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Suspecting $8 billion fraud, SEC shuts down Stanford Group

NEW YORK — The federal government says R. Allen Stanford's investment businesses were too good to be true and shut his companies down Tuesday.

Two months after Bernard Madoff was accused of running the largest investment fraud in history, Securities and Exchange Commission officials raided the offices of Stanford, a Texas billionaire, and froze the assets of three companies he controls, saying he perpetrated an $8 billion investment fraud.

Stanford, 58, is accused in civil actions of lying about the safety of investments he sold as "certificates of deposit" and promised unrealistically high rates of return. Regulators also said he faked historical data about other investments that he then used to lure in more investors.

Houston's Stanford Group Co. has offices in South Florida.

The fraud's operations allegedly reached as far as the tiny Caribbean island of Antigua, where Stanford was knighted in 2006. As news of the charges broke Tuesday afternoon, dozens of customers were turned away as they rushed to the main branch of the Bank of Antigua trying to get their money.

Stanford's whereabouts were not immediately known. Brian Bertsch, a spokesman for Stanford, referred all questions to the SEC. Stephen Webster, an SEC attorney, said the agency is actively trying to find Stanford and didn't know whether he had been served with court papers.

In addition to Stanford himself, the civil lawsuit filed in federal court in Dallas names as defendants James Davis, the chief financial officer of Stanford International Bank, an Antigua-based company that was one of the three whose assets were frozen, as well as Laura Pendergest-Holt, the chief investment officer of Stanford Financial Group, a Houston-based financial advisory firm.

James Dunlap, an Atlanta-based securities lawyer, said Stanford customers he has been advising have been told they can't get their money out of the firm, with some being told there is an indefinite hold on withdrawals.

Dunlap said his firm is still trying to understand the scope of the alleged fraud and how to pursue remedies for his clients, which include customers in the United States, Latin America and Australia.

"At this point I can't say where the money is," Dunlap said.

Suspecting $8 billion fraud, SEC shuts down Stanford Group 02/17/09 [Last modified: Tuesday, February 17, 2009 10:26pm]
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