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Wednesday, February 18, 2009

The Lingering Question: 'What Were the Lawyers Doing?"

SEC Alleges $8 Billion Savings Fraud
Allen Stanford, Colleagues Lied About Investments, CD Return Rates, Agency Says
The Washington Post by Zachary A. Goldfarb - February 18, 2009

The Securities and Exchange Commission yesterday charged R. Allen Stanford, a prominent Texas businessman, and three companies under his control with carrying out a "massive, ongoing fraud" involving the sale of $8 billion in certificates of deposit. The case is one of the largest alleged financial frauds in U.S. history and comes just two months after the SEC accused New York financier Bernard L. Madoff of orchestrating a Ponzi scheme of up to $50 billion. 

Stanford and two colleagues, operating through a web of firms based in Houston and the Caribbean, lied to customers about how their money was being invested and how the firms' investment portfolios had performed in the past, the SEC said in a civil complaint filed in federal court in Dallas. Antigua-based Stanford International Bank and related firms promised "improbable, if not impossible" returns to investors on certificates of deposit, the SEC added, often many percentage points higher than what rivals offered. CDs, popular savings products, promise fixed returns to investors, who usually agree to deposit their money for a set period of time. Stanford clients were told their deposits were safe, invested in easily sellable securities. In fact, the SEC said, the funds were largely invested in illiquid real estate and private equity holdings.

"We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world," Rose Romero, director of the SEC's Fort Worth office, said in a statement. In addition to Allen Stanford, the SEC charged Stanford International Bank; two affiliates in Houston, Stanford Group and Stanford Capital Management; and two top executives, James M. Davis and Laura Pendergest-Holt. The SEC acted after Stanford moved to liquidate some of its holdings, including $178 million from the bank's accounts, over the past two weeks. Yesterday, federal agents raided Stanford office buildings in Houston, posting a sign on the door: "The company is still in operation but under the management of a receiver." The fate of customer deposits -- largely from wealthy investors -- wasn't immediately clear. Stanford had 50,000 CD accounts as of 2007, with customers around the world, according to the SEC.

A federal judge in North Texas yesterday froze Stanford Bank's assets. The SEC said Allen Stanford and his associates refused to help account for the funds. "People are not going to get their money immediately," said Julie Preuitt, an SEC official in Fort Worth. "The receiver has to determine where all the assets are and how much they're worth and do their best to distribute the funds." No lawyer representing Allen Stanford or other defendants could be identified yesterday. Executives at Stanford Group referred inquiries to the SEC. The SEC said it is continuing its investigation. The investigation into Stanford Group, which has involved Florida regulators and the Financial Industry Regulatory Authority, has been ongoing for at least several months. The firm recently acknowledged the probes, which it called routine. The case comes just two months after the SEC filed charges against Madoff. After that case was exposed, the SEC faced criticism from commentators and lawmakers that its oversight and enforcement operations were ineffective.

"The SEC has been under a tremendous amount of scrutiny and it probably has sensitized the staff both to red flags and to the timeliness of bringing the case," said Don Walker, a former SEC official and now at FTI Consulting. The SEC said Stanford International Bank offered CDs paying anywhere from 7.45 percent to 10 percent annual interest rates, often more than double what rivals offered. The SEC said Stanford Group advisers, who were paid hefty commission fees, aggressively marketed these CDs to investors around the world. The bank told customers that it invested their money in highly liquid securities such as equities or cash and that it had been able to post double-digit returns consistently over the past 15 years, the SEC said. Customers were told that investments were overseen by a team of more than 20 research analysts. In fact, the SEC said, much of the investment was in illiquid assets, such as private equity or real estate, and managed just by Allen Stanford and Davis.

More recently, the firms falsely told customers that they were not exposed to losses related to the Madoff case, the SEC said, when executives knew of $400,000 tied to Madoff. Stanford Group has nearly $50 billion under management or advisement, according to the SEC. The SEC also alleged that a $1.2 billion mutual fund program was sold to investors based on false information about its historical returns. Allen Stanford, with citizenship in the United States and Antigua & Barbuda, is one of the world's richest men, with an estimated worth of $2 billion, according to Forbes magazine. The Antiguan government knighted him; he now uses the honorific "sir." Stanford has given campaign contributions to some of the nation's top lawmakers. A Stanford Group political action committee contributed more than $100,000 to various causes last year. Staff researcher Julie Tate contributed to this report.

