Freitag, 30. März 2012

TD Bank, lawyers accused of "fraud on court" for presenting false "Customer Due Diligence Form" in seminal AML civil case

March 30, 2012
By Brian Kindle
TD Bank, one of the world's largest financial institutions, is facing what may be the most explosive and damaging risk it has ever confronted. In a federal district court in Miami, it was accused this week of "working a fraud on the court and the jury" by doctoring a crucial document it presented in evidence at a recent trial it lost.

The accuser and winner of the recent trial, Coquina Investments, of Texas, says the false document gave the appearance that TD Bank officially considered its former customer, Scott Rothstein, as being "Low Risk," when, in fact, the true document it withheld from the court blared "HIGH RISK."

Coquina won landmark $67 million verdict against TD Bank in January

Coquina won an unprecedented $67 million jury verdict against TD Bank in January after a 2-1/2 month trial in Miami federal court before US District Judge Marcia G. Cooke. TD Bank was found liable by an eight-person jury of having "aided and abetted fraud" by helping Rothstein, a South Florida lawyer, to perpetrate a $1.2 billion fraud and to launder the proceeds.

It is believed to be the first case in history in which a bank has been held liable of "aiding and abetting fraud" for helping a customer execute a fraud and launder the proceeds.

Rothstein curried favor with bankers with gifts

Rothstein is serving a 50-year sentence in federal prison after pleading guilty in 2010 to the fraud and laundering. He is actively cooperating with federal agents and the bankruptcy trustee in the wide ranging, international case. His testimony has not spared his former Ft. Lauderdale law partners or the TD Bank officials who received his favors and gifts, including access to a hideaway pad in Ft. Lauderdale Rothstein stocked with wine and women.

TD Bank, through spokeswoman Rebecca Acevedo, told ACFCS, "We are vigorously opposing the motion and our opposition papers will be filed very shortly."

Lawyers for TD Bank, at Greenberg Traurig, did not respond to a request for comment.

OCC has been silent on TD Bank

The Office of the Comptroller of the Currency has been monitoring the case but has not taken any regulatory action against TD Bank in the 30 months since the Rothstein scandal broke.

Coquina's lawyer, David Mandel, of Mandel & Mandel in Miami, who is a former federal prosecutor, said on March 26 in the "Plaintiffs Fourth Motion for Sanctions" that TD Bank and Greenberg Traurig presented as evidence a Customer Due Diligence Form for Rothstein that had been stripped of a red banner that read "HIGH RISK" in bold letters. The comments "Complete-Approved" and "Date Submitted 12-Dec-2007" flanked the banner and were also missing in the version presented in the Coquina trial. The form documented that Rothstein had been found to be a high risk for money laundering activities based on certain factors, such as total monthly check deposits and cash activity.

The form also documented that TD Bank had performed "enhanced due diligence" procedures on Rothstein, including visits to his offices and a check of commercial databases.

These procedures are mandated by regulations issued by the Treasury Department's Financial Crimes Enforcement Network (FinCEN) under the US Bank Secrecy Act (Title 31 USC, Sections 5311 et seq.)

Coquina discovered true version of "HIGH RISK" form in related case

Mandel's motion says he discovered the "fraud" when, in a different but related case, TD Bank "produced a substantially different... Customer Due Diligence Form" for Rothstein. "Even a cursory examination of the recently produced documents [in the related case] shows that... [t]he document admitted into evidence in (the Coquina) case, is a fraud," the motion for sanctions continues.

The Customer Due Diligence Form that TD Bank presented in the other case was identical to the one it presented in the Coquina case except for the "HIGH RISK" banner at the top.

The new accusations by Coquina which were presented to Judge Cooke arise after TD Bank filed its appeal of the $67 million verdict with the 11th US Circuit Court of Appeals, in Atlanta.

The simultaneous appeal and allegation of falsified evidence puts a rarely-seen wrinkle in a civil case. Judge Cooke has ample remedies at her disposal, including the imposition of monetary penalties and the striking of pleadings, but she may feel constrained by the uncertainty of what the 11th Circuit Court may decide in the appeal of the main case. The appellate court is not officially aware of the new allegations by Coquina.

