SEC Stops 'Massive Fraud' in Houston Investment Firm

Cricket, Jets and Junkets Drove Stanford's $9.2 Billion Fraud The leather bound marketing brochures, luxurious jets and a cricket championship with a $20 million top prize were all part of what the Securities and Exchange Commission (SEC) says was a 'massive fraud' on the part of a Houston investment firm. Robert Allen Stanford and other top executives of the Stanford Financial Group are accused by the SEC of fraud in the sale of about $8 billion of high-yielding certificates of deposit held in the firm's bank in Antigua.

In the complaint, filed in Federal District Court in Dallas, SEC accuses Stanford and two senior executives, CFO James Davis and Laura Pendergest-Holt, the CIO of Stanford Group and the Antigua Bank, with misrepresenting the safety and liquidity of the uninsured CDs. The CDs, sold by Stanford International Bank, were marketed through the firm's broker dealer in Houston. The SEC says in its complaint that it couldn't account for the $8 billion in assets that were supposed to be in the Antigua bank after issuing subpoenas for bank records. The bank, which says it has $8.5 billion in assets and more than 30,000 customers in 131 countries and the brokerage unit with 30 U.S. offices, were named in SEC's suit. Stanford Financial has previously claimed to advise $50 billion in assets.

Bank officials, including Stanford and Davis, did not appear to testify or give any proof on the assets claimed. Pendergest-Holt testified to the SEC that she couldn't account for the assets, saying Stanford and Davis had access with access to the bank's assets.

The SEC's court filings accuse the bank of falsely stating in marketing materials that client funds were put in liquid financial instruments , when they were actually put in private equity funds and real estate investments.

The SEC's complaint requests that Stanford's assets be frozen and a receiver appointed to take control of business operations. The complaint also asks that the assets of the bank and other offshore units be repatriated. It also says that Stanford and other executives surrender their passports.

The SEC also says another investment advisory unit, Stanford Capital Management, has inflated the performance of its $1.2 billion assets mutual fund to prospective investors.

Stanford used his status as a billionaire to draw interest in cricket. In September, Forbes named him No. 205 in its 400 Richest Americans article. He sponsored cricket competitions in Antigua and in 2008 held a cricket match where four teams competed for $20 million. He also donated money to legislators in both the House and Senate and sponsored political junkets on his jets to Antigua and other exotic islands to increase his political connections and clout.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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