By Patsy R. Brumfield/NEMS Daily Journal
(NOTE: The Daily Journal’s Patsy R. Brumfield is back from the Allen Stanford trial in Houston, but we’ll continue to run news updates from the federal trial, especially with the help of The Associated Press.)
HOUSTON, Texas – As fallen financier R. Allen Stanford’s federal fraud trial completes its third week, a Washington, D.C. federal judge ordered the Securities Investor Protection Corp. to explain why it shouldn’t begin a claims process for the victims of Stanford’s alleged investment fraud.
Thursday, U.S. District Judge Robert Wilkins ruled that SIPC, a nonprofit corporation funded by the brokerage industry, must tell the court by Feb. 16 why it shouldn’t be ordered to start a liquidation proceeding in federal court in Texas to handle more than $1 billion in possible claims related to the alleged Stanford fraud.
At issue is whether more than 7,000 brokerage customers who invested in the alleged $7 billion Ponzi scheme run by Stanford are entitled to have their losses covered by SIPC. The Securities and Exchange Commission sued SIPC in December to compel coverage.
In Houston, the government continued its case against Stanford, accused of masterminding a the scheme through his Stanford International Bank Ltd. in Antigua.
The Houston Chronicle reported that bank regulator Paul Ashe told the 15-member jury that on the day after he became an Antiguan bank regulator, Stanford offered him a job that would make him a “very happy man” for the rest of his life.
Ashe, supervisor of international banks for Antigua’s Financial Services Regulatory Commission, indicated he quickly ended the conversation with Stanford in February 2008, did not know what job Stanford was proposing and didn’t follow up.
He said he came to doubt the bank’s financial reports later in the year.
Ashe said he was “shocked” to fine $1 billion missing from Swiss bank accounts belonging to SIBL, days before U.S. regulators seized the company, Bloomberg News reported.
Records he received from Societe Generale in early 2009 listed $250 million in SIBL.’s Swiss investment account as of mid-2008, he said. Stanford bank records Ashe examined in the same timeframe showed $1.25 billion in the same account.
“I was shocked,” Ashe testified Thursday. “It suggested the document shown to us when we did the examination was altered, forged.”
According to The Chronicle, Ashe also described panic among depositors in February 2009, when a U.S. lawsuit against the bank’s parent company, Houston-based Stanford Financial Group, froze the assets of all Stanford properties.
“It was total chaos. The customers were screaming for their money,” Ashe told the jury in U.S. District Judge David Hittner’s court.
Ashe said that he worked with a regulator accused of taking bribes, Leroy King, former head of the Financial Services Regulatory Commission.
He said he was unaware of under-the-table cash payments or gifts of Super Bowl tickets King is accused of taking and said that Antiguan law prohibits regulators from accepting gifts worth more than $50.
King is a co-defendant in another indictment, along with Baldwyn native Laura Pendergest-Holt, who was Stanford’s chief investment officer, and two other Stanford executives. Their trial is scheduled for September.
Previous witnesses testified that the bank loaned Stanford millions of dollars for his personal use and business ventures, even though investors in the certificates of deposit were told their money was invested conservatively and not used for such lending.
Thursday, the jury also got a view of Stanford’s luxurious life, as a personal assistant described his fleet of vessels and estate in St. Croix, U.S. Virgin Islands.
“He always liked having the best,” said Kelly Taylor, who, along with her then-husband, worked for Stanford for several years. At one point their tasks included overseeing the $13 million renovation of the Sea Eagle, a 106-foot yacht Stanford purchased for $4 million and extended to 112 feet.
The Chronicle also said Taylor described Stanford as a difficult boss, and said she and other employees jokingly referred to their jobs as “stand by to stand by” because they always were on call to respond to his often-changing demands.