HOUSTON—R. Allen Stanford, the former
board of directors chairman of Stanford International Bank (SIB), has been
sentenced to a total of 110 years in prison for orchestrating a 20-year investment
fraud scheme in which he misappropriated $7 billion from SIB to finance his
personal businesses.
The sentencing was announced by
Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal
Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; FBI
Assistant Director Kevin Perkins of the Criminal Investigative Division;
Assistant Secretary of Labor for the Employee Benefits Security Administration
Phyllis C. Borzi; Chief Postal Inspector Guy J. Cottrell; and Chief Richard
Weber, Internal Revenue Service-Criminal Investigations (IRS-CI).
Stanford, 62, was convicted on 13 of 14
counts by a federal jury following a six-week trial before U.S. District Judge
David Hittner and approximately three days of deliberation. The jury also found
that 29 financial accounts located abroad and worth approximately $330 million
were proceeds of Stanford’s fraud and should be forfeited.
Speaking on behalf of the victims in the
case during the sentencing hearing today were Angie Shaw, the director and
founder of the Stanford Victims Coalition, and Jaime Escalona, who represents
Stanford victims from Latin America.
“Mr. Stanford, you took advantage of the
trust that is placed in U.S. companies and caused losses that prevented families
from being able to pay for medical and basic living expenses,” said Escalona.
“This was not a bloodless financial
crime carried out on paper,” furthered Shaw. “It was and is an inconceivably
heinous crime, and it has taken a staggering toll on the victims. Innocent
investors from around the world sacrificed and saved for decades to build a
solid foundation for their futures. That foundation crumbled beneath them when
the news of the Stanford Financial Group Ponzi scheme became public. Many of
the victims had lived the proverbial American Dream, only to have it snatched
away from them in the name of greed.”
In handing down the sentence, Judge
Hittner remarked that “this is one of the most egregious frauds ever presented
to a trial jury in federal court.”
After considering all the evidence,
including more than 350 victim impact letters that were sent to the court,
Judge Hittner sentenced Stanford to 20 years for conspiracy to commit wire and
mail fraud; 20 years on each of the four counts of wire fraud, as well as five
years for conspiring to obstruct a U.S. Securities and Exchange Commission
(SEC) investigation; and five years for obstruction of an SEC investigation.
Those sentences will all run consecutively. He also received 20 years for each
of the five counts of mail fraud and 20 years for conspiracy to commit money
laundering, which will run concurrent to the other sentences imposed today, for
a total sentence of 110 years.
As part of Stanford’s sentence, the
court also imposed a personal money judgment of $5.9 billion, which is an
ongoing obligation for Stanford to pay back the criminal proceeds. The court
found that it would be impracticable to issue a restitution order at this time.
However, all forfeited funds recovered by the United States will be returned to
the fraud victims and credited against Stanford’s money judgment.
According to court documents and
evidence presented at trial, the vehicle for Stanford’s fraud was SIB, an
offshore bank Stanford owned based in Antigua and Barbuda that sold certificates
of deposit (CDs) to depositors. Stanford began operating the bank in 1985 in
Montserrat, the British West Indies, under the name Guardian International
Bank. He moved the bank to Antigua in 1990 and changed its name to Stanford
International Bank in 1994. SIB issued CDs that typically paid a premium over
interest rates on CDs issued by U.S. banks. By 2008, the bank owed its CD
depositors more than $8 billion.
According to SIB’s annual reports and
marketing brochures, the bank purportedly invested CD proceeds in highly
conservative, marketable securities, which were also highly liquid, meaning the
bank could sell its assets and repay depositors very quickly. The bank also
represented that all of its assets were globally diversified and overseen by
money managers at top-tier financial institutions, with an additional level of
oversight by SIB analysts based in Memphis, Tennessee.
As shown at trial, that purported
investment strategy and management of the bank’s assets was followed for only
about 10-15 percent of the bank’s assets. Stanford diverted billions in
depositor funds into various companies that he owned personally, in the form of
undisclosed “loans.” Stanford was thus able to continue the operations of his
personal businesses, which ran at a net loss each year totaling hundreds of
millions of dollars, at the expense of depositors. These businesses were
concentrated primarily in the Caribbean and included restaurants, a cricket
tournament, and various real estate projects. Evidence at trial established
Stanford also used the misappropriated CD money to finance a lavish lifestyle,
which included a 112-foot yacht and support vessels, six private planes, and
gambling trips to Las Vegas.
According to evidence presented at
trial, Stanford continued the scheme by using sales from new CDs to pay
existing depositors who redeemed their CDs. In 2008, when the financial crisis
caused a slump in new CD sales and record redemptions, Stanford lied about
personally investing $741 million in additional funds into the bank to
strengthen its capital base. To support that false announcement, Stanford’s
internal accountants inflated on paper the value of a piece of real estate SIB
had purchased for $63.5 million earlier in 2008 by 5,000 percent, to $3.1
billion, even though there were no independent appraisals or improvements to
the property.
The trial evidence also showed that
Stanford perpetuated his fraud by paying bribes from a Swiss slush fund at
Societe Generale to C.A.S. Hewlett, SIB’s auditor (now deceased), and Leroy
King, the then-head of the Antiguan Financial Services Regulatory Commission.
In addition to Stanford, a grand jury in
the Southern District of Texas previously indicted several of his alleged
co-conspirators, including: James Davis, the former chief financial officer;
Laura Holt, the former chief investment officer; Gil Lopez, the former chief
accounting officer; Mark Kuhrt, the former controller; and King. Davis has
pleaded guilty and faces up to 30 years in prison under the terms of his plea
agreement. The trial of Holt, Kuhrt, and Lopez, which was severed from
Stanford’s trial, is scheduled to begin before Judge Hittner on September 10,
2012. They are presumed innocent unless and until convicted through due process
of law.
The investigation was conducted by the
FBI’s Houston Field Office; the U.S. Postal Inspection Service; IRS-CI; and the
U.S. Department of Labor, Employee Benefits Security Administration. The case
was prosecuted by Deputy Chief William Stellmach and Trial Attorney Andrew Warren
of the Criminal Division’s Fraud Section, former Assistant U.S. Attorney (AUSA)
Gregg Costa of the Southern District of Texas. AUSA Kristine Rollinson of the
Southern District of Texas and Trial Attorney Kondi Kleinman of the Asset
Forfeiture and Money Laundering Section in the Justice Department’s Criminal
Division assisted with the forfeiture proceeding, and AUSA Jason Varnado and
Fraud Section Jeffrey Goldberg assisted with the sentencing proceeding.
The Justice Department also wishes to
thank several countries for their ongoing cooperation during the investigation
and prosecution of Stanford and his co-conspirators, including the governments
of Antigua and Barbuda, Switzerland, the Cook Islands, the United Kingdom, and
the Isle of Man.
Posts
No comments:
Post a Comment