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Many seek their money as Stanford fallout spreads

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ST. JOHN’S/CARACAS (Reuters) – People scrambled on Wednesday to get back their money from firms linked to Texas billionaire Allen Stanford, as fallout from U.S. fraud charges against him spread from the United States and the Caribbean to Latin America and Europe.

The U.S. Securities and Exchange Commission, which charged Stanford and two Stanford Group Co executives on Tuesday with an $8 billion fraud, said it did not know where the flamboyant 58-year-old financier and sports entrepreneur was.

In Miami, the local NBC television station reported that Stanford Group offices there had been raided by federal authorities, a day after a similar raid at Stanford’s U.S. headquarters in Houston.

The U.S. Attorney’s Office and an FBI spokeswoman in Miami said their agencies had not been involved in the latest raid and referred calls to the SEC.

Stanford‘s operations in Miami and Baton Rouge, Louisiana, were being shut down by a court-appointed receiver, a source briefed on the matter said.

ABC News, citing federal authorities, reported the Federal Bureau of Investigation and others have been investigating whether Stanford was involved in laundering drug money for Mexico Gulf cartel.

Citing unnamed officials, ABC reported Mexican authorities had detained one of Stanford’s private planes as part of the investigation, which has been going on since last year.

Officials said checks found inside the plane were believed to be connected to the Gulf cartel, one of Mexico‘s most violent gangs, ABC reported.

ABC cited authorities as saying Stanford could potentially face criminal charges of money laundering and bribery of foreign officials. Authorities said the SEC’s action against Stanford on Tuesday may have complicated the federal drug investigation.


From the tiny Caribbean island of Antigua, a key outpost in Stanford’s business empire, to Andean nations Venezuela, Colombia and Ecuador, investors and depositors, most angry, some in tears, besieged his banks and companies to try to redeem funds or seek information about their savings.

After the shock generated by the alleged $50 billion Ponzi scheme fraud blamed on Wall Street veteran Bernard Madoff, regulators sought to calm public fears about another major financial scandal at a time of global recession and banking failures.

In Colombia, a local affiliate of Stanford halted its activities on that country’s stock exchange.

In Ecuador, the local Stanford affiliate was suspended for 30 days from operating in the Quito stock exchange, the bourse said.

While mystery surrounded Stanford’s whereabouts, CNBC television reported that he tried to hire a private jet to fly from Houston to Antigua, but the jet lessor refused to accept his credit card.

The SEC accused Stanford in a civil complaint of fraudulently selling high-yield certificates of deposit from his Antiguan affiliate, Stanford International Bank Ltd (SIB).

Asked by reporters whether there would be more fraud cases of the scale and scope of Madoff and Stanford, U.S. Attorney General Eric Holder told reporters: “It’s hard to say. I’d like to think that those are going to be the largest.”

He declined to comment on why the Justice Department has not filed criminal charges against Stanford.

Asked if Stanford may be outside the United States, SEC spokeswoman Kimberly Garber said: “Certainly that’s a possibility, but we don’t know.”


In the twin-island Caribbean state of Antigua and Barbuda, where Stanford is the biggest private employer, Prime Minister Baldwin Spencer said the SEC charges could have “catastrophic” consequences, but urged the public not to panic.

In Antigua’s capital, St. John’s, and in Venezuela‘s, Caracas, hundreds besieged Stanford banks and offices.

“I heard the news and came straight down. We’ve had money here for two years and I want it back,” said Caracas resident Josefina Moreno, who added her son had about $10,000 invested.

A Venezuelan official estimated that people in that country have invested about $2.5 billion in SIB.

Antiguan police officers stood watch at Stanford-controlled Bank of Antigua where hundreds turned out on Wednesday.

“I’d like to get my money out,” said Andrea Lamar, 28.

Bank of Antigua, with three branches in Antigua and Barbuda, is part of Stanford‘s global business interests, but separate from SIB, the offshore affiliate at the heart of fraud charges lodged by U.S. regulators.

