Stanford Ex-Investment Chief Pendergest Holt Gets 3 Years

Stanford’s Ex-Investment Chief Pendergest Holt Gets 3 Years
Former CIO Stanford Financial Group Co. Laura Pendergest Holt arrives at the Bob Casey Federal Courthouse for sentencing in Houston, Texas, on Sept. 13, 2012. Photographer: Aaron M. Sprecher/Bloomberg

Laura Pendergest Holt, the former chief investment officer for Stanford Financial Group Co., was sentenced to three years in prison for obstructing a U.S. Securities and Exchange Commission probe of a $7 billion Ponzi scheme at the company.

Pendergest Holt, 39, was sentenced today by U.S. District Judge David Hittner in Houston. She was the third-highest-ranking executive in the financial services firm Texas financier R. Allen Stanford built on what the U.S. said was a fraud based on bogus offshore bank certificates.

“I’m sorry that I was so trusting,” she said in court, fighting back tears. Referring to Stanford, she said, “He didn’t deserve my trust. And in so trusting, I harmed others.”

Her statement drew criticism from Assistant U.S. Attorney Jason Varnado, the prosecutor arguing the government’s case. At his request, the judge ordered her taken into custody rather than being allowed to report to prison next month as she asked.

“She did not plead guilty to trusting others,” Varnado said. “She pled guilty to obstructing the SEC. That’s a serious crime.”

“When it was time to tell the truth, Mrs. Holt chose not to do that,” the prosecutor said, referring to her interviews with the SEC. “She corruptly obstructed justice. She stalled. She delayed. She frustrated their efforts.”

Defense Argument

Pendergest Holt’s lawyer Chris Flood argued for home confinement or assignment to a halfway house, saying that federal sentencing guidelines might have left her with as little as a one-year term instead of the three she agreed to.

Varnado countered that a guideline-based sentence probably would have been just three months less. She didn’t accept responsibility for her crime -- which the guidelines reward with less prison time -- and couldn’t change the agreement at the last minute, he told the judge.

Flood reminded Hittner that his client admitted obstruction, not participating in the fraud scheme itself.

“Don’t punish her for the crimes of Allen Stanford,” he said. “She didn’t plead guilty to those.”

Pendergest Holt faced a trial this month on 21 counts before agreeing in June to plead to one count of obstruction in exchange for the 36-month prison term.

Judge’s Letters

Hittner received dozens letters urging him to reject the plea deal, his clerk said. The agreement required him to accept or reject it without changing its terms.

Pendergest Holt’s family and friends submitted 22 letters urging a lenient sentence. Varnado said most portrayed her as a victim duped by Stanford. That proved she hadn’t accepted responsibility, Varnado said.

Hittner said he read all the letters and wrote a note to himself in the margin of one: “Remember she pleaded guilty to obstruction of justice.”

After the judge rejected her request to report to prison later to give her time to arrange for the care of her 16-month-old daughter, she was led from the court without being placed in handcuffs.

Her husband, Jim Holt, angrily confronted prosecutors as they left the courtroom.

“It’s unconscionable,” he said before Flood prevented him from saying more.

First Charge

The first of Stanford’s associates to be accused of a crime, Pendergest Holt was initially charged with obstruction in February 2009. She was re-indicted along with Stanford and three others in June 2009.

Stanford, who was convicted of orchestrating and concealing the fraud scheme in March, is serving a 110-year sentence at a federal prison in Florida.

He is appealing his conviction and sentence, while a court-appointed receiver marshals his assets to repay investors who lost more than $7 billion on fraudulent certificates of deposit at Antigua-based Stanford International Bank Ltd.

Pendergest Holt admitted to lying to investors and to the firm’s financial advisers, claiming she oversaw a stable of international money managers who invested the bulk of the bank’s assets in conservative, liquid assets.

Varnado told Hittner in June that Pendergest Holt was being allowed to plead to just one count because she wasn’t aware of the fraud until near the end.

Actual Knowledge

Varnado said during the plea hearing that while Pendergest Holt told investors and brokers she oversaw the bank’s entire investment portfolio, she had actual knowledge of just two portions, worth about 12 percent of the bank’s assets.

The prosecutor said Pendergest Holt didn’t learn until early 2009, at a meeting of Stanford’s senior staff in a Miami airport hangar, that the third and largest tier of the portfolio consisted of overvalued real estate, risky private equity investments and a $1.6 billion personal loan to Allen Stanford.

Pendergest Holt told Hittner in June that she met with SEC officials a few days after the Miami meeting to intentionally stall the agency’s investigation.

“I decided to withhold the information about Tier 3 to give Stanford -- the company, not Mr. Stanford personally -- time to correct the disclosures, amend them, so we could fall into line,” she said.

During Stanford’s trial, Pendergest Holt’s ex-boss and former lover, James M. Davis, the company’s finance chief, testified they had a three-year affair that ended shortly before she was named investment chief.

Husband’s Investment

Other witnesses testified she gave $2 million of the bank’s money to her husband, a former personal trainer, to invest in his hedge fund.

Besides the prison term, she was sentenced to three years’ supervision after her release. No fine was imposed because she lacks the means to pay, the judge said. Her assets were seized by a court-appointed receiver in an SEC lawsuit against her and other Stanford executives for use in repaying victims.

Jury selection in the trial of two more defendants in the case, Stanford Chief Accounting Officer Gilbert Lopez and ex-Comptroller Mark Kuhrt, is scheduled for Sept. 28.

The case is U.S. v. Stanford, 09-cr-0342, U.S. District Court, Southern District of Texas (Houston).

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