http://www.msnbc.msn.com/id/29237750/ Another firm with $50B AUM suspected of fraud.
Stanford’s returns compiled by SeekingAlpha on Feb. 10: http://static.seekingalpha.com/uploads/2009/2/10/saupload_dalmady.jpg Background story from yesterday: http://www.businessweek.com/investing/wall_street_news_blog/archives/2009/02/the_pressure_mo.html?campaign_id=rss_daily
wow
Just because you have good returns, in come the Feds. Maybe they bought a lot of the ultra short etf’s out there.
Stopping what it called a “massive ongoing fraud,” the Securities and Exchange Commission on Tuesday accused Robert Allen Stanford, the chief of the Stanford Financial Group, of fraud in the sale of about $8 billion of high-yielding certificates of deposit held in the firm’s bank in Antigua. Also named in the suit were two other executives and some affiliates of the financial group. In the complaint, filed in Federal District Court in Dallas, the S.E.C. accused Mr. Stanford and two associates — James M. Davis, a director and chief financial officer of Stanford Group and the Antigua-based bank affiliate, and Laura Pendergest-Holt, the chief investment officer of both organizations — with misrepresenting the safety and liquidity of the uninsured CDs. The CDs were sold by Stanford International Bank through the firm’s registered broker-dealer and investment adviser, which are in Houston. Both the bank, which claims $8.5 billion in assets and 30,000 clients in 131 countries, and the brokerage unit, which operates about 30 offices in the United States, were named in the S.E.C. suit. Stanford Financial asserts that it advises about $50 billion in assets. In its complaint, the S.E.C. said it could not account for the $8 billion in assets that were housed in the Antigua bank after issuing subpoenas for bank records and to various witnesses. Most witnesses, including Mr. Stanford, Mr. Davis, and the Antigua-based bank’s president, failed to appear to testify nor did they produce documents shedding light on the assets. Ms. Pendergest-Holt said in testimony to the S.E.C. that she could not account for the assets, asserting that Mr. Stanford and Mr. Davis were the only ones with access to the bank’s assets. In the complaint, the S.E.C. called “improbable, if not impossible” claims by the offshore bank that it paid “significantly” higher returns on its CDs because of the high quality of its investments. The S.E.C. accused the bank and its affiliates of falsely stating in marketing materials that client funds were placed in liquid financial instruments, when in fact they were invested in private equity funds and real estate. On Nov. 28, Stanford International Bank quoted a rate of 5.375 percent on a $100,000 three-year CD, compared with rates of less than 3.2 percent at American banks. The bank recently has offered rates of more than 10 percent on five-year CDs, the filing stated. In the complaint, the S.E.C. requested that the defendants’ assets be frozen and that a receiver be appointed to take control of business operations. It also requested that the assets of the bank and other offshore units be repatriated. And the agency asked that Mr. Stanford and the other named executives be required to surrender their passports. The S.E.C. has come under fire in Congress and the media for ignoring repeated warnings over a period of years about the Bernard L. Madoff, who is accused of running a $50 billion Ponzi scheme. While investigators have been looking at Mr. Stanford and his financial empire’s activities for many months, the scrutiny into the too-good-to-be-true returns on the CDs increased substantially after the Madoff case. Oddly enough, even the Stanford operation was touched by Mr. Madoff. Despite the fact the Antigua-bank assured investors in a report in December 2008 that it had no “direct or indirect” exposure Mr. Madoff’s funds, the bank suffered an estimated $400,000 in losses, apparently through investments in so-called “feeder funds.” Additionally, the S.E.C. accused Stanford Capital Management, another Houston-based investment advisory unit, of inflating the performance of its $1.2 billion-asset Stanford Allocation Strategy mutual fund in promoting it to prospective investors. The complaint also accused the offshore banking unit and the Houston-based broker dealer of violating provisions of the Investment Company Act of 1940 in failing to register as an investment company.
I heard UCLA and Berkeley were next.
JohnThainsLimoDriver Wrote: ------------------------------------------------------- > I heard UCLA and Berkeley were next. LOL I was just about to make a comment about how this company is NOT affiliated with the university (in case anyone had any doubts), but the limo driver’s comment takes the cake. +1
I have some investment marketing material on my desk at home from Stanford Financial. I’ll be sure to flip through it tonight. $8 Billion is a hefty chunk of change.
I’m surprised no one yet has written “Standford,” lol!
it’ll just be a matter of time before someone writes Standford or Stamford…
I want to know who’s investing in these scams? You know what they say about a fool and his money…
On CNBC I heard them say that Stanford was offering a 10 year 10.0% APY CD back in 2007. I believe they also quoted a 7% 1 year CD. Too good to be true.
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When are they going to investigate U Texas’s endowment? 
ok whatever i have read on stanford case hasnt convinced me that a fraud was committed. is it fradulent to tell an investor that you will return 8% year in year out geomoetrically averaged over 15 years? unethical by CFA standards, yes. but illegal? what did they do that was fraud. IMO this is a case of govt going after someone just to spite him.
Can anyone tell me what the fraud here was? This feels like an attempt at wealth re-distribution.
Lets assume for a minute that he 100% committed fraud, which I believe he did… where the F are the regulators. I mean what do these people do all day… besides nothing. I heard on CNBC this is just the tip of the iceberg. I love finance but there are TONS of shady people in the industry. Fundamental changes need to happen.
this doesnt sound like fraud to me. the allegations against him are he promised steady returns. unethical, yes. fraud, no. unless i am missing somthing.
You are missing something. The guy faked historical data… isn’t that the textbook definition of fraud. “Stanford was accused in civil charges of lying about the safety of investments he sold as “certificates of deposit” and promised unrealistically high rates of return. Regulators also said he faked historical data about other investments which he then used to lure in more investors for the CD products.”