An Antiguan banking regulator told the jury in R. Allen Stanford’s criminal trial he was “shocked” to find $1 billion missing from Swiss bank accounts belonging to Stanford’s Antiguan bank, days before U.S. regulators seized the company on suspicion of fraud in February 2009.
Paul Ashe, Antigua’s supervisor of international banks, testified that records he received from Societe Generale SA in early 2009 listed $250 million in Stanford International Bank Ltd.’s Swiss investment account as of mid-2008. Stanford bank records Ashe examined in the same timeframe showed $1.25 billion in the same account.
“I was shocked,” Ashe testified today in federal court in Houston. “It suggested the document shown to us when we did the examination was altered, forged.”
Prosecutors claim Stanford masterminded a $7 billion investment fraud through bogus certificates of deposit at his Antigua-based Stanford International Bank. Stanford, 61, who denies all wrongdoing in connection with the alleged scheme, has been in custody as a flight risk since his indictment in June 2009.
Witnesses have testified that Stanford secretly borrowed more than $2 billion to finance a lavish lifestyle and private businesses ranging from Caribbean airlines and real estate to cricket tournaments. Prosecutors have presented evidence suggesting that Stanford bribed Leroy King, then Antigua’s top banking regulator, to hide the fraud.
Ashe testified he found no mention of Stanford’s sizeable borrowings in Stanford International Bank’s investment portfolio records. Under Antiguan banking laws, any significant loans to bank insiders must be “fully secured by cash, and the cash should be placed within the bank itself, not in another bank,” he said.
If Stanford International Bank had revealed Stanford’s loan was part of its investment portfolio, “that would’ve been the end of the bank,” Ashe testified. “This loan would’ve been illegal. It would’ve been reckless, irresponsible and downright negligent.”
In early February 2009, after Stanford bank executives supplied Antiguan regulators with new records Ashe said made him suspicious, the Financial Services Regulatory Commission opened another examination of SIB. Ashe said he was still conducting that exam when the U.S. Securities and Exchange Commission seized Stanford’s operations on Feb. 17, 2009.
Two days later, island regulators appointed an Antiguan receiver to oversee Stanford’s bank, which was then “in chaos,” Ashe told jurors. “There was no leadership. Customers were screaming for their money.”
Stanford’s attorneys have told jurors the financier was in the process of consolidating more than 100 private companies and investments onto the bank’s ledgers in late 2008. They said the consolidation would have zeroed out Stanford’s loan balance and repaid all depositors if the SEC had not stepped in and stopped the process. They contend the court-appointed U.S. receiver has destroyed much of the value of Stanford’s companies through mismanagement.
“The SEC didn’t make the bank insolvent,” Ashe testified. “The bank was already insolvent.”