Ex-Stanford exec gets 3 years for $7B swindle

A top executive in the now-defunct empire of disgraced Texas financier R. Allen Stanford was sentenced to three years in prison Thursday for her role in helping the once jet-setting businessman bilk investors out of more than $7 billion in one of the biggest Ponzi schemes in U.S. history.

By JUAN A. LOZANO

Associated Press

A top executive in the now-defunct empire of disgraced Texas financier R. Allen Stanford was sentenced to three years in prison Thursday for her role in helping the once jet-setting businessman bilk investors out of more than $7 billion in one of the biggest Ponzi schemes in U.S. history.

Former Stanford chief investment officer Laura Pendergest-Holt's sentence was part of a plea agreement reached with federal prosecutors. She had pleaded guilty in June to one count of obstruction of a U.S. Securities and Exchange Commission proceeding in exchange for the sentence.

After U.S. District Judge David Hittner handed down the sentence he revoked Pendergest-Holt's bond, and she was taken into custody. She waved to her husband Jim Holt before she was put in handcuffs and taken from the courtroom by federal marshals.

A tearful Pendergest-Holt told Hittner prior to sentencing that she was sorry for putting her trust in Stanford and others in his financial empire, including the former chief financial officer, James M. Davis, who also has pleaded guilty and faces up to 30 years in prison.

"I'm sorry I was so trusting in people who didn't deserve my trust, and my trusting them caused harm in others. I apologize greatly," she said.

Prosecutors said Stanford, 62, used the money from investors who bought certificates of deposit from his bank on the Caribbean island nation of Antigua to fund a string of failed businesses, bribe regulators and pay for a lavish lifestyle that included yachts, a fleet of private jets and sponsorship of cricket tournaments. Authorities said Stanford and others in his companies lied to investors from more than 100 countries, telling them their funds were being safely invested in stocks, bonds and other securities.

Pendergest-Holt, 38, a native of Baldwyn, Miss., was the first person indicted in the case. Prosecutors said she and other executives conspired to hide the bank's true financial health and provide misleading testimony to the SEC in 2009 when it was investigating Stanford's bank.

One of her attorneys, Chris Flood, told Hittner that Pendergest-Holt was also a victim of Stanford's Ponzi scheme and lost her life savings. Flood had asked that she not be imprisoned for three years but be allowed to serve that time in home confinement, a halfway house or a combination of the two.

She "is an extremely upstanding citizen and not a danger to anyone," Flood said. "Don't punish her for the crimes of Allen Stanford or Jim Davis."

But prosecutor Jason Varnado told Hittner that from Pendergest-Holt's statement in court on Thursday and from letters her family and friends had submitted calling her a victim, the former Stanford executive wasn't taking full responsibility for what she had done. Varnado asked that she be sent to prison.

"She led (investors) to believe (their money) was invested in a particular manner ... Ms. Holt is not a victim. She is a federal felon," Varnado said.

As part of the plea deal, prosecutors will drop 20 other counts she faced, including conspiracy, wire and mail fraud.

Stanford, the one-time billionaire, was convicted in March on 13 of 14 fraud-related counts. In June, Hittner sentenced Stanford to 110 years in prison. He is serving his sentence in a prison in Central Florida.

Two other indicted ex-executives - Gilbert Lopez, the ex-chief accounting officer, and Mark Kuhrt, the ex-global controller - are set for trial later this month. A former Antiguan financial regulator was also indicted and awaits extradition to the U.S.

Former agent goes to court on Stanford-related charge

A former top federal drug agent appeared handcuffed in a Fort Lauderdale, Fla., federal court today, a day after he was indicted on charges related to the Stanford Financial Group fraud case.

Thomas Raffanello, who was Stanford Financial's global security director, is accused of conspiracy, destroying records and impeding a probe by the U.S. Securities and Exchange Commission into the operations of Stanford Financial, founded by Texas native R. Allen Stanford—who also faces criminal charges.

Raffanello is the former head of the U.S. Drug Enforcement Administration's Miami office.

Magistrate Robin Rosenbaum set bail at $100,000 and set Raffanello's arraignment for next Friday. .

Raffanello, 61, is the second Stanford executive to be charged in Florida by prosecutors and federal securities regulators who accuse Stanford and others of bilking investors out of more than $7 billion through a scheme involving bogus certificates of deposit.

Thursday's three-count indictment accuses Raffanello, 61, and Bruce Perraud, 42, of helping to shred documents at Stanford Financial's office in Fort Lauderdale. Their lawyers have said the men only destroyed documents after giving investigators electronic duplicates.