Another question is what effect the true Customer Due Diligence form may have had on the jury, which ruled in favor of Coquina anyway.

Coquina asks judge for referral to Justice Department and Florida Bar

An allegation of knowingly presenting falsified records in court is extremely serious and is usually dealt with harshly by a sitting judge. In its motion, Coquina asks Cooke to take three steps:

1) To sanction TD Bank "in the manner and extent that the Court deems just and appropriate,"
2) To refer TD Bank "to the Office of the United States Attorney for investigation of potential obstruction of justice charges,"
3) To refer "Defense counsel to the Florida Bar for investigation into what role, if any, Defense counsel had in this matter."

Whatever the outcome in the 11th Circuit Court of Appeals and before Judge Cooke on the Coquina motion, it is clear the tangible and intangible costs TD Bank incurs may end up being far greater than the $67 million a Miami federal jury found it should pay to the Texas investors in Rothstein's fraudulent Ponzi scheme.

(The two versions of the top part of TD Bank's Customer Due Diligence Form for Rothstein's now-defunct firm Rothstein, Rosenfeldt and Adler appear below. The version presented in the Coquina case appears first, followed by the unexpurgated version.)

False Customer Due Diligence Form

TD Bank Customer Due Diligence Form

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Mittwoch, 21. März 2012

Allen Stanford, American Drug Lord

Stanford Drug Lord March 21, 2012
By dhopsicker

Missing from coverage of the conviction two weeks ago of Texas "financier" Allen Stanford for running a $7 billion Ponzi scheme was any mention of Stanford's long-time role as an authentic-if no longer certified-American Drug Lord.

"Sir" Allen (the title was bought) is an excellent example of a curiously under-publicized species: the American Drug Lord.
Texas billionaire Allen Stanford
(The U.S. Drug Enforcement Administration claims the species doesn't even exist; it may be they have their own reasons.)

To most observers in the Caribbean, however, Stanford's narco-bank was as visible a manifestation of the global drug trade as a homemade semi-submersible submarine, or a convoy of SUV's snaking through Sinaloa's Sierra Madre Mountains.

Banks like his immodestly-named Stanford International Bank on the island of Antigua, where financial regulators are apparently even more easily-corrupted than their counterparts in the U.S., are as essential to global drug trafficking as fleets of late-model, preferably American-registered luxury jets.

"Every island has one," one veteran Caribbean observer told us from Kingston Jamaica, referring to Stanford's bank. "The days are mostly gone when you could walk in and lay out three suitcases of cash and get a penthouse condo on Miami Beach."

"You can't spend money you haven't first deposited in a bank these days."

It's the little things

Conspicuously missing at Stanford's trial were answers to questions widely being asked, especially in the Caribbean, where many lost their life savings, about Stanford's relationship with the CIA.

Stanford Drug Lord

Was Stanford's bank in Antigua just the latest in a long line of money-laundering banks—like Castle Bank, Nugan Hand, and Wachovia—used to move money around by the CIA and organized crime?

One telling detail: when Stanford's fellow Ponzi All-Star Art Nadel (of Huffman Aviation in Venice Florida fame) went on the lam, he lit out for Slidell, Louisiana, the legendary site of Carlos Marcello's hunting lodge just outside New Orleans.

After Stanford went on the lam he was found in Fredericksburg, Virginia, just over the hill from "The Farm," the training facility of one of the U.S. Government's most famous three-letter agencies at the Marine Corps Base in Quantico.

White kid gloves only, please

The kid-glove treatment accorded two of Stanford's accomplices is another clue to Stanford's provenance. Without their help, say observers, Stanford's operation would have been shut down as much as a decade earlier.

Both were high-level U.S. Federal Agency employees, one in the DEA, the other in the SEC, America's Securities Exchange Commission, charged with preventing financial fraud.