10 comments:

Eliot Bernstein said...

Did I hear Proskauer Rose? Thomas Sjoblom, a partner at Proskauer Rose, had represented Allen Stanford until last week, when he withdrew as Stanford Investment Bank was supposed to document its assets. If Proskauer is involved they may have spearheaded this financial scam and then tried to flee the ship as the feds came in. The lawyer not knowing if he should burn or drown, exposed the crime not in Whistleblower fashion but through his panic behavior. Proskauer is also in a trillion dollar federal lawsuit in the Sec. Circuit Court of Appeals docket Docket 08-4873-cv from the USDC – Southern District of New York (07cv11196) Bernstein, et al. v Appellate Division First Department Disciplinary Committee, et al., legally related to a Whistleblower case (07cv09599) Anderson v The State of New York, et al., The case of this blog.
In an opinion from the lower court Judge Shira Scheindlin she proclaims in her order that the case is about “murder”. Did I hear the auditor, Charlesworth Hewlett for this Stanford firm just died on Jan. 1st 2009. hmmm. http://www.guardian.co.uk/sport/2009/feb/18/allen-stanford-cas-hewlett
Feds should core in on Proskauer and their liability and be certain they report to appropriate liability carriers their liability in this affair; it is presumed they are not reporting the trillion-dollar federal lawsuit as they are still able to operate and commit more alleged crimes http://iviewit.tv/CompanyDocs/United%20States%20District%20Court%20Southern%20District%20NY/20080509%20FINAL%20AMENDED%20COMPLAINT%20AND%20RICO%20SIGNED%20COPY%20MED.pdf at this time, perhaps another fraud they are behind. Allegations in the fed court are that Proskauer spearheaded Fraud on the US Patent & Trademark to steal client inventions that changed the creation and distribution of digital imaging and video, resulting in patent suspensions and fed and international investigations ongoing.
Recently in a letter to President Barack Obama, US Attorney Eric Holder was invited to join the fed lawsuit on behalf of the interests of the US and the patent office. An inventor, Eliot Bernstein’s car was blown up to attempt to force the lid on the crimes, images of the car bombing and more on Proskauer @ http://www.iviewit.tv perhaps this is the root of all evil.

I have been trying for almost a decade personally to expose the multitude of crimes but with justice seized it was impossible. Perhaps times are a changing and the rats on the run.

Eliot I. Bernstein
Founder & Inventor
Iviewit Technologies, Inc.
2753 NW 34th Street
Boca Raton, FL 33434
(561) 245-8588
iviewit@iviewit.tv
http://www.iviewit.tv
batoutofhell

Eliot Bernstein said...

