Freitag, 22. Januar 2010

TD Bank Loses Bid to End Stanford Investments Lawsuit

January 22, 2010
By Joe Schneider
Toronto-Dominion Bank Canada's second-biggest bank by assets, must face a lawsuit accusing it of negligence for accepting deposits for the Antigua-based bank run by alleged Ponzi scheme operator R. Allen Stanford.

Investors in Alberta and Quebec claim in the suit that they lost C$17 million ($16.1 million) when Stanford International Bank Ltd. collapsed last year amid fraud allegations. The case can move ahead on narrower grounds than initially proposed, Ontario Superior Court Judge Herman Wilton-Siegel in Toronto said in a ruling released yesterday.

"The court has allowed the negligence claim to proceed based on actual knowledge, willful blindness and recklessness," Jim Patterson of Bennett Jones LLP, who represents the plaintiffs, said today in a phone interview. "We will proceed."

Stanford faces 21 criminal charges that he swindled investors of more than $7 billion in a scheme that paid above- market rates to early investors by taking money from those who bought certificates of deposit sold by his bank. The investors included the plaintiffs in the Ontario case, who bought the deposits through Toronto-Dominion, the correspondent bank for Stanford International.

Susan Webb, a spokeswoman for the Toronto-based bank, declined to immediately comment.

Five Plaintiffs

The five plaintiffs in the case are closely held Dynasty Furniture Manufacturing Ltd., which is based in Calgary; Alberta investors Shafiq Hirani, Hanif Asaria and Dinmohamed Sunderji; and a Quebec company. The high-yield certificates of deposit bought by the plaintiffs appear to have been issued as part of a Ponzi scheme that collapsed in February, Wilton-Siegel wrote.

Toronto-Dominion maintained 12 accounts for Stanford International and accepted deposits into the accounts, the judge said.

Wilton-Siegel dismissed the investors' claims that the bank had a duty of care to investigate the Stanford accounts and to verify they were legitimate. The law doesn't require banks to conduct such investigations for their clients, the judge said.

"Nor is there any case law imposing liability on a bank for failing to conduct such an investigation," Wilton-Siegel wrote.

The judge also dismissed claims the bank ought to have known the Stanford scheme was illegal.

Wilton-Siegel allowed the investors to change the wording in their filing to proceed with a claim that the bank failed to comply with the Proceeds of Crime Act, a federal anti-money laundering law.

The case is Between Dynasty Furniture Manufacturing Ltd. and Toronto-Dominion Bank, 09-8373-00CL, Ontario Superior Court of Justice (Toronto).

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Dienstag, 5. Januar 2010

Stanford's Lawyer Played Key Role In Shielding Banker From Scrutiny

January 5, 2010
By Zachary Roth
We told you arlier today about Yolanda Suarez, the Florida lawyer who forged ties with members of Congress and ran interference with journalists on behalf of Allen Stanford. But it's also worth paying attention to another Florida lawyer and key Stanford ally, who appears to have played an equally crucial role in allowing the Texas banker -- who was charged in June with orchestrating a multi-billion dollar Ponzi scheme -- to stay a step ahead of the government for so long.

As Stanford's lawyer of choice, Carlos Loumiet helped set up the unusual regulatory arrangement that allowed the Stanford Financial Group (SFG) to move hundreds of millions of dollars from Florida to Antigua with little scrutiny. Soon afterwards, he served on a Stanford-funded task-force to rewrite Antigua's banking laws -- an effort that U.S. regulators have said left major loopholes and hindered efforts to crack down on fraud. And the court-appointed receiver seeking to unravel Stanford's far-flung financial empire has demanded that the two law firms that have employed Loumiet -- who hasn't been charged with any wrongdoing -- hand over records of their work on behalf of Stanford.

As the Miami Herald reported earlier this year, the story starts in 1998, when Stanford wanted to set up an easy way to move money from SFG's Miami office, which sold certificates of deposit to investors, to Antigua, where his banking empire was headquartered.

He turned to Loumiet, at the time a lawyer at Greenberg Traurig. That's the Miami firm where Suarez, then SFG's legal counsel, had previously worked, and which would later become known as the firm from which Jack Abramoff bribed government officials. As the Herald has also reported, despite the objections of the state's top banking lawyer, Loumiet prevailed on Florida officials to allow SFG to set up a special trust office that could move money to Antigua without submitting to fraud or money -laundering checks. With the money pipeline established, the Herald reported, the Miami office sold millions in CDs over the next decade, then used jets to fly the checks, stuffed in pouches, to Antigua.

