$7 Billion Ponzi Scheme- Allen Stanford Trial Hears of Scramble to Cook Books as Last Millions Ran Out

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$7 Billion Ponzi Scheme- Allen Stanford Trial Hears of Scramble to Cook Books as Last Millions Ran Out

A federal jury found R. Allen Stanford guilty of masterminding a $7.1 billion Ponzi scheme, completing an extraordinary fall from grace for a wealthy financier once feted as a successful entrepreneur.

A federal jury found R. Allen Stanford guilty of masterminding a $7.1 billion Ponzi scheme, completing an extraordinary fall from grace for a wealthy financier once feted as a successful entrepreneur.

After a criminal case that dragged on for nearly three years, a jury of eight men and four women on Tuesday convicted Mr. Stanford on 13 of the 14 charges brought by prosecutors, including fraud, obstructing investigators and conspiracy to commit money laundering. The verdict is a victory for the U.S. government, which targeted the chairman of Stanford Financial Group as part of a crackdown on white-collar crime following the financial crisis.

He faces a maximum of 230 years in prison. Mr. Stanford’s attorneys, while still under a court order to not discuss the case, told reporters they would appeal but didn’t specify on what grounds. Prosecutors declined to comment.

Robert Khuzami, enforcement director of the SEC, said in a statement, “Today’s guilty verdicts send a resounding message that those who violate the law and obstruct SEC investigations will be held accountable. We applaud the skill and tenacity of the prosecutors handling the case.”

The verdict, coming on the fourth full day of deliberations after a month long trial, marks a remarkable downfall for Mr. Stanford, 61 years old, who rose from owning a gym in Texas to becoming a billionaire knighted in Antigua. As the verdict was read, Mr. Stanford, wearing a dark suit and open-necked shirt, turned to family members sitting in the courtroom and appeared to mouth the words, “It’s OK.”

On Monday, the judge ordered jurors to continue deliberating after they said they couldn’t reach a unanimous verdict on all 14 criminal counts.

Prosecutors estimated Mr. Stanford’s $7.1 billion fraud was among the largest in history, but it was overshadowed by an even greater financial crime: the $17.3 billion Ponzi scheme orchestrated by financier Bernard Madoff, who pleaded guilty in 2009.

The end of Mr. Stanford’s criminal case could allow investors to attempt to recover hundreds of millions of dollars from his accounts and the assets of Stanford Financial Group. A judge has placed on hold the civil suit brought against him by the SEC while the criminal case is pending. An appeal of the verdict, however, may delay investors’ recovery efforts.

Cassie Wilkinson, a Stanford Financial investor, said she was “relieved, happy and sad,” about the verdict. “I feel sorry for his family, for his mother,” she said, referring to Sammie Stanford, the 81-year-old who has been in the courtroom every day since deliberations began. “It’s a tragic loss for so many families, for tens of thousands of investors.”

After the verdict, jurors began to hear the case on the Justice Department’s efforts to seize funds in bank accounts controlled by Mr. Stanford, estimated to hold more than $300 million. The SEC, in a separate civil action, could ask a judge for permission to move forward with its case if it believes there are additional assets to recover.

A federal jury convicted international financier R. Allen Stanford on 13 of 14 charges of money laundering and fraud in a Ponzi scheme that lost billions of dollars for investors, Joanna Chung reports on digits. Photo: Getty Images.

In 2008, before his downfall, Mr. Stanford was the 205th richest American with a net worth of $2.2 billion, according to Forbes magazine. His holdings in Antigua, where he held a dual citizenship, included banks, airlines and the country’s biggest newspaper. A cricket enthusiast, he rose to international prominence as a benefactor of the sport.

But Mr. Stanford’s lavish lifestyle, spent aboard yachts and jets and in residences around the world, was built on funds he borrowed illegally from his investors, prosecutors said.

In 2009, the U.S. government accused Mr. Stanford of swindling thousands of investors by selling them certificates of deposit issued by a bank he controlled in Antigua, representing to clients that the money would be invested conservatively in stocks and bonds. Instead, prosecutors argued at trial, he funneled the proceeds into risky real-estate assets and his own businesses, concealing the scheme by bribing an Antiguan regulator and an outside auditor.

Mr. Stanford’s lawyers, who ultimately persuaded him not to testify in his own defense, countered at trial that he ran a legitimate business that was ruined when the SEC raided his office in 2009 and froze his assets. They portrayed Mr. Stanford as an absentee chief executive and argued that any fraud would have been committed by his chief financial officer, James Davis, a government witness. In 2009, Mr. Davis pleaded guilty to three counts and agreed to cooperate with prosecutors in the investigation.

Jurors found Mr. Stanford not guilty on one count of wire fraud, a $9,000 purchase of Super Bowl tickets in 2006, which prosecutors said he bought to bribe Mr. King. On Monday, jurors had asked to re-examine testimony about Antigua’s rules governing gifts. An Antiguan court last month upheld an order that Mr. King be extradited to the U.S. to face fraud, money laundering and conspiracy charges in connection with the case.

Mr. Stanford has been jailed since June 2009 because he was judged to be a flight risk. In prison, Mr. Stanford was beaten in September 2009 by a fellow inmate. Mr. Stanford complained of memory loss from the head trauma, and a court found that he was so addicted to his prescribed painkillers that he wasn’t competent to stand trial. In December 2011, a judge found him competent and the trial commenced in January.

 

Read More: http://online.wsj.com/article/SB10001424052970203458604577265490160937460.html

 

2012-03-07T18:11:28+00:00

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