By: Scott Cohn
Senior Correspondent, CNBC
Newly unsealed court documents obtained by CNBC allege the Libyan government knew Allen Stanford was running a scam when officials withdrew tens of millions of dollars in Stanford investments in 2008 and early 2009.
The Libyan Investment Authority and the Libyan Foreign Investment Company managed to withdraw nearly $55 million, including $12 million in January, 2009, less than three weeks before Stanford was accused by U.S. authorities of running a $7 billion Ponzi scheme.
The newly unsealed complaint, filed on behalf of the court-appointed receiver who is rounding up assets for investors, says the Libyans deposited all the funds in a Citibank account in the U.S. A federal judge has ordered the funds frozen at least until a hearing in December.
CNBC first reported last week on the claims by receiver Ralph Janvey, but the identity of the bank was not disclosed until now. Citibank has not been accused of wrongdoing.
Also undisclosed until now was the allegation that the Libyans knew before the general public — or Stanford's 28,000 investors — that the Stanford empire was about to collapse.
Stanford traveled to Tripoli and met with representatives of the Libyan Investment Authority on January 25 and 26, 2009. Two days later, according to the court filing, the Libyans withdrew $12.6 million — the last in a series of withdrawals dating back to November, 2008. On February 16, 2009, the SEC sued Stanford, shutting the business down.
"(I)t is clear the Libyan Defendants had access to Mr. Stanford that was substantially superior to other investors," the filing says, "and the Libyan defendants were aware of the impending demise of the Stanford investment scheme well before the Receivership was imposed on the Stanford parties."
The filing cites a U.S. State Department cable first revealed by WikiLeaks as proof the Libyans knew Stanford was in trouble. The cable, sent on January 28, 2010, notes that the head of the Libyan Investment Authority, Mohamed Layas, initially denied the fund invested with Stanford, saying the Texas financier approached the LIA "in the middle of this crisis" — proof, the filing said, that Stanford was seeking help from the Libyans, and the Libyans knew exactly why he was there.
According to the filing, Janvey's office traced the funds the Libyans withdrew to two Citibank accounts, one with a balance, as of March, of nearly $2.8 million, and the other with a balance of nearly $1.4 billion.
The complaint says all the Libyan withdrawals — $54.8 million — belong to Stanford's 28,000 investors.
Stanford's companies "made the payments to the Libyan defendants with actual intent to hinder, delay or defraud their creditors," the filing says.
While the discovery of the funds is an important step, it is not entirely clear how Janvey will ultimately collect the funds, because of the ongoing Libyan crisis.
For now, the funds are frozen by court order, with a hearing scheduled for December.
Allen Stanford, who faces 14 criminal counts in the alleged Ponzi scheme, has denied wrongdoing. He is currently scheduled to go on trial in January.
Showing posts with label tripoli. Show all posts
Showing posts with label tripoli. Show all posts
Thursday, 23 June 2011
Sunday, 27 February 2011
Stanford, Libya Connected Through Alleged Ponzi Scheme
In January of 2009, accused ponzi scheme financier Allen Stanford and his girlfriend, Andrea Stoelker, boarded one of Stanford's private jets for an exotic yet fateful trip. First stop: Tripoli, Libya.
The global financial crisis was at its worst, and Stanford, like nearly every other banker in the world, was trying hard to keep his empire afloat.
Libya, which had only recently won fully normalized relations with the U.S., would throw Stanford a major lifeline, according to court filings: The Libyan government's sovereign wealth fund invested some $500 million with Stanford, who left Libya the next day along with Stoelker and an unidentified third person, bound for Zurich, Switzerland.
But three weeks later, it all fell apart. The United States Securities and Exchange Commission accused Stanford of running a $7 billion Ponzi scheme, and a court froze all the firm's assets—including, presumably, Libya's money.
It had been widely believed that the Gaddafi regime was one of the largest victims of the alleged Stanford scam, in which investors have thus far recovered less than three cents on the dollar.
But now, CNBC has learned Libya may have managed to withdraw much of its Stanford investment just before the firm collapsed, according to a source close to the case. If true, it would have been a stunningly fast trade that thousands of much smaller investors were unable to make.
All the deposits and withdrawals by Stanford investors are being closely examined by a court-appointed receiver, Dallas attorney Ralph Janvey, who has already filed hundreds of millions of dollars in "clawback" claims against investors who allegedly withdrew money they were not entitled to.