That wasn't the end of Loumiet's service to Stanford though. About a year later, the Clinton administration, as part of an effort to crack down on money laundering, was considering cutting off access to U.S. currency for all offshore institutions in Antigua.

In order to convince U.S. regulators to back off, Stanford volunteered to organize and fund a task force to re-write Antigua's banking laws -- allowing him to appoint the task force's members. Stanford named Loumiet and another Greenberg lawyer, Patrick O'Brien.

Loumiet touts the experience in the bio on his law firm website. But the revised laws that he and his fellow panelists drew up were denounced by the U.S. government as containing loopholes that made it even harder than previously for regulators to access bank records. In a letter to the Antiguan Prime Minister, the Treasury Department complained that the island nation had "weakened its anti-money laundering laws to the point they are now significantly below international standards, making Antigua more vulnerable to money laundering."

In an interview with the Washington Post at the time, Loumiet defended Stanford and suggested the U.S. and Britain did not have Antigua's best interests at heart. "Allen Stanford did not feel that if this was done with the benevolent help of the U.S. and Britain it would help Antigua," he said. "They were trying to put the fox in charge of the chicken coop, and frankly the chickens weren't very happy about it."

In any case, the panel had done its job. Stanford's operation continued largely free from regulatory scrutiny.

But Stanford still appears to have taken pains to keep Loumiet involved. When, in 2001, the lawyer moved from Greenberg to Hunton & Williams, where he remains, Stanford switched to the new firm and continued to use Loumiet as a lawyer.

That wasn't all Stanford used Loumiet's new firm for. Since 2000, Stanford Financial Group, like many large companies, had hired lobbyists to promote its interests in Washington. But, according to lobbying disclosure reports, Hunton was hired in 2005 to lobby Congress on tax issues, on behalf of Stanford personally. A spokeswoman for the firm declined to discuss what the work consisted of.

The court-appointed receiver on the Stanford case, Ralph Janvey, appears to see Loumiet's work as central to the operation. Janvey has asked both Greenberg and Hunton for files containing records of their work for Stanford. Hunton has handed over some files, but is fighting to keep others secret, citing legal issues regarding jurisdiction and client privilege.

A request to Loumiet from TPMmuckraker to discuss his work on behalf of Stanford was referred to a Hunton spokeswoman, who declined to comment.

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Sonntag, 3. Januar 2010

Feds probe links between lawmakers, Allen Stanford

January 3, 2010
Just hours after federal agents charged banker Allen Stanford with fleecing investors of $7 billion, the disgraced financier received a message from one of Congress' most powerful members, Pete Sessions.

"I love you and believe in you," said the e-mail sent on Feb. 17. "If you want my ear/voice - e-mail," it said, signed "Pete."

The message from the chair of the National Republican Congressional Committee represents one of the many ties between members of Congress and the indicted banker that have caught the attention of federal agents.

The Justice Department is investigating millions of dollars Allen Stanford and his staff contributed to lawmakers over the past decade to determine if the banker received special favors from politicians while building his spectacular offshore bank in Antigua, McClatchy Newspapers has learned.

Agents are examining campaign dollars, as well as lavish Caribbean trips funded by Stanford for politicians and their spouses, feting them with lobster dinners and caviar.

The money Stanford gave Sessions and other lawmakers was stolen from his clients while he carried out what prosecutors now say was one of the nation's largest Ponzi schemes.

Sessions, 54, a longtime House member from Dallas who met with Stanford during two trips to the Caribbean, did not respond to interview requests.

Supporters say the lawmaker, who received $44,375 from Stanford and his staff, was not assigned to any of the committees with oversight over Stanford's bank and brokerages.

His press secretary, Emily Davis, said she was unable to comment on the e-mail sent at 11:31 a.m. on the day Stanford was charged by the U.S. Securities and Exchange Commission. "I haven't seen it, so I can't verify its authenticity at this time," she said.

Found on the servers

But the message found on Stanford's computer servers and the contributions he made to Sessions and other lawmakers - totaling $2.3 million - are now part of the government's inquiry.

Records show Stanford also doled out $5 million on lobbying since 2001, setting up his own Washington firm last year with expensive furnishings and artwork - the money plundered from his customers' accounts.

