HOUSTON – Texas billionaire R. Allen Stanford pleaded not guilty Thursday to charges he swindled investors out of $7 billion as part of a massive investment scam.
Stanford entered his plea during his arraignment in federal court. Authorities have alleged that Stanford used his international banking empire as a pyramid scheme, which typically operates by paying of earlier investors with money collected from later investors.
Laura Pendergest-Holt, Gilberto Lopez and Mark Kuhrt, three executives with the now defunct Houston-based Stanford Financial Group who were indicted along with their former boss, also entered not guilty pleas.
At a bond hearing shortly after the executives’ arraignment, prosecutors argued Stanford should be held without bond as he awaits trial because he might have access to billions of dollars in secret funds.
Prosecutor Paul Pelletier said investigators found a secret Swiss account Stanford controlled that was drained of more than $100 million in December 2008.
Jeffrey Ferguson, a forensic examiner hired to review the records of SFG and its affiliated bank on the Caribbean island of Antigua, testified that nearly $1.2 billion of the $7 billion Stanford and his co-defendants are accused of bilking from investors can’t be accounted for.
In court documents filed Thursday, prosecutors also said Stanford faces a potential life sentence, has access to a private jet and has an international network of wealthy acquaintances who would help him, including one who recently agreed to give him $36,000 to pay his lease on a Houston apartment for a year.
Dick DeGuerin, Stanford’s attorney, objected to Pelletier characterizing the account as secret, saying it was known to Stanford’s employees.
“It’s just wrong and it’s designed to prejudice potential jurors who will hear this case,” DeGuerin said.
Charity work cited
DeGuerin argued in court documents that Stanford is not a flight risk and highlighted his charity efforts, including his work with a foundation for single mothers in Antigua, strong ties to his children and amicable relationships with the mothers of his children as examples of his strong character.
Stanford has been in federal custody since he was arrested in Virginia on June 18.
Stanford was returned to Texas on Tuesday. He was being held in the Montgomery County Jail in Conroe, just north of Houston. He arrived in court in leg irons, handcuffs and an orange prison jumpsuit.
Each of the most serious counts that Stanford faces carry prison terms of up to 20 years. But prosecutors say sentencing guidelines could increase his total sentence to life in prison.
The billionaire and the executives are accused of orchestrating a fraud by misusing most of the $7 billion they advised clients to invest in certificates of deposit from the Stanford International Bank, based on the Caribbean island of Antigua.
Also indicted is Leroy King, the former chief executive officer of Antigua’s Financial Services Regulatory Commission. He was taken into custody by island authorities and will now face extradition proceedings, according to a government official who spoke on condition of anonymity because she was not authorized to discuss the case. King is accused of accepting more than $100,000 in bribes to turn a blind eye to irregularities.
Stanford and his co-defendants are charged with wire fraud, mail fraud, conspiracy to commit mail, wire and securities fraud and conspiracy to commit money laundering.
Stanford, Pendergest-Holt and King are also charged with conspiring to obstruct a Securities and Exchange Commission investigation and obstruction of an SEC investigation.
The indictment also says Stanford and the other executives misrepresented the Antigua island bank’s financial condition, its investment strategy and how it was regulated.
James M. Davis, 60, Stanford Financial Group’s chief financial officer, faces similar charges in a criminal information. He is due in court July 1.
A separate indictment in Florida accused another Stanford worker, Bruce Perraud, of destroying records important to the investigation.
Juan A. Lozano/The Associated Press