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SEC Files Charges Against Stanford International Bank


The SEC filed charges yesterday against Robert Allen Stanford and 3 of his companies (including Stanford International Bank) for "orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8 billion CD program." Here are some excerpts from the SEC press release:
The SEC's complaint, filed in federal court in Dallas, alleges that acting through a network of SGC financial advisers, SIB has sold approximately $8 billion of so-called "certificates of deposit" to investors by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through SIB's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years.

According to the SEC's complaint, the defendants have misrepresented to CD purchasers that their deposits are safe, falsely claiming that the bank re-invests client funds primarily in "liquid" financial instruments (the portfolio); monitors the portfolio through a team of 20-plus analysts; and is subject to yearly audits by Antiguan regulators. Recently, as the market absorbed the news of Bernard Madoff's massive Ponzi scheme, SIB attempted to calm its own investors by falsely claiming the bank has no "direct or indirect" exposure to the Madoff scheme.

More details are available in this New York Times article.

I first mentioned Stanford International Bank in this Friday post. As I mentioned in that post, this development at Stanford is an example of why I stick with US federally insured banks and credit unions.

To learn how you can verify if websites offering CDs and other bank accounts are part of federally insured banks or credit unions, please refer to my 2007 post on verifying FDIC or NCUA membership.

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Anonymous   |     |   Comment #1
NYT buried the lede: "Also unknown Tuesday were the whereabouts of Mr. Stanford — or Sir Allen, as he became known after the Antiguan prime minister knighted him — whose financial activities on the tiny island had raised eyebrows among American authorities as far back as a decade ago."
Anonymous   |     |   Comment #2
In a related article, UBS got fined for hiding investor accounts from taxation. Offshore accounts are getting more scrutiny from tax officials.

Anonymous   |     |   Comment #3
"There were no signs of imminent criminal charges against Stanford, whose personal fortune was estimated by Forbes Magazine last year at $2.2 billion."


My, how the mighty have fallen.
deepak   |     |   Comment #4
here were no signs of imminent criminal charges
Anonymous   |     |   Comment #5
It is yet to be proven that he operated a ponzi scam. If that was the case, fry him.

But I also have a sense that his bank was taking in money from investors, misleading them only in the name of the product (CD), investing in various markets, and sharing the returns, more like a mutual fund. This isn't how US banks generally generate their CD rates, but many foreign countries don't have central banks to control rates of return.

It's a shame that the good that he did in smaller countries is being mocked by the cruel at heart.
Anonymous   |     |   Comment #6
I just looked over the CD offerings at Schwab today....paltry, to say the least. But Wells Fargo and someone else is offering one whose rate of return is based on a maximum + or - 20 point swing in the S&P. I've seen this in other countries, at other times, but never in the US.

Is this much different than what Stanford was doing, except with disclosure that the capital was going into a market, and not Federal Funds?
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On-line CD Rates   |     |   Comment #7
It is one thing if the company was making full disclosure of its activities. It seems like they were not and people who thought there money was safe, is not.
Anonymous   |     |   Comment #8
The FBI tracked him down at Fredericksburg, Virginia and federal prosecutors took his passport. He was supposedly staying with a girlfriend who lives in a townhouse there. He was reported earlier attempting to buy a flight from Houston to Antigua, but the agent would not accept his credit card.