Déjà vu: US accuses St Vincent bank of Stanford-type fraud

KINGSTOWN, St Vincent, March 27, 2009 – Another Caribbean-based bank is being probed by the United States’ Securities and Exchange Commission (SEC) for allegedly running a scheme similar to what it accuses Texan financier Sir Allen Stanford of operating in Antigua.


This time around it’s the St Vincent and the Grenadines-registered Millennium Bank in the spotlight, with the SEC alleging that through that institution and its parent company, United Trust of Switzerland SA, more than 375 investors were duped into buying US$68 million in “bogus high-yield” certificates of deposit (CDs) since July 2004.


The assets of two American business persons who allegedly led the scam, William Wise and Kristi Hoegel, have been frozen and a receiver appointed to take control of the property.


In a release issued yesterday, the Commission said that it had filed emergency court action to halt the Ponzi scheme – a scam in which early investors out of the money paid in by subsequent investors, rather than from revenues generated by any real business. According to the SEC, investors were promised  returns up to 321 per cent higher than the national overnight average rates offered on traditional bank-issued CDs.


“As alleged in our complaint, the defendants disguised their Ponzi scheme as a legitimate offshore investment and made promises about exuberant returns that were just too good to be true,” said Rose Romero, Director of the SEC’s Fort Worth Regional Office, in a statement issued after the Commission filed its complaint in court yesterday.


“This case demonstrates that investors need to be especially cautious when placing money with entities that may be outside the reach of US regulators.”


The SEC has claimed that Millennium Bank solicited new investors for its CD programme through “blatant misrepresentations and glaring omissions in its online solicitations and in advertising campaigns targeting high net-worth individuals”.


For example, it said, the bank claimed to be “the benefactor of Swiss banking…as well as the vast global investment network that United Trust of Switzerland SA has built over the last 75 years”. The US authorities said those assurances were false since neither business actually invested any of the money received from investors.


“Moreover, United Trust of Switzerland SA is not a bank. In reality, investor funds were diverted to the Defendants and used for a variety of illegitimate purposes,” the SEC claimed.


Furthermore, according to the complaint, bank records establish that a vast majority of the money raised from investors was misappropriated by the defendants, “who enriched themselves and paid their personal expenses, while making small Ponzi payments to investors—satisfying investors’ liquidation requests with recent deposits of new investors”.


The SEC’s complaint also alleges that the defendants funneled some of the US$68 million to relatives and other people and entities.


The case against Millennium Bank is similar to that filed against Sir Allen Stanford who has been accused of engaging in a US$8 billion CD scheme surrounding his Antigua-based Stanford International Bank (SIB).


He has not spoken publicly about the charges but just yesterday, attorney-at-law Dick DeGuerin who said he took up that case last week, is quoted in international media accusing the SEC of causing his client’s investors to panic and creating a fatal run on his financial empire.


“He’s not a swindler…This isn’t a Ponzi scheme. He was able to pay back every investor until the regulators came in like storm troopers, caused a panic, and his banks got nationalized in Venezuela and Antigua,” he said.


In other developments in Sir Allen’s case, a federal judge has approved a motion by Stanford Financial Group’s court-appointed receiver to set aside a US$10 million fund for future expenses.


US District Judge David Godbey approved the shift of the funds currently held in an account with clearing bank Pershing to a Stanford account controlled by the receiver, Dallas attorney Ralph Janvey. The funds can be used to reimburse expenses of the receiver and the firms working for it. They still have to submit invoices for the judge to approve before withdrawing any of the funds.
He has not spoken publicly about the charges but just yesterday, attorney-at-law Dick DeGuerin who said he took up that case last week, is quoted in international media accusing the SEC of causing his client’s investors to panic and creating a fatal run on his financial empire.


“He’s not a swindler…This isn’t a Ponzi scheme. He was able to pay back every investor until the regulators came in like storm troopers, caused a panic, and his banks got nationalized in Venezuela and Antigua,” he said.


In other developments in Sir Allen’s case, a federal judge has approved a motion by Stanford Financial Group’s court-appointed receiver to set aside a US$10 million fund for future expenses.


US District Judge David Godbey approved the shift of the funds currently held in an account with clearing bank Pershing to a Stanford account controlled by the receiver, Dallas attorney Ralph Janvey. The funds can be used to reimburse expenses of the receiver and the firms working for it. They still have to submit invoices for the judge to approve before withdrawing any of the funds.