Stanford Drug Lord

Neither Agency has exactly covered itself in glory in living memory. In the $3 trillion financial heist in 2008, the SEC, unfortunately, got there a little late...

And in the now 40-year old War on Drugs, the DEA cannot be said to be "shock and awe-ing" the global drug trade into anything like submission.

In the aftermath of Stanford's arrest, the two former high-level Federal employees fared pretty well. One, deeply and criminally implicated by numerous sources, paid just a $50,000 fine, and never even faced criminal charges.

And when the second one did face criminal charges, a miracle occurred.
Thomas Raffanello
The 'Immaculate Acquittal'

It's morning in Miami. Tuesday the 10th of February, 2010. Inside the Federal Courthouse downtown something extremely rare is about to take place: a miracle, at least the closest thing to a miracle veteran court-watchers have seen in a long time.

It comes at the end of the trial of Thomas Raffanello, Allen Stanford's Chief of Security, and the long-time chief of the Drug Enforcement Administration's Miami office. Before joining Stanford, Raffanello led investigations against Manuel Noriega and the Medellin Cartel.
Thomas Raffanello
There has long been speculation about Stanford's connections with the world of "los narcos." But Raffanello is the one verifiable link between Allen Stanford and the global drug trade.

Raffanello, accused of illegally shredding documents at Stanford Financial Group after Stanford's arrest, was taken to a Fort Lauderdale federal courtroom in shackles, facing charges of conspiracy, obstruction of justice and destroying records.

But he had committed no crime, his lawyers said in a court filing. He was simply taking out the garbage.

On the morning of February 10, 2010, Raffanello sat in court awaiting the jury's verdict as the jury asked for clarification on one of the charges. Then, after they retired to continue their deliberations, Judge Richard Goldberg ordered the charges dismissed.

Lawyers called the ruling extremely rare, almost unprecedented. "Something smells here," said one courtroom observer afterwards.

It was the Immaculate Acquittal.

"Judges always wait for the jury to finish deliberations. If the jury finds the defendant not guilty, case closed. If they find him guilty, the judge has the power to over turn the conviction. But in that case the judge proclaims, Judgment notwithstanding the verdict."

"We witnessed a miracle," said one of Raffanello's defense attorneys, Janice Burton Sharpstein.
Barry Seal
It's a small world, after all

Sharpstein is married to Richard Sharpstein, a Miami attorney who represented one of the trigger men in the assassination of Barry Seal in Baton Rouge Louisiana in 1986.

We interviewed him while researching "Barry & the Boys." But the story he told us speaks volumes about the world of Allen Stanford.

"Why was Barry Seal murdered?" we asked.

"Seal had been irate when the IRS seized all his property," Sharstein related. "The IRS man said to Seal, ‘You owe us $30 million for the money you made drug smuggling."
Thomas Raffanello "Hey, I work for you," was Seal's reply. "We both work for the same people."

"You don't work for us," the IRS agent replied. "We're the IRS."

"Then Unglesby (Seal's attorney) watched as Seal place a call to (then-Vice President) George Bush," Sharpstein stated.

"He heard Barry say, If you don't get these assholes off my back I'm going to blow the whistle on the Contra scheme."

"What Unglesby says is, That's why he's dead.

Allen Stanford isn't dead. But he pissed somebody off bad enough to make him wish he were.

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Dienstag, 20. März 2012

La. Stanford victims' negligence claims moving forward

March 20, 2012
By Leslie Turk
On Monday the 5th U.S. Circuit Court of Appeals in New Orleans reversed a 2011 lower-court ruling, clearing the way for state court class actions against financial advisers, lawyers and other third parties accused of aiding convicted financial Allen Stanford's $7 billion Ponzi scheme.

U.S. District Judge David Godbey in Dallas had ruled in 2011 that the federal Securities Litigation Uniform Standards Act, or SLUSA, barred the state cases in Louisiana and Texas because they were related to securities fraud.

