Texas Billionaire May Face 250 Year Sentence for $7 Billion Ponzi Scheme

June 22, 2009 by Suzanne Conlon

On Friday, Texas billionaire R. Allen Stanford, five executives of his company Stanford Financial Group, and one former Antiguan bank regulator were charged with massive fraud.  Prosecutors claim that Stanford and the others were involved in a $7 billion Ponzi scheme to defraud investors.

The enforcement director of the Securities and Exchange Commission, Robert Khuzami, said that investigators have built “an impressive criminal case from the rubble of this massive fraud.”  Stanford and the other executives, according to the indictment, had plans that “would cause the movement of millions of dollars of fraudulently obtained investors’ funds from and among bank accounts.” 

Some investors would receive money “to perpetuate the false appearance that [the business] was financially sound,” says the indictment.  Allegedly, clients were advised to buy certificates of deposit from the Antigua-based Stanford International Bank.  Stanford is being charged with 21 counts of fraud, charges that could result in up to 250 years in prison.

Stanford is “confident that a fair jury will find him not guilty of any criminal wrongdoing,” according to his lawyer, Dick DeGuerin.  Stanford’s banking empire collapsed this year, but DeGuerin said that it was not due to illegal activities: “the present insolvency of the Stanford Companies was caused by the SEC heavy-handed actions, which have destroyed and continue to destroy much of the value” of the companies and investors. 

Stanford Company executives Laura Pendergest-Holt, Gilberto Lopez, and Mark Kuhrt are named in the same Houston indictment as Stanford; Bruce Perraud has been indicted separately in Florida for destroying records important to the investigation. 

Leroy King, the former chief executive officer of Antigua’s Financial Services Regulatory Commission, was charged separately with conspiracy to obstruct an SEC investigation.  “We examine their books on a regular basis.  We follow their strategies and up to the last examination we found them in good order,” King told reporters in February.  King is accused of accepting more than $100,000 in bribes for his role in concealing the fraud of 30,000 investors.

The bank allegedly claimed in advertisements for its CDs that it had a conservative investment philosophy, but the SEC’s lawsuit claims that investor dollars were “misappropriated by defendant Allen Stanford and used by him to acquire private equity investments and real estate.”

The lawyer of Laura Pendergest-Holt, chief investment officer of Stanford’s parent company, has released a statement saying that she was “set up” by Stanford.

Stanford was arrested by FBI agents outside his home in Virginia Friday afternoon.  A court date has not been set.