Two-and-a-half years after he was arrested for allegedly running a $7 billion Ponzi scam, the criminal trial of Allen Stanford has begun. The Texas financier is charged with 14 counts of fraud, conspiracy to commit money laundering, and conspiracy. He denies any wrongdoing.
Stanford is accused of issuing $7 billion in fraudulent CDs through his Antigua-based Stanford International Bank to investors in over a hundred nations. He then allegedly defrauded them.
Even since his arrest these investors have not recovered any of their money. According to Reuters, a guilty conviction won’t necessarily help his Ponzi victims recoup their losses. Hopefully, however, the Securities and Exchange Commission’s lawsuit against the Securities Investor Protection Corp. will remedy this.
The SEC wants SIPC, the broker industry-funded fund, to accept the securities claims made by Stanford’s victims. Meantime, SIPC maintains that it has no jurisdiction over the Stanford case. (Also, this week, arguments over that lawsuit will begin in federal court, and Judge David Hittner, who is presiding over the criminal case against Stanford has overruled a motion by the government to keep the decision in the SIPC v. SEC case off-limits.)
The prosecution says that Stanford promised investors that they would get higher returns if they bought CDs through the Antigua bank (compared to the returns coming from US bank CDs). The money from these CD sales was then used pay off earlier investors and financially support Stanford’s other businesses. He also allegedly used investors’ money to pay for expensive vehicles, luxury residences, and women.
Stanford and three of ex-company executives are accused of trying to cover up their wrongful actions through bogus bank records and with bribes to auditors and regulators in the form of Super Bowl tickets, other perks, and money (over $3 million). The Ponzi scam collapsed in 2008 when his bank ran out of funds and investors stopped receiving payments.
Meantime, Stanford’s defense attorneys are arguing that he wasn’t running a Ponzi scam. They claim that Stanford’s investment operation was legitimate.
His legal team is instead blaming the financial scheme on former Stanford International Bank CFO James M. Davis, who has already pleaded guilty to charges of securities fraud, wire fraud, conspiracy to commit mail fraud, and conspiracy to obstruct a SEC investigation. Davis, who struck a plea deal in his criminal case, is expected to testify for the prosecution during Stanford’s trail.
Stanford, who has been behind bars for the last two-and-a-half years, was declared fit for trial in December. His case had been delayed so he could recover from a medication addiction and from injuries he sustained after he was involved in a jail brawl.
Prosecutors say Texas financier Stanford, stole investors’ money in $7 billion Ponzi scheme, The Washington Post, January 24, 2012
Stanford trial starts, cold comfort for investors, Reuters, January 24, 2012
More Blog Posts:
Multibillion-Dollar Stanford Securities Fraud Scam Has Investors Contacting Houston Stockbroker Fraud Lawyers for Help, Stockbroker Fraud Blog, February 19, 2009
Ex-SEC Lawyer to Settle DOJ Charges Accusing Him of Inappropriately Representing Ponzi Fraudster Allen Stanford, Stockbroker Fraud Blog, January 12, 2012
Securities Fraud Lawsuit Names NRP Financial Inc. in $150M Minnesota Ponzi Scam, Stockbroker Fraud Blog, January 10, 2012