September 28, 2009 - The case was voluntarily dismissed.
Case Update - 02/20/2009

On late Tuesday four investors with Stanford filed the first lawsuit on Thursday, February 19, 2009, an investor with Stanford International Bank Ltd. filed the second class action lawsuit in the United States District Court for the Southern District of Texas on behalf of purchasers of Stanford International Bank Ltd. certificates of deposit or shares in Stanford International Bank Ltd.’s Stanford Allocation Strategy proprietary mutual fund wrap program between February 19, 2004 and February 17, 2009, and investor, a trustee of a Colorado charitable foundation, filed the third lawsuit also late Thursday.

According to the complaint the investor accuses that Stanford International Bank Ltd. (“SIB”), its affiliated investment advisors and certain of its officers and directors violated the Securities Exchange Act of 1934. The complaint alleges that between February 19, 2004 and February 17, 2009SIB and its affiliated investment advisors, Stanford Group Company (“SGC”) and Stanford Capital Management, LLC (“SCM”), fraudulently sold certificates of deposit (“CDs”) that promised rates of return far above those available from other banks. Defendants claimed that these superior returns were possible because SIB invested its deposits rather than loaning them and to ensure that depositors could redeem their CDs, defendants assured them that SIB’s investments were liquid and diversified, so the lawsuit. But the plaintiff alleges that in fact, nearly 80% of SIB’s investments were concentrated in just two high-risk, illiquid categories: private equity and real estate. The complaint also alleges that defendants misled investors in SIB’s SAS program. Specifically, defendants picked a handful of mutual funds that had performed extremely well in 1999-2004 and claimed the returns of those high-performing funds as the historical returns of the SAS program. The plaintiff accuses that the defendants also inflated the claimed returns of the SAS program in 2006 and 2007. Investors, misled by defendants’ claims of historic returns, have fared very poorly in the SAS program. In addition, according to the complaint, when investors became concerned that SIB might have invested in Bernard Madoff’s $50 billion Ponzi scheme, SIB sent them each a letter stating that “Stanford International Bank did not have any exposure to the Madoff Fund.” But an SIB analyst informed all three of the individual defendants, including R. Allen Stanford (“Stanford”), that SIB had invested in Meridian, a New York-based hedge fund that used Tremont Partners as its asset manager and Tremont, in turn, had invested a portion of Meridian’s – and SIB’s – money with Madoff, so the lawsuit.

The Trustee of the Colorado charitable foundation raises similar allegations. The lawsuit accuses the Stanford entities of fraud, conspiracy, violation of the Texas Securities Act, negligent misrepresentation, breach of fiduciary duty, and breach of contract, and seeks a temporary restraining order prohibiting defendants from transferring or encumbering the related CD funds. According to the petition, Plaintiff has demanded the return of his investments by Defendants but they have refused, ignoring Plaintiff's pleas that the funds were needed because the entire Foundation's efforts south of the US border depended on them. Indeed, Plaintiff expressly told Defendants that thousands of natives will not get medical and dental and surgical help, nor will hundreds of orphanages be getting food for their daily lives if these funds are not recovered.

The U.S. Securities and Exchange Commission (“SEC”) filed charges on Tuesday with carrying out a massive, ongoing fraud involving the sale of $8 billion in CDs. The SEC said in the complaint that R. Allen Stanford and two colleagues allegedly lied to customers about how their money was being invested and how the firms' investment portfolios had performed in the past. CDs are popular savings products, promising fixed-returns to investors, who usually agree to deposit their money for a set period of time. On its Web site, Stanford says the product, known as Stanford Allocation Strategies, aims to reduce volatility throughout the investment cycle. The SEC said that Stanford International Bank, working through a network of Stanford Group advisers, promised improbable, if not impossible returns to investors, often many percentage points higher than what rivals offered. The firms told customers their deposits were safe, invested in easily sellable securities, while in fact, so the SEC, the funds were invested in real estate and private equity holdings. The SEC alleges that the firms also falsely told customers that investments were monitored by more than 20 research analysts and subject to yearly audits by Antiguan regulators, while most of the investments were actually managed only by Allen Stanford and Davis. More recently, the firms falsely told customers that its funds had no exposure to the Madoff case, the SEC said, when executives knew of $400,000 tied to Madoff and the bank told clients its investment portfolio lost just 1.3 percent in 2008, although the Standard & Poor's 500 plummeted 39 percent. 'Stanford International Bank goes to great lengths to prevent any true independent examination of those portfolios,' the SEC's complaint states.