R. Allen Stanford, who also denies wrongdoing, is being held without bail in a Conroe jail awaiting trial on a 19-count indictment by a federal grand jury in Houston. That indictment also named three other company executives and a banking regulator in the Caribbean island nation of Antigua and Barbuda.

Another company executive was charged separately, pleaded guilty and is cooperating with prosecutors.

Stanford exec faces heat from mentor's plea deal

James Davis and Laura Pendergest-Holt became friends after they met at church when she was a teenager in a small town. He mentored her and helped get her a job that paid $1 million a year. Now his evidence could put her behind bars for a long time.

Pendergest-Holt, who was chief investment officer in alleged swindler Allen Stanford's financial group, is a target for prosecutors in the $7 billion fraud case.

Davis, Stanford Financial Group's former chief financial officer, has been cooperating with the government for six months. On August 27, he pleaded guilty to fraud, conspiracy and obstruction of justice, and he signed a plea deal with prosecutors that puts Pendergest-Holt in a very tight spot.

Pendergest-Holt has pleaded not guilty to 21 felony counts of fraud, conspiracy and obstruction. Her criminal defense lawyer said previously that she will fight the charges at trial. The 36-year-old faces the possibility of life in prison -- a maximum penalty of 375 years -- if convicted on the charges.

Few female executives have ever faced such a litany of charges in a white-collar case.

"Typically what happens in a federal criminal action is the first people who cooperate get the best deal," Ken Springer, a former FBI agent and president of consulting firm Corporate Resolutions Inc.

Pendergest-Holt would have to have a very good defense to justify battling the charges in a post-Bernard Madoff era where juries and judges will likely take a harsher view of white-collar criminals, Springer and others said.

"If she had come around four months ago when she first got arrested, that would have been the time to cooperate because she could have delivered Davis," Springer said.

Pendergest-Holt is free on a $300,000 bond. Her criminal defense lawyer did not respond to requests for comment.

DEVIL IN DETAILS

The plea agreement with Davis details Pendergest-Holt's alleged involvement in a scam where Stanford clients were said to be duped into believing their investments were safe.

Instead, U.S. prosecutors said the funds were put into an illiquid pool of real estate and private equity investments, a fact they say Pendergest-Holt sought to hide from investors and research analysts who worked for her.

From 2005 through at least February 2009, Stanford, Pendergest-Holt and Davis attended investor conferences "where they would falsely tout the assets and earnings" of the offshore bank's assets and earnings, the plea deal said.

She is also accused of lying to investigators from the U.S. Securities and Exchange Commission. At the direction of Davis, Pendergest-Holt falsely told the SEC that she did not know about the offshore bank's alleged bogus assets, the plea agreement said.

Pendergest-Holt was also named to the offshore bank's investment committee in 2005, and "held herself out to investors" and others as managing the bank's entire investment portfolio, according to the June 18 indictment.

Davis' plea agreement contains an unusual amount of new information about the government's case that may signal the prosecutors' next move, said Gurbir Grewal, an attorney at Howrey LLP and former federal prosecutor.

"I think what they are trying to do is encourage a plea or have people come in and cut a deal," Grewal said.

The government has Stanford in their sights and will be eager to line up people to testify against him, so any new information from Pendergest-Holt, if she decided to cooperate, will likely be welcomed.

"If she has another piece of this case that Davis doesn't have, it might help," Corporate Solutions' Springer, said, adding that she could already be helping the government.

At first, after civil fraud charges were filed in February, Pendergest-Holt cooperated with the SEC.

But several days later, she was suddenly arrested in the lobby of Stanford Financial Group's Houston headquarters and stopped her cooperation, her lawyer said in court hearings.

BALDWYN CONNECTION

Davis, 60, and Pendergest-Holt met in a church in Baldwyn, Mississippi. At the time she was a teenager, but the pair remained close and years later Davis and Stanford hired her out of graduate school in 1997 as a research analyst.

Pendergest-Holt zoomed through the ranks at Stanford Financial Group and last held the job of chief investment officer, a job that paid her about $1 million per year in salary and bonus.

Davis was her direct supervisor, so his cooperation with the government sets up an uncomfortable showdown between the two small-town neighbors.

"It puts her in a difficult position to move forward," Howrey's Grewal said. "Here you have a mentor that is going to be requested to provide additional details about her conduct."

David Finn, Davis' attorney, said after a court hearing in July that his client agreed to cooperate because he felt very guilty. The attorney added that Davis was driven by greed.

"He had a heavy heart the very first time I met him," Finn told reporters outside federal court in Houston. "Ultimately he knew he did wrong," he said, adding that the evidence in the case was "overwhelming."