Wednesday, February 18, 2009

SEC Accuses Texas Financier of 'Massive' $8 Billion Fraud

The Securities and Exchange Commission charged Texas financier R. Allen Stanford with an $8 billion fraud, alleging in a civil complaint that he lured investors with promises of high returns on certificates of deposit but poured their money into a "black box" of hard-to-trade assets.

The second huge alleged fraud to emerge in three months -- following Ponzi-scheme charges against Bernard L. Madoff -- reverberated around the world, given Mr. Stanford's status as an international cricket sponsor, Washington political donor and private banker to Latin America's wealthy. Federal agents searched the Houston buildings that are home to his Stanford Financial Group, and customers lined up to withdraw money from a bank he owns in Antigua, the Caribbean island nation where Mr. Stanford's offshore banking operations are based.

According to the SEC, Stanford representatives told people who bought CDs from Stanford International Bank that it was putting their money in easy-to-trade assets; had more than 20 analysts monitoring the portfolio; and underwent yearly audits by Antiguan regulators. In fact, the SEC alleged, the bulk of the money went into real estate and private equity, and the investments were reviewed by only two people: Mr. Stanford and James M. Davis, the bank's chief financial officer and Mr. Stanford's onetime classmate at Baylor University.

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