Wednesday, February 18, 2009

Securities: SEC Brings Fraud Charges against Stanford

The Securities and Exchange Commission has filed a civil complaint against R. Allen Stanford and his holdings alleging a massive fraud of $8 billion. The suit, filed in federal court in Dallas, Texas, sought and obtained an order freezing Stanford's assets and ordering repatriation. SEC staff is working with Antigua's authorities to enforce the freeze in that jurisdiction.

The complaint alleges that representatives of Stanford sold prospective investors certificates of deposits from a banking institution located in Antigua, promising higher returns than other banks offered. Stanford and his agents told the investors that the bank was able to pay the high returns because they had placed the funds in high return investments. Moreover, they assured the investors that the monies were in highly liquid investments and that a staff of analysts monitored the investments. Additionally, the complaint alleges that Stanford and his agents assured investors that the investments were subject to annual audits by Antigua's regulators.

In fact, the complaint states that Stanford had placed the monies in private equity and real estate investments. Moreover, the government alleges that Stanford did not employ a staff of analysts to monitor the investments, nor did Antigua perform annual audits.

The SEC apparently increased the pace of its investigation of Stanford after suffering withering criticism for its failure to uncover the Madoff scheme.

Finally, it seems almost inevitable that the Department of Justice is conducting a parallel criminal investigation and may bring charges against Stanford and others.

For in depth news coverage of the Stanford matter, please see the New York Times article of February 17, 2009, and the Wall Street Journal article of February 18, 2009.

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