But the federal three-judge appeals court panel said that law was only "tangentially related" to the fraud alleged by the plaintiffs, the sale of bogus CDs issued by Stanford's Antigua-based Stanford International Bank Ltd.

Defendants include Stanford financial advisers, SEI Investments Co, which was accused of inducing investors to move retirement funds into the CDs, and the insurance brokerage Willis Group Holdings.

Phillip Preis, a lawyer for plaintiffs who has estimated total losses of $1 billion among some 1,000 Louisiana investors, said the ruling was the most significant for investors since Stanford's fraud was uncovered in February 2009.

"It will allow us to assert negligence claims," Preis told the Chicago Tribune. "It's a big deal." The plaintiffs in the Preis lawsuits affected by the appeals court's decision claim that SEI Investments Co. and Stanford's financial advisers, among them Tiffany Angelle and Hank Mills, both of whom worked out of the former Lafayette office in River Ranch, either knew or should have known that Stanford was stealing their money.

Preis also told Baton Rouge's Daily Report that the ruling is significant because state law only requires that plaintiffs prove negligence, not outright fraud, on the part of those entities. Preis said the appeals court's decision makes it more likely that those people will be made whole:

Preis filed the original class action suit in Baton Rouge's 19th Judicial District against the Stanford Trust, trust administrator SEI, a major international firm, and the Louisiana Office of Financial Institutions. Defendants were able to move the suit to federal court, but the Fifth Circuit (Monday) remanded the suit back to Baton Rouge. Preis expects to meet with Judge R. Michael Caldwell during the next six weeks to set a new schedule for the suit. "All those big companies like SEI that supported Stanford," Preis says, "we have a very viable claim against them."

A Houston federal jury found Stanford guilty March 6 on 13 criminal counts, including fraud, conspiracy and obstructing the SEC's investigation. The 61-year-old could face more than 200 years in prison at his June 14 sentencing, or a maximum of about 20 years if he is sentenced to concurrent terms, the Tribune reported.

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Mittwoch, 7. März 2012

Stanford verdict could boost civil claims

March 7, 2012
By Leigh Jones
The conviction of Allen Stanford on Tuesday for orchestrating a $7 billion Ponzi scheme could be bad news for two prominent law firms and an attorney facing civil lawsuits arising out of the Texas financier's crimes.

Attorney Thomas Sjoblom and New York-based law firms Chadbourne & Parke and Proskauer Rose are defendants in several class actions and other lawsuits brought by Stanford Financial investors, who claim they lost hundreds of millions of dollars as a result of the fraud.

Filed mostly in Texas, the lawsuits allege that Sjoblom, who worked at Chadbourne & Parke from 2002 to 2006 and at Proskauer Rose from 2006 to 2009, helped Stanford cover up the Ponzi scheme and evade authorities. Investors claim that the firms failed to properly supervise Sjoblom and were negligent in hiring him.

Sjoblom and the law firms also are defendants in a $1.8 billion lawsuit filed in January in Washington, D.C., federal court by the receiver for Stanford Financial, who alleges claims similar to those filed by the investors.

Legal experts said that Tuesday's jury verdict against Stanford on 13 counts of fraud could bolster the class actions and individual cases against the firms and Sjoblom.

"We now know there were bad actors and people suffered. The only question left is who should pay for it," said Michael Downey, a legal malpractice attorney with law firm Armstrong Teasdale who is not involved in the Stanford matter. "The issue will be 'should we make these poor innocent investors bear the losses or the lawyers who helped make it all happen.'"

Daniel Richman, an evidence professor at Columbia Law School, said the criminal conviction does not guarantee a win in the civil actions. But the verdict could mean that information favorable to the civil cases about the scheme will "shake out," he said.

"It may well reveal the nature of any co-conspirators," he said.

Sjoblom did not respond to messages seeking comment. Prior to private practice, he was an attorney with the U.S. Securities and Exchange Commission's enforcement division. He is now a solo practitioner in Washington.

Proskauer Rose, which has about 650 attorneys, did not respond to a request for comment. Chadbourne & Parke, which has about 440 lawyers, declined to comment.