Over the years, he took on battles to protect his banking network while fending off regulators.

In 2001, he pressed successfully to kill a bill that would have exposed the flow of millions into his secretive offshore bank in Antigua.

The next year, he helped block legislation that would have drawn more government scrutiny to his bank.

While he was fighting reforms to financial secrecy and offshore banking laws, Stanford was hobnobbing with dozens of lawmakers.

Stanford hosted a wedding dinner for New York's U.S. Rep. John Sweeney at his five-star restaurant in Antigua in 2004 - toasting the couple for photographers-and staged a cocktail fundraiser for now-disgraced Ohio congressman Bob Ney at his bayfront Miami office.

"He legitimized himself by having himself vetted by powerful members of Congress," said Steven Riger, a former vice president at Stanford's Miami brokerage. "It was all about the public's perception."

Kent Schaffer, Stanford's court-appointed attorney, said his client never asked for special favors. "Stanford gave contributions to politicians, but there was nothing criminal behind it," he said.

The federal investigation comes after months of criticism from victims' groups complaining that elected leaders failed to vet Stanford before accepting money from him the past 10 years. If they had, they would have discovered that the U.S. State Department in 1999 concluded that Stanford helped create a haven for money-laundering in Antigua.

Most members of Congress contacted by McClatchy Newspapers declined to discuss their ties to the banker, other than to say they have since returned the contributions.

Stanford's foray into the Washington power game began in 2001, shortly after he was allowed to open a controversial trust office in Miami.

The special office was a boon to Stanford's bank, generating millions in the sale of certificates of deposit - the money stuffed in pouches and sent on jets to his banking headquarters in Antigua.

But when a bill was created to compel offshore bankers to reveal the sources of money flowing into their banks, Stanford jumped into the fight to kill it.

The measure would have forced Stanford - who was moving millions illegally through his Miami trust office - to open his books to federal regulators.

"He wanted the complete freedom to move money offshore without any threat," said Jack Blum, a lawyer who testified before Congress supporting the legislation. "He was cheerleading for the offshore tax havens."

To combat the bill, Stanford launched a strategy he would use for the next eight years: He gave money to the party in power, including $40,000 to the Senate Republican Campaign Committee and $100,000 to the inaugural committee of George W. Bush, records show. By summer of 2001, the bill was dead.

In the ensuing years, Stanford's banking empire flourished, with the Miami office generating hundreds of millions of dollars, records show.

In late 2001, Stanford confronted another threat: A bill allowing state and federal regulators to share details about fraud cases - which would have brought Stanford's brokerages under closer scrutiny - landed in the Senate Banking Committee.

Though the Senate was now controlled by Democrats, Stanford was prepared: He had given $500,000 to the Democratic Senatorial Campaign Committee in 2002 - his largest-ever contribution.

"I told him that the Democrats were going to take over, and he needed to make friends with them," recalled his lobbyist Ben Barnes, once Texas' lieutenant governor.

Stanford also doled out $100,000 to a national lobbying group to fight the measure.

The bill, which sparked sweeping opposition from brokerages and insurers, never made it to a vote.

While he was scoring points in Washington, Stanford was squaring off for a crisis at his banking headquarters in Antigua.

In 2003, investors began questioning the legitimacy of his certificates of deposit, which generated higher returns than major U.S. banks, and articles began appearing in news magazines about money-laundering in Antigua.

In addition, Stanford was drawing the scrutiny of the SEC, which was demanding to know where his bank was investing customers' money.

A contact in Antigua

In the ensuing years, Stanford would play a dual role of staving off regulators - paying $200,000 in bribes to Antiguan banking chief Leroy King - while forging ties with members of Congress, court records show.

Those connections deepened when Stanford started hosting a series of congressional visits to Antigua.

It began in 2003, when lawmakers including Sessions, Ney, John Sweeney, Gregory Meeks, Donald Payne, Max Sandlin and Phil Crane arrived in Antigua on a mission to "promote relations" with the Caribbean nation.

The cost of the January trip - including nights in luxury hotels and two Stanford jets for travel - came to $39,500, records show.

For four days, they gathered for talks on business in the Caribbean, trading jokes with Prime Minister Lester Bird and touring the island.

In time, the group of lawmakers, which became known as the "Caribbean Caucus," would take 11 more trips - the costs picked up by the Inter-American Economic Council, a nonprofit funded by Stanford.