UPDATE: SEC Charges Stanford, 3 Cos With $8 Billion CD Fraud

Tuesday February 17th, 2009 / 19h52
(Updates with details throughout)
By Siobhan Hughes and Miguel Bustillo Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The Securities and Exchange Commission on Tuesday charged financier R. Allen Stanford with orchestrating a multi-billion dollar scheme that attracted $8 billion of investments by promising high returns through a certificate of deposit program.
It marked the second time in as many months that an apparently safe investment program was painted by regulators as a multi-billion dollar fraud. It was only in December that the SEC and criminal authorities charged Bernard L. Madoff, a former chairman of the Nasdaq Stock Market, with leading a $50 billion swindle.
Federal regulators said that Stanford and three of his companies promised improbable and unsubstantiated high interest rates - in 1995 and 1996 the firm claimed returns of 15.71% - that were supposedly earned through a unique investment strategy that purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years.
"As we allege in our complaint, 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," SEC enforcement director Linda Thomsen said in a statement. "We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors."
"I have no comment," said longtime Stanford lawyer Richard Razook of the law firm Hunton & Williams. "I don't want to discus that at all. Thank you." Thomas Sjoblom, a partner at Proskauer Rose, had represented Allen Stanford until last week, when he withdrew as Stanford Investment Bank was supposed to document its assets, according to a person familiar with the matter.
SEC investigators, accompanied by U.S. marshals, arrived in a fleet of Chevy Suburbans and GMC pickup trucks with tinted windows. They swarmed Stanford's Houston headquarters as early as 9 a.m. Central time, according to witnesses who saw them.
Agents quickly secured all entrances and exits to two buildings, both carrying Stanford Financial Services signs: one four-story building at 5050 Westheimer Road that appeared to be the main headquarters, and another 20-story building across the street at 5051 Westheimer Road.
Dozens of workers inside the headquarters building were herded into glassed-in offices on the ground floor, where they appeared to be sequestered.
Federal agents set up a perimeter around the buildings, and some agents were posted on the roofs of nearby buildings with a view of the area. Agents declined to comment on the situation.
Wallis Marsh, who works for an oil company in a neighboring building and has friends who work for Stanford, came over to the Stanford building when he saw law enforcement gathering there. "They didn't come in with guns blazing, but as you can see, they have a big presence," he said of the agents, pointing to the people on the roof.
Stanford's headquarters are located in Houston's Galleria shopping and office district west of the city's downtown.
The charges came as the SEC teams were sent to three Stanford-affiliated offices: in Memphis, Tennessee and Tupelo, Mississippi, where the chief financial officer, James Davis, has offices; and Houston. The agency also sent in a receiver who will be responsible for returning assets to investors.
The SEC said it won a temporary restraining order freezing the assets of Stanford and three of his companies. The agency acted on information that in the last two weeks, Stanford International Bank, based in Antigua, has sought to remove more than $178 million from its accounts.
The SEC said that Stanford Investment Bank and its advisers had sought to lull investors into thinking their investments were safe, providing assurances that the bank invested the money in liquid financial instruments that were monitored by a team of more than 20 analysts.
But those assurances were false, the SEC said. Instead of ultra-safe investments, a substantial portion of the portfolio was placed in real estate and private equity, the SEC said. The investments weren't monitored by a team of analysts, but instead by two people - Stanford and Davis.
The SEC said that as the market absorbed news of the alleged Madoff fraud, Stanford Investment Bank has attempted to calm its own investors by claiming that the bank has no "direct or indirect" exposure to the Madoff scheme. But those assurances were false, the SEC said. In December, Stanford was told that through indirect investments to the Madoff scheme, the Stanford companies had lost about $400,000.
-By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; Siobhan.Hughes@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=u9gzepKS5PquNM6TGKKLHA%3D%3D. You can use this link on the day this article is published and the following day.

and

Proskauer Lawyer Raised ‘Red Flag’ in Billionaire Probe
Posted 2 hours, 25 minutes ago
By Debra Cassens Weiss

The Securities and Exchange Commission accused a Texas investment manager in an $8 billion fraud just days after his lawyer raised a red flag by disaffirming everything he had told authorities.

The civil complaint by the SEC claims billionaire Robert Allen Stanford and businesses he controlled sold $8 billion in certificates of deposit based on unsubstantiated claims that the CDs had been generating double-digit annual returns since 1995. The complaint also claims investors were misled about how their money was invested.

The lawyer, identified by Bloomberg News as Thomas Sjoblom at Proskauer Rose in Washington, D.C., represented the Antigua affiliate of Stanford’s investment advisory firm. Sjoblom disavowed everything he told authorities as Stanford ignored subpoenas seeking to account for the $ 8 billion in depositor money, the story says.

Peter Henning, a criminal and securities law professor at Wayne State, told Bloomberg that the withdrawal “is a massive red flag” that “screams fraud.”

“If the SEC hadn’t turned up the heat by that point, it did then,” Henning told the wire service. Sjoblom joined Proskauer Rose in 1999 after working 20 years for the SEC, according to Times Online.

A separate story by Bloomberg highlights a different legal problem for Stanford. Stanford University filed a trademark infringement suit last year that claimed Stanford Financial Group Co. was capitalizing on the school’s name, the story says. A hearing in the case is set for March 20.

http://www.guardian.co.uk/sport/2009/feb/18/allen-stanford-cas-hewlett

Eliot Bernstein / Iviewit / Patentgate said...

oh yeah here is where the cesspool of lawyers who suck are, Pitchfork Revolution on these guys.