In Mexico City, some 40 mainly middle-aged and elderly people waited outside a Stanford office for information. Tempers frayed. “I demand to be let in,” one woman shouted.

Peruvian regulators sent an inspection team to local Stanford offices.

In its civil complaint, the SEC said SIB sold $8 billion in CDs by promising returns “that exceed those available through true certificates of deposits offered by traditional banks.”

Stanford Group claims to oversee $50 billion in assets.

In Houston, the first of what lawyers think may be a flood of lawsuits against Stanford was filed in federal court on Tuesday, hours after a U.S. judge froze the company’s assets.

Four investors who each put in between $250,000 and $600,000 with Stanford will seek “consequential damages” in a trial where they will lay out how the company’s army of financial advisers managed to sell $6.7 billion in CDs.

In Florida, Michael A. Gross, acting director of the division of securities at the Florida Office of Financial Regulation, said the office still had “an open examination” of Stanford’s business in the state, conducted through a trust office in Miami and broker-dealers in Miami, Longboat Key, Boca Raton and Vero Beach.

Fifteen months ago, in November 2007, the Financial Industry Regulatory Authority (FINRA) fined Stanford Group Co $10,000 for distributing marketing materials that “failed to present fair and balanced treatment of the risks and potential benefits of a CD investment.”

In the 2007 claim, FINRA said that Stanford failed to tell clients that it had a potential conflict of interest because an affiliated bank was issuing the CDs. Stanford did not admit any wrongdoing.

FINRA regulates close to 5,000 brokerages.


The SEC said Stanford had failed to respond to subpoenas seeking testimony.

Since Tuesday, Stanford company officials have been referring requests for comment to the SEC.

There were no signs of imminent criminal charges against Stanford, whose personal fortune was estimated by Forbes Magazine last year at $2.2 billion.

A federal judge appointed a receiver on Tuesday “to take possession and control of defendants’ assets for the protection of defendants’ victims.”

Stanford, who holds dual U.S.-Antiguan citizenship, has donated millions of dollars to U.S. politicians and secured endorsements from sports stars, including golfer Vijay Singh and soccer player Michael Owen.

Singh, wearing a golf shirt with a Stanford logo, told Reuters in California that he was “just surprised by it all.” He said Allen Stanford had donated large sums to charity.

Other public figures tried to distance themselves from Stanford. British brokerage and investment house Blue Oak Capital said it had canceled a deal to distribute research from Stanford Washington Research Group.

Former Swiss President Adolf Ogi said he would resign from the board of Stanford Financial Group.

A leading figure in British cricket described the England and Wales Cricket Board‘s (ECB) association with Stanford as a “fiasco.

A planned Stanford-sponsored Twenty20 international cricket tournament was now unlikely to take place, ECB chairman Giles Clarke said.

In Antigua, Stanford owns the country’s largest newspaper, heads a local commercial bank, and is the first American to receive a knighthood from its government. He has homes across the region, from Antigua to St. Croix in the U.S. Virgin Islands to Miami.

(Additional reporting by Frank Jack Daniel, Ana Isabel Martinez and Saul Hudson in Caracas, James Vicini and Randall Mikkelsen in Washington, Cyntia Barrera in Mexico City, Teresa Cespedes in Lima, Alonso Soto in Quito, Rachelle Younglai, Simon Evans in Antigua, Tom Brown in Miami, Svea Herbst-Bayliss in Boston, Anna Driver in Houston, Helen Popper and Nelson Bocanegra in Bogota, Martin de Sa’Pinto and Emma Thomasson in Zurich and Mitch Phillips and Joel Dimmock in London; writing by Pascal Fletcher in Miami and Toni Reinhold in New York; editing by John Wallace, Jeffrey Benkoe, Gary Hill)

Yahoo! News


Written by Michael Cooper

February 19, 2009 at 6:00 am

Posted in Uncategorized

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