TOPICS > Politics

Billionaire Stanford, Bank Officials Indicted in Massive Fraud Case

BY Admin  June 19, 2009 at 2:45 PM EST

Stanford signs autographs in Antigua; AFP/Getty

The 59-year-old financier will appear Friday afternoon in
federal court in Virginia to answer allegations he orchestrated the fraud
through his Antigua bank with the aid of company executives and an Antigua
regulator.

Stanford’s lawyer issued a statement Friday afternoon
stating his client is innocent. “Allen Stanford will continue to fight
those allegations,” lawyer Dick DeGuerin said, according to Reuters.
“He is confident that a fair jury will find him not guilty of any criminal
wrongdoing.”

Stanford holds dual U.S. and Antigua and Barbuda
citizenship. He denies any wrongdoing and has said he would put up “the
fight of my life” if indicted. He surrendered to FBI agents outside his
girlfriend’s house in Virginia late on Thursday, according to media reports.

The indictment charges Stanford and other Stanford Financial
Group executives “would cause the movement of millions of dollars of
fraudulently obtained investors’ funds from and among bank accounts.”

The firm would give money to some investors “to
perpetuate the false appearance that (Stanford’s business) was financially
sound,” according to the indictment.

A federal grand jury in Texas indicted Stanford, former
Stanford corporate officials Laura Pendergest-Holt, Gilberto Lopez, Mark Kuhrt
and Leroy King, the former CEO of Antigua’s Financial Services Regulatory
Commission, on 21 charges of fraud and obstruction.

The indictment states that the suspects defrauded investors
who bought about $7 billion in certificates of deposit from Stanford’s offshore
bank. They are also accused of diverting $1.6 billion in undisclosed personal
loans to Stanford and charged with falsely claiming Stanford’s bank assets grew
from $1.2 billion in 2001 to $8.5 billion in December 2008.

The indictment alleges that about $5 billion of the bank’s
reported assets consisted of notes on loan to Stanford and grossly overstated
interest in island properties. More than $2 billion was allegedly added to the
bank’s books in 2008 from artificial real estate deals.

Stanford is also accused of making more than $100,000 in
“corrupt payments” to King to ensure bank records were not audited.

The indictment seeks the forfeiture of fraud proceeds from
all the defendants.

A separate indictment unsealed in Florida accuses a Stanford
worker, Bruce Perraud, of destroying records important to the investigation.

Stanford already faces civil charges by the Securities and
Exchange Commission that he fraudulently sold $8 billion in certificates of
deposit with improbably high interest rates from his Stanford International
Bank Ltd, headquartered in the Caribbean island of Antigua.

The SEC, saying Stanford had used Antigua as a
“personal playground,” filed new civil charges on Friday against company
officials and an Antigua regulator, saying they aided Stanford in the pyramid
investment scheme.

“If the SEC had not come in and disemboweled a living,
breathing, strong organization the way they did, there’s no question on God’s
green earth that everyone would have been made whole and we would have had a
lot of money left over,” Stanford said to Reuters in April.

The new SEC complaint said Pendergest-Holt, chief investment
officer for the Stanford Financial Group, and James Davis, the company’s chief
financial officer who was also Stanford’s one-time roommate at Baylor
University, misappropriated billions of dollars and falsified company financial
statements.

Stanford and Davis both signed the falsified statements, the
SEC claims. Stanford, Davis and Pendergest-Holt have previously denied
wrongdoing.

The SEC also alleged Stanford accountants Lopez and Kuhrt “reverse-engineered”
the Antigua bank’s financial statements to report nonexistent income.

It said Davis, Lopez and Kuhrt developed elaborate methods
to handle and hide financial information, transferring it to portable hard
drive that they called “the football” and deleting it from U.S.-based
servers and flying paper files on Stanford’s fleet of six private jets to
Antigua, where they were burned.

According to the SEC, Stanford used some of the funds to
finance a restaurant called the “Sticky Wicket” and “Stanford
20/20,” an annual cricket tournament boasting a $20 million purse.

Stanford became the first American to be knighted by Antigua
and Barbuda in 2006. He made his first fortune in real estate in the early
1980s and expanded the family firm into a global wealth management company.

“This starts to bring closure for the victims,”
Jacob Frenkel, a former SEC enforcement official and now an attorney in
Maryland, said of the criminal indictment.

Before the SEC leveled the fraud charges, his personal
fortune was estimated at $2.2 billion by Forbes magazine. Stanford was a
generous sports patron and owned homes in Antigua, St. Croix, Florida and
Texas.

Until now, the only Stanford official to have faced criminal
charges is Pendergest-Holt. She was arrested by the FBI in February and later
freed on bail.

Davis has not been charged with criminal activity and is
cooperating with federal authorities, although his attorney expects his client
to be indicted.

Stanford’s Antiguan liquidators and the company’s U.S.-based
receiver have been locked in a battle over control of the offshore bank.

Ralph Janvey, the Dallas lawyer appointed by U.S. District
Judge David Godbey to oversee Stanford’s assets and operations, has filed court
papers arguing he should oversee the Antigua bank along with the U.S.-based
Stanford entities he controls. The Antiguan liquidators disagree.