Freitag, 26. April 2013

Allen Stanford Told to Disgorge $6.7 Billion in SEC Case

April 26, 2013
By Andrew Harris
R. Allen Stanford, the Texas financier convicted last year of leading an investment fraud scheme, was ordered to disgorge more than $6.7 billion by the judge in a U.S. Securities and Exchange Commission lawsuit.

U.S. District Judge David Godbey in Dallas issued the order yesterday against Stanford, his Stanford Group Co. and the Antigua-based Stanford International Bank Ltd.

The order may clear the way for Godbey to grant a court- appointed receiver's request to make an interim $55 million payout to investors who lost money after buying certificates of deposit issued by the Stanford Bank.

"The fraud perpetrated was obviously egregious, was done with a high degree of scienter, caused billions in losses and occurred over the course of a decade," Godbey said, using the legal term to describe the mental state of intent to deceive.

A federal jury in Houston convicted Stanford of lying to investors about how their money was being handled.

"The truth is that he flushed it away," Justice Department lawyer William Stellmach told jurors in his closing arguments at the March 2012 trial. "He told depositors he was using their money in one way and the truth was completely different."

Stanford, 63, was sentenced to 110 years in prison. Maintaining his innocence, he has appealed the verdict.

Parallel Judgment

Godbey referred to the jury's guilty finding in granting the SEC's request he render a parallel judgment in their case filed in February 2009, four months before the financier was indicted. The judge also cited the August 2009 guilty plea by Stanford Group Chief Financial Officer James Davis.

"The court finds that $5.9 billion is a reasonable approximation of the gains connected to Stanford's fraud," Godbey said of the sum he would order disgorged. He then added more than $861 million in interest for a total of $6.76 billion. Davis too is jointly liable.

Finally the judge imposed a $5.9 billion penalty on Stanford and a $5 million assessment against Davis, who received a five-year prison sentence.

The court-appointed receiver, Ralph Janvey, asked Godbey this month for permission to begin repaying some of the losses incurred by the more than 17,000 claimants. At an April 11 hearing, the judge told Janvey's lawyer, Kevin Sadler, he was concerned about doing so before a final order had been entered against Stanford.

Societe Generale

In a separate filing today, a group of Stanford investors asked Godbey to grant them a judgment of at least $95 million in a lawsuit against a unit of Paris-based Societe Generale SA. (GLE)

The lender's Societe Generale Private Banking (Suisse) unit took the money from a Stanford bank account with his permission in December 2008 to repay a loan made to him four years earlier, according to court papers.

The financier had caused a business funded by Stanford investor-depositor money to guarantee the loan in 2007, the investors alleged, while those depositors received no benefit. The transfer of that money to Societe Generale just two months before the SEC sued Stanford and shut down his businesses was a fraudulent transfer, the investors claimed in today's filing.

Ken Hagan and Jim Galvin, New York-based spokesman for the French bank, did not immediately reply to voicemail messages seeking comment on the allegations.

Slush Fund

Davis, the CFO, testified at Stanford's trial that the financier maintained a Societe Generale Swiss bank account, funded by investor deposits.

"It was a slush fund, just used for whatever the holder wanted to use it for," Davis said during the Houston federal court trial in February 2012.

The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston).

The investors' case is Rotstain v. Trustmark National Bank, 09-cv-02384, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at
To contact the editor responsible for this story: Michael Hytha at

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