Pendergest-Holt, Stanford Executive, Charged With Obstruction

Pendergest-Holt, Stanford Executive, Charged With Obstruction

Feb. 27 (Bloomberg) -- Laura Pendergest-Holt, the chief investment officer of Stanford Financial Group, is scheduled to appear today before a magistrate judge in Houston on charges she obstructed an investigation into an alleged $8 billion financial fraud, according to the Justice Department.

Pendergest-Holt, 35, was arrested by the FBI yesterday at Stanford’s Houston headquarters, the agency said. She’s being held in a federal detention center in Houston.

The Securities and Exchange Commission sued Pendergest-Holt, Stanford Chairman R. Allen Stanford, and Stanford Chief Financial Officer James M. Davis on Feb. 17, accusing them of misleading investors about $8 billion in certificates of deposit in Antigua- based Stanford International Bank Ltd. The FBI is investigating, along with the Internal Revenue Service and Postal Inspection Service.

A federal judge in Dallas froze the company’s and Allen Stanford’s assets and appointed a receiver to account for investors’ money.

A criminal complaint charging Pendergest-Holt alleges that she made misrepresentations to the SEC to obstruct its investigation, according to the Justice Department. The complaint is based on a finding of probable cause by a magistrate judge, and Pendergest-Holt has not been indicted by a grand jury, according to the statement.

‘Extremely Disappointed’

“She is extremely disappointed in the path the SEC and law enforcement are taking,” her lawyer Dan Cogdell said in a telephone interview last night. “She has been cooperating for weeks, and now she is falsely charged for a crime she didn’t commit.”

“They want her to be the canary, to sing and tell all against those of greater prominence in the company,” said Jacob Frenkel, a former SEC attorney, in an interview. “The government’s hope is that she becomes the first plea in what will be a much more substantial case.”

The charge relates to a Feb. 10 meeting between Pendergest- Holt and representatives of the SEC at the commission’s Fort Worth, Texas regional office, according to the Justice Department. She was subpoenaed to discuss the allegations that Stanford Financial Group and related companies, including Stanford International Bank, defrauded investors.

Pendergest-Holt made “several” misrepresentations under oath to the SEC during her testimony, including failure to reveal that she participated in a Miami session with Stanford corporate officers to prepare for the meeting with the SEC, according to the statement.

Airplane Hangar

In an affidavit filed with the complaint, the FBI said Pendergest-Holt met on Jan. 21 and on Feb. 2 in Stanford’s private Miami airplane hangar with two Stanford Group executives, a company attorney, an executive from an affiliated company and three people who are now cooperating with authorities in their investigation, to prepare for her testimony before the SEC. The FBI described “Executive A” as a shareholder and “Executive B” as a member of the board who managed the investment portfolio with Pendergest-Holt.

Stanford described himself in tax documents filed in the U.S. Virgin Islands two years ago as the companies’ sole shareholder and the SEC in its Feb. 17 complaint said the portfolio was managed by chief financial officer, James Davis.

Three Tiers

The Antigua bank managed its portfolio in three tiers, the SEC said in its civil lawsuit last week. The first included cash and like-cash instruments. Pendergest-Holt oversaw the second tier, which invested through outside managers, the SEC said.

In the Feb. 10 meeting with the SEC, Pendergest-Holt failed to reveal to investigators “the extent of her knowledge” of the Tier III portfolio, the Justice Department statement said. That portfolio comprised 81 percent of all the company’s investments, the affidavit said.

During the Miami discussions, Pendergest-Holt presented a pie-chart that showed that $3 billion in Tier III assets were invested in real estate and another $1.6 billion was a “loan to shareholder,” the FBI statement said. The affidavit said the three cooperating witnesses believed that loan went to “Executive A.”

“At no point did Pendergest-Holt reveal that the $1.6 billion loan had been discussed with corporate officers in Miami,” according to the statement.

In a December newsletter, Stanford told depositors that it had made a $541 million capital infusion into the bank to help it weather the economic downturn. The affidavit said that money was actually made up of real estate investments that the bank already owned.

Investment Committee

Pendergest-Holt denied that she was a member of the international bank’s investment committee, even though she was, and didn’t explain the extent of her knowledge about the Tier III portfolio, according to the Justice Department.

She was again interviewed by the SEC on Feb. 17 in Memphis, Tennessee, and continued to obstruct the investigation by saying she didn’t know about the Tier III portfolio, according to the statement.

Pendergest-Holt is a native of Baldwyn, Mississippi, a town of about 3,300 people near Elvis Presley’s hometown of Tupelo. Pendergest-Holt met Davis, the financial chief, in church, her husband, Jim Holt, said in a Feb. 20 interview.

Holt said his wife oversaw “investable assets” of the company, and that she didn’t manage the company’s Tier III portfolio. Her sister Amy is married to Ken Weeden, Stanford Financial Group’s managing director of investments and research.

BLOOMBERG