Stanford was accused of defrauding about 30,000 investors for more than 20 years in 113 countries with high-interest certificates of deposit at Stanford National Bank, based in Antigua. He denied the allegations, but the jury on Tuesday convicted him of fraud, conspiracy and obstructing an investigation by the SEC. He was found not guilty on one count of wire fraud. He could face up to nearly 20 years in prison.

Edward Valdespino, an attorney representing some of the investors suing the law firms and Sjoblom, said that the conviction likely will give him better access to employees at the firm who were questioned by prosecutors in the criminal case but who were unable or unwilling to talk to him.

"It puts us in a better position," Valdespino said.

And Jesse Castillo, a lawyer representing about 350 plaintiffs in class actions against Sjoblom and the firms, said the criminal conviction "reinforces" his cases.

"It's satisfying to our clients," he said.

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Vitter Testifies at House Hearing, Continues to call for SIPC to Compensate Stanford Victims

March 7, 2012
For Immediate Release
(Washington, D.C.) - U.S. Sen. David Vitter today was invited to testify at the U.S. House Committee on Financial Services, Subcommittee on Capital Markets about some of the ongoing problems at the Securities Investor Protection Corporation (SIPC). Vitter testified about SIPC's refusal thus far to compensate the victims of the Allen Stanford Ponzi scheme.

Since early 2009, Vitter has been the leading Congressional advocate for Stanford victims, many of whom live in Louisiana.

The text of Vitter's testimony as prepared for delivery is below.

Thank you, Chairman Garrett and Ranking Member Waters and members of the Capital Markets and Government Sponsored Enterprises Subcommittee, for inviting me to testify here today. Congress has given the Securities Investor Protection Corporation (SIPC) incredible responsibility for protecting investors, and for that reason, it's vitally important and appropriate that we point the spotlight at SIPC to understand the ways that it is and is not working.

If there is one common cause between Stanford and Madoff investors, it's the way SIPC fought investors every step of the way and has absolutely refused to protect the victims of fraud. For three years the Stanford victims have been fighting just to have their day in court - and unfortunately, it's SIPC that they have to fight.

I fear we are in a situation where, if SIPC were a true financial regulator, we would call it regulatory capture. The actions of SIPC are dictated by the member companies rather than by the law. SIPC is functioning more like a trade association and advocate than a quasi-regulator.

I first became involved in the Stanford case because it has affected thousands of victims in the United States, and many of them live in Louisiana. Allen Stanford was adept at preying upon the savings of retired oil and gas workers in Louisiana in particular. Many of the victims have told me their entire savings has been lost because of the Stanford fraud, and that they have been forced to sell their home and re-enter the work force.

I want to be absolutely clear. I don't believe there is any need to change to the Securities Investor Protection Act in order to provide coverage for the Stanford victims. These victims are entitled to coverage under the law as it is currently written.

In the actual criminal case against Allen Stanford, he is accused of stealing customer funds. Instead of purchasing Stanford International Bank (SIB) "certificates of deposit" (CDs), the Stanford Group Company (SGC) which was a SIPC member, acquired control of its customers' funds and the funds were stolen by Allen Stanford. The Securities Exchange Commission (SEC) and courts have taken the position in litigation related to the receivership of Stanford's estate, that the Stanford companies operated as a Ponzi scheme and, "a Ponzi scheme is, as a matter of law insolvent from its inception." And, just yesterday, a jury convicted Allen Stanford on 13 of 14 counts related to this case.

In Old Naples Securities, Inc. the U.S. Court of Appeals for the 11th Circuit held that customers of an introducing broker-dealer who thought they were purchasing bonds through the broker- dealer were "customers" of an introducing broker-dealer within the meaning of SIPA and entitled to coverage under the statute. The court held whether a claimant deposited cash with the debtor "does not... depend simply on to whom the claimant handed her cash or made her check payable, or even where the funds were initially deposited." Rather, the issue was one of "actual receipt, acquisition or possession of the property of a claimant by the brokerage firm under liquidation."

