The SEC complaint against Stanford is quite astonishing. Here are some of the highlights, which include a slew of outright lies and even an investment with Bernie Madoff.
- Impossibly, Stanford’s portfolio managed to rack up identical 15.71% back-to-back returns in 1995 and 1996 — which implies that this fraud has been going on for at least 13 years.
- Stanford, and his CFO James Davis, have "wholly failed to cooperate with the Commission’s efforts to account
for the $8 billion of investor funds purportedly held by" Stanford International Bank.
- Stanford told at least one customer that the SEC was freezing the CDs, rather than Stanford itself.
- Stanford’s public statements about its investments "are false":
A substantial portion of the bank’s portfolio was
placed in illiquid investments, such as real estate and private equity. Further, the vast majority
SIB’s multi-billion dollar investment portfolio was not monitored by a team of analysts, but rather
by two people – Allen Stanford and James Davis.
- "SIB has exposure to losses from the Madoff
fraud scheme despite the bank’s public assurances to the contrary": Stanford invested money with Tremont Partners, which in turn invested more than 6% of that money with Madoff. One analyst came up with an estimate of $400,000 in Madoff losses.
- "Since 2005, SGC
advisers have sold more than $1 billion ofa proprietary mutual fund wrap program, called Stanford
Allocation Strategy, by using materially false and misleading historical performance data."
- Both Stanford and Davis "refused to appear
and give testimony in the investigation."
- "Tier 3" assets of SIB — "unknown assets under the apparent control of Stanford and Davis" — accounted for 81% of the Bank’s investment portfolio as of December 2008.
- Stanford’s senior investment officer did what he was told by Laura Pendergest-Holt, the CIO:
The SIO followed Pendergest’s instructions, misrepresenting that
a team of 20-plus analysts monitored the bank’s investment portfolio. In so doing, the SIO never
disclosed to investors that the analysts only monitor approximately 10% of SIB’s money. In fact,
Pendergest-Holt trained the SIO "not to divulge too much" about oversight of the Bank’s
portfolio because that information ”wouldn’t leave an investor with a lot of confidence."
- "SIB’s accountant, C.A.S. Hewlett & Co., a small local accounting firm in
Antigua, is responsible forauditing the multi-billion dollar SID’s investment portfolio. The
Commission attempted several times to contact Hewlett by telephone. No one ever answered the
with the benefit ofhindsight, picked mutual funds that performed extremely well during years
1999 through 2004, and presented the back-tested performance ofthose top-performing funds to
potential clients as ifthey were actual returns earned by the SAS program."
- In any case, the performance claims were simply false: "(e.g., a claimed return of 18.04% in 2000, when actual SAS investors lost as much as 7.5%)."
The only thing missing here is any indication of how much money Stanford really has. If he’s really a billionaire, then maybe all his personal cash can be put towards making his depositors whole. But I suspect that if you have a Stanford CD, you’ll end up with pennies on the dollar. Or maybe a really nice new home in Antigua.