In addition to Stanford, the SEC complaint charged Antigua-based Stanford International Bank and two affiliates in Houston, Stanford Group and Stanford Capital Management. Also charged were executives James M. Davis, Stanford International Bank's chief financial officer, and Laura Pendergast-Holt, chief investment officer of Stanford Financial Group. Stanford, which says it has more than 30,000 investors and $8.5 billion in assets, has not cooperated with investigators, so the SEC, which asked a federal judge in North Texas to freeze the defendants' assets. 'Contrary to recent public statement by Stanford International Bank, Stanford and Davis have wholly failed to cooperate with the commission's efforts to account for the $8 billion of investor funds purportedly held by Stanford International Bank.'

About 90 percent of this portfolio is in a 'black box' that is shielded from independent oversight, according to the complaint. The U.S. District Judge Reed O'Connor entered the temporary restraining order, froze the defendants' assets and appointed a receiver to marshal the assets, according to the SEC. Also federal authorities reportedly entered the firm's office buildings in Houston According to an the eyewitness about 15 people, some wearing jackets identifying them as U.S. marshals, entered the lobby of Stanford's office in the Houston Galleria area.

The SEC also alleged that Stanford Group used false and misleading historical performance data to lure more than $1 billion in investments into a mutual fund investment program. Meanwhile depositors from as far away as Colombia have reportedly begun arriving in the island nation of Antigua, seeking to withdraw their money from an offshore bank under investigation by U.S. state and federal authorities. Mr. Stanford reportedly said in a conference call to employees Tuesday there would be a temporary moratorium of two months on early redemptions for CDs, according to one Stanford financial adviser who has worked at the firm for about five years.

A customer in Houston, who said he has more than $2 million in Stanford CDs, said a representative told him on Feb. 11 that he'd have to wait until the maturity date to get his money back. John Painter, who reportedly invested $10 million with Stanford, said You put your money in an institution and think everything is fine and then you find out that it isn't fine. That's not good .

Original Post - 02/18/2009

On late Tuesday four investors with Stanford filed a proposed class action lawsuit in the United States District Court for the Southern District of Texas alleging Allen Stanford, Stanford Group Company, Stanford Financial Group, Stanford International Bank, Stanford Holdings, Inc. Stanford Capital Management and four individual officers allegedly committed fraud.

he Alleged Fraud, leads directly to the recent painful experience with the largest Ponzi Schemes in US history orchestrated by Bernard Madoff, and investors fear to get a second Madoff disaster..

The lawsuit names Stanford Group Company, Stanford Financial Group, Stanford International Bank, Stanforf Holdings, Inc. Stanford Capital Management, R. Allen Stanford and other individuals as defendants. According to the complaint the plaintiff alleges that the defendants violated Federal Securities laws. Specifically the complaint alleges that Stanford, and the individual Defendants, engaged or participated in the implementation of manipulative devices to falsely report investment returns to customers, made or participated in the making of false and misleading statements, and participated in a scheme to defraud, or a course of business that operated as a massive fraud or a deceit on its customers. Stanford International Bank sold be the end of 2007 $6.7billion of CDs and Stanford Group Company advisors who questioned how Stanford International Bank could pay such high rates of return for CD’s compared to U.S. banks were told that the bank’s investment strategy had garnered consistently high investment returns on its portfolio, so the lawsuit. However, any attempts to discover the specifics of the investment portfolio were rebuffed, and advisors were summarily told that Stanford International Bank could not disclose the details of its assets or portfolio managers, except to say that the assets were safe in a globally diversified portfolio that was capable of 90% liquidation within 48 hours, but in reality, so the lawsuit, advisors were deceived by senior management to make misrepresentations.

SEC filed charges On Tuesday

The SEC filed charges filed on Tuesday with carrying out a massive, ongoing fraud involving the sale of $8 billion in certificates of deposit. The U.S. Securities and Exchange Commission (“SEC”) said in a complaint that R. Allen Stanford and two colleagues allegedly lied to customers about how their money was being invested and how the firms' investment portfolios had performed in the past.