There was no immediate comment from Janvey's team on whether he plans to pursue a claim against Libya. If Stanford's empire was, in fact, a Ponzi scheme, attorneys could argue that the money invested by Libya was owed to earlier investors, so that money returned to Libya would constitute a fraudulent transfer.
The last-minute investment with Stanford by the Libyan government has been the subject of renewed speculation now that the government has fallen into chaos and Libya's U.S. assets have been frozen.
In a 2010 State Department cable uncovered by WikiLeaks, the head of Libya's sovereign wealth fund is said to have told the U.S. ambassador that the fund turned down investment requests from Stanford and convicted Ponzi schemer Bernard Madoff. But a source close to the case tells CNBC Libya did indeed invest with Stanford, "to the tune of nine figures."
Allen Stanford, who is currently undergoing drug treatment at a prison hospital in Butner, North Carolina, has denied wrongdoing.
In a 2009 bail hearing, prosecutors cited the January trip to Libya as evidence Stanford had the means to flee.
But his attorney at the time, Dick DeGuerin, argued the trip was above board.
"In fact, Mr. Stanford applied through the State Department and the embassy, the Libyan embassy in Washington, DC, to travel to Libya to develop business there," DeGuerin said according to a transcript of the hearing. "The state department of the United States is encouraging American business, now that the travel ban and the business ban is over with, to develop business there. That's why Mr. Stanford was there."
The judge in the case sided with the government, ruling Stanford's international ties made him a flight risk. He has been held without bail ever since, and his trial—which could shed more light on the Libyan connection—has been put indefinitely on hold.
The global financial crisis was at its worst, and Stanford, like nearly every other banker in the world, was trying hard to keep his empire afloat.
Libya, which had only recently won fully normalized relations with the U.S., would throw Stanford a major lifeline, according to court filings: The Libyan government's sovereign wealth fund invested some $500 million with Stanford, who left Libya the next day along with Stoelker and an unidentified third person, bound for Zurich, Switzerland.
But three weeks later, it all fell apart. The United States Securities and Exchange Commission accused Stanford of running a $7 billion Ponzi scheme, and a court froze all the firm's assets—including, presumably, Libya's money.
It had been widely believed that the Gaddafi regime was one of the largest victims of the alleged Stanford scam, in which investors have thus far recovered less than three cents on the dollar.
But now, CNBC has learned Libya may have managed to withdraw much of its Stanford investment just before the firm collapsed, according to a source close to the case. If true, it would have been a stunningly fast trade that thousands of much smaller investors were unable to make.
All the deposits and withdrawals by Stanford investors are being closely examined by a court-appointed receiver, Dallas attorney Ralph Janvey, who has already filed hundreds of millions of dollars in "clawback" claims against investors who allegedly withdrew money they were not entitled to.
There was no immediate comment from Janvey's team on whether he plans to pursue a claim against Libya. If Stanford's empire was, in fact, a Ponzi scheme, attorneys could argue that the money invested by Libya was owed to earlier investors, so that money returned to Libya would constitute a fraudulent transfer.
The last-minute investment with Stanford by the Libyan government has been the subject of renewed speculation now that the government has fallen into chaos and Libya's U.S. assets have been frozen.
In a 2010 State Department cable uncovered by WikiLeaks, the head of Libya's sovereign wealth fund is said to have told the U.S. ambassador that the fund turned down investment requests from Stanford and convicted Ponzi schemer Bernard Madoff. But a source close to the case tells CNBC Libya did indeed invest with Stanford, "to the tune of nine figures."
Allen Stanford, who is currently undergoing drug treatment at a prison hospital in Butner, North Carolina, has denied wrongdoing.
In a 2009 bail hearing, prosecutors cited the January trip to Libya as evidence Stanford had the means to flee.
But his attorney at the time, Dick DeGuerin, argued the trip was above board.
"In fact, Mr. Stanford applied through the State Department and the embassy, the Libyan embassy in Washington, DC, to travel to Libya to develop business there," DeGuerin said according to a transcript of the hearing. "The state department of the United States is encouraging American business, now that the travel ban and the business ban is over with, to develop business there. That's why Mr. Stanford was there."
The judge in the case sided with the government, ruling Stanford's international ties made him a flight risk. He has been held without bail ever since, and his trial—which could shed more light on the Libyan connection—has been put indefinitely on hold.