A Madoff-like search of overseas accounts is launched as the SEC reveals that someone at Stanford Financial tried to tap those assets
U.S. securities regulators are continuing to tighten the screws on R. Allen Stanford by going after assets that his embattled offshore bank has in Britain. Meanwhile, the disgraced financier continues to argue the government is making it impossible for him to hire a lawyer by freezing his assets in the U.S.
Lawyers for the Securities & Exchange Commission want a judge in England to freeze more than $105 million in assets Antigua-based Stanford International Bank had in five different accounts with the London branch of Credit Suisse's private banking arm. The assets in the accounts include a mix of cash and U.S., Canadian, and Swiss stock shares. But the overwhelming majority of the British assets are investments in unnamed hedge funds, according to a Mar. 26 application filed by the SEC with the Queens Bench Division of High Court of Justice.
The SEC has been working with London police to track the British assets and prevent them from being transferred to Stanford or anyone else. SEC attorney David Reece said in early February that someone from Stanford's operation gave Credit Suisse instructions "to liquidate the entire London-based portfolio," according to the court filing. On Feb. 12, a day after BusinessWeek.com reported that Stanford and his Stanford Financial Group were under investigation, Credit Suisse was asked to wire $17 million to a Stanford International account in Houston, the headquarters for the 59-year-old Texas native's once fast-growing financial empire.
Credit Suisse, however, did not act on any of those demands. "It is my understanding that Credit Suisse did not act on that instruction because of contemporaneous news articles announcing that Stanford was under investigation by regulatory authorities," states Reece. The SEC, meanwhile, also wants the British court to freeze several accounts holding less than $10 million in cash in a London branch of HSBC.
No Criminal Charges
The SEC on Feb. 17 filed a civil complaint against Stanford, charging him with masterminding an $8 billion fraud at his offshore bank, which specialized in selling high-yielding certificates of deposit. Regulators also charged two of Stanford's top deputies, Laura Pendergest-Holt and Jim Davis.
So far, no criminal charges have been filed against Stanford. But federal prosecutors in Houston filed an obstruction-of-justice charge against Pendergest-Holt and continue to investigate.
"Many customers were making requests for early redemptions during this period as the economy continued to tank. At this point, I do not know who ordered the actions to be taken, but at the end of the day the owner/boss of the enterprise was Stanford," said Finn. "And when they follow the money the trail, it will lead directly to Stanford." His client Davis, Stanford Financial's CFO, is cooperating with regulators and federal prosecutors.
The SEC may not be done with its work in Britain and elsewhere around the globe. U.S. and British authorities are looking into "accounts held with two other London-based institutions." BusinessWeek.com previously reported that U.S. regulators were investigating what happened to more than $100 million that the Libyan government reportedly invested with Stanford's bank last November. So far, investigators and Ralph Janvey, the court-appointed receiver overseeing the liquidation of Stanford's firm, have identified just a fraction of the $8 billion allegedly raised from investors in the U.S. and Latin America.
It's not clear what the status of the SEC's overseas freeze request is. The SEC won't comment on the action. Credit Suisse also declined to comment. But the overseas search for Stanford's assets corresponds with the approach that U.S. authorities have taken in tracking assets held by convicted swindler Bernard Madoff and his family.
The SEC's move against Stanford's British assets comes as Stanford all but pleaded poverty in a filing submitted to a U.S. federal judge in Dallas. In a Mar. 25 filing, Stanford denied the civil fraud charges leveled against him by the SEC and asked the judge to "release my seized assets and money so that I may retain counsel."
For the moment, celebrated criminal defense attorney Dick DeGuerin has agreed to represent Stanford and help him with legal filings. The Houston attorney has been outspoken in criticizing the SEC charges against Stanford. It's not clear how long DeGuerin will remain on the case, though, if Stanford can't get money to pay him.
DeGuerin could not be reached to comment on the SEC's attempts to freeze Stanford's assets.