R. Allen Stanford’s jury, after finding the Texas financier guilty of leading a $7 billion international fraud, is now deliberating whether he should forfeit $330 million in assets sought by federal prosecutors.
The jury of eight men and four women two days ago convicted Stanford on 13 of 14 charges including four wire fraud counts and five mail fraud counts carrying maximum penalties of 20 years in prison. No sentencing date has been set.
The forfeiture trial started about 2 1/2 hours after jurors returned their guilty verdict. They deliberated for about 15 minutes yesterday after hearing closing arguments from both sides and will resume their consideration of the evidence today.
“Three hundred, thirty million dollars, that’s what’s at stake here today, $330 million obtained through the sale of certificates of deposits,” Justice Department lawyer Andrew Warren told jurors as he summarized evidence they were shown in the second proceeding.
That money, he said, remained the proceeds of Stanford’s criminal acts regardless of what it was used to buy or where it was deposited and under whose name it was deposited.
Stanford, the founder of Houston-based Stanford Financial Group, denied federal government allegations that he lied to investors about the nature and oversight of the certificates of deposit issued by the bank and sold in U.S. by his securities firm, Stanford Group Co.
‘Belongs to the Victims’
Stanford funds now held in the U.K., Switzerland, Canada and Antigua belong to his bank depositors, Warren told the jury March 6 at the outset of the proceeding.
“It includes the SocGen slush fund about which you’ve heard a lot about already,” Warren said, referring to money held at a Swiss unit of Paris-based Societe Generale SA. (GLE) “Every single dollar the U.S. is seeking is CD depositors’ money that stems from Mr. Stanford’s crimes and belongs to the victims of his fraud.”
U.S. District Judge David Hittner had told the jury that they must unanimously agree upon whether funds on deposit in each of the 29 accounts at issue were proceeds of Stanford’s wire fraud, mail fraud or conspiracy to commit those crimes, and if so, how much of that money was stolen from investors.
Defense attorney Ali Fazel, in his closing comments, told the jury prosecutors didn’t meet their burden.
‘Don’t Assume It’
“They’re wanting you to make the leap again,” the defense lawyer said, reprising a theme he sounded in his closing after the criminal trial. “They want you to assume that all of it is CD money. I’m asking you not to do that. Don’t assume it.”
“Fifty percent of a prosecutor’s job is to obtain the conviction,” said Paul Pelletier, a former Stanford prosecutor who is now with Boston-based Mintz Levin Cohn Ferris Glovsky & Popeo PC (1367L). “The other 50 percent is to recover for the victims, and forfeiture goes a long way towards that goal.”
The jury must find that specific Stanford assets were obtained with criminal proceeds in order to force him to give them up, Pelletier said. Funds recovered through this process will be returned to Stanford fraud victims.
U.S. Postal Inspector Clayton Gerber yesterday traced the flow of money from Stanford investors to accounts in Switzerland and, ultimately, to a bank in the Cook Islands near New Zealand, where they were held in what Gerber identified as the Baby Mama Trust.
The trust held proceeds from the 2009 sale of a Key Biscayne, Florida, home owned by Rebecca Reeves-Stanford, with whom the financier had two out-of-wedlock children.
Gerber said that home was bought in 2005 with money from the sale of a Boca Raton home that Stanford purchased for Reeves-Stanford in 2002 for $1.1 million using CD holders’ money transferred to a Swiss bank account.
On cross-examination by co-lead defense counsel Ali Fazel, Gerber said he didn’t have opening balances for all of the bank accounts about which he testified. While some of those accounts were opened before 2000, his review only reached back to about that year, he said.
“Aren’t you making assumptions as to what monies were there to begin with?” Fazel asked.
“No,” the postal inspector said.
As the Houston jury heard forfeiture evidence, the U.S. Court of Appeals in New Orleans issued a ruling reiterating that it will maintain its March 2 order freezing $55 million that, while belonging to the Libyan government, is sought by the Stanford receiver appointed by a federal judge in Dallas.
The ousted Libyan regime of Col. Muammar Qaddafi had been a Stanford investor. Receiver Ralph Janvey sued to gain control of the funds last year, arguing they were ill-gotten gain. U.S. District Judge David Godbey in Dallas, who appointed Janvey in 2009, last month ruled the receiver hadn’t proved the likelihood of success needed to warrant an injunction barring withdrawal of the funds by the Libyan Investment Authority.
Janvey appealed and obtained an order reimposing an asset freeze. The appellate court, while maintaining the status quo, said yesterday that all briefing must be completed by April 23. It hasn’t set a date for argument in the case
The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank Ltd., 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).
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