Stanford guilty of bilking investors of billions

March 6, 2012 by Arkady Bukh

Second Biggest Ponzi Schemer is Now a Federal Guest – for 110 Years

Convicted Ponzi schemer, Robert Stanford, is still in prison. Don’t hold a seat at the table for him; it will be awhile before his social calendar allows him to dine out.

In what was a vindication for the Federal government, Stanford’s financial empire was shut down in February 2009. It was the largest investment fraud since Bernie Madoff. It’s not all good news, though. The U.S. Justice Department had neglected for ages to recognize that Stanford was a castle built on nothing.

When the government finally took the fraud to court, Stanford was found guilty of 13 out of 14 counts which included fraud, collusion and interference of the probe by the U.S. Securities and Exchange Commission.

Stanford, 66, looked at the seats where his mother and two daughters set. Touching his hand to his heart, law enforcement led Stanford to jail — to await the court’s decision about his appeal — where he has been since his arrest.

Ali Fazel, Stanford’s attorneys, said, “We’re discouraged in the result, and we will appeal.”

Stanford faced a sentence of over 200 years if the sentences were consecutive. Observers believed Stanford would probably face a peak of 20 years if he is sentenced to concurrent terms, a trend usually followed in white-collar cases. In the end, Stanford was given an 110-year prison term

Just a day before publishing the decision, the Houston federal panel told U.S. District Judge David Hittner they could not arrive at a judgment. Hittner told the jurors to keep weighing the evidence. The sentence may only be a minute victory for the marks. Most have gotten none of the funds, in restitution, they spent in Stanford’s certificates of deposit. Prosecutors tried to seize over $300 million in foreign assets connected to Stanford.

Cassie Wilkinson, a Houston investor in Stanford funds, said, “For all the investors I think there is some relief that they weren’t just fools. There was a jury who found the same thing — we were conned.”

Observers across the country closely followed Stanford’s downfall.

Once estimated to have a personal fortune of over $2 billion, Stanford regularly stormed the bank he controlled in Antigua, Stanford International Bank. Prosecutors said Stanford used the bank as his “personal ATM”.

Buying a castle in Florida, for one of his lovers, his eldest child lived in a million-dollar condo in Houston, paid for with stolen funds. Stanford enjoyed the high-life as he donned custom-made suits and even funded a $20 million bonus once for an intercontinental cricket competition.

Just hours following the decision, the jurors started to reflect on the government’s demand that over $300 million — in 30 bank accounts connected to Stanford — be relinquished. The capital was held in accounts in Geneva, the UK, and Canada.

“Every dollar that America is trying to forfeit is CD depositor money that connects to Mr. Stanford’s offenses,” said prosecutor Andrew Warren.

During the trial, the prosecution’s lead witness, one-time Stanford aide James Davis, told the court that he and Stanford falsified records and engineered false financial reports. Then funneling millions of dollars from the Stanford owned bank to a Swiss account, Stanford tapped into the money for his own use.

Stanford’s attorneys painted their client who was ahead of his time, an idealistic who was not associated with the day-to-day activities at the bank. They pointed to Davis as the perpetrator of the scam and claimed that Stanford’s companies were viable until shut down by the government. With no funds, Stanford was reported indigent. Public funds paid for his defense.

Wendell Odom, a defense lawyer in Houston, said Stanford’s attorneys discredited Davis, who had pled guilty to three counts. But the attorneys neglected to produce an option for the jury. “There was just overwhelming evidence,” Odom said.

While Stanford was in jail waiting for his day in court, he was battered by another prisoner. Stanford was left with a brain injury and addiction to anti-anxiety medicine. He was determined to be fit to stand trial following eight months in a prison medical facility even though his attorneys claim that Stanford had lost his recall.

Before the start of the trial, Stanford’s attorneys desired to explain his account to the jury, but the fraudster eventually did not testify.

Growing up in Mexia, Texas, Stanford studied banking at Baylor University. Davis, the same one that testified against him, was his friend at Baylor.

Becoming a real estate investor in the 1980s, Stanford started a foreign bank, Guardian International Bank, on Montserrat. Later when the British began a crackdown on Montserrat’s offshore-banking, Stanford moved the bank to Antigua and renamed it Stanford International Bank. Stanford’s bank concentrated on selling certificates of deposit, and he gamed clients in Latin America as well as oil company employees on the American Gulf Coast.

Becoming a philanthropist in Antigua, Stanford decided to be a cricket sponsor. Cricket, the state pastime, raised his visibility, and he was identified as “Sir Allen” when he was knighted there in 2006. By 2008, Stanford was #205 on Forbes magazine’s listing of the richest Americans.

Questions have surfaced about how Stanford International Bank’s CDs could pay higher than market rates. By February 2009, investors were trying to recoup their money. They weren’t quick enough. On February 17, the government swooped in on his Houston headquarters and shut it down.

Stanford lost his knighthood and all of his assets. Incarcerated at Coleman II USP in Florida, the earliest he can be released is April 17, 2105.

It should go without saying that Stanford was banned from the securities industry.