Stanford Attorney’s Exit ‘Screams Fraud,’ Spurred SEC (Update2)
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By David Scheer and Alison Fitzgerald

Feb. 18 (Bloomberg) -- As R. Allen Stanford assured clients last week that U.S. investigators were conducting “routine examinations” of his Texas investment advisory firm, a lawyer for his company’s Antigua affiliate was backing out.

Stanford, the 58-year-old billionaire now accused of running a “massive, ongoing fraud,” spent his final weeks at the firm struggling to soothe clients while disregarding subpoenas that sought to account for almost $8 billion of their money, according to a lawsuit filed yesterday by the Securities and Exchange Commission. Regulators pounced days after a lawyer at the Antigua bank at the heart of the case “disaffirmed” everything he had told authorities.

“The attorney’s withdrawal is a massive red flag” that “screams fraud,” said Peter Henning, who teaches criminal and securities law at Wayne State University in Detroit. “If the SEC hadn’t turned up the heat by that point, it did then.”

The SEC’s civil suit accused Antigua-based Stanford International Bank of touting “improbable, if not impossible” returns while selling certificates of deposits to investors for more than a decade. A federal judge in Dallas agreed to freeze assets and appoint a receiver to account for the roughly $8 billion investors spent on the CDs, according to the SEC.

The attorney who stepped down was Thomas Sjoblom at Proskauer Rose LLP in Washington, according to a person familiar with the matter. Sjoblom declined to comment. Stanford spokesman Brian Bertsch referred questions to the regulator.

Madoff’s Arrest

The SEC had been investigating Houston-based Stanford Group since at least last summer about sales of the CDs. The inquiry intensified after the December arrest of New York money manager Bernard Madoff, who allegedly confessed to masterminding a $50 billion fraud in which early investors were promised steady returns and paid with money from later participants.

Stanford Group, selling the CDs through a network of financial advisers, told clients their funds would be placed mainly in easily sellable financial instruments, monitored by more than 20 analysts and audited by regulators on the Caribbean island of Antigua, the SEC said.

Instead, the “vast majority” of the portfolio was managed by Allen Stanford and James Davis, the Antigua subsidiary’s chief financial officer, according to the regulator. Some 90 percent of the portfolio is essentially a “black box,” shielded from independent oversight, the SEC said. A “substantial” portion may have been steered into assets that are difficult to sell, such as real estate and private equity investments, it said.

Wire Transfers Stop

A day after Madoff’s arrest, Pershing LLC, the Jersey City, New Jersey-based clearing firm, told Stanford Group it would no longer process wire transfers to its Antigua affiliate, citing suspicions about its reported investment returns, according to the SEC.

In the past several weeks, as investigators sent subpoenas in an attempt to account for investor money, Stanford and Davis failed to appear for testimony or provide any documents, the agency said. Laura Pendergest-Holt, a member of Stanford International’s investment committee, couldn’t account for the funds, and nor could a former senior investment officer whom the SEC didn’t identify, the agency said. She and Davis were also named as defendants in the civil case.

James Sharp, a lawyer in Washington representing Davis, didn’t immediately respond to a message seeking comment. Attorneys for Allen Stanford and Pendergest-Holt couldn’t be located. Rose Romero, director of the SEC’s office in Fort Worth, Texas, said the agency doesn’t know Stanford’s whereabouts.

‘Every Breath’

On about Feb. 6, Allen Stanford imposed a two-month moratorium on early redemptions of CDs, according to the SEC. Then, on Feb. 11, he wrote a letter to clients to address press reports about the U.S. inquiries.

“Regulatory officers have conveyed to us these visits are part of their routine examinations,” he wrote, according to a copy obtained by Bloomberg. In an e-mail the next day, he told employees he’d “fight with every breath to continue to uphold our good name” in the face of the investigations.