Previously, the SEC has argued that "a customer's legitimate expectations" ought to be protected "regardless of the fact that the securities were fictitious." It is impossible for an insolvent entity issue legitimate securities. In re New Times Securities Services, Inc., the owner sold fictitious mutual funds, as well as bona fide mutual funds to investors via a register broker dealer that was a SIPC member and a non-broker-dealer entity.

Forensic accounting, which was done by the court appointed receiver, shows that the SIB CDs were not purchased by SGC for its customers, and therefore they are not worthless securities with zero value as argued by SIPC. Instead, these CDs are fictitious. The SGC customer funds were never transferred to the Antiguan bank and there was never any money standing behind the CDs.

On June 5, 2011, the SEC Commission voted on a determination that SIPC should provide coverage for the Stanford victims. In the analysis of the case provided by the SEC to SIPC, the SEC explains that on the specific facts of this case, investors with brokerage accounts at SGC who purchased the CDs through the broker-dealer qualified for protected "customer" status under SIPA.

In reaching its determination, the SEC cited the conclusions in the report of the court appointed-receiver for SGC, who noted that the many companies controlled and directly or indirectly owned by Stanford "were operated in a highly interconnected fashion, with a core objective of selling" the CDs. Among other things, the receiver also noted that "[c]orporate separateness was not respected within the Stanford empire... Money was transferred from entity to entity as needed, irrespective of legitimate business need. Ultimately, all of the fund transfers supported the Ponzi scheme in one way or another, or benefited Allen Stanford personally."

A SIPA liquidation proceeding would allow investors with accounts at the SGC to file claims with a trustee selected by SIPC. The trustee would decide whether the investors have "customer" claims that are protected by the statute, and an investor who disagreed with the trustee's determination could seek court review.

However, the ultimate roadblock to the victim's day in court is SIPC.

During the eight months since the SEC made its determination instructing to provide protection to the Stanford victims, SIPC has tried every conceivable idea to drag out making a final determination.

After the SEC's determination, SIPC ran up $200,000 of charges in June and July of last summer in reviewing the court appointed receiver's documents - a cost that will be ultimately be paid for with the money set aside for the victims. When asked about these charges, SIPC claimed that it was in order to do research into a settlement offer to the victims. However, an official settlement offer never materialized.

During the time between the SEC's determination and the SEC ultimately filing an application with the DC Circuit Court to compel a SIPA liquidation, I had many calls and meetings with Orlan Johnson, then Chairman of SIPC and his staff, including Stephen Harbeck. Concerns were raised by both Mr. Johnson and his staff on a reoccurring basis, as far back as our first meeting on this issue, about the cost to the SIPC fund of covering Stanford victims and how SIPC member companies would react to the need for SIPC to increase its assessments. I stressed in our discussions that I believe the only focus should be on providing the victims with swift resolution under the law in a manner that takes into account the complex nature of the fraud and uses the forensic accounting that had already been undertaken.

In these meetings and on these calls, it seemed to me, that SIPC was more interested in the cost of the resolution and protecting its Wall Street member companies than it was in doing their duty, doing the right thing, and immediately initiating a formal liquidation proceeding in the Stanford matter as ordered by the SEC. In fact, I was told that SIPC felt they would be sued no matter what they ultimately decided to do. SIPC was certain they would either be sued by the SEC or sued by their member companies.

During the course of these meetings and phone calls it also became obvious that SIPC hired lawyers to defend itself from the SEC while still negotiating a settlement offer, and SIPC has shown every indication it will continue to litigate this matter in court.

Currently, SIPC is fighting the SEC in court trying to avoid being compelled to file a protective order which would ultimately allow individual victims to get a judicial review of the merits of their claims against SIPC. While this judicial review is certainly part of the SIPA process, it was intended to be more of a summary proceeding, and I think everyone would be surprised at some of SIPC's tactics they are willing to use in order to avoid compensating the victims.

