Stanford International Bank Ltd.’s $1.7 billion in undisclosed loans to indicted financier R. Allen Stanford are proof the bank was involved in fraud, a examiner testified in a U.S. court trial in Houston.
“There’s a complete disconnect between what the bank is saying, that it has fully liquid, short-term, fully monetized assets, and the fact a third of these assets are loans to the shareholder,” fraud accountant Mark Berenblut said today.
Berenblut made the statement in his second day of testimony in a civil trial over whether directors’ and officers’ insurance sold to Stanford’s businesses by Lloyd’s of London is voided by alleged criminal conduct.
Investors bought more than $7 billion in certificates of deposit from the Antiguan bank, which Stanford controlled as sole shareholder until the U.S. Securities and Exchange Commission sued the financier in February 2009, and seized his businesses.
Stanford and three other company executives in June 2009 were indicted by a federal grand jury in Houston on charges they’d run a $7 billion fraud scheme centered on the sale of certificates of deposit by the Stanford bank.
Rejected Claims
Investors had been told the bank’s portfolio consisted of conservative, highly liquid investments that offered above- market returns.
Lloyd’s last year rejected the executives’ pleas for coverage under the $100 million worth of insurance bought by the business after Stanford Group Cos. Chief Financial Officer James M. Davis pleaded guilty to charges he aided in the scheme.
The case is Laura Pendergest-Holt v. Certain Underwriters at Lloyd’s of London, 4:09-cv-03712, U.S. District Court, Southern District of Texas (Houston).
The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas).
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