Yesterday morning, the U.S. Marshal’s office in Houston sent a 15-person task force to secure files and computers at Stanford’s offices in the Galleria shopping district, said Alfredo Perez, a spokesman for the agency.

Stanford Group’s alleged fraud wasn’t limited to the sale of CDs, the SEC claimed. Since 2005, Stanford Group advisers sold more than $1 billion of a proprietary mutual fund “wrap program,” named Stanford Allocation Strategy, “by using materially false and misleading historical performance data,” according to the SEC complaint.

‘Strange’ Numbers

The allegedly false data helped the program grow from less than $10 million in 2004 to more than $1.2 billion, generating fees exceeding $25 million.

Investors in Stanford’s CDs filed a federal lawsuit yesterday seeking class-action status, claiming they were defrauded by Allen Stanford, Stanford Group, Stanford International Bank and four other executives. The claim, in the Southern District of Texas, was filed by Mike O’Brien, the attorney representing two former Stanford Group employees who were subpoenaed by the SEC after accusing the company in a July lawsuit of illegal behavior.

Since 1993, the Stanford International Bank has reported annual investment gains ranging from 11.5 percent to 16.5 percent, except last year, when it reported a loss of 1.3 percent, according to the SEC. The numbers were at times “strange,” hitting exactly 15.71 percent in 1995 and 1996, the agency said. Stanford International Bank says it has 30,000 clients and $7.2 billion in assets under management, according to the SEC.

Forbes List

The Stanford Financial companies, including Stanford Group, Stanford International Bank and Stanford Trust, were founded by Allen Stanford, who is their chairman. The Texas native was listed last year by Forbes magazine as the 605th-richest man in the world with an estimated net worth of $2 billion.

Allen Stanford is a citizen of the U.S. and of Antigua & Barbuda after being naturalized in that Caribbean country 10 years ago, according to a biography on the company’s Web site. He was knighted by the Antiguan government in 2006 and now uses the title “Sir.” Stanford Group has 19 offices in the U.S. and more than $43 billion under management or advisement, according to its Web site.

To contact the reporter on this story: Alison Fitzgerald in Washington at Afitzgerald2@bloomberg.net; David Scheer in New York at dscheer@bloomberg.net.

Anonymous said...

The lawyers were busy counting their ill gotten gains, that's where they were....... If you hold the lawyers accountable, you'll prevent a BIG PILE OF WHITE COLLAR CRIME from happening.

eliot bernstein said...

lawyers or criminals acting as lawyers more apropo are the root of the evil plaguing our country, from the courts to the justice dept to the executive offices these guys are using law to commit crimes and then writing and changing law to try and evade prosecution. there are good lawyers but they have been scarred of shotgun blasts in the face or other heavy handed tactics such as the Christine Anderson case indicates. When will the good ones put their fears behind them and prosecute these guys full force, full RICO for their conspiracies and a forensic audit to trail their assets back to people, we the people, they stole from. this group of rotten ivy leagures and their warped parents who paid for them to go our finest schools and plot to destroy our country all need to be tried for treason. Please support the iviewit senate cult bill at www.iviewit.tv/senatecultbill.htm to stop the infiltration of these cults with subversive intent. Eric Holder claimed americans were cowards today, I agree, get the Pitchfork Revolution going, pitchforks provided free @ www.iviewit.tv

Pogo said...

Yet another oversight failure! so where was the SEC, et al.? how come all these things are coming out NOW? The oversight illusion is a big FRAUD. These people all belong in JAIL, yes including the oversight minions.

retired atty said...

"What Were the Lawyers Doing?" that's easy, they were ripping off everything they could and screwing each and everyone they could! That's what lawyers are trained to do, they can't help themselves!

Anonymous said...

You are so right !
Lawyers are the biggest criminals of our time. They cripple and destroy people for a living. They have no conscience and would rip off their own mother if they could make a dollar off it. Absolute scumbags.

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See Video of Senator John L. Sampson's 1st Hearing on Court 'Ethics' Corruption

The first hearing, held in Albany on June 8, 2009 hearing is on two videos:


               Video of 1st Hearing on Court 'Ethics' Corruption
               The June 8, 2009 hearing is on two videos:
         
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