CDs (Certificates of deposits) are popular savings products, promising fixed-returns to investors, who usually agree to deposit their money for a set period of time. On its Web site, Stanford says the product, known as Stanford Allocation Strategies, aims to reduce volatility throughout the investment cycle. The SEC said that Stanford International Bank, working through a network of Stanford Group advisers, promised improbable, if not impossible returns to investors, often many percentage points higher than what rivals offered. The firms told customers their deposits were safe, invested in easily sellable securities, while in fact, so the SEC, the funds were invested in real estate and private equity holdings. The SEC alleges that the firms also falsely told customers that investments were monitored by more than 20 research analysts and subject to yearly audits by Antiguan regulators, while most of the investments were actually managed only by Allen Stanford and Davis. More recently, the firms falsely told customers that its funds had no exposure to the Madoff case, the SEC said, when executives knew of $400,000 tied to Madoff and the bank told clients its investment portfolio lost just 1.3 percent in 2008, although the Standard & Poor’s 500 plummeted 39 percent. “Stanford International Bank goes to great lengths to prevent any true independent examination of those portfolios,” the SEC’s complaint states. In addition to Stanford, the SEC complaint charged Antigua-based Stanford International Bank and two affiliates in Houston, Stanford Group and Stanford Capital Management. Also charged were executives James M. Davis, Stanford International Bank's chief financial officer, and Laura Pendergast-Holt, chief investment officer of Stanford Financial Group. Stanford, which says it has more than 30,000 investors and $8.5 billion in assets, has not cooperated with investigators, so the SEC, which asked a federal judge in North Texas to freeze the defendants' assets. “Contrary to recent public statement by Stanford International Bank, Stanford and Davis have wholly failed to cooperate with the commission’s efforts to account for the $8 billion of investor funds purportedly held by Stanford International Bank.” About 90 percent of this portfolio is in a “black box” that is shielded from independent oversight, according to the complaint. The U.S. District Judge Reed O'Connor entered the temporary restraining order, froze the defendants' assets and appointed a receiver to marshal the assets, according to the SEC.

Yesterday federal authorities also reportedly entered the firm's office buildings in Houston According to an the eyewitness about 15 people, some wearing jackets identifying them as U.S. marshals, entered the lobby of Stanford's office in the Houston Galleria area.

The SEC also alleged that Stanford Group used false and misleading historical performance data to lure more than $1 billion in investments into a mutual fund investment program. Meanwhile depositors from as far away as Colombia have reportedly begun arriving in the island nation of Antigua, seeking to withdraw their money from an offshore bank under investigation by U.S. state and federal authorities. Mr. Stanford reportedly said in a conference call to employees Tuesday there would be a temporary moratorium of two months on early redemptions for CDs, according to one Stanford financial adviser who has worked at the firm for about five years.

Investor Voices:

Eyewitness News reports that investors were met by a sign on the door at the Stanford Financial Group's headquarters that said they're closed and that Federal marshals turned people away as investigators sent employees home and went to work inside.

A depositor from Columbia, who said she has hundreds of thousands of dollars tied up in Stanford certificates of deposit, reportedly said after her arriving in Antigua that this is not a vacation, I'm here to calm my nerves, and that she is waiting to withdraw her money after a representative in Colombia told her he submitted the withdrawal request Friday and that it would take five days to process.

Another depositor in Houston reportedly said he tried to redeem his CDs worth roughly $500,000 Friday morning after reading newspaper articles about the investigation and his advisor told him he couldn't redeem them for two months. He said that “[his] fear is that some investors are being allowed to redeem CDs while others are not..

One Austin, Texas-based depositor said he called his advisers Feb. 12 and was told he could not cash out his CDs. Another customer in Houston, who said he has more than $2 million in Stanford CDs, said a representative told him on Feb. 11 that he’d have to wait until the maturity date to get his money back a Stanford client reportedly said I'm half in a state of shock and hoping it's not true . I feel like I've been scammed, said another client, who estimates half the life savings are invested with Stanford said. Initially, we put our money in this institution because we were nervous with the market and we thought it was a safe place. I'm so upset right now I can't even talk about it. John Painter, who reportedly invested $10 million with Stanford, said You put your money in an institution and think everything is fine and then you find out that it isn't fine. That's not good .

Background

Allen Stanford, with citizenship in the United States and Antigua & Barbuda, is one of the world's richest men (No. 205), with an estimated worth of $2 billion, according to Forbes Magazine 2008. Stanford Group has more than $43 billion under management or advisement, according to the firm's Web site. He became the first American to be knighted by the British Commonwealth nation in a 2006 ceremony that was attended by Prince Edward, son of Queen Elizabeth, according to the firm's Web site. Stanford's grandfather, Lodis, founded the first Stanford company in Mexia in 1932, in the midst of the Great Depression. Stanford made his first fortune in Houston, when he bought real estate in the early 1980s. He went on to expand the family business, which now oversees roughly $50 billion in assets for clients in 140 countries. Stanford, is a major donor to St. Jude Children's Research Hospital and a sponsor of cricket tournaments, including a $20 million showpiece match. He also has sponsored professional golf, polo, tennis and sailing events.