Allen Stanford found guilty of running a US$7billion Ponzi scheme

Left with no money, Stanford was declared indigent by the court and his defence was paid for with public funds.

By Valerie Jones

BRIDGETOWN, Barbados, Wednesday March 7, 2012 – Allen Stanford was found guilty yesterday on 13 counts of a 14-count criminal indictment, including fraud, conspiracy and obstructing an investigation by the U.S. Securities and Exchange Commission (SEC).  He was found not guilty on one count of wire fraud.  He now faces a possible life sentence.

The verdict followed a six-week trial and came less than a day after a Houston federal jury said it could not reach a unanimous verdict on all 14 counts.  U.S. District Judge David Hittner ordered them to continue deliberating.

The subsequent decision came three years after Stanford was accused of defrauding nearly 30,000 investors in 113 countries in a Ponzi scheme involving US$7billion in fraudulent high-interest certificates of deposit at the Stanford International Bank in Antigua.

Prosecutors argued that Stanford had lied for more than two decades, promoting safe investments for money that he channelled into a luxurious lifestyle, a secret Swiss bank account and business deals that consistently failed.

At trial, prosecutors told how Stanford repeatedly raided the bank he owned in Antigua, using it as his “personal ATM.”

Only three years ago, Stanford had an estimated fortune of over US$2billion, a knighthood awarded by Antigua and a collection of yachts, jets and mansions.  He bought a castle in Florida for one of his girlfriends, and his oldest daughter lived in a million-dollar condominium in Houston.  According to prosecutors, he treated Antigua like his personal business haven, with politicians and regulators in tow, through bribes and political campaign contributions.

“There really is no dispute that Allen Stanford lied,” federal prosecutor William J. Stellmach told the jurors in his closing argument, “lining his pockets with billions of dollars of other people’s money.” Another prosecutor, Gregg Costa, compared Stanford to Bernard Madoff, who is serving a 150-year prison sentence for orchestrating an even larger Ponzi scheme.

The government’s star witness, former Stanford aide James M. Davis, testified that he and Stanford faked documents and fabricated financial reports to calm investors and fool regulators.  They funnelled millions of dollars from Stanford International Bank in Antigua to a secret Swiss bank account that Stanford tapped for his personal use, Davis testified.  Davis has pleaded guilty to three criminal counts.

Stanford’s lawyers portrayed their client as a visionary who was not involved in his firm’s daily activities.  They blamed Davis for any fraud and argued that Stanford’s businesses were viable until the government shut down Stanford Financial Group in Houston in February 2009.  Left with no money, Stanford was declared indigent by the court and his defence was paid for with public funds.

During cross-examination, Robert A. Sardino, one of the defence attorneys, accused Davis of manipulating financial statements and requesting that bribes be sent to an Antiguan auditor without Stanford’s knowledge.  Davis countered that it was Stanford who engineered the fraud for more than two decades.  Near the end of his testimony, he shook his finger at Stanford and said that anyone who wanted to know the truth about the Stanford enterprises had only to “follow the money, just follow the money.”

For the prosecution, the Stanford case was a Ponzi scheme in which he and five conspirators gave investors false financial statements indicating that the certificates of deposit were invested in conservative assets when US$2billon was actually lent to Stanford.  All along, auditors, along with the head of Antigua’s Financial Services Regulatory Commission, received bribes to cover up the scheme and misinform the SEC, they said.

For Stanford, the verdict was the latest episode in a riches-to-rags career that has included a fitness club and real estate speculation in Texas, and offshore banking in Montserrat and Antigua.  Antigua has since stripped him of his knighthood and seized his local assets, and the disgraced financier is now believed to be virtually penniless.

After the hearing, Stanford attorney Ali Fazel said:  “We are disappointed with the outcome.  We expect to appeal.”

Cassie Wilkinson, 62, an investor who said she and her retired husband had to go back to work because of their losses, cried after the verdict was announced.

“I’m just relieved, happy, and I’m sad,” she said.  “As an investor, you have to wonder whether you were just stupid or taken advantage of.  This removes the doubt.  It is a vindication.”  Click here to receive free news bulletins via email from Caribbean360. (View sample)