A total of $311,307 was spent on the trips to places like Montego Bay, St. Croix and Key Biscayne. "We were rolling out food, caviar, wine, lobster," recalled Stanford's personal chef, Jonas Hagg.

During a 2004 Antiguan trip, Sweeney and his 34-year-old girlfriend were married, with Stanford hosting the ceremony and reception for the New York Republican at the famed Pavilion Restaurant.

"If it wasn't for Allen, I certainly would not be here today," Sweeney told Stanford's newspaper, The Antigua Sun. "He has done a tremendous job of promoting and raising the awareness of Antigua in the United States, and people take notice of a man of his standing and stature in the halls of Washington."

Photos of Stanford and caucus members were splashed in company publications and news releases. "You looked and you saw all these important people," Riger said. "That legitimacy allowed him to go out and collect a lot of money."

Stanford was not only funding the trips - the money looted from his customers - but also staging fundraisers.

He held an event at his office on the 21st floor of the Miami Center for Ohio house member Ney, who was later sentenced to 30 months in prison after admitting to accepting gifts and money from clients of lobbyist Jack Abramoff.

He rallied his brokers when Sessions was in a tight race with Democrat Martin Frost in Texas in 2004.

Working the phones

"He got on the speakerphone and told everyone to give to Pete Sessions," said Riger. "He said Sessions was good for our company and we needed to give to him."

Stanford raised $38,875 in the final weeks of the campaign for Sessions, who defeated Frost.

While he was forging ties in Washington, he was getting into deeper trouble with the SEC. By 2006, the agency had sent two confidential letters to the Antiguan government demanding information about the solvency of Stanford's bank, records show.

Both times, Stanford was aided by lead regulator King, who managed to keep the bank's finances secret while accepting thousands in bribes from Stanford - their pledge sealed in a blood oath in Stanford's airplane hangar in Antigua, according to court records and interviews.

With pressure mounting from the SEC, Stanford increased his lobbying in Washington.

In 2008, he started his own lobby firm on 14th Street and New York Avenue, spending $2.2 million - more than he spent the previous four years combined, records show.

"He was spreading his money around," said Blum, the Washington expert on money-laundering.

"It was a way of gaining legitimacy and getting people to say, 'Hey, I'm OK.' "

Just one month before the FBI launched a criminal probe into his banking empire, Stanford hosted a lavish gathering of powerful Washington insiders, with keynote speeches from Madeleine Albright, former secretary of state, and Paul Wolfowitz, former deputy secretary of defense.

Also co-hosting the May event: Miami lawyer Yolanda Suarez, Stanford's longtime chief of staff. The topic: the global financial crisis, and the private sector's need to work with government. But Stanford's own crisis was about to explode.

On Feb. 17, armed with court orders, federal agents swarmed into his offices across the country, shutting down his operations and declaring that Stanford was running a massive fraud.

In his Houston headquarters, agents found reams of company documents, electronic records and e-mails received by Stanford in his final days, including the message from Sessions.

As the scandal unfolded, members of the Caribbean Caucus began returning their contributions.

Nineteen lawmakers gave back a total of $87,800 to the court-appointed receiver as of August. Others, including Meeks, Sessions, Sandlin, Sweeney and Crane, said they turned some of the money over to charities.

In addition, Democratic House member Charlie Rangel returned $11,800 to charities, and Democratic Florida Sen. Bill Nelson $45,000 to charities, half of which came from a fundraiser at Stanford's Miami office in 2006.

"Just like a number of people, (they) started to run for cover the minute Allen was under scrutiny," said Schaffer, Stanford's attorney.

"People he had been very close to - and never asked anything of - all of a sudden are distancing themselves. Whether he's innocent or guilty, they don't really care. They worry about how it affects their image."

As federal agents examine Stanford's political contributions, victims' groups have criticized lawmakers for failing to vet Stanford before accepting his donations and trips.

The State Department had singled out Stanford in a 1999 report for using his influence to weaken the Antiguan banking laws, creating "one of the most attractive financial centers in the Caribbean for money launderers."

"None of this was difficult to ascertain," said Bill Branscum, a former U.S. Treasury agent who investigated laundering in the Caribbean. "With the position of public trust comes a consummate responsibility. They should have made it their business to figure out what was going on."

"You've got to give (Stanford) credit - he got the best bang for his buck."

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