SEC accuses Texas magnate in US$9.2b fraud
Posted: 18 February 2009 0156 hrs

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WASHINGTON : The US Securities and Exchange Commission (SEC) on Tuesday accused Texas magnate and top cricket promoter Allen Stanford of massive fraud in connection with the sale of securities.

A US district judge froze the assets of Stanford, a major promoter of the sport of cricket, after the SEC slapped fraud charges worth 9.2 billion dollars on the flamboyant billionaire.

The SEC charged Stanford and three of his companies for "orchestrating a fraudulent, multi-billion dollar investment scheme centering on an eight billion CD (certificate of deposit) program," a statement from the commission said.

Stanford's companies include Antiguan-based Stanford International Bank (SIB), Houston, Texas-based broker-dealer and investment adviser Stanford Group Company (SGC), and investment adviser Stanford Capital Management.

The SEC complaint alleged an additional scheme relating to 1.2 billion dollars in sales by SGC advisers of a mutual fund program, called Stanford Allocation Strategy (SAS), by using "materially false" data.

The SEC also charged SIB chief financial officer James Davis as well as Laura Pendergest-Holt, chief investment officer of Stanford Financial Group (SFG), in the enforcement action.

The SEC filed the complaint against Stanford and the others in a federal court in Dallas.

Following the complaint, the statement said that US District Judge Reed O'Connor had entered a temporary restraining order, froze Stanford's assets, and appointed a receiver to marshal those assets.

"Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors," said Linda Thomsen, director of the SEC's enforcement division.

"We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors."

Rose Romero, an SEC regional director, said, "We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world."

According to the SEC complaint, SIB had, through a network of SGC financial advisers, sold about eight billion dollars of "self-styled certificates of deposit" to investors by promising improbable and unsubstantiated high interest rate returns.

These rates were supposedly earned through SIB's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years, the SEC said.

Stanford and the others allegedly misrepresented to securities purchasers that their deposits were safe.

The SEC also accused SIB of "falsely claiming" that the bank has no "direct or indirect" exposure to a scheme run by Wall Street financier Bernard Madoff, who faces charges he ran a 50-billion-dollar pyramid fraud.

The charges against Stanford is also dampening his cricket promotion.

The England and Wales Cricket Board (ECB) said Tuesday they had suspended their talks with him.

West Indies cricket could also face a major financial blow.

The 20-nation West Indies domestic 20/20 cricket tournament and the cricket Super Series staged last year bear the name of Stanford.

Stanford was knighted by the Antigua government and goes under the prefix 'Sir.'

- AFP /ls