In a filing on February 16th, despite the fact that SIPC has run up a charge of $200,000 dollars with the court-appointed receiver, SIPC asked the judge to allow a discovery of documents related to who the customers were, the certificates of deposit and the corporate structure of the Stanford Companies. In addition, on Monday of this week, SIPC asked the judge for approval to review all of emails and documents of the SEC's legislative affairs team in a fishing expedition in an attempt to find a past instance where a staffer at the SEC might have said something that disagreed with what the SEC ultimately voted on months or years later.

The SIPA statute is 41 years old, and SIPC has never challenged the authority of the SEC in court the way it is now. SIPC has decided to test the SEC's authority to compel SIPC to protect investors. If SIPC persists on this pat, SIPC will undermine the faith investors have in markets and in SIPC coverage itself. Although I hope SIPC will see the error of their logic, I realize that ship has already sailed. I will continue to work on behalf of Stanford victims and all of Louisiana victims of securities fraud.

Chairman Garrett, I want to close by once again commending you on this timely hearing. I hope that my testimony shows that though no additional legislative action is needed to provide SIPC coverage for the Stanford victims, they are facing what amounts to regulatory capture and are in a desperate search for ways to hold SIPC accountable. Hearings like this one are a very important step in that process. I encourage you to bring them back before this committee on a regular basis to answer for their actions.

I hope at some point to hear Mr. Harbeck and Ms. Bowen tell the victims why they feel comfortable running up a $200,000 tab at the expense who have lost everything.

Thank you again Chairman Garrett, Ranking Member Waters and Members of the Subcommittee for the opportunity to speak on behalf of the victims.
Congressman Bill Cassidy questions CEO of SIPC Stephen Harbeck
Related article:
The Securities and Exchange Commission ("SEC") and the Securities Investor Protection Corp. ("SIPC") have reached the stipulated facts that are attached hereto. In addition, the SEC is still attempting to confirm and the parties are attempting to reach a stipulation to the following effect: "SIBL did not provide its investors with U.S. tax Form 1099 for the income purportedly earned on the SIBL CD investments. SGC did not include SIBL CD ‘interest income' on the Forms 1099 it provided to investors."

The Securities and Exchange Commission ("SEC") and the Securities Investor Protection Corp. ("SIPC") hereby stipulate and agree to the following facts only for purposes of the abovereferenced matter:
At the specified times or at all relevant times:

1. Stanford Group Company ("SGC") was a Houston-based broker-dealer that was registered with the Commission and a member of SIPC.

2. Stanford International Bank, Ltd. ("SIBL") was a bank organized under the laws of Antigua.

3. SIBL offered certificates of deposit ("CDs") to investors. In order to purchase a SIBL CD, an investor had to open an account with SIBL. CD investors wrote checks that were deposited into SIBL accounts and/or filled out or authorized wire transfer requests asking that money be wired to SIBL for the purpose of opening their accounts at SIBL and purchasing CDs.

4. Most SGC investors either received the physical CD certificates or had them held by an authorized designee, including Stanford Trust Company. To the extent that some SIBL CD investors did not receive the physical certificates, the SEC is not relying on that fact to support its claims in this proceeding.

5. SIBL CD investors received periodic statements from SIBL reflecting the balances in their SIBL accounts, including their CD balances. (An example of such a periodic statement is attached as Exhibit A.)

6. In the United States, disclosure statements for SIBL's CDs stated that "SIBL's products are not subject to the reporting requirements of any jurisdiction, nor are they covered by the investor protection or securities insurance laws of any jurisdiction such as the U.S. Securities Investor Protection Insurance Corporation." (An example of such a disclosure document is attached as Exhibit B.) A version of the marketing brochures for SIBL's CDs stated that SIBL CDs "are not subject to the reporting requirements of any jurisdiction outside of Antigua and Barbuda, nor are they covered by the investor protection or securities insurance laws of any jurisdiction such as the U.S. Securities Investor Protection Insurance Corporation or the bonding requirements thereunder.
There is no guarantee investors will receive interest distributions or the return of their principal." (An example of such a marketing document is attached as Exhibit C.)

