Stanford trial likely to unveil tales of intrigue, money

By Patsy R. Brumfield | NEMS Daily Journal

Many Mississippians will turn their attention westward 640 miles on Monday – fallen financier R. Allen Stanford goes on trial.
With that courtroom drama comes all the emotions and grief experienced worldwide nearly three years ago when certificate of deposit investors with Stanford International Bank Ltd., realized their life savings and retirement funds had evaporated.
Baldwyn native Laura Pendergest-Holt, then Stanford’s chief investment officer, told federal investigators she didn’t know where the $7.2 billion was.
Instead, she told them to ask Stanford and James Davis, Stanford’s right-hand-man and the bank’s chief financial officer.
Davis and his wife, Lori, lived in luxury just up the road from Baldwyn in Union County.
In June 2009, Stanford, Davis, Holt and others were charged with a massive fraud on investors.
By August, Davis admitted his part and promised to testify against all the others.
Their lives and the lives of thousands of others were ruined.
Stanford insists he is innocent and that whatever happened was Davis’ fault.
Holt, two other former Stanford executives and a former Antiguan bank regulator are scheduled to face their charges at trial in June.
All the criminal court action takes place in Houston, Texas, where Stanford made his fortune and built his financial empire.
Today, that empire is dust – sold off or in process of liquidation by a court-appointed receiver whose goal is to build a victims fund but who is spending so much money to do so that critics worry there won’t be anything left.
Roommates at Baylor
Allen Stanford’s grandfather started an insurance and real estate business in Mexia, Texas, in 1935. The business grew through Stanford’s father while the next generation studied business courses at Baylor University.
That’s where Allen Stanford and James Davis were roommates.
When the Houston oil boom became a real estate bust in the 1980s, Stanford began buying distressed apartment complexes, then went on to banks, real estate, publishing and sports sponsorships from Houston to the Caribbean.
His massive financial support of British cricket won him an Antiguan knighthood.
In 1996, Stanford Financial Group borrowed $8 million for its headquarters in the 70,000-square-foot office high rise across from the shopping mecca, Galleria mall.
Stanford and SFG were big time now.
In 2007, Forbes magazine declared Sir Robert Allen Stanford the United States’ 239th richest person.
Nineteen years before, his college buddy, Davis, began his career as controller of Stanford’s Guardian International Bank Ltd., on the Caribbean island nation of Montserrat.
U.S. prosecutors claim that soon after that move, Stanford asked Davis to show fictitious quarterly and annual profits by falsifying entries in the general ledgers.
In early 1990, Guardian moved to Antigua under a cloud and under the name Stanford International Bank Ltd., with Davis still its controller. Two years later, Davis became chief financial officer for Stanford Financial Group, the bank’s parent company, and a web of other affiliated financial services entities.
SIBL’s primary investment product was a certificate of deposit sold through its financial advisers worldwide.
Forensic auditors are expected to testify that the continued CD sales propped up much ballyhooed investment gains. So long as lots of money was coming in, and not so much was going out, the Stanford empire was liquid.
Meanwhile, the flamboyant Stanford supported multiple families and bought expensive homes, yachts, art and other goodies allegedly straight out of company funds.
All the while, investors believed their money was protected by U.S.-backed insurance, like regular bank funds.
Whistleblowers emerge
By June 2005, a few Stanford advisers turned whistleblowers that the much-promised investment gains were not materializing.
The U.S. Securities and Exchange Commission questioned the Antiguan bank regulator about SIBL’s CD investment portfolio. This is when the phrase “possible Ponzi scheme” first appeared.
More than a year later, the SEC asked again.
Prosecutors claim that another two years later, an outside attorney hired by Stanford was informed of a previously undisclosed group of investments not “managed” by Holt. It reportedly constituted some $6 billion or about 80 percent of SIBL’s investment portfolio.
The government also claims it can prove that a series of conspiratorial dance steps across another year held investors and investigators at bay.
In mid-February 2009, employees and locals associated with various Stanford offices were surprised when federal agents presented their badges and began hauling away records. Business continued but only through the Internet.
Stanford assets were frozen and business dried up. The U.S. District Court of Northern Texas in Dallas appointed a receiver to oversee things.
Stanford, Holt, two other executives and the Antiguan bank regulator were indicted in June 2009 in Southern Texas.
Holt’s attorney said soon after her arrest that she’d been “set up” by Stanford.
Everyone but Stanford was released on bail. He’s been in custody ever since.
Davis cut his deal with prosecutors and pleaded guilty to three counts of wire fraud, mail fraud and conspiracy to obstruct an SEC proceeding.
If he fully cooperates and helps bring convictions for everybody else, the government will recommend a more lenient sentence than the 30 years he’s facing now.
worldwide search
Investigators continue to search worldwide for billions in Stanford investors’ money – the United Kingdom, Canada, Switzerland and the Caribbean.
U.S. senators and representatives continue to push for industry-backed help for Stanford victims.
Victims cannot sue their former Stanford investment advisers without permission from the court-appointed receiver. That has been few and far between.
This week, the 30,000 victims worldwide may pause and look toward Texas to better understand what happened.
When they do, they will wait to hear from a man who worked in Tupelo and built a mansion just west of Baldwyn, where he’d promised a renaissance.
Likely, books will be written when it’s all said and done.
But first, the Stanford trials have all of the appeal of a first-class movie.
patsy.brumfield@journalinc.com