SEC accuses Allen Stanford in $9.2 bn fraud
US regulators have accused Texas magnate and top cricket promoter Allen Stanford of fraud in selling $9.2 billion in securities by promising 'improbable and unsubstantiated' returns. A US district judge froze Stanford's assets after the Securities and Exchange Commission said he was involved in global 'fraud of shocking magnitude that has spread its tentacles throughout the world.'business Updated: Feb 19, 2009 02:49 IST
US regulators on Tuesday accused Texas magnate and top cricket promoter Allen Stanford of fraud in selling 9.2 billion dollars in securities by promising "improbable and unsubstantiated" returns.
A US district judge froze Stanford's assets after the Securities and Exchange Commission (SEC) said he was involved in global "fraud of shocking magnitude that has spread its tentacles throughout the world."
Stanford's wealth management and financial services group has offices across North America, Latin America, Europe and the Caribbean.
The SEC filed the civil charges against Stanford and other officials of his financial group in a federal court in Dallas.
The immediate whereabouts of Stanford, who reportedly lives in the US Virgin Islands most of the year, are not known.
Subpoenas were issued to Stanford but he has not appeared for testimony or produced a single document, the SEC said.
It is the most high profile alleged fraud scheme since the SEC charged Wall Street financier Bernard Madoff with carrying out a 50-billion-dollar Ponzi scheme December.
The SEC also accused Stanford's Antiguan-based Stanford International Bank (SIB) of "falsely claiming" that the bank has no "direct or indirect" exposure to the Madoff scheme.
A major cricket entrepreneur, the 58-year old Stanford faces fraud charges for "promising improbable and unsubstantiated high interest rates," the SEC said.
It charged him and three of his companies with "orchestrating a fraudulent, multi-billion dollar investment scheme centering on an eight billion CD (certificate of deposit) program," a statement said.
Aside from SIB, Stanford's companies include Houston, Texas-based broker-dealer and investment adviser Stanford Group Company (SGC), and investment adviser Stanford Capital Management.
The SEC also linked Stanford to an additional scheme relating to 1.2 billion dollars in sales by SGC advisers of a mutual fund program, called Stanford Allocation Strategy (SAS), by using "materially false" data.
SIB chief financial officer James Davis as well as Laura Pendergest-Holt, chief investment officer of Stanford Financial Group (SFG), were included with Stanford in the SEC enforcement action.
Following the commission's action, US District Judge Reed O'Connor had entered a temporary restraining order, froze Stanford's assets, and appointed a receiver to marshal those assets.
"Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors," said Linda Thomsen, director of the SEC's enforcement division.
Rose Romero, an SEC regional director, said, "We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world."
The charges against Stanford have raised doubts over his cricket deals.
The England and Wales Cricket Board (ECB) said Tuesday they, together with West Indies cricket chiefs, had suspended talks with him concerning a new sponsorship deal.
The 20-nation West Indies domestic 20/20 cricket tournament and the cricket Super Series staged last year bear the name of Stanford.
Stanford was the man behind the eponymous Stanford Super Series Twenty20 competition, which culminated with his team of hand-picked Caribbean Superstars defeating England in a Twenty20 match at his own ground on the Caribbean state of Antigua and Barbuda, which netted the winning side a million dollars each.
In all Stanford put up 20 million dollars in prize money for the match.
But it is the cash-strapped West Indies Cricket Board (WICB) that could suffer the biggest blow if Stanford withdraws from cricket.
According to the WICB website, Stanford had promised to invest 100 million dollars from 2008 through 2011, 20 percent of it directly to grassroots schemes, plus an additional monthly backing of 15,000 dollars to each of the 20 Caribbean nations in the Twenty20 set-up.
First Published: Feb 18, 2009 09:09 IST