7. SIBL and Stanford Trust Company are not and never have been members of SIPC.

8. For purposes of its Application in this proceeding, the SEC is relying on investors' deposit of funds for the purchase of SIBL CDs; it is not relying on transactions involving any other securities (or funds for other securities).

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Dienstag, 6. März 2012

Jury convicts R. Allen Stanford in investor fraud

March 6, 2012
By Loren Steffy
A federal court jury on Tuesday convicted Texan R. Allen Stanford of all but one count of an indictment alleging he ran a $7 billion fraud through an offshore bank.

Stanford, a Mexia native, was convicted of 13 counts of conspiracy, fraud, obstruction and money laundering. The counts of which he was found guilty carry total penalties of 230 years.

Stanford, 61, sat with his hands clasped over his mouth as he awaited the verdict, then looked to family members in the courtroom as U.S. District Judge David Hittner read the 13 verdicts of guilty and one of not guilty.

Evelyn Saravia, a friend of Stanford who has been in court every day since the trial began Jan. 23, wept as the verdicts were read, and family members wiped tears.

The 8-man, 4-woman jury acquitted Stanford of a wire fraud count alleging he bought Super Bowl tickets for co-defendant Leroy King, a regulator in the Caribbean nation of Antigua who is set for trial later.

On Monday, the jurors asked to review testimony about rules regarding gifts to Antiguan regulators, then told the court they were unable to reach a unanimous verdict on all counts.

Hittner ordered them to keep deliberating, and they reached the verdict after about 90 minutes of deliberations Tuesday morning.

Stanford Caption
Convicted Texan R. Allen Stanford
They broke for lunch, then returned to the courtroom at 1:30 p.m. Tuesday to consider a forfeiture matter they weren't aware of until after they returned the verdict.

The government asked jurors to find that in view of his conviction, Stanford must forfeit 29 bank accounts the government alleges contain investor money.

The jurors heard testimony on that matter Tuesday afternoon, and will deliberate it Wednesday.

Defense lawyer Ali Fazel said the defense team is disappointed in the guilty verdicts and plans to appeal.

Asked about Stanford's state of mind, defense lawyer Robert Scardino said, "He would be unusual, I think, if he was anything but depressed. It was a long, hard case and of course the consequences for Stanford are going to be dire."

Hittner did not immediately set a sentencing date for Stanford.

He has been jailed without bond as a flight risk since he was indicted in June 2009, four months after the Securities and Exchange Commission filed a fraud suit and shut down his international financial network, all part of Houston-based Stanford Financial Group.

The government alleged that Stanford and others defrauded investors in certificates of deposit issued by Stanford International Bank in Antigua.

Stanford declined to testify in the case, on the advice of lawyers.

The jury convicted Stanford on one count of conspiracy to commit mail or wire fraud; four counts of wire fraud; five counts of mail fraud; one count of conspiracy to obstruct a U.S. Securities and Exchange Commission proceeding; one of obstructing an SEC proceeding; and one of conspiracy to commit money laundering.

The government's star witness was Stanford's former chief financial officer, James Davis, who has pleaded guilty for his role in the scheme. Evidence included documents showing that potential customers were attracted by the offshore bank's higher rates of interest and guarantees of "safe and conservative" investments, from 1990 until federal regulators shut it down on Feb. 17, 2009.

Other key evidence came from FBI agent Robert Martin, who once worked as a banking officer. He showed jurors weeks ago how government investigators traced funds from the bank to a secret Swiss bank controlled by Stanford. From there, some of the money went to King and to an auditor, who signed off on the bank's annual report numbers, as well to other Stanford bank accounts in Houston and Florida.

By the time federal regulators shut down Stanford's enterprise, the government claims, Stanford had taken more than $2 billion from the offshore bank in loans.

Federal prosecutors said Stanford was taking $1 million a day out of the Antigua bank by the end of 2008.
Allen Stanford
Convicted Texan R. Allen Stanford

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