SEC charges Stanford with fraud

SEC charges Stanford with fraud


Sir Allen Stanford, the billionaire Texan and cricket bankroller, was charged by US securities regulators on Tuesday over a “massive” investment fraud through his Antigua-based offshore bank.

The Securities and Exchange Commission alleged that Stanford International Bank, based in St John’s, Antigua, and one of several companies run by Sir Allen, sold about $8bn in “certificates of deposits’’, promising “improbable and unsubstantiated high interest rates”.


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The regulator accused SIB of falsely claiming that customers’ deposits were safe and that the bank re-invested client funds primarily in “liquid” financial instruments. It also said the bank had falsely claimed no “direct or indirect” exposure to the $50bn “Ponzi’’ scheme allegedly perpetrated by New York broker Bernard Madoff.

SIB has been the focus of controversy in recent weeks, sparked in part by an analyst note that was critical of its apparent ability to deliver consistently market beating returns on its $8bn portfolio of depositors’ assets. It offered an attractive fixed interest rate paid out of investment returns.

According to the SEC, the bank is managed by a close circle of Sir Allen’s family and friends. His father, who lives in Mexia, Texas, serves on the investment committee as does another unnamed resident of the town who has business experience in cattle ranching and car sales.

James Davis, SIB chief financial officer and college roommate of Sir Allen, also serves on the committee. The other member is Laura Pendergest-Holt, chief investment officer of Stanford Financial Group, who prior to joining SFG had no financial services or securities experience.

The SEC said only Sir Allen and Mr Davis “know the whereabouts of the vast majority of the bank’s multi-billion investment portfolio”. Despite this, SIB told investors its investment portfolio was “monitored” by a team of more than 20 analysts in Memphis.

“Stanford and the close circle of family and friends...perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors,” said Linda Thomsen, the SEC’s enforcement director.

The regulator also charged Mr Davis and Ms Pendergest-Holt.

A US district judge granted the SEC’s request for a temporary restraining order on Mr Stanford’s operations, an asset freeze, and the appointment of a receiver for assets. The SEC is seeking financial penalties and forfeited profits.

Sir Allen is a citizen of Antigua who resides in the US Virgin Islands. He has extensive investments in Antigua including two major banks, a trust company and a real estate development company. He also owns a newspaper, a cricket ground, two restaurants and large tracts of land. Sir Allen also made a multimillion-dollar investment in Caribbean cricket through the Stanford Twenty20 tournament.

The alleged fraud has embarrassed the England and Wales Cricket Board, with whom Sir Allen has been negotiating a new sponsorship deal. The ECB said it had suspended those talks.

Stanford referred calls to the SEC. A sign on the door of the group’s Houston office said: “The company is still in operation but under the management of a receiver.”

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