Stanford

Madoff Sentencing Postponed; Stanford Indicted

While I was away in Vegas at a conference last week, two important events for several of the most notorious scammers (in one case still alleged). First, we were all awaiting the moment when $50 billion+ thief and Far Rockaway High School grad Bernie Madoff was to be sentenced on June 16. According to Reuters, it has now been postponed to next Monday, June 29 (of course I am scheduled to be out of the country then). There was no particular reason given for the postponement by U.S. District Judge Denny Chin, though it is not unusual for this to happen. Hey the guy’s in jail so no big rush. The judge also announced that the sentencing would be held in a much larger courtroom than Chin’s regular one. Get ready to camp out for seats! After that, the Madoff news will continue to flow as we wonder what will happen to wife Ruth, kids, brother and niece (and whether more money is found, and whether more advisors who funneled him money will be nabbed).

Meantime, Texas billionaire (not for long?) R. Allen Stanford surrendered to the FBI on June 18. He was indicted the next day in a 57-page 21-count indictment along with a former Antiguan regulator (actually the CEO of their financial services regulatory commission!)  and also Stanford’s chief accounting and investment officers in an alleged $7 billion scheme. Stanford will be in court in Texas tomorrow for a bail hearing, according to Bloomberg News. The prosecutors want bail denied as they are concerned that Stanford’s alleged history of paying bribes will encourage him to find a way to flee. The group is accused of selling phony certificates of deposit to tens of thousands of unwitting investors. Among other things, Stanford is accused of taking close to $2 billion in undisclosed personal loans. We think James Davis, the former CFO of Stanford, is cooperating and may bring the Feds a lot of damning information. Stanford still denies wrongdoing, having told Bloomberg News in April, “I’m not a damn swindler.” Based on that, this one may not be a simple guilty plea as we saw in the Madoff case. Law students, sharpen your pencils, there’s probably going to be some learning on this one.

Stanford CIO Denies Charges

Stanford Financial Group’s former chief investment officer, no surprise, has denied charges that she participated in issuing fraudulent certificates of deposit along with her boss, R. Allen Stanford, who is also quite a bit in trouble (and has denied all charges) in an alleged $9 billion scheme.

Laura Pendergest-Holt, so far the only high profile female in the latest rash of alleged swindles (the New York Times politely declined to give her age as is their norm), is facing civil fraud and criminal charges (for obstruction related to an allegation she lied about her role in the mess). As we earlier reported, Stanford’s former CFO, James Davis, is cooperating with investigators.

The London Times online has reported that Pendergest-Holt gave employees and senior executives of Stanford carefully prepared scripts of what to say to the public, investors and regulators. There are reports that she is also cooperating, but that may have stopped when prosecutors started believing, apparently, that she was part of the scam.

Stanford’s #2 is Cracking

Most of you have read about the December civil case filed by the SEC against one R. Allen Stanford, Texas financier. He is accused of using his Stanford Financial and Stanford International Bank to perpetrate what the lawsuit called “a massive Ponzi scheme” that allegedly stole about $9 billion from investors. Criminal investigations also are progressing. It now appears, according to the Wall St. Journal, that the number 2 guy at Stamford, James M. Davis, has decided to cooperate after initially refusing. Davis and Stanford were roommates at Baylor University. Davis was both a director and CFO of the Stanford entities.

Apparently, Stanford International Bank convinced people to fork over their money with promises of very high returns on certificates of deposit, but these were not protected by the FDIC. The SEC alleges that the bank lied about what it did with the money, which allegedly was put into real estate and private equity. It appears that much of the fraud was perpetrated against Venezuelans, to the tune of about $3 billion.

Amazingly, Stanford’s websites are still active (http://www.stanfordfinancial.com/sir_allen), suggesting that “Sir Allen” was the first Knight named by the British Commonwealth Islands of Antigua and Barbuda, where he has dual citizenship with the US.

With Davis talking, this one might be a little easier to put together, but even he may not know as much as there is to know. We will follow this and keep you informed.