIB, Sir Allen and other matters.
The Board said it had found that King had, among other things, "deliberately or negligently failed to inform the Board of various questionable decisions he had taken regarding SIB".
Meantime, a shackled Sir Allen, wearing an orange prison jump-suit, yesterday also appeared in court in Texas and pleaded not guilty to all 21 criminal charges filed against him. Unlike King, he will remain in jail for the time being.
US Magistrate Judge Frances Stacy had set a US$500,000 bond with a US$100,000 cash deposit, but stayed her order until Friday after the US Justice Department said it plans to appeal her decision, arguing that Sir Allen was likely to flee the country rather than face life in prison if convicted of the charges.